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War Talk Cripples Markets; Terror Alert Level Raised; Powell Goes Before U.N. Security Council

Aired February 08, 2003 - 10:00   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.


CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week.
I'm Christine Romans. I'm on the story of how talk of war talks down the markets.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: And I'm Jeanne Meserve, on the story of homeland security and how we ended the week with a new warning of possible terrorist attack.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: I'm Andrea Koppel, and I'm on the story of Secretary of State Colin Powell's dramatic and historic show-and-tell before the United Nations Security Council.

MARIA HINOJOSA, CNN CORRESPONDENT: I'm Maria Hinojosa in New York. This week, I was on the story of the search for the broken pieces of the shuttle Columbia as thousands of people across Texas and Louisiana were suddenly linked to a disaster in space.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: And I'm Dana Bash, on the story of the challenge for President Bush to win more international support before deciding to attack Iraq.

We'll be on all these stories, and we'll hear from CNN United Nation's producer Liz Neisloss from Cypress, where she traveled with the chief U.N. arms inspector Hans Blix.

And we'll also listen to the president's weekly radio address at the end of the hour. But first, let's check in on what's making headlines right now, from CNN headquarters in Atlanta.

(NEWSBREAK)

MESERVE: Attorney General John Ashcroft, Friday, announced that the terrorism threat level goes up from "elevated risk" to "high risk." We're ON THE STORY.

Welcome back.

The attorney general said the decision to raise the threat condition is based on what he called "specific intelligence," analyzed by the full intelligence community and corroborated by multiple intelligence sources. In his remarks, he talked about threats to soft targets. He mentioned transportation, energy and economic sectors. CNN sources say that, in fact, there's been mention in some of the intercepts of the East Coast, though no specific city was mentioned, and mention specifically of hotels and subways.

HINOJOSA: So, Jeanne, here's a question I have for you. I talked to a lot of people yesterday about this, and I can't tell you the number of people who just said that they were very uncomfortable, but at the same time they weren't quite sure to believe this, that was this just all coming on this end of the week, moving toward war, that suddenly this would be happening?

MESERVE: It's an interesting question, Maria. There has been widespread expectations that when and if hostilities with Iraq begin that the threat level would go up to orange. I've engaged Secretary Ridge in a conversation about that. But yesterday, both Secretary Ridge and the attorney general, John Ashcroft, went out of their way to say there is absolutely no relationship between hostilities in Iraq and this decision to move the threat level now.

Some people are scratching their heads a little, finding it a little hard to believe that there isn't some sort of connection there. But I will tell you, I talked to a source last night who is extraordinarily credible, who is able to take a very honest view of the government's moves in this department. I asked him, is this political? He said, absolutely not.

ROMANS: What about the chatter that you're hearing, or the intelligence sources are hearing? I mean, is it reliable? You know, I think a lot of Americans don't know where it's coming from.

And in New York City, for example, we've been at this orange level since September 11th, 2001. So for us, we don't really know exactly what to think. And what's different now?

MESERVE: There's a lot more of it, that's the principle difference. It's coming from many different sources. And what they say is, if they get information from one guy who isn't necessarily your most credible source but then you hear it from two or three other places, it all adds up. You put the pieces together, you say, a ha, maybe there's more to this than we might ordinarily have thought.

(CROSSTALK)

BASH: ... a debate, really, it seems over the -- at least at the end of the week, in the Bush administration, about whether or not there's been enough to actually raise the threat level. And it wasn't, I guess, until Friday that the Homeland Security Council met and went to the president and said, "OK, Mr. President, it's time to raise -- it's a threat."

MESERVE: And part of the reason, Dana, is because in the past when they raised the threat level or considered it, they said they had to have specific and credible information in order to do it. They wanted to reach out to communities and say, "Here is some specific sorts of things that you ought to be looking at."

There were some people who felt that without that kind of specific information, it was too vague, it wasn't particularly useful. But I think in the end, the determination was there was simply too much out there, that they had to do something, even if the response is largely just to have people open their eyes a little wider and watch a little bit more carefully.

HINOJOSA: But, Jeanne, if you're saying that you have some information that's coming from sources that they may know of specific cities, I can imagine people out there saying, "OK, wait a second. We're being told that the threat level is being elevated. And we even know about specific cities, but we're not hearing which ones."

It's almost like we're getting too much information on one end but not enough on another.

MESERVE: No, there is no information about specific cities. The East Coast is mentioned. But according to sources that Kelli Arena has worked, they do not mention any specific cities. I mean, I think you don't have to be a genius to recognize that New York and Washington are always going to be tops on the list as potential targets, however.

BASH (?): The one thing that I thought was interesting because it's something that, actually, my family has talked about doing, that Secretary Ridge talked about for the first time, is telling people to get information about your family, have everything on the ready in case of some kind of attack. That was really fascinating to hear him say that.

MESERVE: It is interesting because it is the first time they've really underlined that boldly. And frankly, it's important. I mean, many of us live in Washington, D.C. If there's an attack that happens here, you know what, the first responders aren't coming to my house or your house. They're going to be at the Capitol. They're going to be at the White House.

All of us have to be prepared to take care of ourselves and take care of our families. And it is simply prudent to have read the material ahead of time. You can't prepare for everything when something happens. If it happens, it's going to be a specific sort of agent involved. And the specific steps you take are going to be geared to that specific chemical or biological weapon or perhaps radiological device.

But there are certain sorts of generic pieces of knowledge that we all should have. And that's why the recommendation that we read up, get ourselves ready.

KOPPEL: Well, Jeanne, thanks so much for joining us. I know that you're off to continue following this story.

And from terrorism drills and alerts at home, to talk of a war that the Bush administration claims is part of that fight. We are on the story of Colin Powell, the United Nations, and reluctant allies when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: Everything we have seen and heard indicates that instead of cooperating actively with the inspectors to ensure the success of their mission, Saddam Hussein and his regime are busy doing all they possibly can to ensure that inspectors succeed in finding absolutely nothing.

(END VIDEO CLIP)

KOPPEL: Secretary of State Colin Powell in what was high political drama this week, a moment we may all look back on as a turning point in the stand-off with Iraq.

We are ON THE STORY. Welcome back.

And welcome to our U.N. producer, Liz Neisloss, who joins us now from Cyprus.

Powell spoke to the United Nations and, armed with photographs, information from defectors and intercepted conversations, made his case.

I don't know whether you all watched it, but...

ROMANS: Oh, yes.

(LAUGHTER)

KOPPEL: Did you? OK. You got time away from the stock market.

ROMANS: Every word, right.

KOPPEL: But it was...

ROMANS: The stock market was watching it too, I can promise you everyone was watching word for word.

KOPPEL: But this was -- you know, there were three main portions to it. There was the big portion that was devoted to WMD, making the case on that, a big portion or a significant portion on the terrorism, and then a smaller portion on the human rights part.

I'm just curious as to what you all felt was most convincing. ROMANS: For me, I mean, for me, I was overwhelmed by the mechanics of the whole thing. I mean, this thing went off without a hitch. And whether or not you believe in what he is saying, whether or not, you know, you're concerned about the international reaction, this was a very well polished performance.

KOPPEL: But what aspect of it did you find to be...

ROMANS: The voices of the Iraqi intelligence intercepts, the lieutenants talking to each other about hiding the -- don't use the word nerve agents and -- I mean, that really I thought was very, very interesting. And to put actual -- you know, to hear someone speaking these words was interesting to me.

BASH: And that was really the whole point of this, right? I mean, the whole point was that everybody, the whole world and, frankly, most Americans, were saying, "OK, Mr. President, you said that you want to attack Iraq, but where's the evidence that they're really that bad, that they really are subverting these weapons inspections?" And that's exactly what he had to do, and that's why those intercepts were so important.

KOPPEL: Exactly. And that actually, if you look at this CNN-USA Today Gallup poll, is what convinced most Americans.

When asked, you know, whether Powell made a very strong case that Iraq is hiding evidence that it has biological or chemical weapons, 64 percent said that he was hiding evidence, and 61 percent said that he has biological chemical weapons.

Is he trying to develop nuclear weapons? A smaller portion, 44 percent.

Has ties to Al Qaida? Interestingly, only 36 percent. And when you talk to administration officials, they will tell you that that was the least convincing part, as far as they were concerned.

ROMANS: Tell us about the preparation for this though. I mean, I love this picture of the secretary of state really sort of cramming for the most important exam of his career.

KOPPEL: That is exactly the way you can describe it, Christine. He was out at the CIA three or four times before he headed up to New York. The night before, he was up until 10:30 just going through, from beginning to end, this about 80-minute-long presentation.

There was a tremendous amount of energy put into preparing this. And there was a reason why they sent Secretary Powell. This is one of the most trusted members of the Bush Cabinet. He is somebody who, as one aide told me, "He's a shrewd dude."

(LAUGHTER)

This is -- Secretary Powell, we also have another CNN-USA Today poll, which shows...

NIESLOSS: Andrea?

KOPPEL: ... 64 percent -- sorry, Liz, I know you're way off there. Just for one more poll up there that shows, "Who do you trust more on Iraq?" Sixty-three percent of Americans said they trusted Powell, over 24 percent that trusted Bush.

Liz?

NEISLOSS: I have to say there was so much attention focused on what was to come. We were expecting drama. We were warned "no smoking gun," but still, it was a bit of an anti-climax, standing outside. I was standing with the reporters, waiting for diplomats to come out after this presentation. And there really were no diplomats coming out with their eyes wide opened and their jaws agape. They just really said, you know, "Interesting, now surprising."

You know, the Bulgarian foreign minister said to me, "Look, this isn't going to change political stances. It may, you know, shift some open-minded people." But basically, there was no dramatic change at the U.N.

KOPPEL: Well, I think that the Bush administration was trying to prepare the American public for that and certainly was trying to spin the story that way, that there wasn't going to be a smoking gun, that this was going to be...

(UNKNOWN): The expectation.

KOPPEL: They were lowering expectations.

(UNKNOWN): Right.

KOPPEL: But the fact is, what they were trying to do was give enough out there, whether it be on the WMD, whether it be on the terrorism links, whether it be on the human rights case, so that different governments can eventually say, if they choose to, that they had political cover, that if you looked at certain aspects of Powell's presentation that that's what swayed them.

KOPPEL: But when it comes right down to it, Liz, we know that the second resolution is the big question out there, whether or not the Bush administration or Great Britain are going to go for that.

They are, right now, on the phone, talking to various leaders around the world, watching where you are, Liz, watching the Blix- Elbaradei trip to see whether or not Saddam Hussein pulls any aces out of his sleeves.

They're waiting also for the presentation at the end of next week to see whether or not this is something that they are going to be able to achieve. They don't think they have the votes as yet.

BASH: One thing that was interesting about the intelligence information was, apparently, there was -- it started out at the White House, where the deputy national security adviser, Steve Hadley, was kind of charged with sifting through, coordinating this team of people, sifting through what intelligence information could really be presented by Secretary Powell in the first place.

Because of course some of the concern all along has been -- when people have said, "Where's the proof," has been, look, giving over intelligence information is really dangerous because they don't want to compromise the sources and the methods, which is a really interesting point, especially in that you saw the CIA director sitting right behind Colin Powell. That was no accident, right, Andrea?

KOPPEL: No.

HINOJOSA: But you know what? I'm hearing some people asking some pretty basic questions out here. And we're being told that this possible war is going to make us feel safe in this country, but I've spoken to a lot of New Yorkers who continue to ask me these two basic questions: One, where is Osama bin Laden? And shouldn't they be, again, going back to that basic question of the person who posed the most direct threat, Osama bin Laden.

And the other question is, what about imminent threat? There are lots of countries who have weapons of mass destruction. Can there be any kind of proof that Iraq is on the verge really of using this? And then that would be the reason to go to war.

KOPPEL: Well, that's another reason why the administration was trying to show at least some links to terrorism. And they had that one -- they haven't referred to him exactly -- or actually, they did, as the top Al Qaida figure, Zawahiri (ph), who they said is in Baghdad, has been coordinating with Ansar al-Islam, this extremist Islamic group in northeastern Iraq.

So they're trying to make that case, Maria. And certainly there are those out there who were staying that they weren't necessarily convinced that there was enough proof on the terrorism side of things.

BASH: Well, Andrea, you know, the Bush administration is trying to capture that momentum that they think that Secretary Powell started on Wednesday.

And the day after the Powell speech, the president said the game is over for Iraq. But can the president build the support he wants at home and overseas?

We're ON THE STORY when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Saddam Hussein was given a final chance. He is throwing that chance away. The dictator of Iraq is making his choice. Now the nations of the Security Council must make their own.

(END VIDEO CLIP)

BASH: President Bush on Thursday, keeping up the pressure on both President Saddam Hussein and on the United Nations.

You know, Ari Fleischer, the White House spokesman, said something this week that really struck me. He said that in private conversations with world leaders the president sometimes says to them, "Where I come from," meaning Texas, "there are more bumper stickers on cars that say `Get the U.S. out of the U.N.' than `God Bless America.'"

(UNKNOWN): Wow.

BASH: And that was really -- really struck me because it's clear that he's trying to let us know that the president is giving the subtle message to world leaders that, you know, if would be great if he got the U.N. but he really doesn't feel like he needs them.

ROMANS (?): There was a real one-two punch here this week that I thought was very interesting. The Colin Powell testimony and presentation, and then the president's, you know, "We will not play these games" speech. Was that a change in direction, a change in tone?

BASH: Well, it was really interesting to watch because you heard a change in the words that the president used this week. The day after the Colin Powell presentation, he -- with Colin Powell, as you saw in that poll, very important to have Colin Powell next him -- went into the Roosevelt Room started talking, you know, taking the ball forward.

But his words were interesting, in that he didn't talk about the fact that Saddam Hussein has to come clean with his weapons of mass destruction, which is the mantra we've been hearing. It's almost like he's kind of pushed that aside and said, "Game over for you, Saddam Hussein." His focus now instead has been the United Nations and really trying to shame them into doing something here, saying that they're being mocked by a dictator -- really strong words.

KOPPEL: But, you know, in fact, the administration does -- and I can tell you certainly from the State Department's perspective, they are really trying to push for as much support as they can get from the U.N. As one official told me, he said, "Everything changes when you have the support of the U.N."

Remember, this is about so much more than just the war. The U.S. can win this on its own, but...

(UNKNOWN): Right, it's long term.

KOPPEL: ... but it's after, the U.S. does not want to keep tens of thousands of troops on the ground there for years. They want to have the support of other countries.

Liz?

NEISLOSS: It's very clear though at the U.N., it's very clear that the force has really -- the threat of force, and no one is denying that that's really what got weapons inspectors back on the ground. It's that hard tone, though, that now has to sort of modify with the diplomatic world, or come to terms with the diplomatic world, if they still want to do that second resolution.

And I wanted to ask though, Dana, it seems that now that Bush has basically said, "We're ready for a second resolution," is that an indication that maybe, despite Germany and France -- they've been still holding firm to their positions, their kind of anti-war positions -- does this indicate that horse-trading has been done, that maybe deals are really in place and that we will now see the unfolding toward agreement?

BASH: Well, what I was told by somebody very close to the administration is -- and, Andrea, you're probably hearing some similar things -- is that, yes, just like you said, they absolutely see the benefit in having this going through the U.N., in terms of the long- term benefit.

But immediately, what they're saying is that, yes, they do want to get a resolution, and it almost doesn't matter what the resolution says, because they're making clear that they believe they already have the authority to attack Iraq based on the last resolution. So as long as they can get a vote, a vote on something, you know, the language is almost beside the point.

KOPPEL: Well, they're, in fact -- I was told Powell went home this weekend with a briefing paper on the options that are there for the U.S. to choose if it decides to go that way.

The first one would be the most toughly worded resolution, not only finding Iraq in material breach but authorizing the U.N. to use all necessary means, which says you can obviously use military force. The second one is kind of the Goldlilocks approach, you know.

KOPPEL: The second option is the compromise one, where you wouldn't say "all necessary means." You would leave it hanging out there that 1441 gave you the authority.

And then the third approach is exactly what you said. It's "we've had the authority all along for the last 12 years, since the end of the first Gulf War."

And it's just a question as to which one they choose.

BASH: The way they're doing this is interesting, because they're almost approaching it like a political campaign. You know, his father talked about...

(CROSSTALK)

NEISLOSS: ... get what they want at the U.N., despite the harsh words.

BASH: Well, I was saying...

NEISLOSS: It does seem like the U.S. will get what they want. I mean, Bush's words do generate a lot of hostility among some countries, but despite that, it does seem like we're heading toward what the U.S. wants (inaudible).

ROMANS: Well, and meanwhile, some critics have been saying that, look, you know, you've got war-mongering against Iraq, but what's happening with North Korea? You've got North Korea sort of thumbing its nose at the United States.

And to sort of switch gears into that realm, this week Richard Armitage said -- I thought it was so interesting, he was answering some questions about that criticism. He said, "Listen, we've been using diplomacy with North Korea for about three months. We've been using diplomacy with Iraq for 12 years. We are at the end of the road with them."

BASH: And the Democrats really saw an opening there on the North Korea story this week, and they really started attacking the Bush administration, saying, "OK, North Korea, it really has nuclear weapons. Why are we focused on Iraq? We've got to focus on North Korea." So they were really strong on that, no question about it.

KOPPEL: And the administration is very defensive about this, because it does recognize that North Korea is becoming increasingly a hot issue. And obviously with nuclear weapons and new threats, they need to be doing more about it.

And the long arm of the United Nations stretches from its New York headquarters all the way to Iraq, with a stopover in Cyprus. We will talk to CNN's U.N. producer, Liz Neisloss, who has been traveling with chief weapons inspector Hans Blix as he makes his way back to Baghdad.

Plus, how war is keeping the economy and investors in a defensive mood, and Maria Hinojosa talks about the massive search for parts of the space shuttle Columbia.

All this ahead, plus a news alert, as we continue ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KOFI ANNAN, SECRETARY GENERAL OF THE U.N.: I still believe that war is not inevitable. But a lot depends on President Saddam Hussein and the Iraqi leadership.

(END VIDEO CLIP)

NEISLOSS: U.N. Secretary General Kofi Annan, still hoping for peace. However, he did tell reporters this week he has no plans to go to Baghdad.

I'm Liz Neisloss, on the story in Larnaca, Cyprus. And I'm on the road once again with Hans Blix, the chief U.N. weapons inspector.

Now, Blix left about eight hours ago. He's in Baghdad now, where he's going to meet with Iraqi officials, as you've heard many, many times. This is Blix's third trip though, and he has said that there needs to be some pretty dramatic change by the Iraqis, and he does admit this could be his last trip if there is no such change.

KOPPEL: Liz, any sense that you've gotten -- you've been with him now for the last couple of days -- as to what it will take for Hans Blix to then go back to the U.N. on Friday and say, "They are doing what we asked them to do. They are really cooperating." To give them, you know, a B+, what would it take? NEISLOSS: I think it's really going to be very clear, not just to Blix, but possibly very publicly, I think whether it's talking about scientists or an agreement on U-2 surveillance planes, whether it's progress toward this national legislation they're looking for or something deeper, handing over of more documents, handing over of any particular weapons cache. They're really looking for something active.

That's what it would take for Blix to come forward on the February 14th, which, by the way, is going to be a very important date, because -- we keep saying that about each one of these dates, but that really will be where the world will be watching.

HINOJOSA: Liz, I'm just wondering if you can take us inside in these trips that you've taken. I mean, what's the mood? How is it different from the other trips that you've taken? Is there something that you're qualitatively feeling that is different amongst all of the people on these trips?

NEISLOSS: Well, you know, it's funny, this is now the third trip with Hans Blix. And he is very calm, very collected. He's able somehow to compartmentalize, I guess, mentally the stress and the strains. He doesn't really show it.

We've gone on various stops -- London to Vienna to Larnaca, Cyprus. He went on to Baghdad. It's somewhat like a diplomatic road rally when you're trying to follow him. But I have to say, it doesn't always go like clockwork. We had one instance when we were in Vienna, Blix was there. He was doing a training course, closing a training course for new weapons inspectors.

And we are sitting on the tarmac, the group of us on the plane, reading newspapers. We hear an announcement that there's plane trouble, and we all sort of roll our eyes. And Blix and his aides start joking about, you know, the newspaper headline is going to saying, "Peace waits while plane repair happens." And we get hauled off the plane.

(LAUGHTER)

But it was very surreal to watch his aides, basically going up to the flight attendants and the ticket counter people and saying, "Listen, we have to get going. Do you...

(LAUGHTER)

... realize who this man is? This is very important. We have to get to Baghdad."

So sort of strange to follow that...

KOPPEL: Liz, what you laid out just a moment ago sounds as if that's this administration's worst nightmare, that he's going to give them sort of a C+, B- and say, "We need to," reading between the lines, "give them more time." You said it's a very important date. This administration, the U.S., is really going to start pushing if it thinks it can get it for that second resolution after February 14th.

NEISLOSS: Well, you've never really heard Hans Blix recently say he wants more time. That's something very delicate. He kind of doesn't want those words out there on the record.

His nuclear counterpart, Mohamed ElBaradei, who has a slightly more simple task -- or not simple, but more black and white -- has said he would like a certain amount of time.

But Hans Blix is avoiding that. He wants the burden of any decision, any decision on the so-called material breach, anything that could trigger war, to be in the hands of the Security Council.

I don't think you'll see him try to drag this out. On the other hand, he won't make a dramatic end to the inspection process. ROMANS: Liz Neisloss, thanks so much for joining us. And best of luck in the next few days as you continue to cover this story, the latest on the U.N. and the arms inspectors.

All of this talk of terrorism, of war, and this week budget deficits, giving us all jitters. And Wall Street has the numbers the prove it.

We're ON THE STORY, and back in two minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP

MITCH DANIELS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Deficits are not always unacceptable. The strongest proponents of balanced budgets routinely make exceptions for war, recession and emergency, exactly the conditions we have experienced simultaneously.

(END VIDEO CLIP)

ROMANS: Mitch Daniels, director of the Office of Management and Budget, toeing the administration line that the big budget deficit is appropriate and temporary.

We're ON THE STORY. Welcome back.

The administration sent Congress a budget this week with record deficits. And meanwhile, talk of war and terrorism pulled down the markets. In fact, the markets lower for four weeks in a row now.

It has been tough going here. They're talking about the market being caught between Iraq and a soft patch...

(LAUGHTER)

... the soft patch in the economy, Iraq of course hanging over the market. Investors, companies, anybody who has to do with the economy seems to be holding on until the next deadline comes in the situation with Iraq. And then there's a little bit of relief when that deadline passes, as happened with Colin Powell's testimony this week. And then the market starts to get worried again.

So that's the continuing sort of hurdle that this market is going over.

And of course, the White House is always thinking about the economy...

(LAUGHTER)

... and thinking about the impact of that. So yesterday the White House announced that they're going to send for the next weeks 15 to 20 Cabinet and sub-Cabinet level officials fanning out across the country to talk about the president's economic plan.

BASH: It's interesting how little the economic plan has gotten play. You would think in a situation where Iraq was not a factor, this would be front-page news with, you know, examples of how five different families would fare under the president's plan.

We're talking about record budget deficits, and it is international events that seem to have stolen the show. Looks as though the White House wants to really get out there and pound the pavement with it's message to try to get it in the forefront.

Maria?

HINOJOSA: There's a certain level of just absolute overload. I mean, we're being told that we've got to go home now and talk to our families about the plan for escape. And we've got to figure out whether or not we're going to be going to war and if the soldiers there are going to be killed in some way that we -- that is just unimaginable.

And at the same time, we're being told, "Well, think about your money." I mean, it I think it's just -- there's just too much.

I mean, most of what I'm hearing is people just saying, "We're not doing anything. All plans are off. There is no buying of anything. There is no apartment moving. There is nothing. Everything is on standby."

And when you have an entire country that's on standby, of course it's going to affect the economy.

ROMANS: And how can you blame anyone when you've been looking at your mutual fund statements? I mean, I don't know if you guys have gotten them recently, but I have, and they aren't pretty. And for most people, they aren't.

I mean, it's this law of diminishing returns. And you know, you take a look at what you're getting in a money market account. You're getting about .77 percent in a money market account. I mean, that's nothing.

The Dow is down 17 percent over the past year. And consider what a $10,000 investment in GE in the first day of 2001 is worth today. It is worth about $4,800. A $10,000 investment in AOL stock in 2001 is worth $2,600. AOL-Time Warner, of course, the parent of this network, as we all know and feel in our pocketbooks.

So this is something that's pretty serious. Why would anybody go out and try to get into the stock market again if this is what's happened to you over the past two or three years and you have this huge international event hanging over your head? And that's exactly why there's this paralysis on Wall Street.

KOPPEL: I mean, when you look at what most economists say about the cost of war, that it's so underestimated, do you -- have you heard any numbers on Iraq. ROMANS: Looking at all of the numbers of Iraq, you look at $99 billion. Some people say $60 billion. Some people say...

(UNKNOWN): But no one knows.

ROMANS: No one knows.

BASH: And they admit at the White House, they have no idea.

ROMANS: Right. And historically, the cost of war, what the White House tells its president, has been vastly under what it really was. You go back to the Civil War, the Revolutionary War, the Vietnam War, you know, in some cases 10, some cases 15 times more is what it actually costs, because there is occupation afterward. There is rehabilitation and help for the people of the country. There -- you know, all kinds of different costs that don't get factored in there.

There is a Yale University study that's amazing that puts the cost from anywhere from $90 billion to $1.9 trillion in a worst-case scenario -- worst-case scenario, keep in mind, but that's at least a range.

BASH: And by the way, that was not factored into the budget that came out this week, at all.

(UNKNOWN): No, it wasn't at all.

BASH: That's not in there at all.

(UNKNOWN): It wasn't at all.

BASH: So, you know, it's a really interesting situation that we're in right now. You've already got an economy that was slowing and, you know, that was coming out of recession and started to recover in 2002. But now what? Now what happens when you have companies that are saying, "We're going to keep all of our new spending, you know, until the second half of 2003. It's going to be a second-half 2003 story."

So... HINOJOSA: Well, a lot of uncertainty in the world, and certainly now the discussion from money and jobs and investments to the story we were all watching exactly one week ago, the loss of the space shuttle Columbia.

Just ahead on ON THE STORY, we're on the story of how the deadly accident especially touched the lives of people across Texas and Louisiana when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Their mission was almost complete, and we lost them so close to home.

(END VIDEO CLIP)

HINOJOSA: President Bush at the Johnson Space Center. We're ON THE STORY, and welcome back.

The shuttle astronauts lost so close to home and the disintegrating shuttle raining down on the homes and towns of so many Americans who, until last Saturday, were unaware and untouched by the space program.

And I have to tell you that it was really an extraordinary place to be. I mean, this is an area of Texas that is not often talked about. It's east Texas, it's the lakes region.

But people here were absolutely transformed, this idea that these pristine forests where they live and their cattle grazing grounds were now suddenly filled with this debris that they were told was very toxic, that they shouldn't touch it, that they shouldn't get near it. And yet it was literally, in some cases, right on their front lawns. Really an extraordinary miracle that no one was hurt on the ground.

ROMANS: How many pieces, Maria -- do they have any idea just how many pieces are out there and what kind of territory it's covering?

HINOJOSA: Thousands and thousands and thousands of pieces. And when we first got there -- we were there on Saturday night -- we had heard that morning perhaps 250 square miles that they were going to search. That was upped when I left on Wednesday evening to a thousand square miles.

And what we were hearing was they hadn't even made a dent into even 1 percent of that territory. And this is in the Sabine counties, where the Sabine National Forest is. And then you can't forget also that these is the Toledo Bend Reservoir, which is an 80-mile-long river -- or, I'm sorry, lake, where they think that also large pieces ended up.

So a real sense -- once the shock wore off, a real sense for these people that this, like September 11th transformed many of us who live in New York or Washington, D.C., has absolutely changed their psyche about the places that they call home.

BASH: You know, Maria, of course most of the debris fell over the president's home state. And he, apparently, when he met with the NASA administrator, Sean O'Keefe, was talking to him about the fact that he was really amazed, and he was obviously very pleased, about the fact that there was all of this debris falling down from the sky that you talked about and nobody on the ground was hurt.

I mean, you were there. Does that really amaze you by looking at what's around?

HINOJOSA: Well, I'll tell you, when I first got there and I went on the farm of Ronnie Joe Evitts (ph), who took us out onto his -- he's got who knows how many hundreds of acres, it's something that I just can't conceive, living in a small apartment in New York City.

But he was able to see, from where we were standing, perhaps what I would say maybe a block, a city block and a half long. And he said, "You see over there? You see over there? There's a piece." And I'd be like, "What are you talking about? Where?" And then he said, "Oh, come on, girl, let's get in the car." And he would take me in this little golf cart over to see it.

And from that far, we spotted a spike...

(UNKNOWN): Oh, my gosh.

HINOJOSA: ... that I would imagine was probably this long, buried right in the ground, still at an angle like this.

And these are people who -- this is their land. This is what they know. The way those of us might recognize, you know, if the guy who sells us coffee at the local bagel shop isn't there in the morning, they recognize every little piece of what has changed in their territory.

ROMANS: Maria, I have to ask you, is it just an isolated situation, the reports that we were hearing last week about people sort of hording some of this stuff? I mean, is that, unfortunately, the ugly side of this story? Is it something we shouldn't focus on?

HINOJOSA: You know, I think it's going to happen less and less. I think when we first got there, I had heard stories of people who knew people who had had some stuff fall on them and were they thinking to call or maybe they weren't going to call and report it.

But as the warnings came down that there was going to be no amnesty, that people were going to be prosecuted, with the arrests that did occur, I think that people -- if they had any second doubts, they were really going to change.

The problem is that you're talking about the pieces of the debris that were, you know, from a tiny square-inch round to, you know, four to five feet long. So, you know, there might be some people who look at this and say, "Oh, come on, no one is ever going to find out, no one is ever going to realize that this is gone," and thinking, "Well, I'll just keep it." But more and more, I think that that's not what's going to happen. People are just -- they realize that this is federal property and they've got to give it back.

BASH: Well, Maria, thank you.

And thank you to my colleagues.

And thank you for watching.

We'll be back ON THE STORY next week. But still ahead, People in the News with the inside story on Kim Jong Il and Colin Powell.

And at 12:00 noon eastern, 9:00 a.m. Pacific, a special two-hour edition of Showdown: Iraq.

Coming up at the top of the hour a news alert, but first, the president's weekly radio address.

(BEGIN AUDIOTAPE)

BUSH: Good morning.

On Wednesday, Secretary of State Powell briefed the United Nations Security Council on Iraq's illegal weapons programs, its attempts to hide those weapons, and its links to terrorist groups.

The Iraqi regime's violations of Security Council resolutions are evident, they are dangerous to America and the world, and they continue to this hour.

The regime has never accounted for a vast arsenal of deadly biological and chemical weapons. To the contrary, the regime is pursuing an elaborate campaign to conceal its weapons materials and to hide or intimidate key experts and scientists.

This effort of deception is directed from the highest levels of the Iraqi regime, including Saddam Hussein, his son, Iraq's vice president, and the very official responsible for cooperating with inspectors.

The Iraqi regime has actively and secretly attempted to obtain equipment needed to produce chemical, biological and nuclear weapons. Firsthand witnesses have informed us that Iraq has at least seven mobile factories for the production of biological agents, equipment mounted on trucks and rails to evade discovery.

The Iraqi regime has acquired and tested the means to deliver weapons of mass destruction. It has never accounted for thousands of bombs and shells capable of delivering chemical weapons. It is actively pursuing components for prohibited ballistic missiles. And we have sources that tell us that Saddam Hussein recently authorized Iraqi field commanders to use chemical weapons, the very weapons the dictator tells us he does not have.

One of the greatest dangers we face is that weapons of mass destruction might be passed to terrorists who would not hesitate to use those weapons. Saddam Hussein has longstanding direct and continuing ties to terrorist networks.

Senior members of Iraqi intelligence and Al Qaida have met at least eight times since the early 1990s. Iraq has sent bomb-making and document-forgery experts to work with Al Qaida. Iraq has also provided Al Qaida with chemical and biological weapons training, and an Al Qaida operative was sent to Iraq several times in the late 1990s for help in acquiring poisons and gases.

We also know that Iraq is harboring a terrorist network headed by a senior Al Qaida terrorist planner. This network runs a poison and explosives training camp in northeast Iraq, and many of its leaders are known to be in Baghdad.

This is the situation as we find it, 12 years after Saddam Hussein agreed to disarm and more than 90 days after the Security Council passed Resolution 1441 by a unanimous vote.

Saddam Hussein was required to make a full declaration of his weapons programs. He has not done so. Saddam Hussein was required to fully cooperate in the disarmament of his regime. He has not done so. Saddam Hussein was given a final chance. He is throwing away that chance.

Having made its demands, the Security Council must not back down when those demands are defied and mocked by a dictator. The United States would welcome and support a new resolution making clear that the Security Council stands behind its previous demands.

Yet resolutions mean little without resolve. And the United States, along with a growing coalition of nations, will take whatever action is necessary to defend ourselves and disarm the Iraqi regime.

Thank you for listening.

(END AUDIOTAPE)

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Powell Goes Before U.N. Security Council>


Aired February 8, 2003 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week.
I'm Christine Romans. I'm on the story of how talk of war talks down the markets.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: And I'm Jeanne Meserve, on the story of homeland security and how we ended the week with a new warning of possible terrorist attack.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: I'm Andrea Koppel, and I'm on the story of Secretary of State Colin Powell's dramatic and historic show-and-tell before the United Nations Security Council.

MARIA HINOJOSA, CNN CORRESPONDENT: I'm Maria Hinojosa in New York. This week, I was on the story of the search for the broken pieces of the shuttle Columbia as thousands of people across Texas and Louisiana were suddenly linked to a disaster in space.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: And I'm Dana Bash, on the story of the challenge for President Bush to win more international support before deciding to attack Iraq.

We'll be on all these stories, and we'll hear from CNN United Nation's producer Liz Neisloss from Cypress, where she traveled with the chief U.N. arms inspector Hans Blix.

And we'll also listen to the president's weekly radio address at the end of the hour. But first, let's check in on what's making headlines right now, from CNN headquarters in Atlanta.

(NEWSBREAK)

MESERVE: Attorney General John Ashcroft, Friday, announced that the terrorism threat level goes up from "elevated risk" to "high risk." We're ON THE STORY.

Welcome back.

The attorney general said the decision to raise the threat condition is based on what he called "specific intelligence," analyzed by the full intelligence community and corroborated by multiple intelligence sources. In his remarks, he talked about threats to soft targets. He mentioned transportation, energy and economic sectors. CNN sources say that, in fact, there's been mention in some of the intercepts of the East Coast, though no specific city was mentioned, and mention specifically of hotels and subways.

HINOJOSA: So, Jeanne, here's a question I have for you. I talked to a lot of people yesterday about this, and I can't tell you the number of people who just said that they were very uncomfortable, but at the same time they weren't quite sure to believe this, that was this just all coming on this end of the week, moving toward war, that suddenly this would be happening?

MESERVE: It's an interesting question, Maria. There has been widespread expectations that when and if hostilities with Iraq begin that the threat level would go up to orange. I've engaged Secretary Ridge in a conversation about that. But yesterday, both Secretary Ridge and the attorney general, John Ashcroft, went out of their way to say there is absolutely no relationship between hostilities in Iraq and this decision to move the threat level now.

Some people are scratching their heads a little, finding it a little hard to believe that there isn't some sort of connection there. But I will tell you, I talked to a source last night who is extraordinarily credible, who is able to take a very honest view of the government's moves in this department. I asked him, is this political? He said, absolutely not.

ROMANS: What about the chatter that you're hearing, or the intelligence sources are hearing? I mean, is it reliable? You know, I think a lot of Americans don't know where it's coming from.

And in New York City, for example, we've been at this orange level since September 11th, 2001. So for us, we don't really know exactly what to think. And what's different now?

MESERVE: There's a lot more of it, that's the principle difference. It's coming from many different sources. And what they say is, if they get information from one guy who isn't necessarily your most credible source but then you hear it from two or three other places, it all adds up. You put the pieces together, you say, a ha, maybe there's more to this than we might ordinarily have thought.

(CROSSTALK)

BASH: ... a debate, really, it seems over the -- at least at the end of the week, in the Bush administration, about whether or not there's been enough to actually raise the threat level. And it wasn't, I guess, until Friday that the Homeland Security Council met and went to the president and said, "OK, Mr. President, it's time to raise -- it's a threat."

MESERVE: And part of the reason, Dana, is because in the past when they raised the threat level or considered it, they said they had to have specific and credible information in order to do it. They wanted to reach out to communities and say, "Here is some specific sorts of things that you ought to be looking at."

There were some people who felt that without that kind of specific information, it was too vague, it wasn't particularly useful. But I think in the end, the determination was there was simply too much out there, that they had to do something, even if the response is largely just to have people open their eyes a little wider and watch a little bit more carefully.

HINOJOSA: But, Jeanne, if you're saying that you have some information that's coming from sources that they may know of specific cities, I can imagine people out there saying, "OK, wait a second. We're being told that the threat level is being elevated. And we even know about specific cities, but we're not hearing which ones."

It's almost like we're getting too much information on one end but not enough on another.

MESERVE: No, there is no information about specific cities. The East Coast is mentioned. But according to sources that Kelli Arena has worked, they do not mention any specific cities. I mean, I think you don't have to be a genius to recognize that New York and Washington are always going to be tops on the list as potential targets, however.

BASH (?): The one thing that I thought was interesting because it's something that, actually, my family has talked about doing, that Secretary Ridge talked about for the first time, is telling people to get information about your family, have everything on the ready in case of some kind of attack. That was really fascinating to hear him say that.

MESERVE: It is interesting because it is the first time they've really underlined that boldly. And frankly, it's important. I mean, many of us live in Washington, D.C. If there's an attack that happens here, you know what, the first responders aren't coming to my house or your house. They're going to be at the Capitol. They're going to be at the White House.

All of us have to be prepared to take care of ourselves and take care of our families. And it is simply prudent to have read the material ahead of time. You can't prepare for everything when something happens. If it happens, it's going to be a specific sort of agent involved. And the specific steps you take are going to be geared to that specific chemical or biological weapon or perhaps radiological device.

But there are certain sorts of generic pieces of knowledge that we all should have. And that's why the recommendation that we read up, get ourselves ready.

KOPPEL: Well, Jeanne, thanks so much for joining us. I know that you're off to continue following this story.

And from terrorism drills and alerts at home, to talk of a war that the Bush administration claims is part of that fight. We are on the story of Colin Powell, the United Nations, and reluctant allies when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: Everything we have seen and heard indicates that instead of cooperating actively with the inspectors to ensure the success of their mission, Saddam Hussein and his regime are busy doing all they possibly can to ensure that inspectors succeed in finding absolutely nothing.

(END VIDEO CLIP)

KOPPEL: Secretary of State Colin Powell in what was high political drama this week, a moment we may all look back on as a turning point in the stand-off with Iraq.

We are ON THE STORY. Welcome back.

And welcome to our U.N. producer, Liz Neisloss, who joins us now from Cyprus.

Powell spoke to the United Nations and, armed with photographs, information from defectors and intercepted conversations, made his case.

I don't know whether you all watched it, but...

ROMANS: Oh, yes.

(LAUGHTER)

KOPPEL: Did you? OK. You got time away from the stock market.

ROMANS: Every word, right.

KOPPEL: But it was...

ROMANS: The stock market was watching it too, I can promise you everyone was watching word for word.

KOPPEL: But this was -- you know, there were three main portions to it. There was the big portion that was devoted to WMD, making the case on that, a big portion or a significant portion on the terrorism, and then a smaller portion on the human rights part.

I'm just curious as to what you all felt was most convincing. ROMANS: For me, I mean, for me, I was overwhelmed by the mechanics of the whole thing. I mean, this thing went off without a hitch. And whether or not you believe in what he is saying, whether or not, you know, you're concerned about the international reaction, this was a very well polished performance.

KOPPEL: But what aspect of it did you find to be...

ROMANS: The voices of the Iraqi intelligence intercepts, the lieutenants talking to each other about hiding the -- don't use the word nerve agents and -- I mean, that really I thought was very, very interesting. And to put actual -- you know, to hear someone speaking these words was interesting to me.

BASH: And that was really the whole point of this, right? I mean, the whole point was that everybody, the whole world and, frankly, most Americans, were saying, "OK, Mr. President, you said that you want to attack Iraq, but where's the evidence that they're really that bad, that they really are subverting these weapons inspections?" And that's exactly what he had to do, and that's why those intercepts were so important.

KOPPEL: Exactly. And that actually, if you look at this CNN-USA Today Gallup poll, is what convinced most Americans.

When asked, you know, whether Powell made a very strong case that Iraq is hiding evidence that it has biological or chemical weapons, 64 percent said that he was hiding evidence, and 61 percent said that he has biological chemical weapons.

Is he trying to develop nuclear weapons? A smaller portion, 44 percent.

Has ties to Al Qaida? Interestingly, only 36 percent. And when you talk to administration officials, they will tell you that that was the least convincing part, as far as they were concerned.

ROMANS: Tell us about the preparation for this though. I mean, I love this picture of the secretary of state really sort of cramming for the most important exam of his career.

KOPPEL: That is exactly the way you can describe it, Christine. He was out at the CIA three or four times before he headed up to New York. The night before, he was up until 10:30 just going through, from beginning to end, this about 80-minute-long presentation.

There was a tremendous amount of energy put into preparing this. And there was a reason why they sent Secretary Powell. This is one of the most trusted members of the Bush Cabinet. He is somebody who, as one aide told me, "He's a shrewd dude."

(LAUGHTER)

This is -- Secretary Powell, we also have another CNN-USA Today poll, which shows...

NIESLOSS: Andrea?

KOPPEL: ... 64 percent -- sorry, Liz, I know you're way off there. Just for one more poll up there that shows, "Who do you trust more on Iraq?" Sixty-three percent of Americans said they trusted Powell, over 24 percent that trusted Bush.

Liz?

NEISLOSS: I have to say there was so much attention focused on what was to come. We were expecting drama. We were warned "no smoking gun," but still, it was a bit of an anti-climax, standing outside. I was standing with the reporters, waiting for diplomats to come out after this presentation. And there really were no diplomats coming out with their eyes wide opened and their jaws agape. They just really said, you know, "Interesting, now surprising."

You know, the Bulgarian foreign minister said to me, "Look, this isn't going to change political stances. It may, you know, shift some open-minded people." But basically, there was no dramatic change at the U.N.

KOPPEL: Well, I think that the Bush administration was trying to prepare the American public for that and certainly was trying to spin the story that way, that there wasn't going to be a smoking gun, that this was going to be...

(UNKNOWN): The expectation.

KOPPEL: They were lowering expectations.

(UNKNOWN): Right.

KOPPEL: But the fact is, what they were trying to do was give enough out there, whether it be on the WMD, whether it be on the terrorism links, whether it be on the human rights case, so that different governments can eventually say, if they choose to, that they had political cover, that if you looked at certain aspects of Powell's presentation that that's what swayed them.

KOPPEL: But when it comes right down to it, Liz, we know that the second resolution is the big question out there, whether or not the Bush administration or Great Britain are going to go for that.

They are, right now, on the phone, talking to various leaders around the world, watching where you are, Liz, watching the Blix- Elbaradei trip to see whether or not Saddam Hussein pulls any aces out of his sleeves.

They're waiting also for the presentation at the end of next week to see whether or not this is something that they are going to be able to achieve. They don't think they have the votes as yet.

BASH: One thing that was interesting about the intelligence information was, apparently, there was -- it started out at the White House, where the deputy national security adviser, Steve Hadley, was kind of charged with sifting through, coordinating this team of people, sifting through what intelligence information could really be presented by Secretary Powell in the first place.

Because of course some of the concern all along has been -- when people have said, "Where's the proof," has been, look, giving over intelligence information is really dangerous because they don't want to compromise the sources and the methods, which is a really interesting point, especially in that you saw the CIA director sitting right behind Colin Powell. That was no accident, right, Andrea?

KOPPEL: No.

HINOJOSA: But you know what? I'm hearing some people asking some pretty basic questions out here. And we're being told that this possible war is going to make us feel safe in this country, but I've spoken to a lot of New Yorkers who continue to ask me these two basic questions: One, where is Osama bin Laden? And shouldn't they be, again, going back to that basic question of the person who posed the most direct threat, Osama bin Laden.

And the other question is, what about imminent threat? There are lots of countries who have weapons of mass destruction. Can there be any kind of proof that Iraq is on the verge really of using this? And then that would be the reason to go to war.

KOPPEL: Well, that's another reason why the administration was trying to show at least some links to terrorism. And they had that one -- they haven't referred to him exactly -- or actually, they did, as the top Al Qaida figure, Zawahiri (ph), who they said is in Baghdad, has been coordinating with Ansar al-Islam, this extremist Islamic group in northeastern Iraq.

So they're trying to make that case, Maria. And certainly there are those out there who were staying that they weren't necessarily convinced that there was enough proof on the terrorism side of things.

BASH: Well, Andrea, you know, the Bush administration is trying to capture that momentum that they think that Secretary Powell started on Wednesday.

And the day after the Powell speech, the president said the game is over for Iraq. But can the president build the support he wants at home and overseas?

We're ON THE STORY when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Saddam Hussein was given a final chance. He is throwing that chance away. The dictator of Iraq is making his choice. Now the nations of the Security Council must make their own.

(END VIDEO CLIP)

BASH: President Bush on Thursday, keeping up the pressure on both President Saddam Hussein and on the United Nations.

You know, Ari Fleischer, the White House spokesman, said something this week that really struck me. He said that in private conversations with world leaders the president sometimes says to them, "Where I come from," meaning Texas, "there are more bumper stickers on cars that say `Get the U.S. out of the U.N.' than `God Bless America.'"

(UNKNOWN): Wow.

BASH: And that was really -- really struck me because it's clear that he's trying to let us know that the president is giving the subtle message to world leaders that, you know, if would be great if he got the U.N. but he really doesn't feel like he needs them.

ROMANS (?): There was a real one-two punch here this week that I thought was very interesting. The Colin Powell testimony and presentation, and then the president's, you know, "We will not play these games" speech. Was that a change in direction, a change in tone?

BASH: Well, it was really interesting to watch because you heard a change in the words that the president used this week. The day after the Colin Powell presentation, he -- with Colin Powell, as you saw in that poll, very important to have Colin Powell next him -- went into the Roosevelt Room started talking, you know, taking the ball forward.

But his words were interesting, in that he didn't talk about the fact that Saddam Hussein has to come clean with his weapons of mass destruction, which is the mantra we've been hearing. It's almost like he's kind of pushed that aside and said, "Game over for you, Saddam Hussein." His focus now instead has been the United Nations and really trying to shame them into doing something here, saying that they're being mocked by a dictator -- really strong words.

KOPPEL: But, you know, in fact, the administration does -- and I can tell you certainly from the State Department's perspective, they are really trying to push for as much support as they can get from the U.N. As one official told me, he said, "Everything changes when you have the support of the U.N."

Remember, this is about so much more than just the war. The U.S. can win this on its own, but...

(UNKNOWN): Right, it's long term.

KOPPEL: ... but it's after, the U.S. does not want to keep tens of thousands of troops on the ground there for years. They want to have the support of other countries.

Liz?

NEISLOSS: It's very clear though at the U.N., it's very clear that the force has really -- the threat of force, and no one is denying that that's really what got weapons inspectors back on the ground. It's that hard tone, though, that now has to sort of modify with the diplomatic world, or come to terms with the diplomatic world, if they still want to do that second resolution.

And I wanted to ask though, Dana, it seems that now that Bush has basically said, "We're ready for a second resolution," is that an indication that maybe, despite Germany and France -- they've been still holding firm to their positions, their kind of anti-war positions -- does this indicate that horse-trading has been done, that maybe deals are really in place and that we will now see the unfolding toward agreement?

BASH: Well, what I was told by somebody very close to the administration is -- and, Andrea, you're probably hearing some similar things -- is that, yes, just like you said, they absolutely see the benefit in having this going through the U.N., in terms of the long- term benefit.

But immediately, what they're saying is that, yes, they do want to get a resolution, and it almost doesn't matter what the resolution says, because they're making clear that they believe they already have the authority to attack Iraq based on the last resolution. So as long as they can get a vote, a vote on something, you know, the language is almost beside the point.

KOPPEL: Well, they're, in fact -- I was told Powell went home this weekend with a briefing paper on the options that are there for the U.S. to choose if it decides to go that way.

The first one would be the most toughly worded resolution, not only finding Iraq in material breach but authorizing the U.N. to use all necessary means, which says you can obviously use military force. The second one is kind of the Goldlilocks approach, you know.

KOPPEL: The second option is the compromise one, where you wouldn't say "all necessary means." You would leave it hanging out there that 1441 gave you the authority.

And then the third approach is exactly what you said. It's "we've had the authority all along for the last 12 years, since the end of the first Gulf War."

And it's just a question as to which one they choose.

BASH: The way they're doing this is interesting, because they're almost approaching it like a political campaign. You know, his father talked about...

(CROSSTALK)

NEISLOSS: ... get what they want at the U.N., despite the harsh words.

BASH: Well, I was saying...

NEISLOSS: It does seem like the U.S. will get what they want. I mean, Bush's words do generate a lot of hostility among some countries, but despite that, it does seem like we're heading toward what the U.S. wants (inaudible).

ROMANS: Well, and meanwhile, some critics have been saying that, look, you know, you've got war-mongering against Iraq, but what's happening with North Korea? You've got North Korea sort of thumbing its nose at the United States.

And to sort of switch gears into that realm, this week Richard Armitage said -- I thought it was so interesting, he was answering some questions about that criticism. He said, "Listen, we've been using diplomacy with North Korea for about three months. We've been using diplomacy with Iraq for 12 years. We are at the end of the road with them."

BASH: And the Democrats really saw an opening there on the North Korea story this week, and they really started attacking the Bush administration, saying, "OK, North Korea, it really has nuclear weapons. Why are we focused on Iraq? We've got to focus on North Korea." So they were really strong on that, no question about it.

KOPPEL: And the administration is very defensive about this, because it does recognize that North Korea is becoming increasingly a hot issue. And obviously with nuclear weapons and new threats, they need to be doing more about it.

And the long arm of the United Nations stretches from its New York headquarters all the way to Iraq, with a stopover in Cyprus. We will talk to CNN's U.N. producer, Liz Neisloss, who has been traveling with chief weapons inspector Hans Blix as he makes his way back to Baghdad.

Plus, how war is keeping the economy and investors in a defensive mood, and Maria Hinojosa talks about the massive search for parts of the space shuttle Columbia.

All this ahead, plus a news alert, as we continue ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KOFI ANNAN, SECRETARY GENERAL OF THE U.N.: I still believe that war is not inevitable. But a lot depends on President Saddam Hussein and the Iraqi leadership.

(END VIDEO CLIP)

NEISLOSS: U.N. Secretary General Kofi Annan, still hoping for peace. However, he did tell reporters this week he has no plans to go to Baghdad.

I'm Liz Neisloss, on the story in Larnaca, Cyprus. And I'm on the road once again with Hans Blix, the chief U.N. weapons inspector.

Now, Blix left about eight hours ago. He's in Baghdad now, where he's going to meet with Iraqi officials, as you've heard many, many times. This is Blix's third trip though, and he has said that there needs to be some pretty dramatic change by the Iraqis, and he does admit this could be his last trip if there is no such change.

KOPPEL: Liz, any sense that you've gotten -- you've been with him now for the last couple of days -- as to what it will take for Hans Blix to then go back to the U.N. on Friday and say, "They are doing what we asked them to do. They are really cooperating." To give them, you know, a B+, what would it take? NEISLOSS: I think it's really going to be very clear, not just to Blix, but possibly very publicly, I think whether it's talking about scientists or an agreement on U-2 surveillance planes, whether it's progress toward this national legislation they're looking for or something deeper, handing over of more documents, handing over of any particular weapons cache. They're really looking for something active.

That's what it would take for Blix to come forward on the February 14th, which, by the way, is going to be a very important date, because -- we keep saying that about each one of these dates, but that really will be where the world will be watching.

HINOJOSA: Liz, I'm just wondering if you can take us inside in these trips that you've taken. I mean, what's the mood? How is it different from the other trips that you've taken? Is there something that you're qualitatively feeling that is different amongst all of the people on these trips?

NEISLOSS: Well, you know, it's funny, this is now the third trip with Hans Blix. And he is very calm, very collected. He's able somehow to compartmentalize, I guess, mentally the stress and the strains. He doesn't really show it.

We've gone on various stops -- London to Vienna to Larnaca, Cyprus. He went on to Baghdad. It's somewhat like a diplomatic road rally when you're trying to follow him. But I have to say, it doesn't always go like clockwork. We had one instance when we were in Vienna, Blix was there. He was doing a training course, closing a training course for new weapons inspectors.

And we are sitting on the tarmac, the group of us on the plane, reading newspapers. We hear an announcement that there's plane trouble, and we all sort of roll our eyes. And Blix and his aides start joking about, you know, the newspaper headline is going to saying, "Peace waits while plane repair happens." And we get hauled off the plane.

(LAUGHTER)

But it was very surreal to watch his aides, basically going up to the flight attendants and the ticket counter people and saying, "Listen, we have to get going. Do you...

(LAUGHTER)

... realize who this man is? This is very important. We have to get to Baghdad."

So sort of strange to follow that...

KOPPEL: Liz, what you laid out just a moment ago sounds as if that's this administration's worst nightmare, that he's going to give them sort of a C+, B- and say, "We need to," reading between the lines, "give them more time." You said it's a very important date. This administration, the U.S., is really going to start pushing if it thinks it can get it for that second resolution after February 14th.

NEISLOSS: Well, you've never really heard Hans Blix recently say he wants more time. That's something very delicate. He kind of doesn't want those words out there on the record.

His nuclear counterpart, Mohamed ElBaradei, who has a slightly more simple task -- or not simple, but more black and white -- has said he would like a certain amount of time.

But Hans Blix is avoiding that. He wants the burden of any decision, any decision on the so-called material breach, anything that could trigger war, to be in the hands of the Security Council.

I don't think you'll see him try to drag this out. On the other hand, he won't make a dramatic end to the inspection process. ROMANS: Liz Neisloss, thanks so much for joining us. And best of luck in the next few days as you continue to cover this story, the latest on the U.N. and the arms inspectors.

All of this talk of terrorism, of war, and this week budget deficits, giving us all jitters. And Wall Street has the numbers the prove it.

We're ON THE STORY, and back in two minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP

MITCH DANIELS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Deficits are not always unacceptable. The strongest proponents of balanced budgets routinely make exceptions for war, recession and emergency, exactly the conditions we have experienced simultaneously.

(END VIDEO CLIP)

ROMANS: Mitch Daniels, director of the Office of Management and Budget, toeing the administration line that the big budget deficit is appropriate and temporary.

We're ON THE STORY. Welcome back.

The administration sent Congress a budget this week with record deficits. And meanwhile, talk of war and terrorism pulled down the markets. In fact, the markets lower for four weeks in a row now.

It has been tough going here. They're talking about the market being caught between Iraq and a soft patch...

(LAUGHTER)

... the soft patch in the economy, Iraq of course hanging over the market. Investors, companies, anybody who has to do with the economy seems to be holding on until the next deadline comes in the situation with Iraq. And then there's a little bit of relief when that deadline passes, as happened with Colin Powell's testimony this week. And then the market starts to get worried again.

So that's the continuing sort of hurdle that this market is going over.

And of course, the White House is always thinking about the economy...

(LAUGHTER)

... and thinking about the impact of that. So yesterday the White House announced that they're going to send for the next weeks 15 to 20 Cabinet and sub-Cabinet level officials fanning out across the country to talk about the president's economic plan.

BASH: It's interesting how little the economic plan has gotten play. You would think in a situation where Iraq was not a factor, this would be front-page news with, you know, examples of how five different families would fare under the president's plan.

We're talking about record budget deficits, and it is international events that seem to have stolen the show. Looks as though the White House wants to really get out there and pound the pavement with it's message to try to get it in the forefront.

Maria?

HINOJOSA: There's a certain level of just absolute overload. I mean, we're being told that we've got to go home now and talk to our families about the plan for escape. And we've got to figure out whether or not we're going to be going to war and if the soldiers there are going to be killed in some way that we -- that is just unimaginable.

And at the same time, we're being told, "Well, think about your money." I mean, it I think it's just -- there's just too much.

I mean, most of what I'm hearing is people just saying, "We're not doing anything. All plans are off. There is no buying of anything. There is no apartment moving. There is nothing. Everything is on standby."

And when you have an entire country that's on standby, of course it's going to affect the economy.

ROMANS: And how can you blame anyone when you've been looking at your mutual fund statements? I mean, I don't know if you guys have gotten them recently, but I have, and they aren't pretty. And for most people, they aren't.

I mean, it's this law of diminishing returns. And you know, you take a look at what you're getting in a money market account. You're getting about .77 percent in a money market account. I mean, that's nothing.

The Dow is down 17 percent over the past year. And consider what a $10,000 investment in GE in the first day of 2001 is worth today. It is worth about $4,800. A $10,000 investment in AOL stock in 2001 is worth $2,600. AOL-Time Warner, of course, the parent of this network, as we all know and feel in our pocketbooks.

So this is something that's pretty serious. Why would anybody go out and try to get into the stock market again if this is what's happened to you over the past two or three years and you have this huge international event hanging over your head? And that's exactly why there's this paralysis on Wall Street.

KOPPEL: I mean, when you look at what most economists say about the cost of war, that it's so underestimated, do you -- have you heard any numbers on Iraq. ROMANS: Looking at all of the numbers of Iraq, you look at $99 billion. Some people say $60 billion. Some people say...

(UNKNOWN): But no one knows.

ROMANS: No one knows.

BASH: And they admit at the White House, they have no idea.

ROMANS: Right. And historically, the cost of war, what the White House tells its president, has been vastly under what it really was. You go back to the Civil War, the Revolutionary War, the Vietnam War, you know, in some cases 10, some cases 15 times more is what it actually costs, because there is occupation afterward. There is rehabilitation and help for the people of the country. There -- you know, all kinds of different costs that don't get factored in there.

There is a Yale University study that's amazing that puts the cost from anywhere from $90 billion to $1.9 trillion in a worst-case scenario -- worst-case scenario, keep in mind, but that's at least a range.

BASH: And by the way, that was not factored into the budget that came out this week, at all.

(UNKNOWN): No, it wasn't at all.

BASH: That's not in there at all.

(UNKNOWN): It wasn't at all.

BASH: So, you know, it's a really interesting situation that we're in right now. You've already got an economy that was slowing and, you know, that was coming out of recession and started to recover in 2002. But now what? Now what happens when you have companies that are saying, "We're going to keep all of our new spending, you know, until the second half of 2003. It's going to be a second-half 2003 story."

So... HINOJOSA: Well, a lot of uncertainty in the world, and certainly now the discussion from money and jobs and investments to the story we were all watching exactly one week ago, the loss of the space shuttle Columbia.

Just ahead on ON THE STORY, we're on the story of how the deadly accident especially touched the lives of people across Texas and Louisiana when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Their mission was almost complete, and we lost them so close to home.

(END VIDEO CLIP)

HINOJOSA: President Bush at the Johnson Space Center. We're ON THE STORY, and welcome back.

The shuttle astronauts lost so close to home and the disintegrating shuttle raining down on the homes and towns of so many Americans who, until last Saturday, were unaware and untouched by the space program.

And I have to tell you that it was really an extraordinary place to be. I mean, this is an area of Texas that is not often talked about. It's east Texas, it's the lakes region.

But people here were absolutely transformed, this idea that these pristine forests where they live and their cattle grazing grounds were now suddenly filled with this debris that they were told was very toxic, that they shouldn't touch it, that they shouldn't get near it. And yet it was literally, in some cases, right on their front lawns. Really an extraordinary miracle that no one was hurt on the ground.

ROMANS: How many pieces, Maria -- do they have any idea just how many pieces are out there and what kind of territory it's covering?

HINOJOSA: Thousands and thousands and thousands of pieces. And when we first got there -- we were there on Saturday night -- we had heard that morning perhaps 250 square miles that they were going to search. That was upped when I left on Wednesday evening to a thousand square miles.

And what we were hearing was they hadn't even made a dent into even 1 percent of that territory. And this is in the Sabine counties, where the Sabine National Forest is. And then you can't forget also that these is the Toledo Bend Reservoir, which is an 80-mile-long river -- or, I'm sorry, lake, where they think that also large pieces ended up.

So a real sense -- once the shock wore off, a real sense for these people that this, like September 11th transformed many of us who live in New York or Washington, D.C., has absolutely changed their psyche about the places that they call home.

BASH: You know, Maria, of course most of the debris fell over the president's home state. And he, apparently, when he met with the NASA administrator, Sean O'Keefe, was talking to him about the fact that he was really amazed, and he was obviously very pleased, about the fact that there was all of this debris falling down from the sky that you talked about and nobody on the ground was hurt.

I mean, you were there. Does that really amaze you by looking at what's around?

HINOJOSA: Well, I'll tell you, when I first got there and I went on the farm of Ronnie Joe Evitts (ph), who took us out onto his -- he's got who knows how many hundreds of acres, it's something that I just can't conceive, living in a small apartment in New York City.

But he was able to see, from where we were standing, perhaps what I would say maybe a block, a city block and a half long. And he said, "You see over there? You see over there? There's a piece." And I'd be like, "What are you talking about? Where?" And then he said, "Oh, come on, girl, let's get in the car." And he would take me in this little golf cart over to see it.

And from that far, we spotted a spike...

(UNKNOWN): Oh, my gosh.

HINOJOSA: ... that I would imagine was probably this long, buried right in the ground, still at an angle like this.

And these are people who -- this is their land. This is what they know. The way those of us might recognize, you know, if the guy who sells us coffee at the local bagel shop isn't there in the morning, they recognize every little piece of what has changed in their territory.

ROMANS: Maria, I have to ask you, is it just an isolated situation, the reports that we were hearing last week about people sort of hording some of this stuff? I mean, is that, unfortunately, the ugly side of this story? Is it something we shouldn't focus on?

HINOJOSA: You know, I think it's going to happen less and less. I think when we first got there, I had heard stories of people who knew people who had had some stuff fall on them and were they thinking to call or maybe they weren't going to call and report it.

But as the warnings came down that there was going to be no amnesty, that people were going to be prosecuted, with the arrests that did occur, I think that people -- if they had any second doubts, they were really going to change.

The problem is that you're talking about the pieces of the debris that were, you know, from a tiny square-inch round to, you know, four to five feet long. So, you know, there might be some people who look at this and say, "Oh, come on, no one is ever going to find out, no one is ever going to realize that this is gone," and thinking, "Well, I'll just keep it." But more and more, I think that that's not what's going to happen. People are just -- they realize that this is federal property and they've got to give it back.

BASH: Well, Maria, thank you.

And thank you to my colleagues.

And thank you for watching.

We'll be back ON THE STORY next week. But still ahead, People in the News with the inside story on Kim Jong Il and Colin Powell.

And at 12:00 noon eastern, 9:00 a.m. Pacific, a special two-hour edition of Showdown: Iraq.

Coming up at the top of the hour a news alert, but first, the president's weekly radio address.

(BEGIN AUDIOTAPE)

BUSH: Good morning.

On Wednesday, Secretary of State Powell briefed the United Nations Security Council on Iraq's illegal weapons programs, its attempts to hide those weapons, and its links to terrorist groups.

The Iraqi regime's violations of Security Council resolutions are evident, they are dangerous to America and the world, and they continue to this hour.

The regime has never accounted for a vast arsenal of deadly biological and chemical weapons. To the contrary, the regime is pursuing an elaborate campaign to conceal its weapons materials and to hide or intimidate key experts and scientists.

This effort of deception is directed from the highest levels of the Iraqi regime, including Saddam Hussein, his son, Iraq's vice president, and the very official responsible for cooperating with inspectors.

The Iraqi regime has actively and secretly attempted to obtain equipment needed to produce chemical, biological and nuclear weapons. Firsthand witnesses have informed us that Iraq has at least seven mobile factories for the production of biological agents, equipment mounted on trucks and rails to evade discovery.

The Iraqi regime has acquired and tested the means to deliver weapons of mass destruction. It has never accounted for thousands of bombs and shells capable of delivering chemical weapons. It is actively pursuing components for prohibited ballistic missiles. And we have sources that tell us that Saddam Hussein recently authorized Iraqi field commanders to use chemical weapons, the very weapons the dictator tells us he does not have.

One of the greatest dangers we face is that weapons of mass destruction might be passed to terrorists who would not hesitate to use those weapons. Saddam Hussein has longstanding direct and continuing ties to terrorist networks.

Senior members of Iraqi intelligence and Al Qaida have met at least eight times since the early 1990s. Iraq has sent bomb-making and document-forgery experts to work with Al Qaida. Iraq has also provided Al Qaida with chemical and biological weapons training, and an Al Qaida operative was sent to Iraq several times in the late 1990s for help in acquiring poisons and gases.

We also know that Iraq is harboring a terrorist network headed by a senior Al Qaida terrorist planner. This network runs a poison and explosives training camp in northeast Iraq, and many of its leaders are known to be in Baghdad.

This is the situation as we find it, 12 years after Saddam Hussein agreed to disarm and more than 90 days after the Security Council passed Resolution 1441 by a unanimous vote.

Saddam Hussein was required to make a full declaration of his weapons programs. He has not done so. Saddam Hussein was required to fully cooperate in the disarmament of his regime. He has not done so. Saddam Hussein was given a final chance. He is throwing away that chance.

Having made its demands, the Security Council must not back down when those demands are defied and mocked by a dictator. The United States would welcome and support a new resolution making clear that the Security Council stands behind its previous demands.

Yet resolutions mean little without resolve. And the United States, along with a growing coalition of nations, will take whatever action is necessary to defend ourselves and disarm the Iraqi regime.

Thank you for listening.

(END AUDIOTAPE)

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