Return to Transcripts main page

Live From...

President Bush Signs $70 Billion in Tax Cuts; National Guard Troops to U.S.-Mexico Border; Senator McCain Shares Oriskany Memories; "Da Vinci Code" Premieres at Cannes

Aired May 17, 2006 - 14:06   ET

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

KYRA PHILLIPS, CNN ANCHOR: President Bush signing that $70 billion tax cut package right now. It extends the 2003 tax cut on dividends and capital gains and exempts many middle class taxpayers from the alternative minimum tax. He's right there on the south lawn of the White House.
Ali Velshi also watching this for you.

Ali, let's get down to the bottom line here. What does it mean for you and me and everybody else?

ALI VELSHI, CNN CORRESPONDENT: Well, it depends on who you are. The math on this really does indicate that it's a better tax cut for high-income earners than for low-income earners. A lot of those big gains affect people -- they don't affect people who don't earn much money, because a lot of the cuts are extensions of cuts that are on investments, like the capital gains investments, the dividend investments, where those cuts that were made in 2003 were set to expire in 2008. Well, they've been extended to 2010.

So if you get a lot of money from capital gains investments that you've had for more than a year, or from stock dividends, the highest tax bracket in 2003 was lowered to 15 percent. That was going to expire. Now that continues until 2010.

So if you've got investments, that helps everybody. Beyond that, there are some changes, but a lot of the criticism here is that this is not a particularly comprehensive tax bill. And, in fact, some people are already talking, Kyra, about the fact that we'll see another tax bill before the end of the year.

This has become a bit of a hallmark of this administration. There's a lot to fix in the tax code, and they're not really getting down to fixing it all. And not just the administration. Congress isn't getting down to fixing all of it. So we're going to see these piecemeal changes as we go along.

PHILLIPS: Kiddy tax part of this as well. Gone, right?

VELSHI: Well, you see, what it used to be is that if you had kids under 14, the government taxed any income they had, unearned income, like increases in investments, dividends, things like that, to prevent people from having their kids as a tax shelter. Well, that was until the age of 14, so you could give your kids investments from the age of 14 and higher at a lower tax rate. That age has now been moved to 18, and that means that parent have no incentive to shelter their investments with their kids. And the types of investments that you would now give kids are different, because if they generate income, interest or capital gains, they're now not going to be useful to give to your kids. I mean, if you want to give your kids gifts, that's fine. But from a tax perspective it changes that picture a little bit.

PHILLIPS: All right. Final question. Let's talk about how much we would save. Obviously, it's depending on our income. I know we've got a graphic put together here just to give sort of an idea on overall average savings.

VELSHI: Yes. This will give you -- this will give you -- obviously these are very different for different people. But if you're making more than a million bucks a year, you'll get a nice big tax savings. If you're making $20,000 to $30,000 a year, about nine bucks.

Fifty thousand to $75,000, about 110 buck, $100,000 to $200,000 you'll get about $1,400 back. And your savings if you make over $1 million, this is where you score. Check this out: $42,000 if you make more than -- more than $1 million.

So that's, as you can see, where this is weighted.

Now, the argument here, Kyra, is that it's these people, the high earners. If you give them tax breaks it will stimulate them to spend. But if you look at, you know, how many people are getting the tax cuts, there just aren't that many people in America who earn more than a million dollars.

So it's not tax relief across the board, Kyra. It's a tax break that's meant to stimulate the economy.

PHILLIPS: Ali Velshi, thanks so much. We'll be talking again.

VELSHI: Yes.

PHILLIPS: Straight ahead, will sending National Guard troops to the border stretch them to the breaking point? I'm going to talk with the man in charge. Lieutenant General Stephen Blum heads the National Guard Bureau. An exclusive interview with him next right here on LIVE FROM.

(COMMERCIAL BREAK)

PHILLIPS: Will bolstering the border put the National Guard under the gun? Guard troops already fight wars overseas and save lives right here at home. Now another mission looms, and in just a few minutes I'll have an exclusive interview with the head of the National Guard Bureau, Lieutenant General Steven Blum.

But first, our Pentagon correspondent, Barbara Starr.

(BEGIN VIDEOTAPE) BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice over): Officials say the new border security deployment will simply give the National Guard more experience in their now typical jobs, fighting war and disaster relief, but insists it won't keep them from being ready to do those jobs.

UNIDENTIFIED MALE: Get up there!

STARR: The first of 6,000 troops are expected to arrive on the U.S.-Mexico border next month. Homeland Security Secretary Michael Chertoff says the National Guard will be part of a comprehensive approach to national security.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: We can have a transformative effect on our immigration problem and illegal migration problem that has plagued this country for over 20 years.

STARR: The Pentagon says the Guard will be doing some of the same jobs it already handles.

PAUL MCHALE, ASST. SECRETARY OF DEFENSE: The missions will include, for example, surveillance and reconnaissance, engineering support, transportation support, logistics support, vehicle dismantling, medical support, as noted by Secretary Chertoff, barrier and infrastructure construction, road building, and linguistics support.

STARR: One of the most sensitive issues, will troops carry weapons and be authorized to shoot?

LT. GEN. STEVEN BLUM, CHIEF, NATIONAL GUARD BUREAU: It is something that must be addressed, ma'am, because it's very important that soldiers know what the expectations are and what the rules are for the area they're operating in.

STARR: Guard commanders say they hope to make it all work by sending troops in for perhaps just a few weeks at a time during their scheduled training periods so their families and jobs will not be disrupted.

BLUM: The only thing that we're really going to do is change the location of where they were going to do their training.

STARR: But don't underestimate how complicated this may turn out to be for the Guard. By one estimate, as many as 150,000 National Guardsmen may find themselves doing border security over the next two years.

(on camera): The National Guard is also expected to use helicopters and other sensors to watch for people crossing the border, but the Guard will not make any arrests.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

PHILLIPS: Now a lot more questions for the man in charge. Lieutenant General Blum joins me from the Pentagon.

Sir, it's a pleasure to have you.

BLUM: Thank you, Kyra. A pleasure to be here.

PHILLIPS: I think -- thank you very much.

I want to get right to one of the main questions that Barbara poses in that piece and a lot have been asking. Tell us, I want to hear it from you, the rules of engagement for these National Guard men and women.

BLUM: Well, the rules of engagement and the rules for use the force will be universal between California, Arizona, New Mexico and Texas. We are working with our states attorney generals to make sure that there's no contradiction amongst the rules of engagement in each of those states, and we'll build upon the time-proven rules of engagement we've used for the counter-narcotics program that we've had on the southern border for about 20 years now.

PHILLIPS: So put into layman's terms for me and for our viewers...

BLUM: Sure.

PHILLIPS: ... will they be armed, and if they get into a dangerous situation, if they feel their life is at stake, there is a high-threat situation going on, will they be able to fire that weapon?

BLUM: In short, absolutely. Every soldier and airman always has the right of self-protection to preserve their life and to save the lives of others. But no, not every soldier and airman will be armed.

There will be a lots of jobs that we'll be performing that will not require people to carry sidearms. However, if they're in a mission profile where they could be subject to threat or injury, or their life is threatened, they will, in fact, carry weapons, just as they do in other missions around the world.

PHILLIPS: And sir, will they be working for the governor of the state where they are, or will they be working for Defense Secretary Donald Rumsfeld?

BLUM: They will be allowed to work under the command and control of the governors of the states, and they will be in support of the federal law enforcement agencies. In this case, the Border Patrol and Customs officials.

So it is a perfect job for the National Guard. They're superb at this. We've done this for 25 years on the Southwest border.

It will be sort of business as usual, but we'll do it on a much grander scale. And it will now -- we will now support a new customer, being the Customs and Border Patrol forces.

PHILLIPS: And what do you think those forces will learn from your men and women?

BLUM: Well, I think they're going to find out that they're superbly trained, they're very well disciplined, and they're very, very committed citizen soldiers and airmen. They're absolutely the right kind of forces for this job.

PHILLIPS: Now, is it possible that the National Guard could be federalized and NORTHCOM could get involved sending in active duty soldiers as well?

BLUM: It's not anticipated that the Guard will be federalized. They are federally funded.

They will be in Title 32, which means that the pay and all of the expenses will be paid by the federal government. This is good for the governors, because they share their National Guard forces, but it doesn't mean that they have to pay for it, because they are in support of a federal mission.

If we need niche capabilities that we do not have in the Guard, then we would go to Northern Command. For instance, if I were to need naval support in the Pacific Ocean or I need some naval support in the Gulf of Mexico because the border is on both ends of it, we do have significant bodies of water, that would be coordinated through U.S. Northern Command.

PHILLIPS: So that leads me to my next question. Will the National Guard be able to cross over the border into Mexico?

BLUM: It's not -- it's not anticipated that that will be required. That is not right now in our mission profile. But one of the great features of using the National Guard is they have a very long-lasting relationship with the armed forces and law enforcement forces in the border states, have their counterparts across the Mexican border. They have frequent training exercises and long-term relationships that we can leverage if that were necessary. But that's not anticipated at this time.

PHILLIPS: Sir, have you had any conversations with Vicente Fox, the president of Mexico?

BLUM: No, that's for our president to do and our secretary of state. I've got enough to do as the chief of the National Guard Bureau.

PHILLIPS: Well, do you think that you'll be able to bring in troops from other states to help, not just border states?

BLUM: Oh, absolutely. I've already received calls from neighboring governors and governors as far away as New England and the northwestern part of our country.

The Guard is family. When you call out the Guard, you call out America. And every time the Guard is called out, all of the other National Guards around the country want to know what they can do to make the unit successful that's being activated. So this is terrific. The best part is we're going to have the flexibility to not mobilize these soldiers for long periods of time. We will have a duration force which will be there for an extended period of time, but they will be the leaders and the planners that need the long-term relationships with the Department of Homeland Security. The bulldozer operators and the radio operators and the medics, they will rotate in there for periods of two to three weeks so that it's very painless for their families and their civilian supporters, so we don't pull them away from the workplace or their schoolroom, or from their families for undue lengths of time.

PHILLIPS: So, sir, let me ask you, let's say some other National Guardsmen and women come from a different state into Arizona. Is it the governor of Arizona that tells those other men and women what their duties will be? Who will command those that come from other states?

BLUM: All of the National Guard forces within California will be commanded by the joint force headquarters of the National Guard in California. They will ultimately be commanded by Governor Schwarzenegger. The same thing applies to Governor Napolitano in Arizona, Governor Perry in Texas, and the same arrangement would also happen in New Mexico.

PHILLIPS: So let me make this clear. So if, say, a National Guard unit from a state that's not a border state comes into a border state, they will be under the command of the governor of the state that they're in?

BLUM: That is absolutely correct, and it's done by a prearranged agreement between the governors before we send the soldiers.

PHILLIPS: Got it. All right.

There's a huge concern that if there were another Katrina or another disaster here on U.S. Soil, that the National Guard will be strapped. I want you to hear from Governor Arnold Schwarzenegger, and I want to be able to get you to respond, sir.

BLUM: OK. Fine.

(BEGIN VIDEO CLIP)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: If there's a earthquake, or if there's a huge fire, if there's a mudslide or a flood, or whatever it is, you know, this state gets hit more often than any other state. And for that, we need the National Guard to help us with this those kind of emergencies. So if you take now 6,000, 7,000 in Iraq, then you take another 6,000 to the borders, what do you have left?

(END VIDEO CLIP)

PHILLIPS: Obviously, god forbid, we don't want to see another Katrina. But if that were to happen, are there enough men and women in the National Guard to respond immediately to a natural disaster? BLUM: The short answer is absolutely yes. But Governor Schwarzenegger is rightfully concerned, as are all of the other governors of our 50 states and territories that we have sufficient National Guard capabilities left in the state to handle what normally comes their way, or what they don't see coming, maybe an act of Mother Nature or an act of terrorism in their state. And they depend heavily on their Guard.

I have made a commitment to every governor that they will have sufficient forces left in their state to deal with their normal weather patterns and the ravages of Mother Nature, or a terrorist attack.

I might tell you we are better prepared for this hurricane season than we were last year. I have more troops available in the National Guard distributed amongst the states. Our equipment has been prepositioned already for this year's hurricane season, and we have purchased about $800 million worth of interoperable communications equipment so that whatever occurs in the United States of America, we can handle that and still do this border mission.

You have to remember that up to 6,000 troops means less than 2 percent of my force or the National Guard force will be on that border at any given time. And we have a combined number of airmen and soldiers. It totals 460,000, and right now we only have about 20 percent of our force overseas, which leaves us a very significant capability here at home, Kyra.

PHILLIPS: Lieutenant General Steven Blum.

You have a tremendous mission on your hands. We'll be following every move. I sure appreciate your time today, sir.

BLUM: Thanks, Kyra.

PHILLIPS: My pleasure.

PHILLIPS: When the Guard goes to the border, he'll be one of the go-to guys. General David Rataczak, the man in charge of the Arizona National Guard, he joins me in the next hour of LIVE FROM.

The news keeps coming. We'll keep bringing it to you.

More LIVE FROM next.

(COMMERCIAL BREAK)

PHILLIPS: All this week CNN continues it's yearlong look into the future, your future. And this month we focus on the workplace. Outsourcing was a tech industry buzz word not too long ago, but a recent study shows one in four companies have now brought outsource functions back in house and to places you might not expect.

CNN's Miles O'Brien has more on the story

(BEGIN VIDEOTAPE) JENNIFER: Five, 10 years ago, I felt like I was going to be pretty safe as an IT industry employee. I recently lost my job. They said that I was redundant. They never truly say you are being replaced with employees over in India.

I very much worry about knowledge that is moving offshore. Are we going to slowly experience a brain drain? We're becoming more of a world economy, which has its benefits, but what will be our expense?

MILES O'BRIEN, CNN CORRESPONDENT: Jennifer's concern is a valid one. If you've ever called an 800 number and gotten someone in Bangalore, you know the story. Right now, U.S. companies employ somewhere between one and two million service workers offshore. Another 3.5 million overseas jobs to be added in the next 10 years. But they may be overlooking a homegrown option.

KATHY BRITTIAN WHITE, FOUNDER, RURAL SOURCING: I think the lure of the big city isn't quite what it used to be.

O'BRIEN (voice-over): Kathy Brittain White, founder of Rural Sourcing, says there is a wealth of untapped IT knowledge right here at home.

WHITE: There were people that were working at McDonald's or Wal- Mart or other places with a college degree, so we really came in and gave them an opportunity to work in the field.

O'BRIEN: White says many companies that employ offshore workers find they don't save as much as they hoped. The overhead is high. And, what's more, their customers are often dissatisfied.

WHITE: We can either sit and whine that there is a global economy or we can get serious and realize we have the responsibility to be competitive and we have to find new ways to innovate. That's what's always made American workers great.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

PHILLIPS: Need to know? No way. Well, maybe.

A change of course for the Bush administration. After five months of refusing full committee briefings on the NSA eavesdropping, it comes less than 24 hours before the start of confirmation hearings for CIA director nominee Michael Hayden, who once led the NSA.

The current leader of the National Security Agency will brief all members of both the House and the Senate intelligence committees. Until now, only the top two members of each panel and the House and Senate leaders were in the loop.

First it was BellSouth, now Verizon is denying it ever turned over any customer calling data to the government. And last week, "USA Today" named those companies, plus AT&T as giving the NSA information on every call placed any time, anywhere. Not the contents of those calls, just numbers, times and places.

Well, the paper stands by its story but says it's investigating the denials. The Bush administration won't even talk about it. Critics call the program a major invasion of privacy.

The sun's shining, but not everyone is smiling. Hundreds of New Englanders still can't go back home and many more are getting their first real look at the flooding.

CNN's Dan Lothian with another worry for the town of Amesbury, Massachusetts.

(BEGIN VIDEOTAPE)

DAN LOTHIAN, CNN CORRESPONDENT (on camera): It's something New England hasn't seen in a week -- sunshine. Now that the rain has stopped, residents impacted by the worst flooding in 70 years are assessing the damage and cleaning up. Meantime, officials say most of the dams that they were so concerned about across northern New England are in the clear. But the mill yard dam here in Amesbury, Massachusetts, continues to be watched closely by engineers. In fact, half of the downtown area downstream from here has been evacuated.

CHIEF WILLIAM SHUTE, AMESBURY FIRE DEPARTMENT: The biggest concern is that we lose the dam up here, which causes some of this debris or some other problems of a surge of water that will open up the blocks down -- about 200 yards down. That will cause blockage of the spillway that goes underneath the town, which would cause this water to start going over its banks, crashing into the restaurants and buildings, taking those out and going through the upper archway into the downtown, which aren't made to handle that kind of water. That is the worst-case scenario that we're worried about until this water goes down at least another foot.

LOTHIAN: And finally, officials across northern New England are amazed that there were not a lot of casualties. In fact, there was only one case, believed to be associated to the storm, a 59-year-old New Hampshire man. His body was found submerged in a car in a flooded outstreet in Massachusetts. It's believed he was trying to drive through and didn't make it.

That's the very latest from Amesbury, Massachusetts. Dan Lothian reporting.

(COMMERCIAL BREAK)

PHILLIPS: Well,the U.S. Navy is sinking one of its own ships today. An aircraft carrier tested in battle and honored by its sailors and airmen, one of whom is now a U.S. senator. John McCain joins LIVE FROM straight ahead.

And we're watching the markets. The Dow down more than 200 points. We're live from the New York Stock Exchange. Stay with us.

(COMMERCIAL BREAK) PHILLIPS: Once shiny and mighty, now rusted and sinking -- and sinking fast. The U.S. aircraft carrier Oriskany is gliding to the bottom of the Gulf of Mexico right now, where the "Mighty O," as it was once known, will take on a new mission: artificial reef.

The ship's old crew remembers her fondly. As Dan Thomas of CNN affiliate WEAR reports.

(BEGIN VIDEOTAPE)

DAN THOMAS, WEAR REPORTER (voice-over): It's a special happy hour at Cooter Brown's (ph) Westin -- special because they share a common history, their time aboard the Oriskany.

UNIDENTIFIED MALE: Becoming a man, I guess you could say, on board the ship. Leaving as a kid and leaving the ship after four years as a man.

THOMAS: Dick Miller (ph), Eddie Vargas (ph) and Kenny Crouch (ph) served when the ship was first put into service, at the beginning of the Korean War. They didn't know each other then, but since coming to Pensacola to watch the ship sink, they've become fast friends.

UNIDENTIFIED MALE: There's a bond there automatically. Because that was a tight ship.

UNIDENTIFIED MALE: We're like old buddies, because there's not as many of us anymore.

THOMAS: For them, it's a bittersweet trip. They put their lives on the line for this ship. Seeing its current state and knowing its fate is the toughest part of the trip.

UNIDENTIFIED MALE: Terrible, very sad.

UNIDENTIFIED MALE: I can remember it. It was a beautiful ship. It was clean as a whistle, fast, new, pretty nice. And seeing it now, it's a 180.

UNIDENTIFIED MALE: It sort of hurts, you know, because you sort of -- I don't know, it's just like a dead person sitting out there, you know?

THOMAS: But they all agree sinking the Oriskany is better than what happens to most decomissioned ships.

UNIDENTIFIED MALE: I think it's the best thing that could happen, really. I'd rather see it go down than to see it made into scrap metal.

UNIDENTIFIED MALE: It's better than having it ground up into scrap. Somebody is going to get some good out of it.

THOMAS: Good for the veterans too. The final days before its sinking, they were able to get together and trade stories about their time aboard the "Mighty O." UNIDENTIFIED MALE: There aren't many things we can do at our age but have memories, and these are good ones.

THOMAS: Dan Thomas, Channel 3 News.

(END VIDEOTAPE)

PHILLIPS: Well, one of many Navy pilots who flew off the Oriskany's flight deck couldn't be there to see it go down. But John McCain had pressing business in Washington and paused a little for a moment to tell me just a few of his memories.

(BEGIN VIDEO CLIP)

PHILLIPS: So Senator, I'm curious, I was doing a little research on the battle of Oriskany, which took place in 1777. Should we talk a little history?

SEN. JOHN MCCAIN (R), ARIZONA: I think it was about upstate New York, as I recall, between -- during the Revolutionary War. Is that correct?

PHILLIPS: You hit it on the head. I'm so impressed. It actually was a big turning point of the American Revolution I found out. Pretty interesting stuff.

MCCAIN: Yes indeed.

PHILLIPS: Well, I know, you know, of course a lot about the carrier, the USS Oriskany. Take me back. As we are about to see this carrier become a manmade reef, what do you remember from the real time missions?

MCCAIN: Well, one of the things I remember most is taking off for the last time from the deck of the Oriskany and then being shot down by a surface-to-air missile over Hanoi.

But what I most remember really is the very tight bonds, friendship and sacrifice and love that existed between all of us, enlisted officer, aviator or non-aviator, and the incredible experience that we had. It was a small, old carrier that fought very valiantly, and I'm very proud to have been a part the air wing that served with great courage and distinction.

PHILLIPS: Senator, how well do you remember that day that you launched off of that carrier and got shot down? And of course we have heard all the stories about you being a POW. What do you think is the most vivid memory from that day?

MCCAIN: Oh, I think probably when the surface-to-air missile struck my airplane, and then it triggered sequences of events, which led to me ending up that day in the infamous Hanoi Hilton, the prison there in Hanoi. Conveniently for them, I came down in a lake near the center of the city, so it was a very short ride to the prison.

PHILLIPS: I guess you're looking at in somewhat of a positive manner?

MCCAIN: Oh, the greatest -- those that I know best and love most are those who I served with, and I cherish the memory of their friendship. Every day I think of my dear friends.

PHILLIPS: So how many arrested landings did you have on that carrier?

MCCAIN: You know, honestly I don't remember how many I had.

PHILLIPS: Do you remember how many times you faltered?

MCCAIN: I'm sure it was numerous.

PHILLIPS: I was hoping you were going to say zero.

MCCAIN: No, no. I wasn't that good. I was no John Glenn.

PHILLIPS: I know you are big fans of each other. Well, let's talk about the fact that this is now going to become the world's largest manmade artificial reef. Do you kind of get a pit in your stomach or do you think this is a neat idea?

MCCAIN: Well, you know, I had kind of hoped that it would be in a museum someplace, like the Intrepid and the Missouri and the Midway and many other carriers, but I think this is kind of unique. And it will certainly be something that will be recreational, to say the least.

PHILLIPS: Are you a diver?

MCCAIN: I am.

PHILLIPS: You are?

MCCAIN: Oh, yes. And I think that it will be -- it will provide a lot of recreation and a lot of good times for people. So, you know, as long as people like me are alive, the memory of the Oriskany will be alive. And so in the history books it will be written about, I think, as a very brave and valiant ship.

PHILLIPS: And it has been written about in that manner. So I'm curious, will you go dive with the others once its down there many, many feet down? And do you think you might be able to still find your quarters?

MCCAIN: I'd love to. I'd love to do it. I'm not sure that I'm -- I'm a diver, but I'm not that good. So I don't know if I can get that deep, but, again, you know, it was a unique time during the Vietnam War. We had more losses from that air wing than any other air wing in the Vietnam War because the war was being escalated dramatically at that time. So there was a lot of sacrifice that was made by the pilots that flew off her.

PHILLIPS: Senator McCain, thank you so much for your time.

MCCAIN: Thank you.

(END VIDEO CLIP)

PHILLIPS: Well, no plane ticket, passport, or press credentials required. LIVE FROM takes you to France for the Cannes Film Festival.

Our Brooke Anderson joins us live with a preview.

BROOKE ANDERSON, CNN CORRESPONDENT: I'm Brooke Anderson at the 59th Cannes Film Festival, where the world premier of "The Da Vinci Code" is underway right behind me. Coming up what Ron Howard and Tom Hanks said today about the controversy surrounding the film. That and more when LIVE FROM continues.

(COMMERCIAL BREAK)

PHILLIPS: Cold shoulder for the code. The Catholic Church has already denounced "The Da Vinci Code." But after a press screening at the Cannes Film Festival, world critics may also want to run Ron Howard out of town on a grail.

CNN's Brooke Anderson joins me from the epicenter of the controversy.

Gee, Brooke, first Sundance now Cannes, this has really been a rough year for you.

ANDERSON: It's been a terrible year, Kyra. I have got to tell you. I'm here at the 59th Cannes Film Festival, where "The Da Vinci Code" is underway. The world premier of "The Da Vinci Code" highly anticipated is happening right behind me at the famed place.

Now, this is a opulent, glamorous setting for the premier for the opening of the festival. We're steps away from the beach. Palm trees adorn the area and near the red carpet.

Now, just a few moments ago Tom Hanks, Audrey Tautou, Paul Bettany, Ron Howard, the whole gang made the traditional walk down the red carpet and then up the steps into the theater, where they are now screening the film.

I was one of among the first to actually get an early look at "The Da Vinci Code" last night in the very first world screening for press. Now, the reception has been very cool. The reviews are pretty harsh, in fact, highly critical and negative for the most part.

To give you an idea, Kyra, "Daily Variety" is calling the film grim, stodgy and on oppressively talky. Now after the movie last night I was waiting for someone to applaud because applause is, you know -- it's very typical here at the festival even when a film is less than stellar, but no one clapped. Instead there were hisses and there were even a few whistles.

Now, the cast and crew of "The Da Vinci Code" did hold a press conference, and while they danced around the questions about negative reviews, they did address the controversy that has been plaguing the film. Take a listen.

(BEGIN VIDEO CLIP)

RON HOWARD, DIRECTOR: There's no question that the film is likely to be upsetting to some people. My advice is, since virtually no one has really seen the movie yet, is to not go see it if you think you are going to be upset. Wait, talk to somebody who has seen it, discuss it, and then arrive at an opinion about the movie itself. But, again, this is supposed to be entertainment. It's not theology.

TOM HANKS, ACTOR: Here's a guy who likes to go see movies, I like two things. I certainly like cracker jack entertainment. I like to be exposed to the same sort of film that a book is a page turner, and I think Ron Howard is the guy that will I turn to as a fan of movies again and again and lucky to be one who's worked with him as many times I have.

But at the same time, I also do want to be challenged somehow. I want to see movies that are provocative in somehow, so I have great things to talk about and perhaps argue about after the movie is over. I thought without a doubt "The Da Vinci Code" was going to be one of those things because this is not a documentary. This is not something that is pulled up and says "These are the facts and this is exactly what happened."

(END VIDEO CLIP)

ANDERSON: Now despite the poor reviews, Howard did say that he thinks the film will do extremely well at the box office, if for no other reason than because the book has been so high profile and so beloved by millions and millions of people. And Kyra, I tend to agree with him. I think the curiosity factor is going to drive a lot of people to the theater to see this one.

PHILLIPS: Sure.

ANDERSON: No matter what the critics say.

PHILLIPS: Oh I agree, it always does. Well a lot of critics wanted a disclaimer at the top of the film. You saw the movie, was there a disclaimer?

ANDERSON: I saw it with my own eyes, Kyra, there is no disclaimer added to the beginning of the film, despite the request from Opus Dei. Opus Dei, of course, the small but influential group within the Catholic Church who feel they are vilified in this story.

But there is no disclaimer. And again, Ron Howard and Tom Hanks say there's really no need for anyone to be offended, for anyone to be incensed by the film, that is it is clearly and strictly a work of fiction, not a historical documentary of any kind.

PHILLIPS: Well meanwhile today's opening day. Give us a feel for what it was like.

ANDERSON: Could you repeat that? I'm sorry. PHILLIPS: Opening day, right? Tell us what it was like.

ANDERSON: Oh, opening day has been incredible. In fact, the vibe here is very exciting and more and more people are gathering here in this area by the Palais and in the streets of Cannes as the day wears on.

People are excited, people are dressed to the nines for the event. But I have to tell you, despite the controversy around the world surrounding "The Da Vinci Code," religious leaders denouncing the movie and calling for boycotts, it seems that a lot of people are just oblivious to that fact and things are running really smoothly.

PHILLIPS: All right, Brooke Anderson, thanks so much. We're watching the Cannes Film Festival. We're also watching the markets. The Dow is down more than 200 points. We're live from the New York Stock Exchange straight ahead. The news keeps coming, we'll keep bringing it to you.

(COMMERCIAL BREAK)

PHILLIPS: Inflation fears are prompting a big selloff on Wall Street. Susan Lisovicz watching those numbers take a big dip. What's going on?

(MARKET REPORT)

(COMMERCIAL BREAK)

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com