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Are Candidates Hearing Middle Class Concerns?; Presidential Attack Ads; Children in the Mehdi Army; Olympics Update

Aired August 24, 2004 - 14:31   ET

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

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


MILES O'BRIEN, CNN ANCHOR: Welcome back to the CNN Center in Atlanta. This is LIVE FROM. I'm Miles O'Brien.
KYRA PHILLIPS, CNN ANCHOR: And I'm Kyra Phillips. Here's what's all new this half hour.

(BEGIN VIDEO CLIP)

JOHN VAUSE, CNN CORRESPONDENT (voice-over): A grenade in one hand and a brand new AK-47 in the other, Karrar Nouri is a volunteer in Muqtada al-Sadr's Mehdi Army.

(END VIDEO CLIP)

PHILLIPS: John Vause and his report on the boys caught in the battle zone.

O'BRIEN: And the fight for the White House: What do the candidates have to do to win the hearts and minds of middle America?

But first, here's what is happening now in the news...

Another round of blame. A new report about the abuse of Iraqi prisoners point fingers directly at top Pentagon officials. It criticizes them for failing to provide enough guards or adequate training. It says there was no policy of abuse, however. We'll have the latest at the top of the hour.

On trial after almost three years in custody, some detainees at Guantanamo Bay, Cuba are going before a military tribunal. A man described as a former bodyguard to Osama bin Laden was the first to be arraigned. Human rights groups are protesting the proceedings, which permit secret evidence, but no appeals.

Under oath, a reporter for "TIME" magazine tells a special prosecutor what he knows about who leaked the name of CIA operative Valerie Plame. Matt Cooper had been found in contempt of court for refusing to divulge his sources. Cooper reportedly agreed to talk after one source gave his permission.

Eying a medal, the Iraqi soccer team continues its quest for Olympic glory. It's playing Paraguay right now, that powerhouse Paraguay. And if these Iraqi athletes win, they will be guaranteed at least a silver. A live update from Greece, 20 minutes that will seem like an eternity for Kyra. PHILLIPS: Now to politics. It's difficult to imagine winning the White House without the support of the American middle class, but many middle-class voters say they're getting squeezed from all sides economically and wonder why the candidates don't seem to be feeling their pain.

CNN's Peter Viles has that story.

(BEGIN VIDEOTAPE)

PETER VILES, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Teacher Lori Magnuson, her election concerns: illegal immigration, the high cost of housing. Her fear: that no one in Washington is listening.

LORI MAGNUSON, MIDDLE CLASS VOTER: At this point, I'm very, extremely tired of the Democrats and Republicans fighting against each other, wanting to work for just their ideals versus working together for the people.

VILES: From coast to coast, middle class anxiety is rising. Jobs are at risk, outsourcing on the rise, health care costs out of control.

UNIDENTIFIED MALE: You know, 20, 25 percent of my income is going towards, you know, medical expenses.

VILES: Gas prices are spiking, real wages are falling.

UNIDENTIFIED FEMALE: Gas prices are going up, and I'm still making the same. And I still have to support myself off of the same pay that I've been getting.

VILES: Overall, there's a sense of economic anxiety.

UNIDENTIFIED MALE: I think the economy is not what it was. I think the economy is much worse for most people.

VILES: Now, you would think both parties are listening; the middle class is the ultimate block of swing voters.

JOHN ZOGBY, POLLSTER: I've looked at this group now in every election since 1972. Whichever candidate has won this group, that candidate has won the election. The only exception was that in 2000 Al Gore won this group. He won the popular vote, but did not win the electoral college.

VILES: There's no official definition of the middle class. The middleclass.org defines it as families making $25,000 to $100,000 a year. That is six in 10 American families, 46 million households.

NORM ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: Most middle class voters, even if they divide into Democrats and Republicans, want to see bipartisan cooperation and want to see the problems of the nation solved. They're not looking to pit one side against the other. But we're in a climate where the campaign is going to be conducted not to focus on the broad mass of voters in that way, but on the margins.

VILES: In other words, a campaign that ignores voters like Lori Magnuson.

MAGNUSON: The Republican and Democrat parties are just so interested in just condemning each other and just forgetting about the people.

VILES: One irony here: The concerns of the middle class voters are largely about the future -- the fear of losing jobs or losing health care -- and yet the campaign news of the past week has been focused on events that took place 35 years ago.

Peter Viles, CNN, Los Angeles.

(END VIDEOTAPE)

O'BRIEN: John Kerry is accusing the Bush campaign of smear-and- fear tactics. It's just the latest battle of words over Kerry's Vietnam War record.

Here now to talk about the charges and countercharges, the "CROSSFIRE" guys, Paul Begala and Tucker Carlson. There they are, in Hoboken, New Jersey, the land of Frank Sinatra, across the river there, just what, across the ferry, you end up in Manhattan. So at least the bus is headed in the right direction.

Gentlemen, good to see you.

TUCKER CARLSON, "CROSSFIRE" CO-HOST: Hey, Miles.

PAUL BEGALA, "CROSSFIRE" CO-HOST: Hi, Miles.

O'BRIEN: First of all, I've got to ask the most...

BEGALA: Yesterday we brought you some Cheese Whiz, you know, from Philadelphia, you Pat's King of Cheese Steaks, so here we're in New Jersey, we've got the -- back in the bus, we've got the headless body of a Mafia informant. They didn't want us to show it on the air, Miles, but we'll bring it back to CNN Center for you.

O'BRIEN: I thought you were going to tell me you found Jimmy Hoffa there?

CARLSON: He's here. We're sitting on top of him, in fact.

O'BRIEN: First of all, which Rat Pack person do you fancy yourself to be? Paul, you first.

BEGALA: I think I'm a Joey Bishop guy.

O'BRIEN: You're a Joey Bishop guy.

BEGALA: He's sort of marginal, but a funny guy. I like Joey Bishop.

O'BRIEN: Kind of on the fringes.

And, Tucker, what do you think? Peter Lawford?

CARLSON: Peter Lawford, a more sober Dean Martin, you know, take your pick.

O'BRIEN: You're a Dino kind of guy, yes, of course you got to -- well, anyway.

All right, let's move on and let's talk politics. 527s, correct me if I'm wrong, Tucker, the president of the United States seems to be on the defensive on this issue, correct?

CARLSON: Yes, I mean, it's amazing. I'm not exactly sure what it says about the aggression of the Kerry campaign, the ineptitude of the Bush campaign. Here have you a couple hundred fellow Vietnam veterans, including Kerry's own commander in Vietnam, come out against him in a pretty specific way.

Now some of the charges have been proved untrue. A lot of them have been not proved untrue. Some of them clearly are true. And yet it's the Bush administration that finds itself apologizing, which I think political is a huge mistake.

Bush should have said, look, this is not between me and Kerry; it's between Kerry and his fellow veterans. They have a right to speak, too. That right is upheld by the First Amendment, but there's a moral issue. They have a right to say what they think is true.

O'BRIEN: Tucker, when the president says, I have no problems with Senator Kerry's war record, admirable record, whatever the exact words are, and then refuses to denounce the ad, which trashes his war record, there's a not-too-subtle message for voters, isn't there?

CARLSON: Well, sure. I mean, look, of course the Bush people like the ad. It's against Kerry. Why wouldn't they? But the fact is Kerry from day one, meaning two years ago when he started running, two and a half years, has said, judge my service in Vietnam. Judge it. Judge it well, of course, judge it to my benefit, but make a judgment on it.

And here people are making a judgment on it, an informed judgment, and suddenly it's out of bounds. Bush should say, no, it's in bounds, because it is in bounds, come on.

BEGALA: That at least would be an honorable thing to do. Tucker is advising President Bush to actually take a stand, which would be nice. If the president believes these are legitimate charges, he should repeat them, state them and try to make an issue of them in the campaign.

If he believes they're illegitimate, as John McCain and John Warner, the Senate Armed Services Committee Chairman, former Naval secretary, many serious Republicans think he should disavow them. But he's trying to have it both ways, and he risks looking wimpy. I mean, Bush's whole political persona is, I'm a tough guy, a Texas tough guy. And Kerry, you know, pokes at that when he reminds people that, while John Kerry was a decorated war hero, George W. Bush was a cheerleader at Andover who didn't even show up for his National Guard duty in Alabama, and Bush risks looking like a wimp when he won't take a stand.

O'BRIEN: I mean, the term that has been thrown around is flip flop. I mean, this is kind of having it both ways, isn't it, Tucker.

And by the way, who's that on the Harley? Is that Joey Bishop pulling up, or...

CARLSON: This is Hoboken, Miles. It could be anybody. This is a Harley-Davidson-friendly town, and Amen that it is.

O'BRIEN: I'm told in my ear -- no, no, I'm told Tucker that's Bob Novak on the Harley, isn't that right?

(LAUGHTER)

CARLSON: Bob's got a Corvette; next step, Harley-Davidson.

BEGALA: Yes, he's wearing the black leather jacket. It says Bad Mama Jama on the back.

CARLSON: Yes, I mean, look, of course -- of course they are having -- I mean, this is the whole point of 527s and all independent expenditures is the campaigns -- all campaigns get to have it both ways. You get some of your allies to say particularly savage things, you don't have to take credit for the savageness, but you get the benefit of the attack. Who cares?

O'BRIEN: Well, but does that take away...

BEGALA: When the Bush campaign says the senator is a flip flopper -- and what senator is not a flip flopper if you look at their record -- isn't that statement kind of undermined by saying he has a good war record, but I'm not going to denounce this commercial?

CARLSON: Well, look, the whole attack on -- as a flip flopper isn't so interesting to me. I mean, smart people evolve, OK? They change their minds. There's no problem with that.

The real critique of the Kerry campaign is that it's not about anything. Running on your Vietnam service four months 35 years ago, that's great and everything, but what are you going to do, for instance, about Muqtada al-Sadr? Should we kill him or not? Questions like that Kerry hasn't even begun...

O'BRIEN: Well, and Paul Begala, let's end with you on that. The point is, I mean, really, this is bogged down in the marshes of Vietnam of all places. And really, when you look at trying to come up with some substantive differences between Bush and Kerry on the war, there's no daylight between them, is there? BEGALA: Exactly. Well, there is some. There is a whole lot.

First off, there's the question of voracity and credibility. Kerry says that Bush misled us into the war. Huge numbers of Americans agree with that.

But today, Kerry did try to take Tucker's advice -- I don't know if Tucker's been calling him this morning -- but Kerry came to New York City -- right behind us -- gave a speech at the Cooper Union -- a serious setting where Abraham Lincoln gave his most famous pre- presidential speech. And he laid out an economic agenda.

He wasn't talking about Muqtada al-Sadr, but he was talking about the economy. He was talking to those voters who were in that piece that Peter Viles filed just a few minutes ago on your show, Miles. And trying to get this back on what's happening in America today rather than what happened in Vietnam 35 years ago.

That's the winning strategy for Kerry. It's to make it about issues and ideas and take it to Bush on those issues.

CARLSON: It's a little late. It's a little late after two years of talking about what a hero he is, I have to say.

O'BRIEN: All right. Sounds like you guys are at the Vince Lombardi Rest Stop there or something there in New Jersey. Hey, it's Jersey. What do you want, right?

All right, Mr. Begala, Mr. Tucker, always a pleasure. Getting close to New York City there, and they'll be driving that bus across the way very shortly. And of course, Paul and Tucker will be back 4:30 Eastern for today's edition of "CROSSFIRE." We invite you to stay tuned for that.

PHILLIPS: All right. We are continuing to monitor the Iraqi soccer game just for you. It's the semifinals. We're going to take you live to Athens. Right now, the score: They're down zip to two to Paraguay.

O'BRIEN: I'm telling you, that Paraguayan team is something.

First, kids in al-Sadr's army. Very serious story. For some Iraqis, resistance is in the family.

PHILLIPS: "Elvis has left the building." That famous line tops today's entertainment buzz. LIVE FROM gets all shook up about that -- the latest.

(COMMERCIAL BREAK)

PHILLIPS: Ready to talk peace? Radical Shiite cleric Muqtada al-Sadr says he wants to end the standoff at the Imam Ali Mosque. But then, he's said that before. Meanwhile, he surrounded himself with his Mehdi Army, an army with some frighteningly young recruits.

CNN's John Vause is in Baghdad with a look at who's manning those guns.

(BEGIN VIDEOTAPE)

VAUSE (voice-over): With a grenade in one hand and a brand new AK-47 in the other, Karrar Nouri is a volunteer in Muqtada al-Sadr's Mehdi Army. He's just years old.

KARRAR NOURI (through translator): I am a guard with the Mehdi Army against the Americans.

VAUSE: He is spending school vacation manning a checkpoint in Sadr City, a sprawling slum in Baghdad and stronghold for the rebellious cleric. The boy's father says Karrar has taken part in the fighting against U.S. and Iraqi forces.

FALAH NOURI, KARRAR'S FATHER (through translator): I taught him how to shoot. He can now shoot by himself.

VAUSE: He's not the only boy with a gun in Sadr City. There are many others -- most in their teens, but a few are younger than Karrar.

The U.S. Military says they have been fired on by boys. They return with warning shots to try to scare them off.

CAPT. JOHN MERIDITH, U.S. ARMY: Just the fact that they would resort to those kind of tactics kind of tells you who we're fighting.

VAUSE: The Iraqi government says just two children have been killed, 20 wounded in Sadr City, during the event outbreak of violence. No one knows how many were actually fighting and how many were caught in the crossfire.

But local doctors say the number is much higher. On the day we spoke with Dr. Adel Mezher, he says eight bodies were brought to his hospital, six of them children.

DR. ADEL MEZHER, SADR CITY HOSPITAL (through translator): They were all civilians. Most died inside their homes, killed by mortars and rockets. We don't know who fired at them.

VAUSE: Here, the so-called Mehdi Army holds almost mythical status.

ABU ZAHRA, BAGHDAD UNIVERSITY (through translator): The Mehdi Army is composed of the orphans of those who were murdered in the prisons of Saddam Hussein. They now chant, "We are the Mehdi Army. This is the pride for us."

VAUSE (on camera): Much of Muqtada al-Sadr's support is the legacy of his late father, the Grand Ayatollah Muhammad al-Sadr. Admired and respected for his opposition to Saddam Hussein, he was shot dead five years ago.

But it seems that family reputation for defiance is now inspiring a young, new generation of the Mehdi Army, only this time, it's defiance of the U.S. and Iraqi interim government. John Vause, CNN, Sadr City.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

O'BRIEN: An Iraqi soccer team, playing away...

PHILLIPS: They are down by two.

O'BRIEN: ... against Paraguay. I'm (ph) Paraguayan juggernaut...

PHILLIPS: That Paraguayan tea -- that's what gives them all that extra energy.

O'BRIEN: All right. We're tracking that. And yet another doping scandal to tell you about. This time involving discus. Larry Smith is in Athens.

Larry Smith gets all the good assignments, doesn't he? Hello, Larry.

PHILLIPS: He and Michael Holmes.

O'BRIEN: How are you?

LARRY SMITH, CNN CORRESPONDENT: It's good to be me. Yes, it's good to be here in Athens. Kali Nikta. Good evening from Athens.

And yes, another gold medalist about to lose his prize due to a post-competition drug test. A Hungarian team spokesman says tonight that the IOC has disqualified discus thrower Robert Fazekas for allegedly tampering with his urine sample.

Now, this is, again, the second in as many days that this has happened. Russia's Irina Korzhanenko yesterday was stripped of her gold medal that she won in the women's shot-put competition, again, because of a failed drug test.

Let's get to that men's soccer match now. Men's semifinals: Iraq versus Paraguay. And the Iraqis on the short end of it at halftime. Two-nil is the score; Paraguay is on top. Iraq vying for its first ever medal in soccer and just the second medal in the nation's Olympic history. The winner of this match goes on to Saturday's gold medal match versus Argentina. The loser plays for the bronze versus Italy.

Now, gymnastics is over and so is the Paul Hamm controversy -- at least for now, it seems. The head of the Gymnastics Federation says there is no need to consider a duplicate gold medal, because the rules won't allow for it. Now, Hamm's gold in the all-around was tainted after three judges admitted a scoring mistake that would have given a South Korean gymnast the gold.

(BEGIN VIDEO CLIP) PAUL HAMM, GYMNASTICS GOLD MEDAL WINNER: It is kind of strange that people have looked at me in a negative way when all I have really done here is compete. And you know, that's what I came here to do. I have done nothing wrong. And I've just been competing for my country, trying to make America proud.

And I do feel as if, why am I forced to deal with this? This is not a matter that I am supposed to be deciding. This is a matter of the governing bodies. And I just feel that the FIG should have really been concerned about their decision early on and not have opened the door for the media to take control of the situation.

(END VIDEO CLIP)

SMITH: These are the Summer Olympics; they've also been the scandal Olympics. Miles, let's go back to you.

O'BRIEN: It seems like that's always the story. All right, Larry Smith, thank you very much. Check in with you later.

Legendary Olympic coach Bela Karolyi -- Bela Karolyi, I like to say it. I like to say it, that's why we booked him, just because we like to say Bela Karolyi -- in the house tomorrow. Join us as we go one on one with the man responsible for training so many medal winning gymnasts.

Going to teach us how to do the -- going to teach Kyra the uneven bars, as a matter of fact, live here on LIVE FROM. That's tomorrow. Stay with us.

PHILLIPS: Everything's uneven about this show. I'm doing back flips for the three hours every day.

All right. Many big businesses working even harder to make you happy.

O'BRIEN: Are their efforts paying off, we ask? Our always satisfying Rhonda Schaffler joins us live from the New York Stock exchange with the answer. Hello, Rhonda.

RHONDA SCHAFFLER, CNN SR. BUSINESS CORRESPONDENT: Sort of follows the theme you were talking about earlier, doesn't it, Miles and Kyra?

O'BRIEN: It does, yes, yes.

PHILLIPS: Perfect.

SCHAFFLER: But there is a new study I was going to tell you about, because American companies are making good apparently on pulling out all the stops to try to please you. They are succeeding.

Researchers at the University of Michigan says overall consumer satisfaction levels remain at a 10-year high. This could be good news for retailers. You can figure this one out: A happy customer often means he or she is willing to spend more. The study's authors do warn, though, high levels of satisfaction may not be enough to offset rise in prices and higher interest rates, which could have a negative impact on consumer spending -- Miles, Kyra?

O'BRIEN: All right, now this is -- this is an interesting one. You give a rebate on a car, and that's supposed to help sell the car, right?

SCHAFFLER: Yes.

O'BRIEN: Is that working that way?

SCHAFFLER: It does.

O'BRIEN: Oh, it does?

SCHAFFLER: And it helps consumers for a while. We've got cash rebates. We know they've been doing this for quite some time, the auto makers. Super low financing deals combine, and that has helped to spur sales.

But with all those new cars being sold, it's also resulting in weakening the value of the car you own. According to the same customer survey, satisfaction among owners of domestic brands continues to lag behind that of Japanese and European companies, and that's despite big quality improvements by Chrysler, GM, and Ford in the past couple of years. Customers still think they get more value for their money from overseas automakers.

Now, as far as your value of investments here on Wall Street, stocks been in a tight range all day. Right now, Dow is up 14 points, Nasdaq slightly lower.

And that's it from Wall Street. Miles, Kyra, back to you.

O'BRIEN: Thank you, Rhonda.

PHILLIPS: We've got more on your money coming up.

(BEGIN VIDEO CLIP)

DEBBI SEDEY, UNDEREMPLOYED IN CANTON, OHIO: I have already worked 35 out of the 51 years I've lived on this planet, and I have nothing to show for it.

(END VIDEO CLIP)

PHILLIPS: Trying to get ahead in America. Does it sound like you?

O'BRIEN: And alleged bodyguard for Osama bin Laden is the first detainee to get a hearing in Guantanamo Bay. We'll have a full report for you just ahead.

PHILLIPS: And a heartbreak moment in Elvis history. Don't leave the building, we got the answer on LIVE FROM.

(COMMERCIAL BREAK)

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Aired August 24, 2004 - 14:31   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MILES O'BRIEN, CNN ANCHOR: Welcome back to the CNN Center in Atlanta. This is LIVE FROM. I'm Miles O'Brien.
KYRA PHILLIPS, CNN ANCHOR: And I'm Kyra Phillips. Here's what's all new this half hour.

(BEGIN VIDEO CLIP)

JOHN VAUSE, CNN CORRESPONDENT (voice-over): A grenade in one hand and a brand new AK-47 in the other, Karrar Nouri is a volunteer in Muqtada al-Sadr's Mehdi Army.

(END VIDEO CLIP)

PHILLIPS: John Vause and his report on the boys caught in the battle zone.

O'BRIEN: And the fight for the White House: What do the candidates have to do to win the hearts and minds of middle America?

But first, here's what is happening now in the news...

Another round of blame. A new report about the abuse of Iraqi prisoners point fingers directly at top Pentagon officials. It criticizes them for failing to provide enough guards or adequate training. It says there was no policy of abuse, however. We'll have the latest at the top of the hour.

On trial after almost three years in custody, some detainees at Guantanamo Bay, Cuba are going before a military tribunal. A man described as a former bodyguard to Osama bin Laden was the first to be arraigned. Human rights groups are protesting the proceedings, which permit secret evidence, but no appeals.

Under oath, a reporter for "TIME" magazine tells a special prosecutor what he knows about who leaked the name of CIA operative Valerie Plame. Matt Cooper had been found in contempt of court for refusing to divulge his sources. Cooper reportedly agreed to talk after one source gave his permission.

Eying a medal, the Iraqi soccer team continues its quest for Olympic glory. It's playing Paraguay right now, that powerhouse Paraguay. And if these Iraqi athletes win, they will be guaranteed at least a silver. A live update from Greece, 20 minutes that will seem like an eternity for Kyra. PHILLIPS: Now to politics. It's difficult to imagine winning the White House without the support of the American middle class, but many middle-class voters say they're getting squeezed from all sides economically and wonder why the candidates don't seem to be feeling their pain.

CNN's Peter Viles has that story.

(BEGIN VIDEOTAPE)

PETER VILES, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Teacher Lori Magnuson, her election concerns: illegal immigration, the high cost of housing. Her fear: that no one in Washington is listening.

LORI MAGNUSON, MIDDLE CLASS VOTER: At this point, I'm very, extremely tired of the Democrats and Republicans fighting against each other, wanting to work for just their ideals versus working together for the people.

VILES: From coast to coast, middle class anxiety is rising. Jobs are at risk, outsourcing on the rise, health care costs out of control.

UNIDENTIFIED MALE: You know, 20, 25 percent of my income is going towards, you know, medical expenses.

VILES: Gas prices are spiking, real wages are falling.

UNIDENTIFIED FEMALE: Gas prices are going up, and I'm still making the same. And I still have to support myself off of the same pay that I've been getting.

VILES: Overall, there's a sense of economic anxiety.

UNIDENTIFIED MALE: I think the economy is not what it was. I think the economy is much worse for most people.

VILES: Now, you would think both parties are listening; the middle class is the ultimate block of swing voters.

JOHN ZOGBY, POLLSTER: I've looked at this group now in every election since 1972. Whichever candidate has won this group, that candidate has won the election. The only exception was that in 2000 Al Gore won this group. He won the popular vote, but did not win the electoral college.

VILES: There's no official definition of the middle class. The middleclass.org defines it as families making $25,000 to $100,000 a year. That is six in 10 American families, 46 million households.

NORM ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: Most middle class voters, even if they divide into Democrats and Republicans, want to see bipartisan cooperation and want to see the problems of the nation solved. They're not looking to pit one side against the other. But we're in a climate where the campaign is going to be conducted not to focus on the broad mass of voters in that way, but on the margins.

VILES: In other words, a campaign that ignores voters like Lori Magnuson.

MAGNUSON: The Republican and Democrat parties are just so interested in just condemning each other and just forgetting about the people.

VILES: One irony here: The concerns of the middle class voters are largely about the future -- the fear of losing jobs or losing health care -- and yet the campaign news of the past week has been focused on events that took place 35 years ago.

Peter Viles, CNN, Los Angeles.

(END VIDEOTAPE)

O'BRIEN: John Kerry is accusing the Bush campaign of smear-and- fear tactics. It's just the latest battle of words over Kerry's Vietnam War record.

Here now to talk about the charges and countercharges, the "CROSSFIRE" guys, Paul Begala and Tucker Carlson. There they are, in Hoboken, New Jersey, the land of Frank Sinatra, across the river there, just what, across the ferry, you end up in Manhattan. So at least the bus is headed in the right direction.

Gentlemen, good to see you.

TUCKER CARLSON, "CROSSFIRE" CO-HOST: Hey, Miles.

PAUL BEGALA, "CROSSFIRE" CO-HOST: Hi, Miles.

O'BRIEN: First of all, I've got to ask the most...

BEGALA: Yesterday we brought you some Cheese Whiz, you know, from Philadelphia, you Pat's King of Cheese Steaks, so here we're in New Jersey, we've got the -- back in the bus, we've got the headless body of a Mafia informant. They didn't want us to show it on the air, Miles, but we'll bring it back to CNN Center for you.

O'BRIEN: I thought you were going to tell me you found Jimmy Hoffa there?

CARLSON: He's here. We're sitting on top of him, in fact.

O'BRIEN: First of all, which Rat Pack person do you fancy yourself to be? Paul, you first.

BEGALA: I think I'm a Joey Bishop guy.

O'BRIEN: You're a Joey Bishop guy.

BEGALA: He's sort of marginal, but a funny guy. I like Joey Bishop.

O'BRIEN: Kind of on the fringes.

And, Tucker, what do you think? Peter Lawford?

CARLSON: Peter Lawford, a more sober Dean Martin, you know, take your pick.

O'BRIEN: You're a Dino kind of guy, yes, of course you got to -- well, anyway.

All right, let's move on and let's talk politics. 527s, correct me if I'm wrong, Tucker, the president of the United States seems to be on the defensive on this issue, correct?

CARLSON: Yes, I mean, it's amazing. I'm not exactly sure what it says about the aggression of the Kerry campaign, the ineptitude of the Bush campaign. Here have you a couple hundred fellow Vietnam veterans, including Kerry's own commander in Vietnam, come out against him in a pretty specific way.

Now some of the charges have been proved untrue. A lot of them have been not proved untrue. Some of them clearly are true. And yet it's the Bush administration that finds itself apologizing, which I think political is a huge mistake.

Bush should have said, look, this is not between me and Kerry; it's between Kerry and his fellow veterans. They have a right to speak, too. That right is upheld by the First Amendment, but there's a moral issue. They have a right to say what they think is true.

O'BRIEN: Tucker, when the president says, I have no problems with Senator Kerry's war record, admirable record, whatever the exact words are, and then refuses to denounce the ad, which trashes his war record, there's a not-too-subtle message for voters, isn't there?

CARLSON: Well, sure. I mean, look, of course the Bush people like the ad. It's against Kerry. Why wouldn't they? But the fact is Kerry from day one, meaning two years ago when he started running, two and a half years, has said, judge my service in Vietnam. Judge it. Judge it well, of course, judge it to my benefit, but make a judgment on it.

And here people are making a judgment on it, an informed judgment, and suddenly it's out of bounds. Bush should say, no, it's in bounds, because it is in bounds, come on.

BEGALA: That at least would be an honorable thing to do. Tucker is advising President Bush to actually take a stand, which would be nice. If the president believes these are legitimate charges, he should repeat them, state them and try to make an issue of them in the campaign.

If he believes they're illegitimate, as John McCain and John Warner, the Senate Armed Services Committee Chairman, former Naval secretary, many serious Republicans think he should disavow them. But he's trying to have it both ways, and he risks looking wimpy. I mean, Bush's whole political persona is, I'm a tough guy, a Texas tough guy. And Kerry, you know, pokes at that when he reminds people that, while John Kerry was a decorated war hero, George W. Bush was a cheerleader at Andover who didn't even show up for his National Guard duty in Alabama, and Bush risks looking like a wimp when he won't take a stand.

O'BRIEN: I mean, the term that has been thrown around is flip flop. I mean, this is kind of having it both ways, isn't it, Tucker.

And by the way, who's that on the Harley? Is that Joey Bishop pulling up, or...

CARLSON: This is Hoboken, Miles. It could be anybody. This is a Harley-Davidson-friendly town, and Amen that it is.

O'BRIEN: I'm told in my ear -- no, no, I'm told Tucker that's Bob Novak on the Harley, isn't that right?

(LAUGHTER)

CARLSON: Bob's got a Corvette; next step, Harley-Davidson.

BEGALA: Yes, he's wearing the black leather jacket. It says Bad Mama Jama on the back.

CARLSON: Yes, I mean, look, of course -- of course they are having -- I mean, this is the whole point of 527s and all independent expenditures is the campaigns -- all campaigns get to have it both ways. You get some of your allies to say particularly savage things, you don't have to take credit for the savageness, but you get the benefit of the attack. Who cares?

O'BRIEN: Well, but does that take away...

BEGALA: When the Bush campaign says the senator is a flip flopper -- and what senator is not a flip flopper if you look at their record -- isn't that statement kind of undermined by saying he has a good war record, but I'm not going to denounce this commercial?

CARLSON: Well, look, the whole attack on -- as a flip flopper isn't so interesting to me. I mean, smart people evolve, OK? They change their minds. There's no problem with that.

The real critique of the Kerry campaign is that it's not about anything. Running on your Vietnam service four months 35 years ago, that's great and everything, but what are you going to do, for instance, about Muqtada al-Sadr? Should we kill him or not? Questions like that Kerry hasn't even begun...

O'BRIEN: Well, and Paul Begala, let's end with you on that. The point is, I mean, really, this is bogged down in the marshes of Vietnam of all places. And really, when you look at trying to come up with some substantive differences between Bush and Kerry on the war, there's no daylight between them, is there? BEGALA: Exactly. Well, there is some. There is a whole lot.

First off, there's the question of voracity and credibility. Kerry says that Bush misled us into the war. Huge numbers of Americans agree with that.

But today, Kerry did try to take Tucker's advice -- I don't know if Tucker's been calling him this morning -- but Kerry came to New York City -- right behind us -- gave a speech at the Cooper Union -- a serious setting where Abraham Lincoln gave his most famous pre- presidential speech. And he laid out an economic agenda.

He wasn't talking about Muqtada al-Sadr, but he was talking about the economy. He was talking to those voters who were in that piece that Peter Viles filed just a few minutes ago on your show, Miles. And trying to get this back on what's happening in America today rather than what happened in Vietnam 35 years ago.

That's the winning strategy for Kerry. It's to make it about issues and ideas and take it to Bush on those issues.

CARLSON: It's a little late. It's a little late after two years of talking about what a hero he is, I have to say.

O'BRIEN: All right. Sounds like you guys are at the Vince Lombardi Rest Stop there or something there in New Jersey. Hey, it's Jersey. What do you want, right?

All right, Mr. Begala, Mr. Tucker, always a pleasure. Getting close to New York City there, and they'll be driving that bus across the way very shortly. And of course, Paul and Tucker will be back 4:30 Eastern for today's edition of "CROSSFIRE." We invite you to stay tuned for that.

PHILLIPS: All right. We are continuing to monitor the Iraqi soccer game just for you. It's the semifinals. We're going to take you live to Athens. Right now, the score: They're down zip to two to Paraguay.

O'BRIEN: I'm telling you, that Paraguayan team is something.

First, kids in al-Sadr's army. Very serious story. For some Iraqis, resistance is in the family.

PHILLIPS: "Elvis has left the building." That famous line tops today's entertainment buzz. LIVE FROM gets all shook up about that -- the latest.

(COMMERCIAL BREAK)

PHILLIPS: Ready to talk peace? Radical Shiite cleric Muqtada al-Sadr says he wants to end the standoff at the Imam Ali Mosque. But then, he's said that before. Meanwhile, he surrounded himself with his Mehdi Army, an army with some frighteningly young recruits.

CNN's John Vause is in Baghdad with a look at who's manning those guns.

(BEGIN VIDEOTAPE)

VAUSE (voice-over): With a grenade in one hand and a brand new AK-47 in the other, Karrar Nouri is a volunteer in Muqtada al-Sadr's Mehdi Army. He's just years old.

KARRAR NOURI (through translator): I am a guard with the Mehdi Army against the Americans.

VAUSE: He is spending school vacation manning a checkpoint in Sadr City, a sprawling slum in Baghdad and stronghold for the rebellious cleric. The boy's father says Karrar has taken part in the fighting against U.S. and Iraqi forces.

FALAH NOURI, KARRAR'S FATHER (through translator): I taught him how to shoot. He can now shoot by himself.

VAUSE: He's not the only boy with a gun in Sadr City. There are many others -- most in their teens, but a few are younger than Karrar.

The U.S. Military says they have been fired on by boys. They return with warning shots to try to scare them off.

CAPT. JOHN MERIDITH, U.S. ARMY: Just the fact that they would resort to those kind of tactics kind of tells you who we're fighting.

VAUSE: The Iraqi government says just two children have been killed, 20 wounded in Sadr City, during the event outbreak of violence. No one knows how many were actually fighting and how many were caught in the crossfire.

But local doctors say the number is much higher. On the day we spoke with Dr. Adel Mezher, he says eight bodies were brought to his hospital, six of them children.

DR. ADEL MEZHER, SADR CITY HOSPITAL (through translator): They were all civilians. Most died inside their homes, killed by mortars and rockets. We don't know who fired at them.

VAUSE: Here, the so-called Mehdi Army holds almost mythical status.

ABU ZAHRA, BAGHDAD UNIVERSITY (through translator): The Mehdi Army is composed of the orphans of those who were murdered in the prisons of Saddam Hussein. They now chant, "We are the Mehdi Army. This is the pride for us."

VAUSE (on camera): Much of Muqtada al-Sadr's support is the legacy of his late father, the Grand Ayatollah Muhammad al-Sadr. Admired and respected for his opposition to Saddam Hussein, he was shot dead five years ago.

But it seems that family reputation for defiance is now inspiring a young, new generation of the Mehdi Army, only this time, it's defiance of the U.S. and Iraqi interim government. John Vause, CNN, Sadr City.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

O'BRIEN: An Iraqi soccer team, playing away...

PHILLIPS: They are down by two.

O'BRIEN: ... against Paraguay. I'm (ph) Paraguayan juggernaut...

PHILLIPS: That Paraguayan tea -- that's what gives them all that extra energy.

O'BRIEN: All right. We're tracking that. And yet another doping scandal to tell you about. This time involving discus. Larry Smith is in Athens.

Larry Smith gets all the good assignments, doesn't he? Hello, Larry.

PHILLIPS: He and Michael Holmes.

O'BRIEN: How are you?

LARRY SMITH, CNN CORRESPONDENT: It's good to be me. Yes, it's good to be here in Athens. Kali Nikta. Good evening from Athens.

And yes, another gold medalist about to lose his prize due to a post-competition drug test. A Hungarian team spokesman says tonight that the IOC has disqualified discus thrower Robert Fazekas for allegedly tampering with his urine sample.

Now, this is, again, the second in as many days that this has happened. Russia's Irina Korzhanenko yesterday was stripped of her gold medal that she won in the women's shot-put competition, again, because of a failed drug test.

Let's get to that men's soccer match now. Men's semifinals: Iraq versus Paraguay. And the Iraqis on the short end of it at halftime. Two-nil is the score; Paraguay is on top. Iraq vying for its first ever medal in soccer and just the second medal in the nation's Olympic history. The winner of this match goes on to Saturday's gold medal match versus Argentina. The loser plays for the bronze versus Italy.

Now, gymnastics is over and so is the Paul Hamm controversy -- at least for now, it seems. The head of the Gymnastics Federation says there is no need to consider a duplicate gold medal, because the rules won't allow for it. Now, Hamm's gold in the all-around was tainted after three judges admitted a scoring mistake that would have given a South Korean gymnast the gold.

(BEGIN VIDEO CLIP) PAUL HAMM, GYMNASTICS GOLD MEDAL WINNER: It is kind of strange that people have looked at me in a negative way when all I have really done here is compete. And you know, that's what I came here to do. I have done nothing wrong. And I've just been competing for my country, trying to make America proud.

And I do feel as if, why am I forced to deal with this? This is not a matter that I am supposed to be deciding. This is a matter of the governing bodies. And I just feel that the FIG should have really been concerned about their decision early on and not have opened the door for the media to take control of the situation.

(END VIDEO CLIP)

SMITH: These are the Summer Olympics; they've also been the scandal Olympics. Miles, let's go back to you.

O'BRIEN: It seems like that's always the story. All right, Larry Smith, thank you very much. Check in with you later.

Legendary Olympic coach Bela Karolyi -- Bela Karolyi, I like to say it. I like to say it, that's why we booked him, just because we like to say Bela Karolyi -- in the house tomorrow. Join us as we go one on one with the man responsible for training so many medal winning gymnasts.

Going to teach us how to do the -- going to teach Kyra the uneven bars, as a matter of fact, live here on LIVE FROM. That's tomorrow. Stay with us.

PHILLIPS: Everything's uneven about this show. I'm doing back flips for the three hours every day.

All right. Many big businesses working even harder to make you happy.

O'BRIEN: Are their efforts paying off, we ask? Our always satisfying Rhonda Schaffler joins us live from the New York Stock exchange with the answer. Hello, Rhonda.

RHONDA SCHAFFLER, CNN SR. BUSINESS CORRESPONDENT: Sort of follows the theme you were talking about earlier, doesn't it, Miles and Kyra?

O'BRIEN: It does, yes, yes.

PHILLIPS: Perfect.

SCHAFFLER: But there is a new study I was going to tell you about, because American companies are making good apparently on pulling out all the stops to try to please you. They are succeeding.

Researchers at the University of Michigan says overall consumer satisfaction levels remain at a 10-year high. This could be good news for retailers. You can figure this one out: A happy customer often means he or she is willing to spend more. The study's authors do warn, though, high levels of satisfaction may not be enough to offset rise in prices and higher interest rates, which could have a negative impact on consumer spending -- Miles, Kyra?

O'BRIEN: All right, now this is -- this is an interesting one. You give a rebate on a car, and that's supposed to help sell the car, right?

SCHAFFLER: Yes.

O'BRIEN: Is that working that way?

SCHAFFLER: It does.

O'BRIEN: Oh, it does?

SCHAFFLER: And it helps consumers for a while. We've got cash rebates. We know they've been doing this for quite some time, the auto makers. Super low financing deals combine, and that has helped to spur sales.

But with all those new cars being sold, it's also resulting in weakening the value of the car you own. According to the same customer survey, satisfaction among owners of domestic brands continues to lag behind that of Japanese and European companies, and that's despite big quality improvements by Chrysler, GM, and Ford in the past couple of years. Customers still think they get more value for their money from overseas automakers.

Now, as far as your value of investments here on Wall Street, stocks been in a tight range all day. Right now, Dow is up 14 points, Nasdaq slightly lower.

And that's it from Wall Street. Miles, Kyra, back to you.

O'BRIEN: Thank you, Rhonda.

PHILLIPS: We've got more on your money coming up.

(BEGIN VIDEO CLIP)

DEBBI SEDEY, UNDEREMPLOYED IN CANTON, OHIO: I have already worked 35 out of the 51 years I've lived on this planet, and I have nothing to show for it.

(END VIDEO CLIP)

PHILLIPS: Trying to get ahead in America. Does it sound like you?

O'BRIEN: And alleged bodyguard for Osama bin Laden is the first detainee to get a hearing in Guantanamo Bay. We'll have a full report for you just ahead.

PHILLIPS: And a heartbreak moment in Elvis history. Don't leave the building, we got the answer on LIVE FROM.

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