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On the Story

Senator Kerry, President Bush Spar on Campaign Trail; Martha Stewart Set to Serve Time

Aired September 18, 2004 - 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.


BETTY NGUYEN, CNN ANCHOR: Good morning. I'm Betty Nguyen.
"Now in the News," some chilling videotape out of Iraq this morning. The Arab network Al Jazeera is airing footage it says shows two Americans and a British citizen being held hostage. Insurgents kidnapped them from their Baghdad home two days ago.

Back home, there are piles of debris where homes once stood in the Florida Panhandle and elsewhere along the Gulf Coast. People are picking up the pieces in the wake of Hurricane Ivan, which is blamed for 24 deaths.

There's a bit of good news for Gulf Coast residents as Tropical Storm Jeanne churns in the Caribbean. The National Hurricane Center says it appears the storm will miss the U.S. coast. Jeanne has lost some of its strength this morning as it heads toward the Bahamas.

And finally, a former child star is facing some adult charges. Macaulay Culkin is out on bond this morning after getting arrested on drugs charges in Oklahoma City yesterday. Police say they found marijuana and other drugs on the 24-year-old actor during a traffic stop.

Those are the headlines "Now in the News." I'm Betty Nguyen.

ON THE STORY starts right now.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week. I'm Suzanne Malveaux, in Kennebunkport, Maine, ON THE STORY of the president, Iraq and the campaign.

SASHA JOHNSON, CNN CORRESPONDENT: I'm Sasha Johnson, in Boston, ON THE STORY of the John Kerry campaign, trying this week to get his message out on Iraq, jobs and health care.

KELLI ARENA, CNN JUSTICE DEPT. CORRESPONDENT: I'm Kelli Arena, ON THE STORY of how the U.S. is on the verge of setting free a man the government has said for three years was a threat to national security.

KATHY SLOBOGIN, CNN CORRESPONDENT: I'm Kathy Slobogin, ON THE STORY of a powerful new documentary focusing on how victims of a terror attack three years ago struggle with the loss and the memories.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, ON THE STORY of how Martha Stewart says she will keep appealing her verdict but wants to start her prison sentence right away.

We'll be talking about all these stories today. And we'll go to California, where Maria Hinojosa is ON THE STORY of the Monterrey Jazz Festival.

Boy she's having fun. Look at that.

E-mail us at onthestory@cnn.com.

Now straight to Suzanne Malveaux and campaign 2004.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Mixed signals are the wrong signals to send to our troops in the field, the Iraqi people, to allies, and most of all the enemy.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Now everyday you look in Iraq, you see it on the nightly news, you see it in the newspapers. The violence is getting worse.

(END VIDEO CLIP)

MALVEAUX: President Bush and Senator Kerry exchanging those long distance jabs during the campaign trail. President Bush defending his Iraq policy and mocking his opponent, Senator Kerry, pointing to the deadly weeks and months that have passed, and also looking at intelligence reports that suggest that they could be on the brink of civil war.

JOHNSON: Suzanne, I'm just curious -- I've obviously been out with John Kerry -- with these new intelligence reporters this week, have you noticed -- has President Bush's rhetoric or his statements about Iraq changed? Has -- is he giving I guess a more realistic picture of what's going on out there on the stump?

MALVEAUX: Well, you know, it's very interesting, Sasha, because you hear the president -- we've been on the campaign trail for weeks now -- and you hear him talking about the weapons of mass destruction. He says time and time again, very clearly, he says, look, we all thought that the weapons of mass destruction -- he does not acknowledge that there were critics and doubters, skeptics about that, but he says essentially we were all to blame in this, that there are no weapons of mass destruction.

But then he goes on very forcefully, saying that he believes he made the right decision, that the country is better off without Saddam Hussein -- the world better off without Saddam Hussein. But the one thing that is interesting here is that, this week, what you saw is numerous documents, there were classified documents, information that came out, that were leaked to us, to the press, suggesting a much bleaker picture. And one of them that you had mentioned, of course, is that Iraq Survey Group.

That is the one that said, quite frankly, that there were no weapons of mass destruction prior to the invasion of Iraq. And another intelligence report that said look at the next 18 months. You know, there's a doomsday scenario here. On the one hand, things may work out. On the other hand, however, they're looking at the possibility of a civil war.

ARENA: Suzanne, you mentioned documents leaking out. Wasn't there a document dump just last night? Can you bring us up to date on what that was all about?

MALVEAUX: And that is so common. We like to call that the Friday night follies.

It happened a lot in the Clinton administration. But it was last night, we were in Charlotte, North Carolina, listening to the president giving a speech, his W is for Women campaign, when we got word that there may be a huge document dump, additional documents on the president's military service, as you know under fire from critics, as well as Senator Kerry.

Really had to switch gears here. E-mails were flying, phone calls about this -- these documents that were being released.

The big question, of course, for all of us, what was inside of them? Did they shed any new light on the controversy?

Once we got them, they were released at the Pentagon, but we were able to gather them on e-mail. Once we got them, we realized that 80 pages or so, there really was one that stood out.

It was a letter from the president's father, George H. W. Bush, to a military officer of Bush saying that he was thanking him for taking care, "looking after my son" while he spent some time in the squadron in the Texas Air National Guard. Critics, Democrats jumped on that immediately, started e-mailing us, as well as the campaign, making phone calls, saying, hey, look, this just shows that the president once again got preferential treatment. The White House came back, slammed him, and saying, look, you know, this really doesn't show much of anything.

SLOBOGIN: Suzanne, you know, we're all intensely focused on these documents, looking for anything new. But is it an election issue? Do the voters really seem to care about the stuff that happened so -- so long ago?

MALVEAUX: Well, you know, it's very interesting, and probably Sasha can join in on this, as well, because we've been talking to people. I've talked with a lot of people who are in the National Guard.

As you know, the president addressed that group just this past week. And you bring them -- if you take them aside and you say, "Look, does this make a difference what the president did or did not do some 30 years ago?" And they say no, really. I mean, they believe what really matters is what's happening now inside of Iraq. And a lot of people, too, say they're quite -- they're quite tired of all the discussion about it. So it goes both ways.

I talked to one gentleman who actually lost his brother in Iraq. And he said, look -- you know, he was critical of the president because he said he believes that he avoided combat during Vietnam being in the National Guard, and he said this is the man ironically who -- who is sending so many soldiers out there on the front lines. But he is a minority of the people out there.

HAYS: And certainly that's what the polls would suggest.

Another interesting story that kind of flew below the radar this week is that the Pentagon is asking to take $3 billion of the $18 billion that's supposed to go to reconstruction to spend on security now, kind of underscoring this intelligence estimate. Also underscoring how little money is being spent on reconstruction, another reason why there's so many troubles there. But the polls, Suzanne, are so interesting.

I would think behind the scenes at the White House, however serious they act, there are big smiles as they see some polls showing President Bush way out ahead. People thinking better to -- at handling an international crisis. And even on the economy, maybe a dead heat with John Kerry.

MALVEAUX: Well, you know, they're not going to publicly gloat, but behind the scenes, of course, they'll tell you, look, you know, we feel that we're very confident here that we've got the kind of bounce that we were looking for, that they do not believe that Kerry performed very well. Ultimately, they believe that -- that the last month was very damaging with Kerry with the whole Swift Boat military Vietnam controversy.

Now you see what's changing. They're turning a corner here. People are looking at President Bush's own military record.

You see both of these campaigns now really putting that aside, saying, look, we don't want to deal with Vietnam or what happened 30 years ago, let's focus on today. They know that they've got to fight this, and they've got to fight in a couple of key states. But what the strategy here is that they are going to the states where normally Kerry would perform very well, and they're essentially making them move to those states, campaign hard in those states, spend their money and their resources, and perhaps just break even.

JOHNSON: Well, Suzanne, we'll talk more about that in a moment. But as you know, every move in each campaign is noted, dissected and analyzed. How's the Kerry campaign fighting back? I'm on that story right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) KERRY: You're going to have to stand up and prove that we can talk the truth, that we can fight back against vicious smears and lies.

(END VIDEO CLIP)

JOHNSON: Democratic presidential candidate John Kerry in New Mexico earlier this week telling crowds to overlook what he says are distortions about his past and his plans for future.

Welcome back. We're ON THE STORY.

HAYS: Sasha, I just asked Suzanne Malveaux about behind the scenes at the White House and how they must be feeling pretty good about what the polls are showing. You're hanging out with the Kerry campaign. You're talking to people when you go to the speeches, you're talking to some of the operatives. I would think they're a little bit depressed to see a man not -- not only is he not making headway, he seems to be losing ground against George Bush in some of these polls.

JOHNSON: Well, they would completely and totally disagree with you on that point. Yesterday, they presented us with I think four or five polls which they say shows the race at least within the margin of error.

They looked at the Gallup poll that came out yesterday that showed Kerry down by double digits and said, "You know what? That's just not true. Our internals show the race much closer."

But, you know, you do talk to people at rallies. I talked to one prominent Democrat at a New Mexico rally the other day. And he said, "Well, you know, his message finally seems to be catching on. We feel a little bit better about the way things are. He seems to be a little more aggressive on the stump. So we're with feeling better about things."

I mean, they acknowledge that they're down, but they say that this is when John Kerry performs his best, when he's the underdog, when his back's against the wall. So, you know, they say, "Look, we've got 45 days. This is definitely not over yet."

MALVEAUX: Sasha, I was in Las Vegas this past week at the National Guard Association, their big conference, and it was really incredible to see because there were thousands of National Guardsmen who were there. And when President Bush walked in, I mean, they just erupted with applause. There were several standing ovations.

To watch the kind of perception that the president got from this group -- and I know that Kerry went a little bit later, I guess two days later, and addressed the same organization. How was he received?

JOHNSON: Well, before we even landed in Las Vegas, the Kerry campaign came back and they said, "Look, do not expect John Kerry to receive the same type of warm welcome that the president -- that President Bush got when he went and spoke to this group. President Bush is the commander in chief. These people have a certain allegiance to him, and we understand that and respect that."

But -- and they also acknowledged John Kerry was going in with what some said was a very unpopular speech. He basically accused the president of not being straight with the audience, not being straight with the National guard about what was happening in Iraq.

He criticized President Bush for, you know, not supplying the National Guard with appropriate types of health care benefits that they deserve. And when I spoke with some National Guards people, as you did, after the speech, it was a pretty mixed response.

There were some people that were definitely pro Kerry, there were others that just said, "Look, this guy shouldn't have come here. We were very respectful. They gave him two standing ovations, but we did it because he's a sitting senator and not because we agreed with anything that he said." But there were people there that did -- that did like what he said.

ARENA: Sasha, that speech just seemed to be part of -- of an overall trend for Senator Kerry to be a little sharper, a little more personal in his -- in his talks that he's giving publicly. A lot of Democrats that I've heard from that have come on CNN in the past are saying, "OK, finally, now he's taking the gloves off and he's getting down to business."

Is that what you're sensing?

JOHNSON: Yes. I mean Democrats outside the campaign are very happy that Kerry's finally in there throwing elbows. And, you know, we traveled to many different states this week, and in each state and each day was a separate issue.

Monday was the assault weapons ban. Tuesday was Medicare. And what the Kerry campaign is trying to do is take all of these policy issues and turn them into character critiques of President Bush.

You know, on Medicare, President Bush says that he's for seniors, but look, senior citizens, he has done x, y and z to raise your health care costs to do these things. So really he's someone that can't be trusted.

So it turns into a character issue. I mean, even last night in Aurora, Colorado, his refrain for President Bush was, can you really trust him?" Look what he's done on Iraq, health care, the economy. He's lost jobs. Can you really trust him?

So they see this as a way of defining why people should vote against President Bush. And it also helps them to sort of counter the wrap on Kerry, which is that he's been a flip-flopper, which the Kerry campaign has acknowledged is a criticism that has stuck somewhat.

SLOBOGIN: Sasha, we heard this week that there was a kind of infusion of new blood at the high levels of the Kerry campaign this week. A lot of the Clintonistas coming on board. Is that -- can you see, is that making a difference? JOHNSON: Well, I mean, I think it depends. Mike McCurry was out on the plane. He, you know, came back and chatted with reporters, was reminiscing about his time in the Clinton White House.

So there are some people that say yes. The -- you know, Joe Lockhart and Mike McCurry coming on has definitely given the campaign a certain new structure, a certain control over the message, if you will.

But others say no, these people had always -- we had always planned on bringing in the big guns 60 days out. And really, what is making John Kerry sharpen his message is the fact that we are 45 days away, the fact that he is down in the polls a little bit, and he has -- he has an uphill fight. So that's really why he's on the attack and I guess fighting a little harder and is being a little more clear in his message.

HAYS: Sasha, it's so hard for us to tell in this day where television seems to dominate and define everything if John Edwards is still out there stumping away as much, if Teresa Heinz Kerry is out there as much. Because we don't see them, particularly not John Edwards, it seems. Is he there and just not getting the coverage, or is he taking kind of a lower profile right now?

JOHNSON: He's definitely not taking a lower profile, I think. The campaign says that we're just not covering John Edwards. That he is out six days a week campaigning.

He wrapped up a western swing and a bus tour through Appalachia. He's going down to -- he's going to be in Pennsylvania, going through some of the places that George Bush has been recently, Ohio.

They say that he is out there on the attack. I mean, he is a sunny and optimistic guy. That's one of the reasons why they picked him. But that he does, you know, come back against things that George Bush and Dick Cheney say.

But they just say, you know, you guys aren't actually covering him. It's the local press that's covering John Edwards.

He's been on the front pages of papers in New Mexico and Ohio. And frankly, that's the coverage that the Kerry campaign wants in these battleground states. I mean, sometimes the national media, it's not irrelevant, but the local press is sometimes more beneficial.

ARENA: All right. Well, Sasha, thanks. We know that both you and Suzanne need to get back on the story. Thanks for joining us.

Well, just ahead, an update from the war on terrorism. And a high-profile suspect is on the verge of walking free. I'm back on that story in just a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) DONALD RUMSFELD, SECRETARY OF DEFENSE: It's harder for them to travel between countries. It's harder for them to communicate with each other.

(END VIDEO CLIP)

ARENA: Defense Secretary Donald Rumsfeld marking some of the successes in the war on terrorism, disruption of the chain of command of al-Qaeda. But at the same time, widespread concern over a possible attack to disrupt the campaign or the election.

Welcome back. We're ON THE STORY.

SLOBOGIN: Kelli, you know we've now successfully passed the third anniversary of 9/11. And all during that time, there have been chatter, there have been heightened alerts, there have been anniversaries that we were worried about. Now there's the jitters about a predilection attack.

And yet, all that time there really hasn't been an attack on American soil. Are we safer now?

ARENA: I think across the board most people that you talk to will say we are safer. But we're not safe. And there's a distinction that they make.

And you saw there was a slew of people that tried to contact us with story ideas about industries and sectors of the -- of the -- the economies that weren't safe. For example, big concern about cyberterrorism and the possibility of terrorists hacking into systems and shutting off lights, and possibly opening up dams, and so on.

So a lot of worse-case scenarios out there, but we are an open society. And there are vulnerabilities that -- that we will have in that -- in that atmosphere that other countries may not.

HAYS: But Kelli, I wonder if there's a little bit of not crying wolf, because I think everyone takes this threat seriously, but we've gotten through the Democratic National Convention, the Olympics in Athens, the Republican National Convention, without any kind of attack, large or small. So I wonder if people don't start getting the feeling that, well, it's there, but, you know, maybe these terrorists, maybe we have succeeded in breaking cells and maybe they are more disorganized and maybe this watchfulness is helping and it's not as much of a threat as we thought.

ARENA: Well, I think that that's what the administration and those in law enforcement are really worried about, is that complacency. Because it has been three years since we saw an attack on U.S. soil.

And they say, look, it's really hard to prove a negative. Can we ever prove without, you know, finding the guy and arresting him and saying, "Oh, yes, well I was perched and ready to attack, but, you know, you changed the whole security system so I couldn't do what I was planning on doing." Barring that, you can't really prove that you've prevented an attack unless you catch them red handed. So there is a concern about getting out there very publicly and dealing with the threat -- threat levels and the alert levels, and letting people know very publicly that we are facing a time of heightened concern. But there really is no way around that either, because they sort of feel, if we don't say anything and something happens, then we're accused of not doing...

HAYS: What about the idea that we're -- we're -- that the terrorists want to make sure President Bush doesn't get reelected? That seems to be another idea out there, that that's why you would make an attack now, disrupt the election, it's terrible for Bush, like in Madrid, et cetera, et cetera.

ARENA: Well, what every terrorism expert will tell you is that it's not about who wins the election. It's about causing chaos. Because regardless of whether George Bush or John Kerry or anybody else is in the White House, we will still be public enemy number one for al Qaeda and related groups.

So it's more about just causing chaos, disrupting that political process, than it is about having a political agenda. Because it's -- it's not like there's a candidate out there who's going to say, "Oh, yes, I'm pro al Qaeda." I mean, that's ridiculous.

HAYS: Right. Right.

SLOBOGIN: What about the legal war on terror? There have been some ups and downs on that road in the last week. Hamdi, this guy who was an enemy combatant, is now out there.

ARENA: Right. Well, not yet. But Yasser Hamdi was caught on the battlefield, as you know, in Afghanistan. And he was held as an enemy combatant.

Now, it was almost three years that he has been in detention, military detention, not -- not the Justice Department detention. He's been in the custody of the military. And they are very close to shipping him out, to getting him, you know, dotting the Is and crossing the T's on a deal to send him back home to Saudi Arabia.

He was born in Louisiana and then moved to Saudi as a toddler. So there was this discretion of him being an American citizen. And we're told by several officials that part of his deal will be that he has to relinquish his citizenship, that he is not allowed back into the United States, that he will have certain travel restrictions placed on him by the Saudi government.

And so once they get everything arranged in terms of where he'll be landing and how he'll be transported and so on, he's out of here. But he's a free man.

SLOBOGIN: Is this...

ARENA: And this is a big...

SLOBOGIN: ... an embarrassment for the Justice Department?

ARENA: Well, I mean, they'll say no. They'll say, look, he wasn't ever in our custody. He was never -- you know, he was never in the criminal justice system.

He was in the -- he was in military custody. So that really doesn't qualify as sort of a Justice Department thing.

HAYS: You've been clear in a lot of your reporting that the authorities have to go very carefully if they're going to get tough on, say, people who are here on visas, violations, Muslims, et cetera, that they might want to be tougher in this October offensive period, but they want cooperation. With that, Brandon Mayfield, that whole case, Portland, Oregon, lawyer, Muslim, where does that stand now?

ARENA: Well, there are two investigations going on, internal investigations by the Justice Department inspector general and by the Office of Professional Responsibility within Justice. And basically what happened was -- to refresh our memories and yours too -- is that he's an Oregon lawyer. He was a Muslim convert.

They ran the prints that were found. There were prints that were found after the Spanish bombings, the train bombings in Madrid. And they ran this through the system and the copy of the prints that the FBI had they said came up with a match for Mayfield.

And they had an independent fingerprint analyst come and look. And he said, oh, yes, it's a match. But the Spaniards from the very beginning were saying no, no, no, it's not a match. Come back here, come look at it again.

But in the meantime, Mayfield was held as a material witness in detention. His home was searched. And there's been a lot of uproar because he says -- he's claiming, and the community around him is claiming, the only reason this happened is because he's a Muslim. And if he wasn't, then there would have been more of a -- of a -- an ability to say, oh, well, maybe we've got the wrong guy.

And they think -- now, the FBI, of course, tells you, no, that is absolutely not true. We were going with the evidence that we had. And we had independent analysts looking at this. And so -- but there are investigations underway to see if that bias exists.

HAYS: A lot going on there. And so much of it may be a little bit off the radar screen. But maybe that's one reason why it hasn't gone on our radar screens.

From the war on terrorism to the personal impact of terrorism, coming up we'll hear about a new documentary on how an attack on a Jerusalem restaurant three years ago left emotional as well as physical scars.

We're going to go out to California and hear what Maria Hinojosa is doing at the Monterey Jazz Festival on stage there with Bobby McFerrin, singing and dancing. And just ahead, we'll be talking about why Martha wants to speed up her date with a prison cell. We're back ON THE STORY after this and a check of what's in the news now.

(COMMERCIAL BREAK)

NGUYEN: Good morning. I'm Betty Nguyen here at the CNN Center here in Atlanta. Here's a look at what's making news right now.

Three U.S. troops were wounded today by a pair of explosions near the Baghdad Airport. The first device exploded as an American convoy approached a bridge. It was followed by a second explosion on the road. Both instances are still under investigation.

In downtown Moscow, police diffused a car bomb along a street often used by senior government officials. The driver reportedly was paid $1,000 to leave two vehicles near a street that leads to the Kremlin. No explosives were found in the second vehicle. The driver reportedly died in police custody.

President Bush will speak before the United Nations general assemble on Tuesday. Now, just a few minutes ago, he offered a preview of that speech in today's weekly radio address.

(BEGIN AUDIO CLIP)

BUSH: America and many other nations are also determined to turn the tide against global poverty by taking a new approach to economic development. It is now our policy to increase foreign aid to those governments that are serious about fighting corruption and improving education, health care and economic opportunity for their people. Modern history teaches that honest governments that invest in their people and promote economic freedom can lift millions out of poverty and despair.

(END AUDIO CLIP)

NGUYEN: And those are the stories "Now in the News." I'm Betty Nguyen here at the CNN global headquarters.

Back to ON THE STORY.

(BEGIN VIDEO CLIP)

MARTHA STEWART, MARTHA STEWART LIVING OMNIMEDIA: I must reclaim my good life. I must return to my good works and allow those around me who work with me to do the same.

(END VIDEO CLIP)

HAYS: Martha Stewart explaining why she wants to start her prison sentence while still trying to get the verdict overturned. She wants to get the personal and professional nightmare behind her, she says, and get back to her garden, her company and her family by spring.

Welcome back. We're ON THE STORY.

ARENA: Kathleen, isn't this really the only thing that she could have done from a business perspective?

HAYS: Well, in so many ways because, first of all, legal experts point out that it's very hard to get an appeals court to turn over a jury verdict. So they had that going against them, although they put on a brave face, we are still confident we'll overturn this verdict.

Number two, the company is losing money. She has lost advertisers. This is the season when magazines like this -- and, of course, she's in so many different kinds of venues -- have to sign up advertisers for the coming season.

So it seems like it was strategic as well, really and truly, to get the company on its feet, moving ahead, to put finality. Everybody wants to know when this begins and when this ends. There are still a couple of loose ends though.

SLOBOGIN: I'm sure she's heavily advised P.R.-wise, too. Is there a sense that this is a sort of kinder, softer Martha, a better message?

HAYS: Well, perhaps. You know, I really don't know the answer to that question. But it seems that -- I think what a lot of people got in that press conference was she really does seem to have accepted what has happened.

And not that she's even taking responsibility for it, but that she's accepted this as what's going to happen. It's done. And she's got to move ahead.

Now, the interesting question about moving ahead is, what will happen when she gets done with her sentence? Obviously, she will go back to the company. But there is...

ARENA: There's still the SEC.

HAYS: Exactly, breathing down her neck because they have a lawsuit they put on hold while they're waiting for the results of the other trial which was concluded in July. And what they're saying is, potentially, you cannot be a director or an executive of your own company because that's the law. Once you're a convicted felon, you can't do that.

The little wiggle room she has is that the felony was for obstruction of justice in an insider trading case not relating to her company, relating to something in her personal life. So who know how that plays out. But we know she's going to prison, maybe not in Danbury, Connecticut, where she'd like to...

ARENA: Right. She requested that, right? But do -- I remember you saying to me it's full or...

HAYS: She wanted to be close to her mom, her 90-year-old mom who is having her birthday this week. But maybe she has to go down to Florida or someplace like that. But sooner or later, she hopes by Halloween, she'll be starting to serve her sentence.

SLOBOGIN: Well, Florida, hello? Hurricanes. Hurricane after hurricane after hurricane, the latest Ivan. The repercussions on the economy must be enormous.

HAYS: Oh, it's amazing. And it's something like, since 1967, where three big hurricanes have struck in such a short period of time -- we're going to be showing, of course, pictures of the devastation and the loss of lives and the psychological stress is huge. But think about the stores that are closed, the banks that are closed, the roads that are closed, the power lines that are down.

And do you know telephones, the old-fashioned phones, in some ways were less vulnerable because the new phones have -- or run in part by power that is connected to utilities. So, quite apart from phone lines, when those utilities go down, some cell phones don't work, BellSouth hit very heavily in Florida.

It's going to take a bite out of the economy now. Granted, there's lots of uninsured losses. But there's uninsured losses.

Again, a loss of sales production, time you're not at work. So that hits the economy now.

The irony of a national disaster though is, once you start rebuilding -- so by the end of this year, early next year, it adds to economic growth. But boy, what a lot of devastation.

ARENA: But explain to me, because it's not clear to me, where is the line drawn between what the taxpayer pays, what the governments pay on those insured losses, and what the private insurance companies pay.

HAYS: Homeowners insurance will pay for wind damage, which is what the hurricane does. Flooding, apparently, a lot of that is actually insurance you take out from the federal government. So to that extent, taxpayers will help.

Now, President Bush has declared Louisiana, Alabama -- was it Georgia, states of emergency? Also, I guess Florida. So there's some help there, which, of course, I think we would all say we would gladly give as fellow citizens of the country.

ARENA: Right. Right -- absolutely.

HAYS: What's going to be tough for a lot people in Florida, apparently, is after Hurricane Andrew in 1992, a lot of the big insurance companies raised the deductibles because they paid out so much money. So that's going to hit people.

And another reason why I think you're going to see some offset, yes, I'm going to rebuild my house, that helps local construction. But if I have to rebuild my house and pay a lot more money out of pocket, I can't spend as much money other ways. That's another way it will be a drag on the economy looking ahead in the months. SLOBOGIN: Kathleen, another development in the economy this week, OPEC, they raised their -- their output targets. But there seems to be a general feeling it isn't going to make any general difference.

HAYS: Well, that was -- that was also tied into the hurricane. There was so much going on to watch, waiting to see the impact of the hurricane, waiting with oil, because 25 percent of U.S. oil and gas production is in the Gulf.

Eight refineries closed down. They're coming back on stream, but there was still production lost there.

Imports from overseas into the United States slowed down for that time as well. So that helps reduce inventories at a time we need to build inventories up.

OPEC said they're going to pump a million more barrels a day. But they're already pumping two million barrels a day over quota.

Apparently, though, this is like we're sending a message. We think the price is too high; we want it lower.

There's a big debate right now over whether or not we're going to see this price range, $45, maybe as much as $50, break because the inventories are building, and we're going to see some relief in a couple of months, or if the inventories are so tight, something like down 24 million barrels over the past 10 weeks or something, they're below average, if we're going to stay at higher levels than we ever thought we would.

ARENA: So maybe we (ph) just gamble a little bit...

(CROSSTALK)

HAYS: The big issue for the economy, we'll see if the Federal Reserve debates it next week, but no change in the idea that they're raising interest rates, even though the skeptics say this is going to be a weight on the economy, these higher oil prices.

ARENA: Right.

SLOBOGIN: From the financial and business world to the emotional aftermath of a terrorism attack. I'm back ON THE STORY of a new documentary about the emotional struggles of victims and rescuers three years after a terrorism attack in Jerusalem.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (through translator): From the corner of my eye, I see Gafnit (ph), who is only two years and 10 months old, flying with the window out into the street.

MICHEL AMAR, JERUSALEM FIREFIGHTER (through translator): My wife screamed on the phone, "We got hurt in a bombing. We got hurt in a bombing." And then the call was disconnected.

I didn't understand exactly whether -- whether they were alive or no longer among the living. I said to myself, "Michel, stand up and run to the vehicle."

(END VIDEO CLIP)

SLOBOGIN: Michel Amar and his wife were two of the people whose lives were blown apart by a terrorist bomb in a pizzeria in Jerusalem in August 2001. Fifteen dead, dozens wounded. Like many terrorist tragedies, it made headlines for a few days, but the impact of that terrorist act radiated far beyond the immediate event.

Welcome back. We're ON THE STORY.

HAYS: So, Kathy, please share with us and our viewers, you know, what this is you've been pouring your heart and soul into, how this documentary came about, and what all it covers.

SLOBOGIN: Well, this documentary, which is going to be on "CNN PRESENTS" tomorrow night at 8:00, was actually put together by a filmmaker, Tim Wallacachuck (ph), and two other producers, Rick Beanstock (ph) and Simcha Yakabovich (ph). And, you know, we've all seen reports about events like this, where you hear the 10-second, 12- second sound bite from some grief-stricken victim.

What these filmmakers did was they spent more than two years tracking the families, the victims, the eyewitnesses, the first responders, and they've really put together a document here that shows you how an event like this rips a hole in people's lives. And they never really put it back together again. And it's a really very powerful film.

ARENA: What -- because, you know, we've all seen a lot, you know, being journalists. What was it about this documentary that will really just stood out or really shook you up?

SLOBOGIN: There are so many things, Kelli. One of the things is just sort of sight and sound thing.

One of the eyewitnesses describes arriving on the scene and of course seeing corpses. But also having this sort of eerie sound effect of cell phones ringing, just a chorus of cell phones ringing.

You k now, we all have cell phones, and when something like this happens, family members are frantically trying to reach their relatives. And for many of these cell phones, they're never going to be answered again.

Another thing that struck me as a really different perspective, first responders, the trained professionals who arrive at a scene like this, I think we all have a conception of them as people who are well trained, they have a lot of experience, they're going to arrive and they're going to go into action mode. Well, in a situation like this, the first responder arrives and thinks, "Where's my wife? What are my children doing? Are they among the victims?" And Michel Amar, who we saw in the clip, arrived at this scene. And one of the first things he saw was the burned stroller of his own 2-year-old.

ARENA: Oh my god.

SLOBOGIN: And then he saw, you know, body parts of other children. And he was completely paralyzed.

There's another very powerful story in this film. A nurse, a trauma nurse who is at the hospital receiving a lot of the victims. And while she's in the emergency room trying to save people, she's also trying to find out what's happened to her niece, whom she knows was downtown, shopping in Jerusalem.

And at one point, she, you know -- in growing desperation, she's not hearing back from her niece, she's not finding her name on any of the lists of victims who have been treated. And so with a sinking heart, she decides to go out and check the hospital morgue. And this is what happens.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: All along, I knew something had happened to her. I said, "I'm looking for my niece, and I know you've got one girl and another person who hasn't been identified. I want to know who she is."

And he opened the first drawer and I looked inside and I said, "No, that's the girl I looked after. She's from the Dutch family. That's not her."

So they opened the other drawer. And -- and I looked at her. And I said, "It's her."

(END VIDEO CLIP)

HAYS: Long-term effects. And also, if I were a Palestinian watching this, I'd just have to ask you, because you have to take this to one set of people, to one group of people. Would I feel that this tells one-half of the story? Will this change me and how I feel about the Israelis? Where is this going?

SLOBOGIN: You know, I think -- I honestly think that you would not feel that way if you were a Palestinian. This film sort of completely avoids blame, one side and the other, politics, arguments.

It's really about being a human being who's lived through this kind of thing. And I would think that Palestinians, who have certainly suffered a great deal of trauma themselves, would really sympathize with this film.

You asked about long-term effects. And, you know, I think one thing that's hard for a lot of us to realize is that the effects are far longer than we can even imagine.

I mean, the family that survived, the firefighter's family, completely traumatized by this. Their lives are completely changed.

I'll tell you one story. An 11-year-old boy in that family who emerged from the bombing covered from head to toe in blood, other people's blood, he now obsessively washes himself. He cannot stop because of that. And this is three years later.

And we're about to hear from a father who lost his teenage daughter, and he speaks movingly about whether you get over, if you can get over it. This is Arnold Roth (ph).

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The tragedy of my daughter's murder, I was really like I think most people outside of Israel. These were events that were framed by a television screen. These were things that occurred and then were overtaken by normal life.

And now I've learned that for the people who are touched by an act of terror in a personal way, it isn't an event which you then work your way past, and as the expression goes, "Life goes on." It actually keeps happening every minute and every day. Life is never going to be the same.

(END VIDEO CLIP)

SLOBOGIN: That program will be on Sunday night at 8:00 p.m. Eastern Standard Time.

HAYS: Well, certainly the impact of terror was felt three years ago in New York. Our colleague, Maria Hinojosa, who covered that event and the impact of that for over a year, told us a couple of weeks ago that going to the Monterey Jazz Festival was a big part of her healing. That's how and why we're heading out to the Monterey Jazz Festival now to see Maria Hinojosa ON THE STORY right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINT EASTWOOD, ACTOR: In a world where pop music has gone in a direction that a lot of people are not enthusiastic about, jazz is maybe our big hope.

(END VIDEO CLIP)

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT: Well, that's Clint Eastwood. We often see him holding guns, blowing people away, but most people don't know that he's a huge jazz fan and is a major supporter of the Monterey Jazz Festival.

Welcome back. We're ON THE STORY. I'm Maria Hinojosa, here in fabulous Monterey, California. Three days of jazz. It's paradise.

ARENA: Well, you know, Maria, before I get to the question of how you get such an assignment, because I'd like to sign up for one, my second question is, I saw you dancing, singing on the stage. OK, what was going on?

HINOJOSA: Well, that was Bobby McFerrin. And a lot of people, you know, think of Bobby McFerrin, keep him kind of limited to that box of "Don't Worry, Be Happy." It was one of the most popular songs of the late 20th century.

But really, he's an extraordinary improvisational vocalist, he's a classic music director. When we were doing our live shots yesterday, he was just kind of doing a rehearsal with Jack de Jeannette (ph), the great drummer. We couldn't get him to stop.

I mean, once he got that mike, he was singing and just going. And then all of a sudden, he roped me in, and then all of a sudden, he's dancing with me, he's having me sing. And I was like, "No, no, no. I can dance but I can't sing."

(LAUGHTER)

SLOBOGIN: Maria, you know, I think a lot -- for a lot of people, jazz is not mainstream. Maybe some people would even say it's marginalized. What's the feeling you get out there? It is alive and well?

HINOJOSA: Oh, here. Yes, you definitely get the feeling here. I mean, this is 40,000 people who are going to come over three days.

It's the longest-running jazz festival ever. Continuously running. But you talk to the artists. A lot of them are worried.

They say, you know, it's a hard time in the economy. We're not sure. They bring up a lot of politics.

A lot of these artists, once the microphones are turned off, they say they're worried about what's happening with the country, and, you know, will there be enough money and support for this kind of art. So there is concern about the artists. But as much as there's that concern, you've got artists who are committed to working with younger jazz artists and helping them find their own be voice, people like Terrence Blanchard, for example, who say they really want to work, just like Art Blakey did, the great drum master, to bring in younger voices and give them a sense of expression.

HAYS: Well, you know, Maria, I've been listening also to jazz probably since my high school days because I had a boyfriend in high school who was really into jazz. So I just -- I just got climatized at an early age.

But the thing about jazz, jazz has always tried to be avant- garde, ahead of the pack, doing something different. So, almost by definition, you know, you're not going to maybe have the big audience. That's always been, I think, part of the dynamic tension.

What is right now the avant-garde in jazz? Because some people are classics, almost like Jack de Jeannette (ph). You're talking about new voices. Are there other new directions in jazz? HINOJOSA: There are new directions in jazz. I mean, one of the things that they like to do here at the festival is to bring those younger voices. So I don't think that you can make a generalization about what's new in jazz.

You have people like Charlie Hunter, who came from hip-hop and rock and now is doing jazz. He's one of the only players that actually has an eight-string guitar that does bass and guitar at the same time. He's one of the new voices.

Another one who's going to be here -- I'll be speaking to here tomorrow -- is Luciana Sosa, who is doing something quite different. She's taking the poetry of the great Chilean poet, Pable Neruda, and translating it into English and singing it to piano.

What they like to do here at the festival is bring in the standards. Tonight, Marianne McPartland, I'll be speaking with her and Clint Eastwood in just a couple of hours, one of the old jazz standards. But they like to bring in the new voices like Luciana Sosa to try to create this kind of sense that jazz is always evolving and can evolve.

ARENA: And crossing cultural boundaries as well, Maria, yes?

HINOJOSA: Totally crossing boundaries. I mean, you know what? I have to tell you, this is -- this is how I prepare for my assignment.

You know, I've just got to listen to all of these CDs, one after another. It's really rough. You know, it's hard work.

ARENA: Yes, getting back to my first question, which is how do you get a gig like this?

UNIDENTIFIED FEMALE: Sounds tough, Maria. I think you need some hardship pay.

HINOJOSA: You've got to work it, you've got to massage it. But interestingly enough, here's what's interesting. When I left the jazz festival last night, there was something going on the streets of Monterey. And I was thinking about this cross-cultural experience here in Monterey.

There was something call the Cherry Jubilee, where they've got these fancy cars. There were all of these low rider cars, which are a big thing on the West Coast in the Chicano culture.

You have jazz happening here. I really felt like this was a moment when you're seeing American culture flourishing across these borders, across these boundaries, and really people finding what unifies them, at least in this space. It is entirely idyllic to be here, no doubt. This is not the gritty, grimy streets of New York, but people are finding common ground through music.

ARENA: All right. Maria, have a good time. Enjoy. Well, in addition to Maria's reports, we can log on to cnn.com.monterey for a schedule of the festival galleries of performers in the past and present and a time line of jazz music.

We'll be back ON THE STORY right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: Kristin Gore, what's her story? Former Vice President Al Gore's daughter has written a novel. "Sammy's Hill" follows a young woman through heartbreak and humor on Capitol Hill.

KRISTIN GORE, AL GORE'S DAUGHTER: You think about D.C. as sort of a boring stuffy place. That's kind of the image. But if you grow up in that, you see all these energetic, fun people, and crazy stuff that happens behind the scenes that no one knows about.

ANNOUNCER: The Harvard graduate's comic credentials include writing for the animated show "Futurama" and "Saturday Night Live."

HAYS: Thanks to my colleagues. Once again, we have covered every aspect of the news we could.

And thank you for watching ON THE STORY. We'll be back next week. We hope to see you then.

Just ahead, "PEOPLE IN THE NEWS." But first, a check in what's happening in the news right now.

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


Aired September 18, 2004 - 10:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BETTY NGUYEN, CNN ANCHOR: Good morning. I'm Betty Nguyen.
"Now in the News," some chilling videotape out of Iraq this morning. The Arab network Al Jazeera is airing footage it says shows two Americans and a British citizen being held hostage. Insurgents kidnapped them from their Baghdad home two days ago.

Back home, there are piles of debris where homes once stood in the Florida Panhandle and elsewhere along the Gulf Coast. People are picking up the pieces in the wake of Hurricane Ivan, which is blamed for 24 deaths.

There's a bit of good news for Gulf Coast residents as Tropical Storm Jeanne churns in the Caribbean. The National Hurricane Center says it appears the storm will miss the U.S. coast. Jeanne has lost some of its strength this morning as it heads toward the Bahamas.

And finally, a former child star is facing some adult charges. Macaulay Culkin is out on bond this morning after getting arrested on drugs charges in Oklahoma City yesterday. Police say they found marijuana and other drugs on the 24-year-old actor during a traffic stop.

Those are the headlines "Now in the News." I'm Betty Nguyen.

ON THE STORY starts right now.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we covered this week. I'm Suzanne Malveaux, in Kennebunkport, Maine, ON THE STORY of the president, Iraq and the campaign.

SASHA JOHNSON, CNN CORRESPONDENT: I'm Sasha Johnson, in Boston, ON THE STORY of the John Kerry campaign, trying this week to get his message out on Iraq, jobs and health care.

KELLI ARENA, CNN JUSTICE DEPT. CORRESPONDENT: I'm Kelli Arena, ON THE STORY of how the U.S. is on the verge of setting free a man the government has said for three years was a threat to national security.

KATHY SLOBOGIN, CNN CORRESPONDENT: I'm Kathy Slobogin, ON THE STORY of a powerful new documentary focusing on how victims of a terror attack three years ago struggle with the loss and the memories.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, ON THE STORY of how Martha Stewart says she will keep appealing her verdict but wants to start her prison sentence right away.

We'll be talking about all these stories today. And we'll go to California, where Maria Hinojosa is ON THE STORY of the Monterrey Jazz Festival.

Boy she's having fun. Look at that.

E-mail us at onthestory@cnn.com.

Now straight to Suzanne Malveaux and campaign 2004.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Mixed signals are the wrong signals to send to our troops in the field, the Iraqi people, to allies, and most of all the enemy.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Now everyday you look in Iraq, you see it on the nightly news, you see it in the newspapers. The violence is getting worse.

(END VIDEO CLIP)

MALVEAUX: President Bush and Senator Kerry exchanging those long distance jabs during the campaign trail. President Bush defending his Iraq policy and mocking his opponent, Senator Kerry, pointing to the deadly weeks and months that have passed, and also looking at intelligence reports that suggest that they could be on the brink of civil war.

JOHNSON: Suzanne, I'm just curious -- I've obviously been out with John Kerry -- with these new intelligence reporters this week, have you noticed -- has President Bush's rhetoric or his statements about Iraq changed? Has -- is he giving I guess a more realistic picture of what's going on out there on the stump?

MALVEAUX: Well, you know, it's very interesting, Sasha, because you hear the president -- we've been on the campaign trail for weeks now -- and you hear him talking about the weapons of mass destruction. He says time and time again, very clearly, he says, look, we all thought that the weapons of mass destruction -- he does not acknowledge that there were critics and doubters, skeptics about that, but he says essentially we were all to blame in this, that there are no weapons of mass destruction.

But then he goes on very forcefully, saying that he believes he made the right decision, that the country is better off without Saddam Hussein -- the world better off without Saddam Hussein. But the one thing that is interesting here is that, this week, what you saw is numerous documents, there were classified documents, information that came out, that were leaked to us, to the press, suggesting a much bleaker picture. And one of them that you had mentioned, of course, is that Iraq Survey Group.

That is the one that said, quite frankly, that there were no weapons of mass destruction prior to the invasion of Iraq. And another intelligence report that said look at the next 18 months. You know, there's a doomsday scenario here. On the one hand, things may work out. On the other hand, however, they're looking at the possibility of a civil war.

ARENA: Suzanne, you mentioned documents leaking out. Wasn't there a document dump just last night? Can you bring us up to date on what that was all about?

MALVEAUX: And that is so common. We like to call that the Friday night follies.

It happened a lot in the Clinton administration. But it was last night, we were in Charlotte, North Carolina, listening to the president giving a speech, his W is for Women campaign, when we got word that there may be a huge document dump, additional documents on the president's military service, as you know under fire from critics, as well as Senator Kerry.

Really had to switch gears here. E-mails were flying, phone calls about this -- these documents that were being released.

The big question, of course, for all of us, what was inside of them? Did they shed any new light on the controversy?

Once we got them, they were released at the Pentagon, but we were able to gather them on e-mail. Once we got them, we realized that 80 pages or so, there really was one that stood out.

It was a letter from the president's father, George H. W. Bush, to a military officer of Bush saying that he was thanking him for taking care, "looking after my son" while he spent some time in the squadron in the Texas Air National Guard. Critics, Democrats jumped on that immediately, started e-mailing us, as well as the campaign, making phone calls, saying, hey, look, this just shows that the president once again got preferential treatment. The White House came back, slammed him, and saying, look, you know, this really doesn't show much of anything.

SLOBOGIN: Suzanne, you know, we're all intensely focused on these documents, looking for anything new. But is it an election issue? Do the voters really seem to care about the stuff that happened so -- so long ago?

MALVEAUX: Well, you know, it's very interesting, and probably Sasha can join in on this, as well, because we've been talking to people. I've talked with a lot of people who are in the National Guard.

As you know, the president addressed that group just this past week. And you bring them -- if you take them aside and you say, "Look, does this make a difference what the president did or did not do some 30 years ago?" And they say no, really. I mean, they believe what really matters is what's happening now inside of Iraq. And a lot of people, too, say they're quite -- they're quite tired of all the discussion about it. So it goes both ways.

I talked to one gentleman who actually lost his brother in Iraq. And he said, look -- you know, he was critical of the president because he said he believes that he avoided combat during Vietnam being in the National Guard, and he said this is the man ironically who -- who is sending so many soldiers out there on the front lines. But he is a minority of the people out there.

HAYS: And certainly that's what the polls would suggest.

Another interesting story that kind of flew below the radar this week is that the Pentagon is asking to take $3 billion of the $18 billion that's supposed to go to reconstruction to spend on security now, kind of underscoring this intelligence estimate. Also underscoring how little money is being spent on reconstruction, another reason why there's so many troubles there. But the polls, Suzanne, are so interesting.

I would think behind the scenes at the White House, however serious they act, there are big smiles as they see some polls showing President Bush way out ahead. People thinking better to -- at handling an international crisis. And even on the economy, maybe a dead heat with John Kerry.

MALVEAUX: Well, you know, they're not going to publicly gloat, but behind the scenes, of course, they'll tell you, look, you know, we feel that we're very confident here that we've got the kind of bounce that we were looking for, that they do not believe that Kerry performed very well. Ultimately, they believe that -- that the last month was very damaging with Kerry with the whole Swift Boat military Vietnam controversy.

Now you see what's changing. They're turning a corner here. People are looking at President Bush's own military record.

You see both of these campaigns now really putting that aside, saying, look, we don't want to deal with Vietnam or what happened 30 years ago, let's focus on today. They know that they've got to fight this, and they've got to fight in a couple of key states. But what the strategy here is that they are going to the states where normally Kerry would perform very well, and they're essentially making them move to those states, campaign hard in those states, spend their money and their resources, and perhaps just break even.

JOHNSON: Well, Suzanne, we'll talk more about that in a moment. But as you know, every move in each campaign is noted, dissected and analyzed. How's the Kerry campaign fighting back? I'm on that story right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) KERRY: You're going to have to stand up and prove that we can talk the truth, that we can fight back against vicious smears and lies.

(END VIDEO CLIP)

JOHNSON: Democratic presidential candidate John Kerry in New Mexico earlier this week telling crowds to overlook what he says are distortions about his past and his plans for future.

Welcome back. We're ON THE STORY.

HAYS: Sasha, I just asked Suzanne Malveaux about behind the scenes at the White House and how they must be feeling pretty good about what the polls are showing. You're hanging out with the Kerry campaign. You're talking to people when you go to the speeches, you're talking to some of the operatives. I would think they're a little bit depressed to see a man not -- not only is he not making headway, he seems to be losing ground against George Bush in some of these polls.

JOHNSON: Well, they would completely and totally disagree with you on that point. Yesterday, they presented us with I think four or five polls which they say shows the race at least within the margin of error.

They looked at the Gallup poll that came out yesterday that showed Kerry down by double digits and said, "You know what? That's just not true. Our internals show the race much closer."

But, you know, you do talk to people at rallies. I talked to one prominent Democrat at a New Mexico rally the other day. And he said, "Well, you know, his message finally seems to be catching on. We feel a little bit better about the way things are. He seems to be a little more aggressive on the stump. So we're with feeling better about things."

I mean, they acknowledge that they're down, but they say that this is when John Kerry performs his best, when he's the underdog, when his back's against the wall. So, you know, they say, "Look, we've got 45 days. This is definitely not over yet."

MALVEAUX: Sasha, I was in Las Vegas this past week at the National Guard Association, their big conference, and it was really incredible to see because there were thousands of National Guardsmen who were there. And when President Bush walked in, I mean, they just erupted with applause. There were several standing ovations.

To watch the kind of perception that the president got from this group -- and I know that Kerry went a little bit later, I guess two days later, and addressed the same organization. How was he received?

JOHNSON: Well, before we even landed in Las Vegas, the Kerry campaign came back and they said, "Look, do not expect John Kerry to receive the same type of warm welcome that the president -- that President Bush got when he went and spoke to this group. President Bush is the commander in chief. These people have a certain allegiance to him, and we understand that and respect that."

But -- and they also acknowledged John Kerry was going in with what some said was a very unpopular speech. He basically accused the president of not being straight with the audience, not being straight with the National guard about what was happening in Iraq.

He criticized President Bush for, you know, not supplying the National Guard with appropriate types of health care benefits that they deserve. And when I spoke with some National Guards people, as you did, after the speech, it was a pretty mixed response.

There were some people that were definitely pro Kerry, there were others that just said, "Look, this guy shouldn't have come here. We were very respectful. They gave him two standing ovations, but we did it because he's a sitting senator and not because we agreed with anything that he said." But there were people there that did -- that did like what he said.

ARENA: Sasha, that speech just seemed to be part of -- of an overall trend for Senator Kerry to be a little sharper, a little more personal in his -- in his talks that he's giving publicly. A lot of Democrats that I've heard from that have come on CNN in the past are saying, "OK, finally, now he's taking the gloves off and he's getting down to business."

Is that what you're sensing?

JOHNSON: Yes. I mean Democrats outside the campaign are very happy that Kerry's finally in there throwing elbows. And, you know, we traveled to many different states this week, and in each state and each day was a separate issue.

Monday was the assault weapons ban. Tuesday was Medicare. And what the Kerry campaign is trying to do is take all of these policy issues and turn them into character critiques of President Bush.

You know, on Medicare, President Bush says that he's for seniors, but look, senior citizens, he has done x, y and z to raise your health care costs to do these things. So really he's someone that can't be trusted.

So it turns into a character issue. I mean, even last night in Aurora, Colorado, his refrain for President Bush was, can you really trust him?" Look what he's done on Iraq, health care, the economy. He's lost jobs. Can you really trust him?

So they see this as a way of defining why people should vote against President Bush. And it also helps them to sort of counter the wrap on Kerry, which is that he's been a flip-flopper, which the Kerry campaign has acknowledged is a criticism that has stuck somewhat.

SLOBOGIN: Sasha, we heard this week that there was a kind of infusion of new blood at the high levels of the Kerry campaign this week. A lot of the Clintonistas coming on board. Is that -- can you see, is that making a difference? JOHNSON: Well, I mean, I think it depends. Mike McCurry was out on the plane. He, you know, came back and chatted with reporters, was reminiscing about his time in the Clinton White House.

So there are some people that say yes. The -- you know, Joe Lockhart and Mike McCurry coming on has definitely given the campaign a certain new structure, a certain control over the message, if you will.

But others say no, these people had always -- we had always planned on bringing in the big guns 60 days out. And really, what is making John Kerry sharpen his message is the fact that we are 45 days away, the fact that he is down in the polls a little bit, and he has -- he has an uphill fight. So that's really why he's on the attack and I guess fighting a little harder and is being a little more clear in his message.

HAYS: Sasha, it's so hard for us to tell in this day where television seems to dominate and define everything if John Edwards is still out there stumping away as much, if Teresa Heinz Kerry is out there as much. Because we don't see them, particularly not John Edwards, it seems. Is he there and just not getting the coverage, or is he taking kind of a lower profile right now?

JOHNSON: He's definitely not taking a lower profile, I think. The campaign says that we're just not covering John Edwards. That he is out six days a week campaigning.

He wrapped up a western swing and a bus tour through Appalachia. He's going down to -- he's going to be in Pennsylvania, going through some of the places that George Bush has been recently, Ohio.

They say that he is out there on the attack. I mean, he is a sunny and optimistic guy. That's one of the reasons why they picked him. But that he does, you know, come back against things that George Bush and Dick Cheney say.

But they just say, you know, you guys aren't actually covering him. It's the local press that's covering John Edwards.

He's been on the front pages of papers in New Mexico and Ohio. And frankly, that's the coverage that the Kerry campaign wants in these battleground states. I mean, sometimes the national media, it's not irrelevant, but the local press is sometimes more beneficial.

ARENA: All right. Well, Sasha, thanks. We know that both you and Suzanne need to get back on the story. Thanks for joining us.

Well, just ahead, an update from the war on terrorism. And a high-profile suspect is on the verge of walking free. I'm back on that story in just a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) DONALD RUMSFELD, SECRETARY OF DEFENSE: It's harder for them to travel between countries. It's harder for them to communicate with each other.

(END VIDEO CLIP)

ARENA: Defense Secretary Donald Rumsfeld marking some of the successes in the war on terrorism, disruption of the chain of command of al-Qaeda. But at the same time, widespread concern over a possible attack to disrupt the campaign or the election.

Welcome back. We're ON THE STORY.

SLOBOGIN: Kelli, you know we've now successfully passed the third anniversary of 9/11. And all during that time, there have been chatter, there have been heightened alerts, there have been anniversaries that we were worried about. Now there's the jitters about a predilection attack.

And yet, all that time there really hasn't been an attack on American soil. Are we safer now?

ARENA: I think across the board most people that you talk to will say we are safer. But we're not safe. And there's a distinction that they make.

And you saw there was a slew of people that tried to contact us with story ideas about industries and sectors of the -- of the -- the economies that weren't safe. For example, big concern about cyberterrorism and the possibility of terrorists hacking into systems and shutting off lights, and possibly opening up dams, and so on.

So a lot of worse-case scenarios out there, but we are an open society. And there are vulnerabilities that -- that we will have in that -- in that atmosphere that other countries may not.

HAYS: But Kelli, I wonder if there's a little bit of not crying wolf, because I think everyone takes this threat seriously, but we've gotten through the Democratic National Convention, the Olympics in Athens, the Republican National Convention, without any kind of attack, large or small. So I wonder if people don't start getting the feeling that, well, it's there, but, you know, maybe these terrorists, maybe we have succeeded in breaking cells and maybe they are more disorganized and maybe this watchfulness is helping and it's not as much of a threat as we thought.

ARENA: Well, I think that that's what the administration and those in law enforcement are really worried about, is that complacency. Because it has been three years since we saw an attack on U.S. soil.

And they say, look, it's really hard to prove a negative. Can we ever prove without, you know, finding the guy and arresting him and saying, "Oh, yes, well I was perched and ready to attack, but, you know, you changed the whole security system so I couldn't do what I was planning on doing." Barring that, you can't really prove that you've prevented an attack unless you catch them red handed. So there is a concern about getting out there very publicly and dealing with the threat -- threat levels and the alert levels, and letting people know very publicly that we are facing a time of heightened concern. But there really is no way around that either, because they sort of feel, if we don't say anything and something happens, then we're accused of not doing...

HAYS: What about the idea that we're -- we're -- that the terrorists want to make sure President Bush doesn't get reelected? That seems to be another idea out there, that that's why you would make an attack now, disrupt the election, it's terrible for Bush, like in Madrid, et cetera, et cetera.

ARENA: Well, what every terrorism expert will tell you is that it's not about who wins the election. It's about causing chaos. Because regardless of whether George Bush or John Kerry or anybody else is in the White House, we will still be public enemy number one for al Qaeda and related groups.

So it's more about just causing chaos, disrupting that political process, than it is about having a political agenda. Because it's -- it's not like there's a candidate out there who's going to say, "Oh, yes, I'm pro al Qaeda." I mean, that's ridiculous.

HAYS: Right. Right.

SLOBOGIN: What about the legal war on terror? There have been some ups and downs on that road in the last week. Hamdi, this guy who was an enemy combatant, is now out there.

ARENA: Right. Well, not yet. But Yasser Hamdi was caught on the battlefield, as you know, in Afghanistan. And he was held as an enemy combatant.

Now, it was almost three years that he has been in detention, military detention, not -- not the Justice Department detention. He's been in the custody of the military. And they are very close to shipping him out, to getting him, you know, dotting the Is and crossing the T's on a deal to send him back home to Saudi Arabia.

He was born in Louisiana and then moved to Saudi as a toddler. So there was this discretion of him being an American citizen. And we're told by several officials that part of his deal will be that he has to relinquish his citizenship, that he is not allowed back into the United States, that he will have certain travel restrictions placed on him by the Saudi government.

And so once they get everything arranged in terms of where he'll be landing and how he'll be transported and so on, he's out of here. But he's a free man.

SLOBOGIN: Is this...

ARENA: And this is a big...

SLOBOGIN: ... an embarrassment for the Justice Department?

ARENA: Well, I mean, they'll say no. They'll say, look, he wasn't ever in our custody. He was never -- you know, he was never in the criminal justice system.

He was in the -- he was in military custody. So that really doesn't qualify as sort of a Justice Department thing.

HAYS: You've been clear in a lot of your reporting that the authorities have to go very carefully if they're going to get tough on, say, people who are here on visas, violations, Muslims, et cetera, that they might want to be tougher in this October offensive period, but they want cooperation. With that, Brandon Mayfield, that whole case, Portland, Oregon, lawyer, Muslim, where does that stand now?

ARENA: Well, there are two investigations going on, internal investigations by the Justice Department inspector general and by the Office of Professional Responsibility within Justice. And basically what happened was -- to refresh our memories and yours too -- is that he's an Oregon lawyer. He was a Muslim convert.

They ran the prints that were found. There were prints that were found after the Spanish bombings, the train bombings in Madrid. And they ran this through the system and the copy of the prints that the FBI had they said came up with a match for Mayfield.

And they had an independent fingerprint analyst come and look. And he said, oh, yes, it's a match. But the Spaniards from the very beginning were saying no, no, no, it's not a match. Come back here, come look at it again.

But in the meantime, Mayfield was held as a material witness in detention. His home was searched. And there's been a lot of uproar because he says -- he's claiming, and the community around him is claiming, the only reason this happened is because he's a Muslim. And if he wasn't, then there would have been more of a -- of a -- an ability to say, oh, well, maybe we've got the wrong guy.

And they think -- now, the FBI, of course, tells you, no, that is absolutely not true. We were going with the evidence that we had. And we had independent analysts looking at this. And so -- but there are investigations underway to see if that bias exists.

HAYS: A lot going on there. And so much of it may be a little bit off the radar screen. But maybe that's one reason why it hasn't gone on our radar screens.

From the war on terrorism to the personal impact of terrorism, coming up we'll hear about a new documentary on how an attack on a Jerusalem restaurant three years ago left emotional as well as physical scars.

We're going to go out to California and hear what Maria Hinojosa is doing at the Monterey Jazz Festival on stage there with Bobby McFerrin, singing and dancing. And just ahead, we'll be talking about why Martha wants to speed up her date with a prison cell. We're back ON THE STORY after this and a check of what's in the news now.

(COMMERCIAL BREAK)

NGUYEN: Good morning. I'm Betty Nguyen here at the CNN Center here in Atlanta. Here's a look at what's making news right now.

Three U.S. troops were wounded today by a pair of explosions near the Baghdad Airport. The first device exploded as an American convoy approached a bridge. It was followed by a second explosion on the road. Both instances are still under investigation.

In downtown Moscow, police diffused a car bomb along a street often used by senior government officials. The driver reportedly was paid $1,000 to leave two vehicles near a street that leads to the Kremlin. No explosives were found in the second vehicle. The driver reportedly died in police custody.

President Bush will speak before the United Nations general assemble on Tuesday. Now, just a few minutes ago, he offered a preview of that speech in today's weekly radio address.

(BEGIN AUDIO CLIP)

BUSH: America and many other nations are also determined to turn the tide against global poverty by taking a new approach to economic development. It is now our policy to increase foreign aid to those governments that are serious about fighting corruption and improving education, health care and economic opportunity for their people. Modern history teaches that honest governments that invest in their people and promote economic freedom can lift millions out of poverty and despair.

(END AUDIO CLIP)

NGUYEN: And those are the stories "Now in the News." I'm Betty Nguyen here at the CNN global headquarters.

Back to ON THE STORY.

(BEGIN VIDEO CLIP)

MARTHA STEWART, MARTHA STEWART LIVING OMNIMEDIA: I must reclaim my good life. I must return to my good works and allow those around me who work with me to do the same.

(END VIDEO CLIP)

HAYS: Martha Stewart explaining why she wants to start her prison sentence while still trying to get the verdict overturned. She wants to get the personal and professional nightmare behind her, she says, and get back to her garden, her company and her family by spring.

Welcome back. We're ON THE STORY.

ARENA: Kathleen, isn't this really the only thing that she could have done from a business perspective?

HAYS: Well, in so many ways because, first of all, legal experts point out that it's very hard to get an appeals court to turn over a jury verdict. So they had that going against them, although they put on a brave face, we are still confident we'll overturn this verdict.

Number two, the company is losing money. She has lost advertisers. This is the season when magazines like this -- and, of course, she's in so many different kinds of venues -- have to sign up advertisers for the coming season.

So it seems like it was strategic as well, really and truly, to get the company on its feet, moving ahead, to put finality. Everybody wants to know when this begins and when this ends. There are still a couple of loose ends though.

SLOBOGIN: I'm sure she's heavily advised P.R.-wise, too. Is there a sense that this is a sort of kinder, softer Martha, a better message?

HAYS: Well, perhaps. You know, I really don't know the answer to that question. But it seems that -- I think what a lot of people got in that press conference was she really does seem to have accepted what has happened.

And not that she's even taking responsibility for it, but that she's accepted this as what's going to happen. It's done. And she's got to move ahead.

Now, the interesting question about moving ahead is, what will happen when she gets done with her sentence? Obviously, she will go back to the company. But there is...

ARENA: There's still the SEC.

HAYS: Exactly, breathing down her neck because they have a lawsuit they put on hold while they're waiting for the results of the other trial which was concluded in July. And what they're saying is, potentially, you cannot be a director or an executive of your own company because that's the law. Once you're a convicted felon, you can't do that.

The little wiggle room she has is that the felony was for obstruction of justice in an insider trading case not relating to her company, relating to something in her personal life. So who know how that plays out. But we know she's going to prison, maybe not in Danbury, Connecticut, where she'd like to...

ARENA: Right. She requested that, right? But do -- I remember you saying to me it's full or...

HAYS: She wanted to be close to her mom, her 90-year-old mom who is having her birthday this week. But maybe she has to go down to Florida or someplace like that. But sooner or later, she hopes by Halloween, she'll be starting to serve her sentence.

SLOBOGIN: Well, Florida, hello? Hurricanes. Hurricane after hurricane after hurricane, the latest Ivan. The repercussions on the economy must be enormous.

HAYS: Oh, it's amazing. And it's something like, since 1967, where three big hurricanes have struck in such a short period of time -- we're going to be showing, of course, pictures of the devastation and the loss of lives and the psychological stress is huge. But think about the stores that are closed, the banks that are closed, the roads that are closed, the power lines that are down.

And do you know telephones, the old-fashioned phones, in some ways were less vulnerable because the new phones have -- or run in part by power that is connected to utilities. So, quite apart from phone lines, when those utilities go down, some cell phones don't work, BellSouth hit very heavily in Florida.

It's going to take a bite out of the economy now. Granted, there's lots of uninsured losses. But there's uninsured losses.

Again, a loss of sales production, time you're not at work. So that hits the economy now.

The irony of a national disaster though is, once you start rebuilding -- so by the end of this year, early next year, it adds to economic growth. But boy, what a lot of devastation.

ARENA: But explain to me, because it's not clear to me, where is the line drawn between what the taxpayer pays, what the governments pay on those insured losses, and what the private insurance companies pay.

HAYS: Homeowners insurance will pay for wind damage, which is what the hurricane does. Flooding, apparently, a lot of that is actually insurance you take out from the federal government. So to that extent, taxpayers will help.

Now, President Bush has declared Louisiana, Alabama -- was it Georgia, states of emergency? Also, I guess Florida. So there's some help there, which, of course, I think we would all say we would gladly give as fellow citizens of the country.

ARENA: Right. Right -- absolutely.

HAYS: What's going to be tough for a lot people in Florida, apparently, is after Hurricane Andrew in 1992, a lot of the big insurance companies raised the deductibles because they paid out so much money. So that's going to hit people.

And another reason why I think you're going to see some offset, yes, I'm going to rebuild my house, that helps local construction. But if I have to rebuild my house and pay a lot more money out of pocket, I can't spend as much money other ways. That's another way it will be a drag on the economy looking ahead in the months. SLOBOGIN: Kathleen, another development in the economy this week, OPEC, they raised their -- their output targets. But there seems to be a general feeling it isn't going to make any general difference.

HAYS: Well, that was -- that was also tied into the hurricane. There was so much going on to watch, waiting to see the impact of the hurricane, waiting with oil, because 25 percent of U.S. oil and gas production is in the Gulf.

Eight refineries closed down. They're coming back on stream, but there was still production lost there.

Imports from overseas into the United States slowed down for that time as well. So that helps reduce inventories at a time we need to build inventories up.

OPEC said they're going to pump a million more barrels a day. But they're already pumping two million barrels a day over quota.

Apparently, though, this is like we're sending a message. We think the price is too high; we want it lower.

There's a big debate right now over whether or not we're going to see this price range, $45, maybe as much as $50, break because the inventories are building, and we're going to see some relief in a couple of months, or if the inventories are so tight, something like down 24 million barrels over the past 10 weeks or something, they're below average, if we're going to stay at higher levels than we ever thought we would.

ARENA: So maybe we (ph) just gamble a little bit...

(CROSSTALK)

HAYS: The big issue for the economy, we'll see if the Federal Reserve debates it next week, but no change in the idea that they're raising interest rates, even though the skeptics say this is going to be a weight on the economy, these higher oil prices.

ARENA: Right.

SLOBOGIN: From the financial and business world to the emotional aftermath of a terrorism attack. I'm back ON THE STORY of a new documentary about the emotional struggles of victims and rescuers three years after a terrorism attack in Jerusalem.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (through translator): From the corner of my eye, I see Gafnit (ph), who is only two years and 10 months old, flying with the window out into the street.

MICHEL AMAR, JERUSALEM FIREFIGHTER (through translator): My wife screamed on the phone, "We got hurt in a bombing. We got hurt in a bombing." And then the call was disconnected.

I didn't understand exactly whether -- whether they were alive or no longer among the living. I said to myself, "Michel, stand up and run to the vehicle."

(END VIDEO CLIP)

SLOBOGIN: Michel Amar and his wife were two of the people whose lives were blown apart by a terrorist bomb in a pizzeria in Jerusalem in August 2001. Fifteen dead, dozens wounded. Like many terrorist tragedies, it made headlines for a few days, but the impact of that terrorist act radiated far beyond the immediate event.

Welcome back. We're ON THE STORY.

HAYS: So, Kathy, please share with us and our viewers, you know, what this is you've been pouring your heart and soul into, how this documentary came about, and what all it covers.

SLOBOGIN: Well, this documentary, which is going to be on "CNN PRESENTS" tomorrow night at 8:00, was actually put together by a filmmaker, Tim Wallacachuck (ph), and two other producers, Rick Beanstock (ph) and Simcha Yakabovich (ph). And, you know, we've all seen reports about events like this, where you hear the 10-second, 12- second sound bite from some grief-stricken victim.

What these filmmakers did was they spent more than two years tracking the families, the victims, the eyewitnesses, the first responders, and they've really put together a document here that shows you how an event like this rips a hole in people's lives. And they never really put it back together again. And it's a really very powerful film.

ARENA: What -- because, you know, we've all seen a lot, you know, being journalists. What was it about this documentary that will really just stood out or really shook you up?

SLOBOGIN: There are so many things, Kelli. One of the things is just sort of sight and sound thing.

One of the eyewitnesses describes arriving on the scene and of course seeing corpses. But also having this sort of eerie sound effect of cell phones ringing, just a chorus of cell phones ringing.

You k now, we all have cell phones, and when something like this happens, family members are frantically trying to reach their relatives. And for many of these cell phones, they're never going to be answered again.

Another thing that struck me as a really different perspective, first responders, the trained professionals who arrive at a scene like this, I think we all have a conception of them as people who are well trained, they have a lot of experience, they're going to arrive and they're going to go into action mode. Well, in a situation like this, the first responder arrives and thinks, "Where's my wife? What are my children doing? Are they among the victims?" And Michel Amar, who we saw in the clip, arrived at this scene. And one of the first things he saw was the burned stroller of his own 2-year-old.

ARENA: Oh my god.

SLOBOGIN: And then he saw, you know, body parts of other children. And he was completely paralyzed.

There's another very powerful story in this film. A nurse, a trauma nurse who is at the hospital receiving a lot of the victims. And while she's in the emergency room trying to save people, she's also trying to find out what's happened to her niece, whom she knows was downtown, shopping in Jerusalem.

And at one point, she, you know -- in growing desperation, she's not hearing back from her niece, she's not finding her name on any of the lists of victims who have been treated. And so with a sinking heart, she decides to go out and check the hospital morgue. And this is what happens.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: All along, I knew something had happened to her. I said, "I'm looking for my niece, and I know you've got one girl and another person who hasn't been identified. I want to know who she is."

And he opened the first drawer and I looked inside and I said, "No, that's the girl I looked after. She's from the Dutch family. That's not her."

So they opened the other drawer. And -- and I looked at her. And I said, "It's her."

(END VIDEO CLIP)

HAYS: Long-term effects. And also, if I were a Palestinian watching this, I'd just have to ask you, because you have to take this to one set of people, to one group of people. Would I feel that this tells one-half of the story? Will this change me and how I feel about the Israelis? Where is this going?

SLOBOGIN: You know, I think -- I honestly think that you would not feel that way if you were a Palestinian. This film sort of completely avoids blame, one side and the other, politics, arguments.

It's really about being a human being who's lived through this kind of thing. And I would think that Palestinians, who have certainly suffered a great deal of trauma themselves, would really sympathize with this film.

You asked about long-term effects. And, you know, I think one thing that's hard for a lot of us to realize is that the effects are far longer than we can even imagine.

I mean, the family that survived, the firefighter's family, completely traumatized by this. Their lives are completely changed.

I'll tell you one story. An 11-year-old boy in that family who emerged from the bombing covered from head to toe in blood, other people's blood, he now obsessively washes himself. He cannot stop because of that. And this is three years later.

And we're about to hear from a father who lost his teenage daughter, and he speaks movingly about whether you get over, if you can get over it. This is Arnold Roth (ph).

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The tragedy of my daughter's murder, I was really like I think most people outside of Israel. These were events that were framed by a television screen. These were things that occurred and then were overtaken by normal life.

And now I've learned that for the people who are touched by an act of terror in a personal way, it isn't an event which you then work your way past, and as the expression goes, "Life goes on." It actually keeps happening every minute and every day. Life is never going to be the same.

(END VIDEO CLIP)

SLOBOGIN: That program will be on Sunday night at 8:00 p.m. Eastern Standard Time.

HAYS: Well, certainly the impact of terror was felt three years ago in New York. Our colleague, Maria Hinojosa, who covered that event and the impact of that for over a year, told us a couple of weeks ago that going to the Monterey Jazz Festival was a big part of her healing. That's how and why we're heading out to the Monterey Jazz Festival now to see Maria Hinojosa ON THE STORY right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINT EASTWOOD, ACTOR: In a world where pop music has gone in a direction that a lot of people are not enthusiastic about, jazz is maybe our big hope.

(END VIDEO CLIP)

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT: Well, that's Clint Eastwood. We often see him holding guns, blowing people away, but most people don't know that he's a huge jazz fan and is a major supporter of the Monterey Jazz Festival.

Welcome back. We're ON THE STORY. I'm Maria Hinojosa, here in fabulous Monterey, California. Three days of jazz. It's paradise.

ARENA: Well, you know, Maria, before I get to the question of how you get such an assignment, because I'd like to sign up for one, my second question is, I saw you dancing, singing on the stage. OK, what was going on?

HINOJOSA: Well, that was Bobby McFerrin. And a lot of people, you know, think of Bobby McFerrin, keep him kind of limited to that box of "Don't Worry, Be Happy." It was one of the most popular songs of the late 20th century.

But really, he's an extraordinary improvisational vocalist, he's a classic music director. When we were doing our live shots yesterday, he was just kind of doing a rehearsal with Jack de Jeannette (ph), the great drummer. We couldn't get him to stop.

I mean, once he got that mike, he was singing and just going. And then all of a sudden, he roped me in, and then all of a sudden, he's dancing with me, he's having me sing. And I was like, "No, no, no. I can dance but I can't sing."

(LAUGHTER)

SLOBOGIN: Maria, you know, I think a lot -- for a lot of people, jazz is not mainstream. Maybe some people would even say it's marginalized. What's the feeling you get out there? It is alive and well?

HINOJOSA: Oh, here. Yes, you definitely get the feeling here. I mean, this is 40,000 people who are going to come over three days.

It's the longest-running jazz festival ever. Continuously running. But you talk to the artists. A lot of them are worried.

They say, you know, it's a hard time in the economy. We're not sure. They bring up a lot of politics.

A lot of these artists, once the microphones are turned off, they say they're worried about what's happening with the country, and, you know, will there be enough money and support for this kind of art. So there is concern about the artists. But as much as there's that concern, you've got artists who are committed to working with younger jazz artists and helping them find their own be voice, people like Terrence Blanchard, for example, who say they really want to work, just like Art Blakey did, the great drum master, to bring in younger voices and give them a sense of expression.

HAYS: Well, you know, Maria, I've been listening also to jazz probably since my high school days because I had a boyfriend in high school who was really into jazz. So I just -- I just got climatized at an early age.

But the thing about jazz, jazz has always tried to be avant- garde, ahead of the pack, doing something different. So, almost by definition, you know, you're not going to maybe have the big audience. That's always been, I think, part of the dynamic tension.

What is right now the avant-garde in jazz? Because some people are classics, almost like Jack de Jeannette (ph). You're talking about new voices. Are there other new directions in jazz? HINOJOSA: There are new directions in jazz. I mean, one of the things that they like to do here at the festival is to bring those younger voices. So I don't think that you can make a generalization about what's new in jazz.

You have people like Charlie Hunter, who came from hip-hop and rock and now is doing jazz. He's one of the only players that actually has an eight-string guitar that does bass and guitar at the same time. He's one of the new voices.

Another one who's going to be here -- I'll be speaking to here tomorrow -- is Luciana Sosa, who is doing something quite different. She's taking the poetry of the great Chilean poet, Pable Neruda, and translating it into English and singing it to piano.

What they like to do here at the festival is bring in the standards. Tonight, Marianne McPartland, I'll be speaking with her and Clint Eastwood in just a couple of hours, one of the old jazz standards. But they like to bring in the new voices like Luciana Sosa to try to create this kind of sense that jazz is always evolving and can evolve.

ARENA: And crossing cultural boundaries as well, Maria, yes?

HINOJOSA: Totally crossing boundaries. I mean, you know what? I have to tell you, this is -- this is how I prepare for my assignment.

You know, I've just got to listen to all of these CDs, one after another. It's really rough. You know, it's hard work.

ARENA: Yes, getting back to my first question, which is how do you get a gig like this?

UNIDENTIFIED FEMALE: Sounds tough, Maria. I think you need some hardship pay.

HINOJOSA: You've got to work it, you've got to massage it. But interestingly enough, here's what's interesting. When I left the jazz festival last night, there was something going on the streets of Monterey. And I was thinking about this cross-cultural experience here in Monterey.

There was something call the Cherry Jubilee, where they've got these fancy cars. There were all of these low rider cars, which are a big thing on the West Coast in the Chicano culture.

You have jazz happening here. I really felt like this was a moment when you're seeing American culture flourishing across these borders, across these boundaries, and really people finding what unifies them, at least in this space. It is entirely idyllic to be here, no doubt. This is not the gritty, grimy streets of New York, but people are finding common ground through music.

ARENA: All right. Maria, have a good time. Enjoy. Well, in addition to Maria's reports, we can log on to cnn.com.monterey for a schedule of the festival galleries of performers in the past and present and a time line of jazz music.

We'll be back ON THE STORY right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: Kristin Gore, what's her story? Former Vice President Al Gore's daughter has written a novel. "Sammy's Hill" follows a young woman through heartbreak and humor on Capitol Hill.

KRISTIN GORE, AL GORE'S DAUGHTER: You think about D.C. as sort of a boring stuffy place. That's kind of the image. But if you grow up in that, you see all these energetic, fun people, and crazy stuff that happens behind the scenes that no one knows about.

ANNOUNCER: The Harvard graduate's comic credentials include writing for the animated show "Futurama" and "Saturday Night Live."

HAYS: Thanks to my colleagues. Once again, we have covered every aspect of the news we could.

And thank you for watching ON THE STORY. We'll be back next week. We hope to see you then.

Just ahead, "PEOPLE IN THE NEWS." But first, a check in what's happening in the news right now.

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