Return to Transcripts main page

On the Story

War Talks Pulls Economy Down; Authorities Work to Identify Victims of Nightclub Fire; U.S. Military Buildup in the Gulf Continues

Aired February 22, 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.


KATHLEEN HAYS, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week.
Welcome to you all. I'm Kathleen Hays, on the story of how war talk hikes up energy costs and pulls down the economy.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: I'm Elizabeth Cohen in Durham, North Carolina. I'm on the story of Jesica Santillan, the 17-year-old teenager who got not one, but two, heart-lung transplants. We'll tell you how she's doing.

WHITNEY CASEY, CNN CORRESPONDENT: I'm Whitney Casey in West Warwick, Rhode Island. Hundreds of family members are waiting on authorities to find out if just one in 96 may be theirs.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: I'm Barbara Starr, on the story of how every day brings more U.S. military personnel to the land and sea surrounding Iraq.

LIZ NEISLOSS, CNN PRODUCER: I'm Liz Neisloss, on the story of how the United Nations is grappling with a looming resolution on Iraq, maybe a final trigger for war.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: And I'm Andrea Koppel, on the story of how the Bush administration's problems with friends, as well as foes, are causing Excedrin-sized headaches at the White House, the Pentagon and the State Department.

We'll be talking about all these stories, and we'll want to hear from you. You can e-mail us at onthestory@cnn.com. We may read your comments on the air.

And we'll listen to the president's radio address at the end of the hour, but first, let's get the hour's top stories from CNN headquarters in Atlanta.

(NEWSBREAK)

CASEY: Well, the death toll here has now reached 96, and the governor believes that's where it will stay. So far, only nine have been identified here.

Yet the federal government has now stepped in. Five teams of pathologists are working around the clock here in hopes of identifying those people. And the governor has underscored from the beginning that it is not the investigation that's important here, but identifying those victims, as family members continue to wait here.

HAYS: Of course, Whitney, I think what everyone's wondering, though, is, why did this happen, how did this happen? A lot of back and forth right now between the club owners and the members of the band, disputing whether or not they should have been using the pyrotechnics that caused this to happen.

CASEY: Exactly. And I just spoke with the attorney general before he left here in a press conference earlier today, and he said that kind of banter is going to continue, and that's what they're investigating.

I also asked him about whether they've called all of the other clubs that have called in after this story to report that when Great White played at their venue, they also used pyrotechnics without the permission of those clubs. And he said he's called all of those clubs and more are calling, and he's looking into each one of those.

NEISLOSS: Whitney, the reporting has been that this club was basically under legal guidelines or following all the codes. So what is it that happened?

I also read they didn't have sprinklers, but that still left them somehow under code. They were following the rules. They did what they should. So what are authorities saying about what should be done?

CASEY: Well, that's interesting, because codes are being looked into right now. But when we talked with the fire marshal, what he says is that many of the people did not know where the fire exits were, making it a question of whether they were well lit or not. So they're certainly looking into that.

But what I thought was interesting, and for discussion purposes, the fire marshal said something like, "Well, when you enter the place, you should immediately know where all of the fire exits are." Well, how many times have you walked into a restaurant or a cocktail party or a hotel, whatever, and looked to see where the fire exits were? You just usually remember exactly where you walked in. And he said, "Had people known where they were, maybe people would have gotten out." Apparently only 12 people left through the back, and one of those 12 was the band leader.

STARR: Now, Whitney, is there actually a state-led investigation going on? What are we talking about here? Is it local fire authorities that are investigating? The state? Has the Bureau of Alcohol, Tobacco and Firearms come into this yet? Who's really doing the investigation?

CASEY: Well, as of right now, it's interesting, the ATF, you see them all around here now. They are the ones, the main investigators. And of course the state attorney general's office is here.

But they have closed down this site. It is no longer a recovery site. It is only an investigation site.

STARR: I thought it was interesting what you said about the other club owners, because when we were watching, you know, some of them on TV, it was pretty interesting. We saw the owner of the Stone Pony down in Asbury Park, and that's a pretty reputable, well-known club, a reputable, well-known owner. It seems like if he's saying there's a problem, the evidence might be building that this issue has come up in the past with other club owners.

CASEY: Yes, he was very vociferous about the fact that he did not -- and he was a bit remiss when they did -- he actually stopped the concert when they did light up those pyrotechnics, because he did not -- he was not aware they were planning on using them.

And of course, if he were aware, he would have had fire marshals come in. And apparently, there's a whole elaborate scheme that you have to do if you do plan on using those. The fire marshals generally come in and test them out to make sure everything's safe.

COHEN: (OFF-MIKE) the people in this community, this is a relatively small community. It must just be devastating for them.

CASEY: (OFF-MIKE) you do not hear anger about this investigation. They are really not even into what happened, who said what. If you ask the people who live here or the family members, who we've been talking a lot to, it's not really about the investigation, it's really about the anxiety they're feeling and the waiting time. You know, they've gone -- they haven't gotten into anger yet.

And a lot of them are actually coming here to the media and bringing us these pictures, because they really don't have anything to do right now in this waiting process. They're becoming somewhat numb.

HAYS: Well, I think it's interesting, what Whitney said -- what you said about the fire marshal saying, "Know where the exits are." It was just uncanny that this is the same week that had the club accident in Chicago where, what, nearly two dozen people died. People, same thing in a way, rushing for an exit and getting trampled. I mean, it just seems...

NEISLOSS: It feels unfortunately very familiar, yes.

HAYS: Yes.

COHEN: There's a bit reminiscent, too, just of 9/11 at this family assistance center and the whole thing about bringing DNA samples. I remember near St. Vincent's, when I was covering 9/11, when they were trying to identify the 3,000 people there, they had people start to bring hair brushes and toothbrushes. And the governor hopes it doesn't get to that, because that will take weeks to identify.

Right now, they're only using dental records. But hopefully, they'll have, within the next few days they hope, all of these people identified. NEISLOSS: Well, thank you, Whitney, very much. You have to, I know, get back to covering this story. We're going to be watching your reports, of course, in the coming days.

But still ahead, on the story of the diplomatic battle waged this week on the pros and cons of war, and what's at stake for the U.S. and the U.N.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The world knows that Saddam Hussein has weapons of mass destruction, even though he said he didn't, and that he is not complying with United Nations demands to destroy them. He is actively deceiving the inspectors.

(END VIDEO CLIP)

NEISLOSS: President Bush, repeating this week that Iraq is defying the U.N. and arms inspectors.

Welcome back. We're ON THE STORY.

And the United Nations in coming days will be where the Iraq debate will come back to the boil. Now, the U.S. and the U.K. face a huge battle, a lobbying effort, to get their resolution done. This is a resolution that will basically decide to go to war. This will be what sort of unleashes the military action. But right now, they're facing a huge lobbying effort, a diplomatic struggle.

KOPPEL: And it is a real numbers game right now, as Liz knows. Fifteen members of the Security Council -- in order to pass a resolution, you need nine out of those 15 without a veto. And it's a divide-and-conquer strategy.

NEISLOSS: It's absolutely that. It's diplomatic math time. You have five permanent members with a veto. The U.S. does not have -- it's the U.S. and the U.K. against the other three basically right now.

There seems to be a strategy right now to go for the votes of the elected members, the nonpermanent members. There are 10 of them.

So if you look at what those countries are, you have Syria and Germany on one side. They will not vote for this war resolution. You have Bulgaria and Spain on the other side who will support it. That leaves, if I'm doing my math right, that leaves six countries in play, basically. And the lobbying effort has been hard on them to get them to come aboard.

HAYS: What's interesting now, Hans Blix, the chief weapons inspector, telling Saddam Hussein he has to destroy some missiles. What is the thinking at the U.N. on how Saddam is going to react and how this might affect the vote? NEISLOSS: Well, they're two, actually, very different things but both very important. It's very hard to say how Iraq is going to react. The best comparison I've heard is from someone who is very familiar with Iraq who says, anytime they get in trouble -- and they are in trouble now -- they're like a hot air balloon, you know. They'll throw something overboard when they start to sink to get a little bit of a lift. You know, they'll allow some scientists to be interviewed. And maybe they need a little lift now, maybe they'll throw something overboard and, say, destroy the missiles.

But basically Hans Blix gave a deadline to Iraq, which is pretty striking for him. This is really something that the U.S. wanted to see. Hans Blix tells Iraq, "You have to destroy these missiles. They're out of range. You're not supposed to have them. But you have to do it by March 1st."

Now, this is really something the U.S. could potentially hang their hat on, could potentially say, "Look, they're not cooperating, and here it is."

KOPPEL: And in fact, they are looking to insert things just like that into the text of a second resolution, which could be introduced, we're hearing, I guess as soon as Monday.

And what they would hope to do is to word it in such a way that it doesn't explicitly authorize force, but it gives various governments political cover, that they can then support a war if the U.S. and U.K. want to go forward with it.

STARR: Let me bring our viewers up to date on one other piece of breaking news that we've just got in.

The Associated Press out of Bogota, Colombia: Leftist rebels in Colombia are now admitting for the first time publicly that they are holding three Americans hostage. These were the Americans who were alive after a plane crashed there several days ago, a DOD Pentagon contractor plane. And those leftist guerrillas are now publicly demanding that the Colombian military suspend operations in the region where the men were abducted.

This is a story of the three Americans being held hostage in Colombia that we will continue to follow, just to bring everybody up to date as to what's going on.

NEISLOSS: And, Barbara, that is a huge story. The conflict in Colombia has been going on for decades. But of course, Iraq overshadows everything else. There really is no discussion of Colombia in the Security Council. Very little focus on that.

STARR: But it's interesting, you know, for President Bush. All of these things continue to percolate in the background on the foreign policy, diplomatic and military front, while the administration clearly is focused on Iraq.

And what I still find curious is, you know, the last we heard, Colin Powell was sort of getting batted around a bit at the U.N. Has there been now a shift in the U.N. back to perhaps what you could think of as the center, I don't know, on this whole question? Is it open to more of a two-way discussion? Where's the balance?

NEISLOSS: It's very tricky. There doesn't seem to be a balance right now. One diplomat said to me -- and this is a diplomat who's lobbying heavily for the U.S. -- said, "We were are in for two very contentious weeks ahead."

The assumption is maybe that the vote will happen the second week of March. Hans Blix has to give yet another report on probably the 7th of March, and the week after that perhaps there may be a vote on this resolution.

But the answer to your question is really, there isn't a balance that's shaped up just yet. Everything is very much in flux. One of the wild cards, really, is France. Literally, a lot of diplomats have said to me, "You know, Chirac is very unpredictable. He could veto." On the other hand, if all these nonpermanent members fall in line, then perhaps he will also, the Russians, the Chinese will fall in line. Everything is still really very much in play. It's really hard to say.

KOPPEL: Yes, I was just going to say that some of the officials I'm talking to on the U.S. side are really scratching their heads. One person said that they're referring to the French now as being in Alamo mode, dating back to the 19th century, the standoff between the Mexicans and the Texans; that they are so entrenched, and Jacques Chirac is so entrenched in his position, that he may go ahead and veto, which nobody really expected.

NEISLOSS: But I have also been told that he -- the French really are still signaling some kind of escape routes in some of their language. They haven't totally ruled out the use of force. And when the French foreign minister was at the Security Council recently, he did not say absolutely, never, no. He did not rule it out. Which, to some, indicates they can walk this back.

COHEN: And now, ladies, from diplomatic affairs, we will later turn to medical affairs. The sad condition of Jesica Santillan, who received not one but two heart-lung transplants. That's when we come back, ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MAC MAHONEY: She's got new heart and new lungs that are just working perfect. No sign of rejection.

(END VIDEO CLIP)

COHEN: That was the family spokesman Mac Mahoney about two days ago when there was still some hope for Jesica Santillan. She received a second heart-lung transplant after the first, it was discovered, because of a mistake, was the wrong blood type. Well, now Duke University is saying that an EEG yesterday showed that Jesica has no brain activity and that a scan shows that Jesica does not have any blood flowing to her brain.

This case brings up so many ethical issues. From the experts I've been talking to, what they say is that Jesica, when she is officially declared brain dead, she is legally dead. Brain dead and legally dead are the same thing, and doctors would take her off the respirator. However, the family has said they don't want that to happen. Her mother said yesterday she always believes that a miracle could happen.

STARR: Elizabeth, this is so tragic. What really happens now? Who decides the next step? The family or the hospital?

COHEN: It's the hospital that decides the next step. When someone is brain dead, they are legally dead, and the hospital -- the doctors would say, "You can have some time to say good-bye to your family member before we actually turn the respirator off," but that person is dead and the respirator would come off.

I asked an expert in this field, I said, "What if the family says no, please don't do that?" Said they would give them some more time to sort of accommodate to the reality, but then if they still were against it the hospital would still turn the respirator off because she is legally dead -- under those circumstances would be legally dead.

HAYS: Elizabeth, she had a long shot anyway, correct? This was a young woman who had been very ill. Maybe this mistake didn't cause her death necessarily. But this kind of thing strikes fear in the heart of anyone who has had a loved one in the hospital or could. How should we protect ourselves from something like this if we have to have an operation?

COHEN: You know, in many ways, it is very, very difficult to protect yourself against medical errors.

Let me answer the first part of your question first. It, indeed, was a long shot. She was born with a heart condition. She spent three years on the waiting list, finally got these organs. At the point that she had her first operation, she weighed 85 pounds and was in very poor health. And then of course, for two weeks, she had to live with the wrong organs as her body continued to reject them, and then had to go through this second operation.

So it was definitely -- it was a long shot the first time. Heart- lung transplants usually, often, do not do very well. And then the second time, some experts have said to me, "You know what, she really shouldn't have had that second chance. Those organs should have gone to somebody else."

And as far as protecting yourself against medical errors, it is very, very tough. I mean, who would have thought that this family would say, "Oh, Doctor, by the way, are these the right type?" So, I mean, I guess you just have to keep asking questions. KOPPEL: So who is liable? I don't even know if they're talking about this yet. Is Duke University liable for this? Is she -- how do they resolve this type of situation?

COHEN: Duke has taken full responsibility for the error. They say that their surgeon did not verify that the blood type was correct and that there were various times in the process that he could have and he didn't. He admitted the mistake immediately to the family. It took Duke 10 days to discuss it publicly, but he admitted it immediately to the family. They have taken full responsibility.

NEISLOSS: So what is it that actually got this second series of transplants? Was it the fear by Duke University of having made such a terrible error? I mean, how is it, if the chances for survival and the chances for this transplant the second time were so terrible, how is it that this came about so quickly?

COHEN: Well, the surgeon said, "We think it might possibly work." I mean, this happens often in medicine. Even when the odds aren't good, the family wants it, the doctors want it, and they want it to happen and so it happens. A doctor was quoted in the newspaper as saying, "It had very little chance, but you know what, I probably would have done the same thing, too."

STARR: Could this now lead to some kind of new standardized protocol for transplant procedures across the United States to make sure this doesn't happen again?

COHEN: Well, it certainly has led to a new protocol here at Duke. With the second operation, they had three different doctors verify that the blood types match. And they said that's now going to be the standard here.

As far as nationally speaking, it's hard to say what they're going to decide to do, because some people say, you know what, this is just a fluke, this doesn't happen very often.

HAYS: Well, thank you, Elizabeth Cohen, for taking time out of a very busy couple of days to join us from North Carolina. We're going to, of course, be waiting for the latest developments in that story.

Now we go from medical issues to the ailing U.S. economy. We're on the story of how war talk, high fuel prices, and terrorism jitters are not helping a recovery.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

BUSH: It's been an amazing period for this nation and our economy to have overcome those obstacles, but there's still too many people looking for work.

(END VIDEO CLIP) HAYS: President Bush on Thursday, admitting to problems with the economy.

We're ON THE STORY. Welcome back.

Unemployment is just one worry. This week saw energy prices continue to climb.

And it was interesting how that refinery fire on Staten Island -- looked like a huge explosion. It was, a big fireball. Black smoke, so dramatic the pictures we saw on CNN. You're seeing it now.

And, you know, when the oil traders reacted to this, one guy said, you know, "We're bidding prices higher anyway. We heard something happened. We bid them up higher." But it wasn't even that they thought how much oil or how much gasoline did we actually lose, the first thought for many people was, could it be a terrorist attack?

The stock market sunk about 70 points momentarily, bounced back as people realized it was just a fire. Officials in New York immediately saying we don't think it was terrorism. But just to show how jittery and on edge all the markets, particularly the oil market, is right now.

NEISLOSS: And when people say jitters, they always think war jitters, Iraq, or maybe I have Iraq at the brain, maybe, being at the U.N. a little too long. But what impact will -- we're looking at probably a whopping cost on a war. And we're also -- there's talk about tax cuts. So all these elements, how is this going to impact the economy and what...

HAYS: Well, of course the budget deficit is going to get bigger. We knew it was going to get bigger, particularly if any element of the president's tax cut plan -- remember that? You know, with all this focus on the war, it seems like any stimulus plan has kind of really taken a back seat now.

I don't think people on Wall Street are so worried about that aspect of it right now. Everyone's talking about war jitters keeping people from doing anything. We had lunch this week with a top CEO, big tech company, and he was saying that -- what he's hearing is, it's a "show me" economy. That's what his customers are saying, fellow CEOs.

Nobody wants to do anything because they are uncertain, and that's what's holding everybody back.

STARR: And we also saw a big jump in the Producer Price Index this week and kind of a disparity between wholesale prices and consumer prices. What's the effect of that?

HAYS: Producer prices, that's prices in the wholesale sector, like you say, it's what businesses pay each other. The biggest culprit -- it was the biggest increase, actually, since, like, 1986 or something in the PPI, as it's called. Energy prices were a big deal, but there were a lot of other price hikes as well. The CPI, the consumer prices, next day, very tame. So maybe we're not worried about inflation yet. And especially because, think about it, if your energy costs go up, if it costs more to fill that big SUV, if your home heating oil bill gets much bigger, you can't just turn off the heat, you don't just stop driving your car. It takes money away from you. That means less spending. That means an economy that doesn't pick up.

That's why most people on Wall Street aren't really worried about inflation, because you need to have an economy that's heating up to have inflation heat up.

KOPPEL: In terms of how the war will impact the economy, it used to be, in the olden days, you know, in the '50s and whatnot, war helped the economy. How much do you think it's going to hurt?

HAYS: Well, actually, it is going to have some help. One of the interesting stories -- we interviewed a technology expert/adviser, kind of, yesterday, who was recommending some defense -- tech defense stock plays. In other words, companies where they're going to sell a big 3-D graphics system to the military, improve computer imaging. But that's a small kind of a slice.

KOPPEL: Certain sectors will improve, yes.

HAYS: The longer run, I think, is the question that Liz raises about a bigger budget deficit. In the long run, that could mean less private capital investment (ph) if the capital's spending more money. The fact that maybe we stay on hold so long that we don't get the kind of pick up we want.

It's just -- you know, right now on Wall Street, the story really is your story, it's Liz's story, it's Barbara's story. You can say what you want about the Producer Price Index, the Consumer Price Index, it has some market impact from day to day. But it's things like a refinery explosion and people think it could be terror, it's what is Hans Blix going to do, is France going to vote -- which side are they coming down on. This is what Wall Street is fixated on now, day in and day out. We're just watching you guys and saying what happens next.

KOPPEL: Well, thanks for the segue.

(LAUGHTER)

From the troubles of a struggling economy to the troubles of a struggling alliance made up of the United States and its friends, we are on that story right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: We are waiting to hear back from the Turks. They understand the importance of this issue to us and to our efforts, and they've got it under consideration now. (END VIDEO CLIP)

KOPPEL: Secretary of State Colin Powell this week on the high- stakes bargaining between two friends, the U.S. and Turkey, over how much money the U.S. would be willing to give Turkey in exchange for giving U.S. troops basing rights ahead of a possible war against Iraq.

We are ON THE STORY. Welcome back.

Difficult talks between the U.S. and Turkey, a reminder that the potential war with Iraq demands a virtual galaxy of military, economic and political arrangements with allies.

I don't know how many of you have actually spent time in the Middle East in one of those souks or bazaars. I say that because what we just witnessed is the same kind of bargaining that takes place when you're trying to buy that rug.

One official I spoke with said, "It's a rug merchant. This is a cultural thing." Turkey wanted $32 billion, an awful lot of money. The U.S. was saying, we'll give you $26 billion. Now they've managed to finesse it in such a way that it's loan guarantees and grants and they'll get more of the money up front.

But this was just, you know, it was negotiating. And in fact, the Turks did pretty well. They got more money in the end.

STARR: It almost seems like checkbook diplomacy, not -- you know, more than just economic incentives, it's getting out your checkbook and writing a check.

KOPPEL: I wouldn't even call it dollar diplomacy. You need to add a big billion or million dollar diplomacy. The U.S. has been handing out money for months now, going back -- whether it's actual dollars like with Kuwait -- they got, I think, $250 million up front -- or you're talking about F-16s, old F-16s that they're passing, I think about 16 of them. You've got Israeli officials who were in town, as well, asking for supplementals.

HAYS: But this is so different from '90-'91 when we were going around getting pledges from people to help us pay for the cost of the war. When you talk about what this is going to do to the deficit, this is one way this situation is so different from 10 years ago, 12 years ago.

KOPPEL: Yes, you wonder kind of where that money is going to come from. And that is very telling about just how unpopular this war is this time around and how the U.S. is having to extend the paychecks and what...

STARR: President Bush made such an interesting comment this week. He talked about the fact that if we spent enough money, maybe we wouldn't need a war. He wasn't terribly specific whether he meant the war on terrorism or war in Iraq.

But even the war on terrorism is somewhat checkbook diplomacy. So much of the rebuilding going on in Afghanistan, humanitarian assistance, enough aid into Afghanistan and maybe the people won't be receptive to having the Al Qaida and the Taliban come back into their country. Dollars going out there to try and make the goal you want happen.

NEISLOSS: Yes, but there are a lot of fears that the dollars will not be there after it's all over in the way that they seem to have dried up in Afghanistan, which you mention.

KOPPEL: Which is why Turkey was bargaining as hard as it was. It stands to lose a lot. After the Gulf War in '91, it was promised a lot of money, didn't get it. They say they lost between $40 billion and $60 billion in tourism and other aspects of their economy.

And they also have problems with the Kurds in northern Iraq. They're afraid that there would be a Kurdish state that would be established after the war. And like other neighbors of Iraq, they're concerned about the fact that Iraq could fragment and cause havoc in the region.

HAYS: But isn't that a big problem -- I think, with Middle East thinking, if you look at it from our point of view of how much we're going to pay to get a war. In the Middle East, they're very worried about the end game, as much as they are, it seems, whether or not there is a war. It's almost like, "Go ahead, get Saddam Hussein out, but tell us how you're going to keep this region from turning into just a cauldron of unrest."

KOPPEL: Well, I'll tell you, you put your finger on the issue right now. And in fact, the administration, on Monday, is going to be briefing reporters. It's going to be an interagency briefing at the White House about the day after, the plans, the humanitarian aspect -- getting the message out.

Colin Powell this week gave -- must have been eight different interviews with foreign news networks -- the Russians, the French, the Germans -- trying to reach out to the publics and sell the fact that the U.S. is not just doing this because we want to take over the oil industries, but because we're trying to liberate the Iraqi people and make it a better society and country.

NEISLOSS: So do you get a sense that after all this, the checkbook diplomacy, the heavy lobbying, how confident is the U.S.? What's your feeling?

KOPPEL: You mean, about getting a second resolution?

NEISLOSS: Yes.

KOPPEL: Honestly, Liz, they do not know. And this weekend, you know, President Bush is going to be meeting out at the ranch with the prime minister of Spain, Aznar. And part of this is, gee, the Spanish, they support us. They also have leverage with a couple of those nonpermanent members of the Security Council -- the Chileans and the Mexicans -- that you can actually use this, you know, divide-and- conquer strategy to bring on... (AUDIO GAP)

STARR: Well, indeed, and over at the Pentagon they're watching the diplomatic front very closely, but as war preparations are continuing at the Pentagon, at bases overseas the buildup continues. We ON THE STORY and back in two minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We will have the time available to execute when we want to, not when as adversary wants to. We'll have the capability and we'll be ready to conduct an operation on a time, a place of our choosing.

(END VIDEO CLIP)

STARR: Lieutenant General David McKiernan (ph), commander of coalition land forces in Kuwait, getting ready for whatever the president orders.

Welcome back. We're ON THE STORY.

The buildup in the Persian Gulf continues, and this week brought a new commitment of U.S. combat troops in the Philippines and new worries that the Pentagon itself remains a target.

A lot of going on this week. We're now up to about -- the U.S. military is up to about 180,000 troops in the Persian Gulf. They say they're as ready as ever, that if the president was to give an order at this point, they could be ready to move within days.

But of course, going back to what we were talking about a minute ago, the Turkish situation, the ability to open a northern front against Iraq still remains a critical issue.

HAYS: So explain that to us. I mean, I think we all now take it as an article of faith almost that we must have Turkey lined up to launch this invasion successfully. Is that true? Is there an alternative strategy just in case this doesn't line up the way it's supposed to?

STARR: Well, there is always plan B in the military. But plan B doesn't look too good to the Pentagon right now.

The reason they fundamentally want Turkey on board is this northern front idea. They are telling the Turks, "You've got to have some U.S. troops along that border. If you don't and war breaks out, Saddam may make a move against the Kurds." There will be unrest. There will be no U.S. military hedged to protect the Kurds and that the Kurdish refugees will flood across the border into Turkey. So that's one issue. They're saying to the Turks, "This will be to your benefit from a military point of view."

But as far as Saddam Hussein goes, they want to open a northern front so he looks south and he gets nervous and he looks north and he gets nervous.

KOPPEL: Just to put a "p.s." on there, by the way, Kurdistan, northern Iraq, is also where you have two major oil-pumping facilities. And the U.S. wants to make sure that those facilities are not destroyed, not the least of which is because it can help pay off the costs of the war and...

HAYS: Aren't there a lot of Kurds in the north then, that are expected to not necessarily (ph) flow over to Turkey but also flow back into areas of Iraq that they had to abandon when they left as refugees. I mean, it gets back to that question of, the troops have to be there to hold things in order once this thing gets going, if it does.

STARR: And one signal of how important this is, very little mention this week, there are now U.S. Special Forces, small numbers, inside northern Iraq, working with the Kurdish minorities, trying to line up support, do liaison, do communications, see what weapons the Kurds have that they could contribute if hostilities break out. The groundwork is absolutely being laid. The anticipation is the Turks will agree, and then the U.S. can begin to move.

NEISLOSS: You wonder, though, what kind of promises -- you hear a lot about the checkbook diplomacy with Turkey. What sort of promises have been made, or arrangements, if any, with the Turks and the U.S., in terms of allowing Turkish troops into northern Iraq? Because obviously, Turkey is very concerned about controlling the Kurds, the Kurds who want autonomy, the Kurds who are really a threat to the Turkish government.

STARR: That has been a big point of discussion between the U.S. military and the Turkish military, of course. There is going to be some little -- I think, Andrea, you have reported on this in the past -- the Turkish military is already very active on that border. They operate...

KOPPEL: Some say they're even south into Kurdistan.

STARR: That's right, exactly, that the Turkish military already operates up there. And so, that's really the issue, how to maintain some sort of stability up there so there isn't a large flow of refugees and a bigger military problem than you already have,

HAYS: And around the world, the Philippines. We're sending troops against the rebels. How big of a step is this? What signal is this sending?

STARR: Well, little notice this week; 350 combat forces, a total U.S. military force of 1,700 on its way to the Philippines to help rout out, they say, the last of Abu Sayyaf. And these U.S. troops will, for the first time, go into combat in the Philippines, side by side with the Philippine military.

KOPPEL: Which is a big deal for the Philippines, because their Constitution, until now and I believe still does, forbid it from having U.S. troops actively participating. STARR: The political justification will be that Abu Sayyaf is tied to extremist groups in Indonesia, groups that are tied to the Al Qaida, link, link, link.

KOPPEL: Got to ask you about the masks.

NEISLOSS: Go ahead.

KOPPEL: Were you going to ask about the masks?

NEISLOSS: Well, really interesting topic for this week.

Well, just very briefly, we heard obviously about masks at the Pentagon. What's that about? It sounds very scary.

STARR: Everyone who works in the Pentagon -- military, civilian, Don Rumsfeld, the cafeteria staff, and even the Pentagon press corps -- you see it here. This is Mike Mount (ph), the Pentagon producer who works with me and Jamie McIntyre.

(LAUGHTER)

We made him put it on. This is the SurvivAir 2000 (ph). Every one of us will get one of these. It will give us 60 minutes to get out of the building if there is a nuclear, chemical or biological attack. Very serious matter, actually, of course.

KOPPEL: Yes, it is.

Well, I want to thank all of my colleagues for joining us.

And thanks to you for watching ON THE STORY. We will be back next week.

Still ahead, "People in the News," focusing this week on National Security Adviser Condoleezza Rice and actor Kevin Spacey. At 12 noon eastern, 9:00 a.m. Pacific, a special two-hour "Showdown: Iraq," live from Kuwait. And at 2:00 p.m. eastern, "American Stories."

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

(BEGIN VIDEOTAPE)

BUSH: Good morning.

This week, members of the House and Senate will return to Washington with a full agenda to address, from strengthening our economy to reforming health care to protecting national security.

On the Senate side, there is a crucial item of business that has been delayed for too long. We face a vacancy crisis in the federal courts, made worse by senators who block votes on qualified nominees. These delays endanger American justice. Vacant federal benches lead to crowded court dockets, overworked judges and longer waits for Americans who want their cases heard. Regional appeals courts have a 15 percent vacancy rate, and filings in those courts reached an all- time high again last year.

Since taking office, I have sent to the Senate 34 qualified, mainstream nominees for the federal courts of appeals. To date, only half of them have received a vote in the Senate, and 12 of the remaining 17 nominees have been waiting more than a year for a floor vote.

It is my responsibility to submit judicial nominations. It is the Senate's responsibility to conduct prompt hearings and up or down floor votes on all judicial nominees.

Yet a handful of Democratic senators, for partisan reasons, are attempting to prevent any vote at all on highly qualified nominees.

One of these nominees is Miguel Estrada, my selection for the D.C. Court of Appeals. I submitted his nomination in May of 2001, and Miguel Estrada has been waiting ever since. That's almost two years, and that's a disgrace.

Miguel Estrada's credentials are impeccable. He has served in the Justice Department under presidents of both political parties. He has argued 15 cases before the U.S. Supreme Court, and he has earned the American Bar Association's highest mark, a unanimous rating of well-qualified.

Miguel Estrada is an exceptional nominee for the federal bench. He also has a remarkable personal story. He came to America from Honduras as a teenager, speaking little English. Within a few years, he had graduated with high honors from Columbia College and Harvard Law School.

Miguel Estrada then served as a law clerk to Supreme Court Justice Anthony Kennedy, as a federal prosecutor in New York, and as assistant to the solicitor general of the United States.

If confirmed, Miguel Estrada would be the first Hispanic American ever to serve on this court, which is often considered the second highest in the land. He would break through a barrier that has stood for too long.

His nomination has strong support from citizens and leaders in both parties and endorsements from the Hispanic National Bar Association, the League of United Latin American Citizens and more than a dozen other distinguished groups.

He's a role model for young people all across this nation, living proof that in American anything is possible.

I nominated Miguel Estrada for the court of appeals because he's a man of talent and character who will be an excellent judge.

Yet after 21 months, he still cannot get an up or down vote from the Senate. Democrats are stalling Miguel Estrada's nomination while they search in vain for a reason to reject him.

Some senators, who once insisted that every appeals court nominee deserves a vote, have abandoned that principle for partisan politics. Their tactics are unfair to the good man I have nominated and unfaithful to the Senate's own obligations.

I call on the Senate Democratic leadership to stop playing politics and permit a vote on Miguel Estrada's nomination. Let each senator vote as he or she thinks best, but give the man a vote.

Thank you for listening.

(END VIDEOTAPE)

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




Victims of Nightclub Fire; U.S. Military Buildup in the Gulf Continues>


Aired February 22, 2003 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KATHLEEN HAYS, CNN CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week.
Welcome to you all. I'm Kathleen Hays, on the story of how war talk hikes up energy costs and pulls down the economy.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: I'm Elizabeth Cohen in Durham, North Carolina. I'm on the story of Jesica Santillan, the 17-year-old teenager who got not one, but two, heart-lung transplants. We'll tell you how she's doing.

WHITNEY CASEY, CNN CORRESPONDENT: I'm Whitney Casey in West Warwick, Rhode Island. Hundreds of family members are waiting on authorities to find out if just one in 96 may be theirs.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: I'm Barbara Starr, on the story of how every day brings more U.S. military personnel to the land and sea surrounding Iraq.

LIZ NEISLOSS, CNN PRODUCER: I'm Liz Neisloss, on the story of how the United Nations is grappling with a looming resolution on Iraq, maybe a final trigger for war.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: And I'm Andrea Koppel, on the story of how the Bush administration's problems with friends, as well as foes, are causing Excedrin-sized headaches at the White House, the Pentagon and the State Department.

We'll be talking about all these stories, and we'll want to hear from you. You can e-mail us at onthestory@cnn.com. We may read your comments on the air.

And we'll listen to the president's radio address at the end of the hour, but first, let's get the hour's top stories from CNN headquarters in Atlanta.

(NEWSBREAK)

CASEY: Well, the death toll here has now reached 96, and the governor believes that's where it will stay. So far, only nine have been identified here.

Yet the federal government has now stepped in. Five teams of pathologists are working around the clock here in hopes of identifying those people. And the governor has underscored from the beginning that it is not the investigation that's important here, but identifying those victims, as family members continue to wait here.

HAYS: Of course, Whitney, I think what everyone's wondering, though, is, why did this happen, how did this happen? A lot of back and forth right now between the club owners and the members of the band, disputing whether or not they should have been using the pyrotechnics that caused this to happen.

CASEY: Exactly. And I just spoke with the attorney general before he left here in a press conference earlier today, and he said that kind of banter is going to continue, and that's what they're investigating.

I also asked him about whether they've called all of the other clubs that have called in after this story to report that when Great White played at their venue, they also used pyrotechnics without the permission of those clubs. And he said he's called all of those clubs and more are calling, and he's looking into each one of those.

NEISLOSS: Whitney, the reporting has been that this club was basically under legal guidelines or following all the codes. So what is it that happened?

I also read they didn't have sprinklers, but that still left them somehow under code. They were following the rules. They did what they should. So what are authorities saying about what should be done?

CASEY: Well, that's interesting, because codes are being looked into right now. But when we talked with the fire marshal, what he says is that many of the people did not know where the fire exits were, making it a question of whether they were well lit or not. So they're certainly looking into that.

But what I thought was interesting, and for discussion purposes, the fire marshal said something like, "Well, when you enter the place, you should immediately know where all of the fire exits are." Well, how many times have you walked into a restaurant or a cocktail party or a hotel, whatever, and looked to see where the fire exits were? You just usually remember exactly where you walked in. And he said, "Had people known where they were, maybe people would have gotten out." Apparently only 12 people left through the back, and one of those 12 was the band leader.

STARR: Now, Whitney, is there actually a state-led investigation going on? What are we talking about here? Is it local fire authorities that are investigating? The state? Has the Bureau of Alcohol, Tobacco and Firearms come into this yet? Who's really doing the investigation?

CASEY: Well, as of right now, it's interesting, the ATF, you see them all around here now. They are the ones, the main investigators. And of course the state attorney general's office is here.

But they have closed down this site. It is no longer a recovery site. It is only an investigation site.

STARR: I thought it was interesting what you said about the other club owners, because when we were watching, you know, some of them on TV, it was pretty interesting. We saw the owner of the Stone Pony down in Asbury Park, and that's a pretty reputable, well-known club, a reputable, well-known owner. It seems like if he's saying there's a problem, the evidence might be building that this issue has come up in the past with other club owners.

CASEY: Yes, he was very vociferous about the fact that he did not -- and he was a bit remiss when they did -- he actually stopped the concert when they did light up those pyrotechnics, because he did not -- he was not aware they were planning on using them.

And of course, if he were aware, he would have had fire marshals come in. And apparently, there's a whole elaborate scheme that you have to do if you do plan on using those. The fire marshals generally come in and test them out to make sure everything's safe.

COHEN: (OFF-MIKE) the people in this community, this is a relatively small community. It must just be devastating for them.

CASEY: (OFF-MIKE) you do not hear anger about this investigation. They are really not even into what happened, who said what. If you ask the people who live here or the family members, who we've been talking a lot to, it's not really about the investigation, it's really about the anxiety they're feeling and the waiting time. You know, they've gone -- they haven't gotten into anger yet.

And a lot of them are actually coming here to the media and bringing us these pictures, because they really don't have anything to do right now in this waiting process. They're becoming somewhat numb.

HAYS: Well, I think it's interesting, what Whitney said -- what you said about the fire marshal saying, "Know where the exits are." It was just uncanny that this is the same week that had the club accident in Chicago where, what, nearly two dozen people died. People, same thing in a way, rushing for an exit and getting trampled. I mean, it just seems...

NEISLOSS: It feels unfortunately very familiar, yes.

HAYS: Yes.

COHEN: There's a bit reminiscent, too, just of 9/11 at this family assistance center and the whole thing about bringing DNA samples. I remember near St. Vincent's, when I was covering 9/11, when they were trying to identify the 3,000 people there, they had people start to bring hair brushes and toothbrushes. And the governor hopes it doesn't get to that, because that will take weeks to identify.

Right now, they're only using dental records. But hopefully, they'll have, within the next few days they hope, all of these people identified. NEISLOSS: Well, thank you, Whitney, very much. You have to, I know, get back to covering this story. We're going to be watching your reports, of course, in the coming days.

But still ahead, on the story of the diplomatic battle waged this week on the pros and cons of war, and what's at stake for the U.S. and the U.N.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The world knows that Saddam Hussein has weapons of mass destruction, even though he said he didn't, and that he is not complying with United Nations demands to destroy them. He is actively deceiving the inspectors.

(END VIDEO CLIP)

NEISLOSS: President Bush, repeating this week that Iraq is defying the U.N. and arms inspectors.

Welcome back. We're ON THE STORY.

And the United Nations in coming days will be where the Iraq debate will come back to the boil. Now, the U.S. and the U.K. face a huge battle, a lobbying effort, to get their resolution done. This is a resolution that will basically decide to go to war. This will be what sort of unleashes the military action. But right now, they're facing a huge lobbying effort, a diplomatic struggle.

KOPPEL: And it is a real numbers game right now, as Liz knows. Fifteen members of the Security Council -- in order to pass a resolution, you need nine out of those 15 without a veto. And it's a divide-and-conquer strategy.

NEISLOSS: It's absolutely that. It's diplomatic math time. You have five permanent members with a veto. The U.S. does not have -- it's the U.S. and the U.K. against the other three basically right now.

There seems to be a strategy right now to go for the votes of the elected members, the nonpermanent members. There are 10 of them.

So if you look at what those countries are, you have Syria and Germany on one side. They will not vote for this war resolution. You have Bulgaria and Spain on the other side who will support it. That leaves, if I'm doing my math right, that leaves six countries in play, basically. And the lobbying effort has been hard on them to get them to come aboard.

HAYS: What's interesting now, Hans Blix, the chief weapons inspector, telling Saddam Hussein he has to destroy some missiles. What is the thinking at the U.N. on how Saddam is going to react and how this might affect the vote? NEISLOSS: Well, they're two, actually, very different things but both very important. It's very hard to say how Iraq is going to react. The best comparison I've heard is from someone who is very familiar with Iraq who says, anytime they get in trouble -- and they are in trouble now -- they're like a hot air balloon, you know. They'll throw something overboard when they start to sink to get a little bit of a lift. You know, they'll allow some scientists to be interviewed. And maybe they need a little lift now, maybe they'll throw something overboard and, say, destroy the missiles.

But basically Hans Blix gave a deadline to Iraq, which is pretty striking for him. This is really something that the U.S. wanted to see. Hans Blix tells Iraq, "You have to destroy these missiles. They're out of range. You're not supposed to have them. But you have to do it by March 1st."

Now, this is really something the U.S. could potentially hang their hat on, could potentially say, "Look, they're not cooperating, and here it is."

KOPPEL: And in fact, they are looking to insert things just like that into the text of a second resolution, which could be introduced, we're hearing, I guess as soon as Monday.

And what they would hope to do is to word it in such a way that it doesn't explicitly authorize force, but it gives various governments political cover, that they can then support a war if the U.S. and U.K. want to go forward with it.

STARR: Let me bring our viewers up to date on one other piece of breaking news that we've just got in.

The Associated Press out of Bogota, Colombia: Leftist rebels in Colombia are now admitting for the first time publicly that they are holding three Americans hostage. These were the Americans who were alive after a plane crashed there several days ago, a DOD Pentagon contractor plane. And those leftist guerrillas are now publicly demanding that the Colombian military suspend operations in the region where the men were abducted.

This is a story of the three Americans being held hostage in Colombia that we will continue to follow, just to bring everybody up to date as to what's going on.

NEISLOSS: And, Barbara, that is a huge story. The conflict in Colombia has been going on for decades. But of course, Iraq overshadows everything else. There really is no discussion of Colombia in the Security Council. Very little focus on that.

STARR: But it's interesting, you know, for President Bush. All of these things continue to percolate in the background on the foreign policy, diplomatic and military front, while the administration clearly is focused on Iraq.

And what I still find curious is, you know, the last we heard, Colin Powell was sort of getting batted around a bit at the U.N. Has there been now a shift in the U.N. back to perhaps what you could think of as the center, I don't know, on this whole question? Is it open to more of a two-way discussion? Where's the balance?

NEISLOSS: It's very tricky. There doesn't seem to be a balance right now. One diplomat said to me -- and this is a diplomat who's lobbying heavily for the U.S. -- said, "We were are in for two very contentious weeks ahead."

The assumption is maybe that the vote will happen the second week of March. Hans Blix has to give yet another report on probably the 7th of March, and the week after that perhaps there may be a vote on this resolution.

But the answer to your question is really, there isn't a balance that's shaped up just yet. Everything is very much in flux. One of the wild cards, really, is France. Literally, a lot of diplomats have said to me, "You know, Chirac is very unpredictable. He could veto." On the other hand, if all these nonpermanent members fall in line, then perhaps he will also, the Russians, the Chinese will fall in line. Everything is still really very much in play. It's really hard to say.

KOPPEL: Yes, I was just going to say that some of the officials I'm talking to on the U.S. side are really scratching their heads. One person said that they're referring to the French now as being in Alamo mode, dating back to the 19th century, the standoff between the Mexicans and the Texans; that they are so entrenched, and Jacques Chirac is so entrenched in his position, that he may go ahead and veto, which nobody really expected.

NEISLOSS: But I have also been told that he -- the French really are still signaling some kind of escape routes in some of their language. They haven't totally ruled out the use of force. And when the French foreign minister was at the Security Council recently, he did not say absolutely, never, no. He did not rule it out. Which, to some, indicates they can walk this back.

COHEN: And now, ladies, from diplomatic affairs, we will later turn to medical affairs. The sad condition of Jesica Santillan, who received not one but two heart-lung transplants. That's when we come back, ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MAC MAHONEY: She's got new heart and new lungs that are just working perfect. No sign of rejection.

(END VIDEO CLIP)

COHEN: That was the family spokesman Mac Mahoney about two days ago when there was still some hope for Jesica Santillan. She received a second heart-lung transplant after the first, it was discovered, because of a mistake, was the wrong blood type. Well, now Duke University is saying that an EEG yesterday showed that Jesica has no brain activity and that a scan shows that Jesica does not have any blood flowing to her brain.

This case brings up so many ethical issues. From the experts I've been talking to, what they say is that Jesica, when she is officially declared brain dead, she is legally dead. Brain dead and legally dead are the same thing, and doctors would take her off the respirator. However, the family has said they don't want that to happen. Her mother said yesterday she always believes that a miracle could happen.

STARR: Elizabeth, this is so tragic. What really happens now? Who decides the next step? The family or the hospital?

COHEN: It's the hospital that decides the next step. When someone is brain dead, they are legally dead, and the hospital -- the doctors would say, "You can have some time to say good-bye to your family member before we actually turn the respirator off," but that person is dead and the respirator would come off.

I asked an expert in this field, I said, "What if the family says no, please don't do that?" Said they would give them some more time to sort of accommodate to the reality, but then if they still were against it the hospital would still turn the respirator off because she is legally dead -- under those circumstances would be legally dead.

HAYS: Elizabeth, she had a long shot anyway, correct? This was a young woman who had been very ill. Maybe this mistake didn't cause her death necessarily. But this kind of thing strikes fear in the heart of anyone who has had a loved one in the hospital or could. How should we protect ourselves from something like this if we have to have an operation?

COHEN: You know, in many ways, it is very, very difficult to protect yourself against medical errors.

Let me answer the first part of your question first. It, indeed, was a long shot. She was born with a heart condition. She spent three years on the waiting list, finally got these organs. At the point that she had her first operation, she weighed 85 pounds and was in very poor health. And then of course, for two weeks, she had to live with the wrong organs as her body continued to reject them, and then had to go through this second operation.

So it was definitely -- it was a long shot the first time. Heart- lung transplants usually, often, do not do very well. And then the second time, some experts have said to me, "You know what, she really shouldn't have had that second chance. Those organs should have gone to somebody else."

And as far as protecting yourself against medical errors, it is very, very tough. I mean, who would have thought that this family would say, "Oh, Doctor, by the way, are these the right type?" So, I mean, I guess you just have to keep asking questions. KOPPEL: So who is liable? I don't even know if they're talking about this yet. Is Duke University liable for this? Is she -- how do they resolve this type of situation?

COHEN: Duke has taken full responsibility for the error. They say that their surgeon did not verify that the blood type was correct and that there were various times in the process that he could have and he didn't. He admitted the mistake immediately to the family. It took Duke 10 days to discuss it publicly, but he admitted it immediately to the family. They have taken full responsibility.

NEISLOSS: So what is it that actually got this second series of transplants? Was it the fear by Duke University of having made such a terrible error? I mean, how is it, if the chances for survival and the chances for this transplant the second time were so terrible, how is it that this came about so quickly?

COHEN: Well, the surgeon said, "We think it might possibly work." I mean, this happens often in medicine. Even when the odds aren't good, the family wants it, the doctors want it, and they want it to happen and so it happens. A doctor was quoted in the newspaper as saying, "It had very little chance, but you know what, I probably would have done the same thing, too."

STARR: Could this now lead to some kind of new standardized protocol for transplant procedures across the United States to make sure this doesn't happen again?

COHEN: Well, it certainly has led to a new protocol here at Duke. With the second operation, they had three different doctors verify that the blood types match. And they said that's now going to be the standard here.

As far as nationally speaking, it's hard to say what they're going to decide to do, because some people say, you know what, this is just a fluke, this doesn't happen very often.

HAYS: Well, thank you, Elizabeth Cohen, for taking time out of a very busy couple of days to join us from North Carolina. We're going to, of course, be waiting for the latest developments in that story.

Now we go from medical issues to the ailing U.S. economy. We're on the story of how war talk, high fuel prices, and terrorism jitters are not helping a recovery.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

BUSH: It's been an amazing period for this nation and our economy to have overcome those obstacles, but there's still too many people looking for work.

(END VIDEO CLIP) HAYS: President Bush on Thursday, admitting to problems with the economy.

We're ON THE STORY. Welcome back.

Unemployment is just one worry. This week saw energy prices continue to climb.

And it was interesting how that refinery fire on Staten Island -- looked like a huge explosion. It was, a big fireball. Black smoke, so dramatic the pictures we saw on CNN. You're seeing it now.

And, you know, when the oil traders reacted to this, one guy said, you know, "We're bidding prices higher anyway. We heard something happened. We bid them up higher." But it wasn't even that they thought how much oil or how much gasoline did we actually lose, the first thought for many people was, could it be a terrorist attack?

The stock market sunk about 70 points momentarily, bounced back as people realized it was just a fire. Officials in New York immediately saying we don't think it was terrorism. But just to show how jittery and on edge all the markets, particularly the oil market, is right now.

NEISLOSS: And when people say jitters, they always think war jitters, Iraq, or maybe I have Iraq at the brain, maybe, being at the U.N. a little too long. But what impact will -- we're looking at probably a whopping cost on a war. And we're also -- there's talk about tax cuts. So all these elements, how is this going to impact the economy and what...

HAYS: Well, of course the budget deficit is going to get bigger. We knew it was going to get bigger, particularly if any element of the president's tax cut plan -- remember that? You know, with all this focus on the war, it seems like any stimulus plan has kind of really taken a back seat now.

I don't think people on Wall Street are so worried about that aspect of it right now. Everyone's talking about war jitters keeping people from doing anything. We had lunch this week with a top CEO, big tech company, and he was saying that -- what he's hearing is, it's a "show me" economy. That's what his customers are saying, fellow CEOs.

Nobody wants to do anything because they are uncertain, and that's what's holding everybody back.

STARR: And we also saw a big jump in the Producer Price Index this week and kind of a disparity between wholesale prices and consumer prices. What's the effect of that?

HAYS: Producer prices, that's prices in the wholesale sector, like you say, it's what businesses pay each other. The biggest culprit -- it was the biggest increase, actually, since, like, 1986 or something in the PPI, as it's called. Energy prices were a big deal, but there were a lot of other price hikes as well. The CPI, the consumer prices, next day, very tame. So maybe we're not worried about inflation yet. And especially because, think about it, if your energy costs go up, if it costs more to fill that big SUV, if your home heating oil bill gets much bigger, you can't just turn off the heat, you don't just stop driving your car. It takes money away from you. That means less spending. That means an economy that doesn't pick up.

That's why most people on Wall Street aren't really worried about inflation, because you need to have an economy that's heating up to have inflation heat up.

KOPPEL: In terms of how the war will impact the economy, it used to be, in the olden days, you know, in the '50s and whatnot, war helped the economy. How much do you think it's going to hurt?

HAYS: Well, actually, it is going to have some help. One of the interesting stories -- we interviewed a technology expert/adviser, kind of, yesterday, who was recommending some defense -- tech defense stock plays. In other words, companies where they're going to sell a big 3-D graphics system to the military, improve computer imaging. But that's a small kind of a slice.

KOPPEL: Certain sectors will improve, yes.

HAYS: The longer run, I think, is the question that Liz raises about a bigger budget deficit. In the long run, that could mean less private capital investment (ph) if the capital's spending more money. The fact that maybe we stay on hold so long that we don't get the kind of pick up we want.

It's just -- you know, right now on Wall Street, the story really is your story, it's Liz's story, it's Barbara's story. You can say what you want about the Producer Price Index, the Consumer Price Index, it has some market impact from day to day. But it's things like a refinery explosion and people think it could be terror, it's what is Hans Blix going to do, is France going to vote -- which side are they coming down on. This is what Wall Street is fixated on now, day in and day out. We're just watching you guys and saying what happens next.

KOPPEL: Well, thanks for the segue.

(LAUGHTER)

From the troubles of a struggling economy to the troubles of a struggling alliance made up of the United States and its friends, we are on that story right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: We are waiting to hear back from the Turks. They understand the importance of this issue to us and to our efforts, and they've got it under consideration now. (END VIDEO CLIP)

KOPPEL: Secretary of State Colin Powell this week on the high- stakes bargaining between two friends, the U.S. and Turkey, over how much money the U.S. would be willing to give Turkey in exchange for giving U.S. troops basing rights ahead of a possible war against Iraq.

We are ON THE STORY. Welcome back.

Difficult talks between the U.S. and Turkey, a reminder that the potential war with Iraq demands a virtual galaxy of military, economic and political arrangements with allies.

I don't know how many of you have actually spent time in the Middle East in one of those souks or bazaars. I say that because what we just witnessed is the same kind of bargaining that takes place when you're trying to buy that rug.

One official I spoke with said, "It's a rug merchant. This is a cultural thing." Turkey wanted $32 billion, an awful lot of money. The U.S. was saying, we'll give you $26 billion. Now they've managed to finesse it in such a way that it's loan guarantees and grants and they'll get more of the money up front.

But this was just, you know, it was negotiating. And in fact, the Turks did pretty well. They got more money in the end.

STARR: It almost seems like checkbook diplomacy, not -- you know, more than just economic incentives, it's getting out your checkbook and writing a check.

KOPPEL: I wouldn't even call it dollar diplomacy. You need to add a big billion or million dollar diplomacy. The U.S. has been handing out money for months now, going back -- whether it's actual dollars like with Kuwait -- they got, I think, $250 million up front -- or you're talking about F-16s, old F-16s that they're passing, I think about 16 of them. You've got Israeli officials who were in town, as well, asking for supplementals.

HAYS: But this is so different from '90-'91 when we were going around getting pledges from people to help us pay for the cost of the war. When you talk about what this is going to do to the deficit, this is one way this situation is so different from 10 years ago, 12 years ago.

KOPPEL: Yes, you wonder kind of where that money is going to come from. And that is very telling about just how unpopular this war is this time around and how the U.S. is having to extend the paychecks and what...

STARR: President Bush made such an interesting comment this week. He talked about the fact that if we spent enough money, maybe we wouldn't need a war. He wasn't terribly specific whether he meant the war on terrorism or war in Iraq.

But even the war on terrorism is somewhat checkbook diplomacy. So much of the rebuilding going on in Afghanistan, humanitarian assistance, enough aid into Afghanistan and maybe the people won't be receptive to having the Al Qaida and the Taliban come back into their country. Dollars going out there to try and make the goal you want happen.

NEISLOSS: Yes, but there are a lot of fears that the dollars will not be there after it's all over in the way that they seem to have dried up in Afghanistan, which you mention.

KOPPEL: Which is why Turkey was bargaining as hard as it was. It stands to lose a lot. After the Gulf War in '91, it was promised a lot of money, didn't get it. They say they lost between $40 billion and $60 billion in tourism and other aspects of their economy.

And they also have problems with the Kurds in northern Iraq. They're afraid that there would be a Kurdish state that would be established after the war. And like other neighbors of Iraq, they're concerned about the fact that Iraq could fragment and cause havoc in the region.

HAYS: But isn't that a big problem -- I think, with Middle East thinking, if you look at it from our point of view of how much we're going to pay to get a war. In the Middle East, they're very worried about the end game, as much as they are, it seems, whether or not there is a war. It's almost like, "Go ahead, get Saddam Hussein out, but tell us how you're going to keep this region from turning into just a cauldron of unrest."

KOPPEL: Well, I'll tell you, you put your finger on the issue right now. And in fact, the administration, on Monday, is going to be briefing reporters. It's going to be an interagency briefing at the White House about the day after, the plans, the humanitarian aspect -- getting the message out.

Colin Powell this week gave -- must have been eight different interviews with foreign news networks -- the Russians, the French, the Germans -- trying to reach out to the publics and sell the fact that the U.S. is not just doing this because we want to take over the oil industries, but because we're trying to liberate the Iraqi people and make it a better society and country.

NEISLOSS: So do you get a sense that after all this, the checkbook diplomacy, the heavy lobbying, how confident is the U.S.? What's your feeling?

KOPPEL: You mean, about getting a second resolution?

NEISLOSS: Yes.

KOPPEL: Honestly, Liz, they do not know. And this weekend, you know, President Bush is going to be meeting out at the ranch with the prime minister of Spain, Aznar. And part of this is, gee, the Spanish, they support us. They also have leverage with a couple of those nonpermanent members of the Security Council -- the Chileans and the Mexicans -- that you can actually use this, you know, divide-and- conquer strategy to bring on... (AUDIO GAP)

STARR: Well, indeed, and over at the Pentagon they're watching the diplomatic front very closely, but as war preparations are continuing at the Pentagon, at bases overseas the buildup continues. We ON THE STORY and back in two minutes.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We will have the time available to execute when we want to, not when as adversary wants to. We'll have the capability and we'll be ready to conduct an operation on a time, a place of our choosing.

(END VIDEO CLIP)

STARR: Lieutenant General David McKiernan (ph), commander of coalition land forces in Kuwait, getting ready for whatever the president orders.

Welcome back. We're ON THE STORY.

The buildup in the Persian Gulf continues, and this week brought a new commitment of U.S. combat troops in the Philippines and new worries that the Pentagon itself remains a target.

A lot of going on this week. We're now up to about -- the U.S. military is up to about 180,000 troops in the Persian Gulf. They say they're as ready as ever, that if the president was to give an order at this point, they could be ready to move within days.

But of course, going back to what we were talking about a minute ago, the Turkish situation, the ability to open a northern front against Iraq still remains a critical issue.

HAYS: So explain that to us. I mean, I think we all now take it as an article of faith almost that we must have Turkey lined up to launch this invasion successfully. Is that true? Is there an alternative strategy just in case this doesn't line up the way it's supposed to?

STARR: Well, there is always plan B in the military. But plan B doesn't look too good to the Pentagon right now.

The reason they fundamentally want Turkey on board is this northern front idea. They are telling the Turks, "You've got to have some U.S. troops along that border. If you don't and war breaks out, Saddam may make a move against the Kurds." There will be unrest. There will be no U.S. military hedged to protect the Kurds and that the Kurdish refugees will flood across the border into Turkey. So that's one issue. They're saying to the Turks, "This will be to your benefit from a military point of view."

But as far as Saddam Hussein goes, they want to open a northern front so he looks south and he gets nervous and he looks north and he gets nervous.

KOPPEL: Just to put a "p.s." on there, by the way, Kurdistan, northern Iraq, is also where you have two major oil-pumping facilities. And the U.S. wants to make sure that those facilities are not destroyed, not the least of which is because it can help pay off the costs of the war and...

HAYS: Aren't there a lot of Kurds in the north then, that are expected to not necessarily (ph) flow over to Turkey but also flow back into areas of Iraq that they had to abandon when they left as refugees. I mean, it gets back to that question of, the troops have to be there to hold things in order once this thing gets going, if it does.

STARR: And one signal of how important this is, very little mention this week, there are now U.S. Special Forces, small numbers, inside northern Iraq, working with the Kurdish minorities, trying to line up support, do liaison, do communications, see what weapons the Kurds have that they could contribute if hostilities break out. The groundwork is absolutely being laid. The anticipation is the Turks will agree, and then the U.S. can begin to move.

NEISLOSS: You wonder, though, what kind of promises -- you hear a lot about the checkbook diplomacy with Turkey. What sort of promises have been made, or arrangements, if any, with the Turks and the U.S., in terms of allowing Turkish troops into northern Iraq? Because obviously, Turkey is very concerned about controlling the Kurds, the Kurds who want autonomy, the Kurds who are really a threat to the Turkish government.

STARR: That has been a big point of discussion between the U.S. military and the Turkish military, of course. There is going to be some little -- I think, Andrea, you have reported on this in the past -- the Turkish military is already very active on that border. They operate...

KOPPEL: Some say they're even south into Kurdistan.

STARR: That's right, exactly, that the Turkish military already operates up there. And so, that's really the issue, how to maintain some sort of stability up there so there isn't a large flow of refugees and a bigger military problem than you already have,

HAYS: And around the world, the Philippines. We're sending troops against the rebels. How big of a step is this? What signal is this sending?

STARR: Well, little notice this week; 350 combat forces, a total U.S. military force of 1,700 on its way to the Philippines to help rout out, they say, the last of Abu Sayyaf. And these U.S. troops will, for the first time, go into combat in the Philippines, side by side with the Philippine military.

KOPPEL: Which is a big deal for the Philippines, because their Constitution, until now and I believe still does, forbid it from having U.S. troops actively participating. STARR: The political justification will be that Abu Sayyaf is tied to extremist groups in Indonesia, groups that are tied to the Al Qaida, link, link, link.

KOPPEL: Got to ask you about the masks.

NEISLOSS: Go ahead.

KOPPEL: Were you going to ask about the masks?

NEISLOSS: Well, really interesting topic for this week.

Well, just very briefly, we heard obviously about masks at the Pentagon. What's that about? It sounds very scary.

STARR: Everyone who works in the Pentagon -- military, civilian, Don Rumsfeld, the cafeteria staff, and even the Pentagon press corps -- you see it here. This is Mike Mount (ph), the Pentagon producer who works with me and Jamie McIntyre.

(LAUGHTER)

We made him put it on. This is the SurvivAir 2000 (ph). Every one of us will get one of these. It will give us 60 minutes to get out of the building if there is a nuclear, chemical or biological attack. Very serious matter, actually, of course.

KOPPEL: Yes, it is.

Well, I want to thank all of my colleagues for joining us.

And thanks to you for watching ON THE STORY. We will be back next week.

Still ahead, "People in the News," focusing this week on National Security Adviser Condoleezza Rice and actor Kevin Spacey. At 12 noon eastern, 9:00 a.m. Pacific, a special two-hour "Showdown: Iraq," live from Kuwait. And at 2:00 p.m. eastern, "American Stories."

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

(BEGIN VIDEOTAPE)

BUSH: Good morning.

This week, members of the House and Senate will return to Washington with a full agenda to address, from strengthening our economy to reforming health care to protecting national security.

On the Senate side, there is a crucial item of business that has been delayed for too long. We face a vacancy crisis in the federal courts, made worse by senators who block votes on qualified nominees. These delays endanger American justice. Vacant federal benches lead to crowded court dockets, overworked judges and longer waits for Americans who want their cases heard. Regional appeals courts have a 15 percent vacancy rate, and filings in those courts reached an all- time high again last year.

Since taking office, I have sent to the Senate 34 qualified, mainstream nominees for the federal courts of appeals. To date, only half of them have received a vote in the Senate, and 12 of the remaining 17 nominees have been waiting more than a year for a floor vote.

It is my responsibility to submit judicial nominations. It is the Senate's responsibility to conduct prompt hearings and up or down floor votes on all judicial nominees.

Yet a handful of Democratic senators, for partisan reasons, are attempting to prevent any vote at all on highly qualified nominees.

One of these nominees is Miguel Estrada, my selection for the D.C. Court of Appeals. I submitted his nomination in May of 2001, and Miguel Estrada has been waiting ever since. That's almost two years, and that's a disgrace.

Miguel Estrada's credentials are impeccable. He has served in the Justice Department under presidents of both political parties. He has argued 15 cases before the U.S. Supreme Court, and he has earned the American Bar Association's highest mark, a unanimous rating of well-qualified.

Miguel Estrada is an exceptional nominee for the federal bench. He also has a remarkable personal story. He came to America from Honduras as a teenager, speaking little English. Within a few years, he had graduated with high honors from Columbia College and Harvard Law School.

Miguel Estrada then served as a law clerk to Supreme Court Justice Anthony Kennedy, as a federal prosecutor in New York, and as assistant to the solicitor general of the United States.

If confirmed, Miguel Estrada would be the first Hispanic American ever to serve on this court, which is often considered the second highest in the land. He would break through a barrier that has stood for too long.

His nomination has strong support from citizens and leaders in both parties and endorsements from the Hispanic National Bar Association, the League of United Latin American Citizens and more than a dozen other distinguished groups.

He's a role model for young people all across this nation, living proof that in American anything is possible.

I nominated Miguel Estrada for the court of appeals because he's a man of talent and character who will be an excellent judge.

Yet after 21 months, he still cannot get an up or down vote from the Senate. Democrats are stalling Miguel Estrada's nomination while they search in vain for a reason to reject him.

Some senators, who once insisted that every appeals court nominee deserves a vote, have abandoned that principle for partisan politics. Their tactics are unfair to the good man I have nominated and unfaithful to the Senate's own obligations.

I call on the Senate Democratic leadership to stop playing politics and permit a vote on Miguel Estrada's nomination. Let each senator vote as he or she thinks best, but give the man a vote.

Thank you for listening.

(END VIDEOTAPE)

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




Victims of Nightclub Fire; U.S. Military Buildup in the Gulf Continues>