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Bush's Budget; Iraqi Election Results

Aired February 13, 2005 - 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.

TONY HARRIS, CNN ANCHOR: I'm Tony Harris at the CNN Center in Atlanta. ON THE STORY starts in a minute. But first, here is what's happening "Now in the News."
The numbers are in from Iraq's historic election. The uncertified results were announced today, and the United Iraq Alliance took a plurality of votes. The Shiite Alliance, backed by the Grand Ayatollah Ali al-Sistani, had expected to get a majority of the votes. Meanwhile, election officials put Iraqi voter turnout at 58 percent.

Iran rejects a European offer involving its nuclear research program. Europe offered to provide a light water reactor if Iran stopped building its controversial heavy water nuclear reactor. Iran's foreign ministry spokesman says it wasn't a bad offer but the nation will continue what he calls its peaceful nuclear project.

Pope John Paul II delivers part of his Sunday message to the faithful only days after leaving the hospital. The pontiff appeared at his Vatican window overlooking St. Peter's Square. The pope spent nine days in the hospital for treatment of a respiratory infection.

More news coming up in 30 minutes. ON THE STORY starts right now.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Welcome to CNN's ON THE STORY, where journalists have the inside word on the stories we covered this week. I am Dana Bash, on the story of President Bush's budget that he calls lean and focused but his opponents call a game of hide and seek.

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: I'm Jane Arraf, on the story in Tikrit, where election results are coming in from Baghdad here in the Sunni heartland. Not a lot of Sunnis went out and voted.

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: I'm Kelly Wallace, in New York, on the story about already looking ahead to the 2008 presidential election here and how Rudy Giuliani and Hillary Clinton are riding high.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: I'm Elizabeth Cohen, in Atlanta, on the story of how a murder trial in South Carolina has focused new attention on the risks and benefits of antidepressants for children.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, on the story of how Carly Fiorina fell from the very top of U.S. business this week.

Also coming up, we'll go to Los Angeles and talk to entertainment correspondent Brooke Anderson about tonight's Grammys.

Email us at ONTHESTORY@CNN.com.

Now, straight to Jane Arraf and results just announced in the Iraqi election.

Jane, you just mentioned the fact that in the Sunni region where you are, voter turnout very low in some cases. I read in some provinces maybe as low as 2 percent.

At the same time, we saw that the party of the Shia leader, the Grand Ayatollah al-Sistani, the United Iraq Alliance, got a plurality, but not the overwhelming majority of the votes that people expected he might -- that party might get. The delicate dance begins. How is the horse trading going to go?

ARRAF: It's going to be extremely complicated. And if we thought actually holding elections was a challenge, and it was, then this horse trading and figuring out how they're going to share power in such a fractious race is going to be really very challenging.

Now, as you mentioned, the list backed by the Ayatollah Ali Sistani didn't get as much support as they thought they would. But still, we're talking 48 percent of the vote. The Kurds second. And what this has turned into is clearly a country where the Kurds and the Shias have the balance of power and Sunnis, who had had power under Saddam Hussein -- and we're standing in his former palace, by the way -- are not going to get a large share of it. And that's what they're trying to address.

BASH: And Jane, is there any kind of silver lining, if you will, to the fact that the Shia did get that 47 percent and not the two- third's majority in that this sort of forces them to negotiate, forces them to form a coalition with other parties and other groups?

ARRAF: They had been making all of the right noises anyway, even before the results were announced. And even before they had claimed victory before the results were announced they had been saying that they would reach out to Sunnis.

Now, one of the rumblings here has always been that the Ba'ath Party shouldn't have been disbanded. There's still a lot of people out there who apparently support the Ba'ath Party and feel there was no point in voting because they didn't have anyone to vote for.

Those parties are reaching out to them. And there are some parties with prominent Sunni politicians who indeed will have a role in this government. Everyone is aware that this time could be even more dangerous than that period of voting. That if they don't get this ride, if they don't incorporate Sunnis, it could widen those divisions in this country and spiral down to civil war. And that really is a fear in people's minds. WALLACE: Jane, picking up on that, what is the mood on the ground? As you travel around and talk to people as you can, what's the mood? There were jubilation we saw on the day of elections. But, again, that point you raise, are people worried that the post-election will be a period of increased violence?

ARRAF: I think the mood is that people are really waiting to see how this is going to fall out. We saw those election results. I'm not sure if you heard them there being read out. And it was an absolutely bewildering array of political parties. Political parties many Iraqis would not have heard of.

Now, they went to the polls. They braved the risk of being attacked by insurgents. They had to deal with an extremely complicated election list.

We're talking 111 parties on the national level. Huge ballots. Many of them didn't know who they would vote for.

They got that the done, and there really has been a really interesting change it seems. Many of the places that we've gone to here -- and we've been traveling around quite a lot -- one of the things I've really noticed is that Iraqis aren't complaining so much about American forces anymore or American politicians. They're complaining about their own leaders.

They're going to have a lot of expectations. But a lot of people still aren't sure how this is all going to shake out.

COHEN: Jane, can you talk about why that Sunni turnout was so low?

ARRAF: You know, part of the reason was they just did not have people they felt confident in voting for. Which means they didn't believe they had people they thought would represent them.

Now, we have met Sunnis who've said that they were going to vote for the Shia slate. We have even met Sunnis who said that they were going to vote for Kurdish politicians.

So it isn't that clear-cut across the board. But really what's happened here in the heartland, in the Sunni heartland, is that with the disintegration, with the dissolving of the Ba'ath Party, the dissolving of all of those institution, the army, all sorts of other institutions that had prominent Sunnis in them -- and Sunnis a large proportion of them -- a lot of people, a lot of Sunnis have felt that hey are not a part of the future of this country, that they have no role to play. And they felt that way to some extent in these elections.

Now, the other thing to note is that, just like anybody, when we went out and talked to people, they said, "Who cares about the elections? We want electricity. We want water. We want those basic things." And democracy took a backseat in a sense.

HAYS: Jane, what about the 1st Infantry Division you have been spending time with? Soldiers get ready to go home, what they're feeling, what you've picked up at this moment for them, which must be fraught with emotion, excitement, tension?

ARRAF: All of those, you are absolutely right. We're talking about something close to 20,000 soldiers who are going home after a very intense year in Iraq. And we're getting down to the last few days.

So all over these military bases, and we're at Forward Operating Base Danger with the 1st Infantry Division. They're incredibly excited about going home.

A lot of them in the other bases who go out all of the time are worried, desperately worried that something might happen to them. That they will have survived a year in Iraq and something might happen in the next few days.

They're not quite sure in some cases what's going to await them at home. I mean, think of the terrible cost of being away from your family for a whole year. And some of them do believe that they might be back in Iraq again. The soldiers who are replacing them, we are seeing some of them coming back for their second deployments here.

Yes, very intention emotion all throughout this area. All among any soldiers who have been here for a year and are going home are facing a mixture, a wide range of very intense emotions.

BASH: Jane, thank you so much for the update on the results that we were just getting back in Iraq. What -- as you were just saying that you're with the 1st Infantry Division in the north. But what are you going to be doing in the next couple of days over there?

ARRAF: We're going to be seeing how this electioneering shakes out. Essentially, whether these political parties are going to make good on their promises to incorporate some of the voters in this region. For instance, only 32 percent of the voters here turned out, as opposed to more than 90 percent in Kirkuk.

We're going to be talking to Iraqis in the street hopefully about what their hopes are and what their fears are. And we're going to be talking to quite a lot of incoming U.S. soldiers, a lot of them from the National Guard who -- some of whom are coming here for the first time.

BASH: Jane, thank you very much.

Well, we're going from the Iraqi elections to how much the overall mission is costing taxpayers here in the United States and how the rest of the federal budget was received this week. I'm back on that story in a moment.

And later, in our "What's Her Story?" segment, on 'round the world sailor Ellen MacArthur, ready to relax after weeks of almost no sleep.

(BEGIN VIDEO CLIP) ELLEN MACARTHUR, SAILOR: Not worried about boat speed. Not worried about what's going to happen with the next weather system. Not worried about if you are about to hit something in the water, all those things you're constantly, constantly on guard. You hardly get any sleep, and now on land it feels like it doesn't matter if I don't sleep for the next month because it's over, it's done.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I have a responsibility to submit a budget. I did.

It's lean. It's focused. It's set priorities. And it says, if we've got programs that aren't working, let's get rid of them for the sake of the taxpayers.

(END VIDEO CLIP)

BASH: President Bush Thursday in North Carolina selling his budget. And by words and deeds, signaling he's ready to go right to the voters put pressure on Congress to get what he wants.

COHEN: Dana, we just heard the president say if there are programs that aren't working, let's get rid of them. Which programs does he want to get rid of?

BASH: Elizabeth, they put out 154 programs to either eliminate or reduce. And it really goes across the board from farm subsidies to education programs he says are not working, to Amtrak subsidiaries, health care, veterans benefits, prescription drugs for those who are wealthy.

And what's really interesting here is that they also proposed cuts almost as many last year. But this time, you hear the White House, you hear the president talking about it, not in terms of one big number to try to reduce spending all over, but talking about specific programs.

This is not an election year perhaps for him. Perhaps it's easier to do that. But also, I'm hearing from some Republicans that it's not so much about reducing the deficit, but it's about making sure his base, the Republican base, understands that he is not a big- spending Republican, that he wants to reduce the size of government. They were very upset about the fact that he spent four years in the White House and never vetoed any spending bills.

HAYS: Well, talk about being a big spender, Dana. Even the Libertarian group Cato -- you know, they're not exactly flaming liberals -- pointed out that his spending has grown twice as fast as spending under President Clinton.

Now we find out that Medicare isn't going to cost $400 billion or $513 billion. It's going to cost, what, $760 billion. This is not what he sold Congress on.

BASH: No. And what was so interesting was that the irony of the timing of that -- of that fact and figure coming out, that the cost of the Medicare prescription drug bill that he signed into law was going to be more expensive than they had originally thought. And it was so interesting to watch the president on Friday saying -- coming out and saying that he will veto any attempt to disrupt that Medicare bill.

So you have Republicans look at him saying, OK, so you're telling us that you want us to cut spending, you're making a big deal out of that. Now your first veto threat is if we -- if we don't -- if we reduce spending on Medicare.

That Medicare news was very -- was very -- was not very well received in Congress among Republicans, because they looked at that and said, look, we told you so. We said that this was going to be very tough not to get out of control, that it was a big new entitlement that Republicans were putting on the books. And this is exactly what happened.

And they also were told by the president that this was going to be a political boon for them, and they all said it was a political dud, that it did nothing for them in the elections at all.

WALLACE: Dana, you know of course, Democrats criticizing the president for his budget outlook. In particular, noting he's not including costs for the ongoing conflict in Iraq, and also his plans to overhaul Social Security. And I want to ask you about that, because it seems that the biggest challenge for the president for when it comes to Social Security is not winning over Democrats but winning members of his own party.

BASH: You know, Kelly, this is something that we heard grumblings from some Republicans about a month ago once the president really started to hit this hard. Then after the State of the Union, the White House thought, well, now that we've given specifics, it will be an easier sell.

But we're hearing from Republicans on the Hill, who of course will have to actually make this into legislation, that they're still very concerned. We heard the House speaker saying that Americans don't want anything rammed down their throats.

And just to sort of illustrate how hard this is for the White House to explain to House Republicans that they actually have to do this, they gave them in a closed-door meeting this past week a tape of President Bush traveling around the country, explaining why Social Security needs to be reformed, why his idea will work. Showing them, illustrating to them, hitting them over the head with the fact that the president is trying to give them the political cover that they have been asking for.

So it certainly is not easy at all.

COHEN: Dana, how can you have a federal budget without including the cost of fighting the war in Iraq that's such an incredibly large amount of money? How did the president explain excluding that?

BASH: This is something -- this is the way the White House and Congress have been essentially paying for the war since the beginning. They do it with an additional spending request. They call it a supplemental spending request.

Right now it will total about $105 billion just this year alone. It's because they say the costs are unknown and they have to sort of keep updating it.

But what the White House is saying is that their projection for the deficit right now is very high. But it's -- that they include the cost of Iraq in there. But they are also saying, admitting that they don't know if they can actually reduce the deficit next year because they just don't know how much Iraq is going to cost. And, Elizabeth, that's a problem for them.

HAYS: Speaking of a global stage, Iran is not going to give up its nuclear program, it says. North Korea says "We have nuclear weapons." Condi Rice had her grand tour to make nice with the Europeans. President Bush's next step?

BASH: Well, first of all, a week from today he's going to Europe, and he's going to be meeting with a lot of the leaders who of course opposed him in Iraq, and a lot of the leaders who he is going to need to keep going on a diplomatic front, as they are signaling they do want to do on Iran. And it's really interesting to watch what is happening in Iraq. Obviously, you see the beginnings of democracy there after -- after a war.

And the White House is, at this point, still trying desperately to work through diplomatic channels on the other two members of the axis of evil, Iran and North Korea. But they're having trouble convincing the allies. And there is a lot of concern that perhaps the intelligence, the bad intelligence on Iraq, is tainting what they're trying to do with the diplomats on these other two countries.

WALLACE: Only just settling in, and already there is speculation about, get this, 2008, especially surrounding Rudy Giuliani and Hillary Clinton.

Also, Democrats bracing for life with Dr. Dean at the national controls. I'm back on those stories right after this.

Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

WALLACE: Is it ever too early to start thinking about the next presidential election? Absolutely not! And according to a new poll, Republicans consider Rudy Giuliani the current front-runner for the GOP in '08. What does the former New York City mayor think about this? Well, he's not saying.

RUDY GIULIANI (R), FMR. NEW YORK CITY MAYOR: We're Americans, the land of the free and the home of the brave!

WALLACE: From last summer's convention to last month's inauguration, covering him is kind of like a hit-and-run exercise.

GIULIANI: I don't think we start thinking about the next one until sometime from now.

WALLACE: He can be very visible at the big events, unable to avoid a quick question about his future. But he also tries to keep his business and his private life just that, private, at least for now.

(END VIDEOTAPE)

WALLACE: And those phrases keep popping up. When you ask about his future, one aide I talked to this past week says he's very focused on his business and not presidential politics at the moment.

Welcome back. We are ON THE STORY.

BASH: And Kelly, I remembered back during the campaign Giuliani going to places you would not expect him, in the South, and campaigning for Republicans, very conservative Republicans you wouldn't think he'd be campaigning for, almost trying to sort of lay the groundwork with those people who don't agree with him on social issues. What are you hearing about his potential to rise above the social differences because of his experience on 9/11 and his ability to sell himself as the guy to fight terrorism?

WALLACE: Dana, say it isn't so. Could he have be thinking about 2008 last year in 2004? Just teasing you, of course.

No, this is a big, big challenge for Rudy Giuliani. As our viewers might not know, he takes positions that are not in lockstep with conservatives, cultural conservatives of his party. He supports abortion rights, supports gay marriage, supports gun control.

One cultural conservative I interviewed this past week said only if Rudy Giuliani has a conversion, suddenly becomes anti-abortion rights and anti-gay marriage will he get the support and be able to become the Republican nominee. But there are others who point to just what you noted, how he was campaigning in conservative parts of the country, how he was helping President Bush.

And because he has this popularity, his tremendous popularity following September 11, strong credentials on national security, a lot of charisma, that may -- perhaps some conservatives could look past their differences on social issues and embrace him for those other reasons.

COHEN: Now Kelly, when you asked Giuliani's aide is he thinking about running for president, and he said, no, no, he's focused on his business at the moment, when he added the phrase "at the moment," did that make bells go off in your head?

WALLACE: Well, you know, it's a woman, this aide. And you know, this is the question they are all getting.

You saw in our lead-up there, Rudy Giuliani, everywhere he goes, from the presidential inauguration, to going across the country, he is being asked, "What are your plans for 2008?" Not focused on that. Not focused on that. That is sort of the politically correct answer.

But all signs indicating he could certainly be looking at a run for the White House. In fact, if you looked at CNN's poll this past week, it was showing Rudy Giuliani as the front-runner, with 34 percent of the support, beating right now John McCain.

Now, a lot of people say this is all name recognition and popularity. But again, right now at this moment, he is doing well.

And if you look at the past, apparently back in 1993, when such a poll was taken, Bob Dole was the front-runner. He became the nominee. And then, 1997, the leader at that time George W. Bush, who ultimately became the nominee. So...

HAYS: Could it be, though, that Rudy Giuliani's moderation on some of these issues could appeal to the moderate part of the Republican Party, which was getting vocal in this last election, which continues to say that it has sort of been coopted, that there are moderates, that there are pro-choice Republicans, that maybe that could be Rudy Giuliani's ultimate strength?

WALLACE: Well, Kathleen, moderates would like to think so. And there are those who think Rudy Giuliani would be a very, very strong Republican candidate in a general election. It is the issue of winning those primary battles. And he will be going up against more conservative candidates.

What cultural conservatives will say, Kathleen, is moral values, issues about abortion, issues about gay marriage played a very big role and motivated evangelical Christians to get to the polls for President Bush. So they believe they have more power than the moderates of the party looking ahead to 2008.

BASH: Talking about moderates and maybe the more traditional part of the base, Howard Dean is of course now officially the DNC chairman. Kelly, what -- you know, there's been a lot of talk about what he sold himself as during the primary, and what perhaps he was in terms of being more moderate when he was governor of Vermont.

What is your sense in talking to Democrats as to what they really hope to see from Howard Dean?

WALLACE: Well, and also, Dana, the only reason I laugh at your intro, politics is so fun, because who would have thunk it, right? Howard Dean, his presidential campaign ends, everybody thinks it's fizzled. Things -- forget Howard Dean, forget Howard Dean in the future. And even in the beginning when he was running to become chair of the Democratic National Committee, you know Democrats publicly and privately saying the same thing, no way, he is not the person for the party. Well, it appears that he did the hard work. He really did over the past several months, talking to the party activists, going around campaigning for this. And there are those Democrats who think, you know what, it's good to have Howard Dean.

Again, as you said, he has some moderate position. He's trying to put those forward. He talks about how Democrats know how to balance budgets and accusing the Republicans of fiscal recklessness.

So he is trying to put forward a little more moderate message. He didn't even mention yesterday as he became chairman the Iraq war, which he strongly opposed. So he's trying to put forward this more moderate message, and they think he'll be able to rally the party hopefully for the future.

COHEN: Now Kelly, Rudy Giuliani is leading the Republican list. Who's leading the Democratic list?

WALLACE: Oh, no surprise perhaps there. Hillary Clinton, she is well ahead, we should point out, of senators Kerry and John Edwards, who were obviously the presidential and vice presidential candidate for the Democrats.

So Hillary Clinton, though, just like Rudy Giuliani, says she is not at all thinking about 2008. She says she has a re-election race for 2006. That's her focus. But a lot of people are looking at every word she utters right now and think she is trying to sort of appeal to the more moderate wing of the party as well.

HAYS: Well, Kelly, we're going to go now from politics to the boardroom, and how a woman at the highest level of U.S. business is out with tens of millions of dollars to cushion the ouster.

Also coming up, will the Grammys remember Ray?

All ahead ON THE STORY. Plus, a check on what's making news right now.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

CARLY FIORINA: We stepped up and made tough choices. We are executing a strategy and we are successful in that strategy.

(END VIDEO CLIP)

HAYS: Carly Fiorina that was a couple weeks back when she was interviewed in Switzerland. And this week, one of the most powerful, most publicized women in U.S. business was out.

Welcome back. I'm Kathleen Hays and we're ON THE STORY.

WALLACE: Kathleen, what happened? I think we were all startled when we learned this week that she was out. She has really been the face for American women when it comes to CEOs.

HAYS: Absolutely because she was the CEO of a very big, powerful, you know, computer technology company. This is the woman who was brought in, in 1999, to take one of the icons of Silicon Valley, a company started back in the '30s by William Hewlett and David Packard in their garage, you know, built into a powerhouse. But people felt in many ways it was a leading company, number one in its printer division but maybe number two or three in some of the other divisions, like PCs.

Her whole career was staked on buying another computer company, Compaq, because she said that will give us the scale to compete. The merger never quite lived up to it. She didn't meet her own profit targets. The board wanted her to cede some responsibility to top deputies and she balked at that and the next thing you know Carly's out of a job.

COHEN: Now, how did HP employees react when they heard the news that she was out?

HAYS: Well, I think things ranged from champagne toasts to, I heard one saying "ding, dong the witch is dead." Now, in fairness to Carly, it's always tough if you come in to a company that has been known for being focused on employees, known for holding onto them, cut thousands of jobs, cut thousands more in this merger.

Another rap against her though the rock star CEO. Carly was very good about going out, speaking to large audience, talking to clients but the board said "We need someone who is here executing day-to-day strategy."

She was accused of being arrogant. She was accused of letting talent go. She was accused of blaming other people for problems in the company, say missing your earnings, when people say, "Hey, you're the boss. You should have shouldered more of that."

So, another big cheer came up from Wall Street. The day this was announced the stock had about a seven percent bounce, so clearly analysts, the big investors are now looking for some new directions from this company now that Carly's gone.

BASH: What's interesting, Kathleen, is certainly there were comments about her hair, about her clothes that you wouldn't hear perhaps about male CEOs. But, by and large, it seems as though her tenure and perhaps the fact that she was fired might not be that different than it would have been if she were a male.

HAYS: Well, that's one thing that's really delicious about this story I think. What Carly Fiorina has shown is, guess what, women can be as driven, as self-centered if you want to make that criticism of her. They can make big mistakes just like men. And just like men they can be second guessed.

She's still got people saying, look, she took the company in the right direction. She streamlined it. They had to make a move. She should have been given more time. Also like the male CEOs, now remember the stock is down 50 percent from the point when Carly took it over, you would think pay for performance would mean low pay. She's going to walk away with anywhere from $21 million to $42 million just like a lot of men have walked away.

One employee described this as yet another CEO walking away and leaving wreckage in its wake. So, I just think the Carly had done exactly what a lot of men have done and done it very, very well depending on how you gauge it.

WALLACE: Kathleen, switching gears a big, we always put you on the spot but you're always so good at explaining what Washington politics and economics will mean for the average person in this country.

We have talked a lot about the president's budget. If you boil it down to the average person on the streets right now, why should he or she care and what will it mean?

HAYS: Oh, I think -- well, as Dana pointed out, 154 programs are going to face some kind of cut and, of course, the president's team says but wait a minute, in some cases we're cutting one program to build up another.

The fact that they're going to change the way Medicaid is funded apparently could result in Medicaid cuts. That's going to hurt low- income people. Cutting back food stamps that's going to be very problematic. I think that's one reason why Wall Street is still kind of skeptical whether or not this budget goes through in its entirety.

There's one program I'd like to point out to everybody though, which is a very important one for a lot of people who have been to college and have student loans because in this budget there's a proposal to change the way you can consolidate loans.

Right now if you have thousands of dollars in student loans, you can consolidate them all at current low interest rates, a fixed rate. If this goes through, you'll be able to consolidate but at a variable rate, so if rates rise, you'll have to pay more money.

I think for something like that this is probably a wakeup call for people. Take a look at those loans. Maybe it's a good time to think about doing it before the law changes.

COHEN: Now, Kathleen, Valentine's Day is coming up and some economists, some very romantic economists have managed to put a price tag on a happy marriage. How did they do that?

HAYS: They just looked at I guess how happy people said they are relative to other people, how well you can sort of economize the scales of life when you're married. They say it's worth about $100,000.

Other economists say, in fact, that people who love, love, are much happier than people who love money but, guess what, divorce can wash it all away and you can end up more unhappy, not even than married people but people who were never married at all. So, be good to your valentine.

COHEN: That's right.

Well, we're going to go from love to murder and how a trial in South Carolina with a teenage defendant has focused new attention on the risk for children on antidepressants. I'm back on that story in a moment.

(BEGIN VIDEO CLIP)

ANNOUNCER: Elizabeth Cohen is a CNN Medical Correspondent. She joined CNN in 1991. Earlier she worked as a newspaper reporter in Washington and Albany. She has a Master's degree in public health.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DANIELLE PITTMAN FINCHUM: In talking to him, he'd be sitting like fidgeting with his hands the whole time. He was constantly up and down in that house. He was just crazy.

(END VIDEO CLIP)

COHEN: He was just crazy. Those were the words of Danielle Pittman Finchum talking about her brother Chris Pittman on trial for the murder of their grandparents. Central to the defense is whether or not Chris Pittman knew right from wrong because he had started taking the widely-prescribed antidepressant Zoloft.

Welcome back. I'm Elizabeth Cohen and we're ON THE STORY.

BASH: And, Elizabeth, you have been down in the courtroom listening, watching. I can't even imagine how gut-wrenching this is in terms of the emotion because you're talking about families here that were really ripped apart. But talk about from the medical perspective what they have been able to discuss or at least learn about Zoloft and the real impact on this case.

COHEN: Dana, it has really been the battle of the psychiatrists. No fewer than five mental health professionals have testified about what state of mind Chris Pittman was in when he killed his grandparents.

Now, he admitted that he killed them. He shot them in the head twice both of them while they were sleeping and then set the house on fire. And so, you have some psychiatrists saying, you know, he was just a bad kid.

He was mean. He was aggressive. He had problem with authority. He was mad at his grandparents because they wanted to send him back to live with his father and he was mad at them so he -- so he killed them.

And then you have psychiatrists saying, no, he was really a sweet boy. He was a good boy. He didn't really have many problems -- many problems in school or discipline problems before this happened and that going on this drug, and he had just gone on it a couple of weeks before, and that going on this drug made him manic, made his psychotic, made him hear voices saying "kill, kill, kill."

So, it's really pretty incredible. You know we all just sat there in the courtroom saying how could they all be talking about the same boy? It just seems like an incredible thing that you can have so many different interpretations of the same set of facts.

WALLACE: And, Elizabeth, take us a little bit inside that courtroom in describing the mood because this is a case that is getting attention from across the country and could very well have implications for the use of this drug in the future one would imagine.

COHEN: That's right, Kelly.

This is one very emotional courtroom. As a matter of fact, the judge several times has had to ask people to calm down. He said, "I know that there's a lot of passion on both sides."

As a matter of fact, several families have flown in, some from California, some from New Jersey because they say that their children killed themselves while they were on these antidepressants and they've come to support Chris.

In fact, one of those families put up the rent for his family to rent a house so that he could be let out on bail and go live with his family during the trial. In fact, this same woman she put up the bail for Chris Pittman.

So, these families who really don't -- haven't known him all that long are being very, very supportive so there's a lot of emotions running on both sides of this.

His family is there every day. He has an aunt who's sitting in the front row, his sister who we saw earlier, his maternal grandmother. They're sitting there in the front row. They're very supportive of him. They think he should be found not guilty.

HAYS: Well, Elizabeth, many families across the country and I'm sure some of these families have kids who were troubled, depressed, trouble taking tests, were put on Zoloft and they say within days sometimes committed suicide. Now, what about the science, what about the competing science and the risk that Zoloft does this or doesn't do this? Can you blame a drug for murder?

COHEN: Right. Well this is basically what the jury heard about for days and days and it got very technical and I'll try to boil it down. You had a psychiatrist, Dr. Steve Romano from Pfizer, he works for the company say, look, "We did clinical trials. We did two clinical trials. We had approximately about 200 kids who were taking Zoloft and they didn't have any statistically significant higher risk of having suicidal thoughts or aggressive, hostile thoughts than the kids who were just taking a placebo, taking a sugar pill." So that's one set of testimony that the jury is hearing.

But the jury is also hearing, hey look, the Food and Drug Administration was concerned enough about reports of violent acts coming in after kids were taking these drugs, reports of suicide, reports of aggressiveness that they now have what's called the black box warning and the wording on that was just finalized recently.

This is the highest level of warning you can put on a drug without actually yanking it off the shelves and this warning says that parents should look for signs of aggressiveness and hostility in their children. So, it's two sort of different messages that the jury got and that's what they get to sort out and they're supposed to start doing that Monday.

BASH: Elizabeth, my question is if there is any question about whether or not this drug will send children or anyone else into this kind of depression or rage that they will actually commit murder, why is it being prescribed at all?

COHEN: Well, you know what, there was a lot of eloquent testimony at the trial, Dana, that said look this drug has saved the lives of many, many people. Many people were depressed, on the verge of suicide perhaps, started taking Zoloft or a drug like it and now they're doing OK.

So, basically what many people will say is, look, it's a good drug. It helps a lot of people. But, on the other hand, perhaps it has this effect in a small number of people particularly young people.

BASH: Elizabeth thank you very much.

And we're going to go from the courtroom to the recording studio with a big celebration of music. The Grammys is tonight and our Brooke Anderson is on that story just ahead.

(COMMERCIAL BREAK)

WALLACE: And that is Kanye West. He is hoping that his song "Jesus Walks" will win him a couple of Grammys tonight for Song of the Year and Best Rap Song. He is up for ten Grammys in all and he's got an ego and a sense of humor to match.

(BEGIN VIDEO CLIP)

KANYE WEST, GRAMMY NOMINEE: My name up until Sunday is no longer Kanye. It's the face, the face of the Grammys.

(END VIDEO CLIP)

WALLACE: The face of the Grammys, OK.

Well our face of the Grammys is Entertainment Correspondent Brooke Anderson ON THE STORY in Los Angeles, Brooke great to see you. This is a day when we all envy the job you have. So, tell us is Kanye West going to live up to the billing of being the face of the Grammys tonight?

BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: Kelly, first of all, can you believe that trash talk? I mean this isn't the sports world.

WALLACE: Oh, it makes it fun. It makes it fun, right?

ANDERSON: It does make it fun. I don't know if that will work here like it may work in the Super Bowl or whatnot. He does lead the nominees with ten nominations, like you say. He probably won't reach double digits but he will pick up some Grammys.

The song "Jesus Walks" very, very powerful. His disc is called "The College Dropout" and the critics absolutely love it. Many call it brilliant. And, you know, he has named himself the face of the Grammys. It's hard to believe but if he wins, he'll be very, very happy, Kelly.

If he doesn't, he's going to let us all know about it like he did recently at the American Music Awards where he lost the Best New Artist award to Gretchen Wilson. He was very upset, visibly, publicly, basically said he got robbed. I'm sure, you know, that didn't make Gretchen Wilson feel that well but he's since made up with her. He's since moved on from the American Music Awards, very excited about the Grammys tonight where he's up for Best New Artist here as well...

HAYS: Brooke.

ANDERSON: ...in addition to the biggie album of the year.

HAYS: Speaking of the Grammys, is it just my imagination or are the Grammys just getting kind of to be a bigger and bigger deal every year, more you know pre-Grammy coverage leading up to it? We've got such a variety of faces at this from, you know, old faces like Rod Stewart, Kanye West a new face. We've got Queen Latifah, who is hosting. She's up for a Grammy and she's performing. It just seems that it's more of a spectacle and the world is paying more attention.

ANDERSON: Oh, Kathleen, you're right and, you know what? I think part of that is because the recording academy is trying to change its image. It used to be called the Grannies, not the Grammys.

Now, if they were talking about my grandmothers that means it was a hip, cool show but they weren't talking about my grandmothers. So, in, you know, in the past it's been kind of stodgy, old-fashioned and they're trying to move into a younger audience, a hipper audience. They've embraced hip-hop, which reflects what consumers have embraced as well.

You know and the recording academy, 20,000 members, this includes CEOs, producers, engineers, so they're very credible people, although sometimes it does take them a minute or two, a year or two to pick up on what everybody else is laying down, so to speak.

COHEN: Now, Brooke, let's try to live vicariously through you since we don't get to go to the Grammys. What are you looking forward to the most about going to the Grammys?

ANDERSON: You know I'm looking forward to seeing so many of the artists walk down the red carpet. They're always so excited to be there, to be nominated. Like everyone says it is an honor just to be nominated. And I know you hear that and you say, oh whatever, they really want to win but they enjoy being there. They enjoy hanging out with each other, seeing their friends.

And you know, Kathleen mentioned Rod Stewart. This guy has never won a Grammy before, if you can believe it. He's been making music for so many years, never won a Grammy. Now he's turned to the songbooks. Basically, he's recording standards showing that these classic songs really do have staying power.

His current album "The Great American Songbook, Volume 3" some of the favorites there include "Blue Moon" and "What a Wonderful World." Many believe this is what a wonderful disc, so to speak. Many hope he picks up best traditional pop vocal album. But you know what guys, if he doesn't, never fear I think a volume 4 is in the works. He could have a chance in the future.

BASH: Brooke, Rod Stewart is exactly what I was going to ask you about because you were talking about hip-hop and everybody focusing on new music but Rod Stewart is somebody who has been nominated, what, 13 times and not won? He's sort of the Susan Lucci of the Grammys.

ANDERSON: Sort of the Susan Lucci.

BASH: So, is there an expectation that perhaps for that reason that maybe he'll get it this time?

ANDERSON: Maybe it finally is his year and, you know, with other award shows, such as the Oscars and the Golden Globes, when people have been nominated so many times in the past, sometimes the voters say, you know what, this person is due. This person needs this award. They're talented. It's time. Let's go ahead and give it to them. So, very, very possibly yes.

And you know I do want to mention Loretta Lynn, the country music legend. She has collaborated with Jack White of the White Stripes, what an unlikely collaboration but what a terrific collaboration you guys. I'm really looking forward to this.

They have made the disk "Van Lear Rose" and how it happened Jack White actually approached Loretta Lynn. He said "Hey, I want us to do this together. I want you to write all the songs. I'm going to produce it. We're going to do it together" and they have and they are up for five Grammy awards.

COHEN: Well, Brooke Anderson thank you very much and you can be sure we'll be watching your reports from the Grammys.

We're back ON THE STORY after this.

(BEGIN VIDEO CLIP)

ANNOUNCER: A British woman battles nature and breaks a world record. What's her story? More when we return.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: Ellen MacArthur what's her story? MacArthur set the record for the fastest solo sail around the world. She fought rough waters, cramped corridors and exhaustion during her 71-day journey.

ELLEN MACARTHUR: There were some time out there that were excruciatingly difficult. There's no doubt about it. I have never in my life had to dig as deep as I did in this trip and not just once or twice but over consecutive weeks.

ANNOUNCER: Her 75-foot sailing vessel was designed specifically for her small frame and to maximize speed for the 27,000 mile voyage. Born in England, MacArthur fell in love with sailing as an 8-year-old girl when her aunt took her out on a small dingy. She saved her lunch money to buy her first boat.

(END VIDEO CLIP)

HAYS: Thanks to all my colleagues for their fascinating show. And thank you for joining us today to watch ON THE STORY. We'll be back next week.

Up next on CNN, "CNN LIVE SUNDAY," with the latest on the Iraqi election results.

At 11:30 a.m. Eastern, 8:30 Pacific, a special live edition of "RELIABLE SOURCES."

And at 12:00 Noon, Eastern, 9:00 a.m. Pacific, "LATE EDITION" with Wolf Blitzer. Among Wolf's guests, the South Korean Minister Ban-Ki Moon.

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 February 13, 2005 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: I'm Tony Harris at the CNN Center in Atlanta. ON THE STORY starts in a minute. But first, here is what's happening "Now in the News."
The numbers are in from Iraq's historic election. The uncertified results were announced today, and the United Iraq Alliance took a plurality of votes. The Shiite Alliance, backed by the Grand Ayatollah Ali al-Sistani, had expected to get a majority of the votes. Meanwhile, election officials put Iraqi voter turnout at 58 percent.

Iran rejects a European offer involving its nuclear research program. Europe offered to provide a light water reactor if Iran stopped building its controversial heavy water nuclear reactor. Iran's foreign ministry spokesman says it wasn't a bad offer but the nation will continue what he calls its peaceful nuclear project.

Pope John Paul II delivers part of his Sunday message to the faithful only days after leaving the hospital. The pontiff appeared at his Vatican window overlooking St. Peter's Square. The pope spent nine days in the hospital for treatment of a respiratory infection.

More news coming up in 30 minutes. ON THE STORY starts right now.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Welcome to CNN's ON THE STORY, where journalists have the inside word on the stories we covered this week. I am Dana Bash, on the story of President Bush's budget that he calls lean and focused but his opponents call a game of hide and seek.

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: I'm Jane Arraf, on the story in Tikrit, where election results are coming in from Baghdad here in the Sunni heartland. Not a lot of Sunnis went out and voted.

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: I'm Kelly Wallace, in New York, on the story about already looking ahead to the 2008 presidential election here and how Rudy Giuliani and Hillary Clinton are riding high.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: I'm Elizabeth Cohen, in Atlanta, on the story of how a murder trial in South Carolina has focused new attention on the risks and benefits of antidepressants for children.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, on the story of how Carly Fiorina fell from the very top of U.S. business this week.

Also coming up, we'll go to Los Angeles and talk to entertainment correspondent Brooke Anderson about tonight's Grammys.

Email us at ONTHESTORY@CNN.com.

Now, straight to Jane Arraf and results just announced in the Iraqi election.

Jane, you just mentioned the fact that in the Sunni region where you are, voter turnout very low in some cases. I read in some provinces maybe as low as 2 percent.

At the same time, we saw that the party of the Shia leader, the Grand Ayatollah al-Sistani, the United Iraq Alliance, got a plurality, but not the overwhelming majority of the votes that people expected he might -- that party might get. The delicate dance begins. How is the horse trading going to go?

ARRAF: It's going to be extremely complicated. And if we thought actually holding elections was a challenge, and it was, then this horse trading and figuring out how they're going to share power in such a fractious race is going to be really very challenging.

Now, as you mentioned, the list backed by the Ayatollah Ali Sistani didn't get as much support as they thought they would. But still, we're talking 48 percent of the vote. The Kurds second. And what this has turned into is clearly a country where the Kurds and the Shias have the balance of power and Sunnis, who had had power under Saddam Hussein -- and we're standing in his former palace, by the way -- are not going to get a large share of it. And that's what they're trying to address.

BASH: And Jane, is there any kind of silver lining, if you will, to the fact that the Shia did get that 47 percent and not the two- third's majority in that this sort of forces them to negotiate, forces them to form a coalition with other parties and other groups?

ARRAF: They had been making all of the right noises anyway, even before the results were announced. And even before they had claimed victory before the results were announced they had been saying that they would reach out to Sunnis.

Now, one of the rumblings here has always been that the Ba'ath Party shouldn't have been disbanded. There's still a lot of people out there who apparently support the Ba'ath Party and feel there was no point in voting because they didn't have anyone to vote for.

Those parties are reaching out to them. And there are some parties with prominent Sunni politicians who indeed will have a role in this government. Everyone is aware that this time could be even more dangerous than that period of voting. That if they don't get this ride, if they don't incorporate Sunnis, it could widen those divisions in this country and spiral down to civil war. And that really is a fear in people's minds. WALLACE: Jane, picking up on that, what is the mood on the ground? As you travel around and talk to people as you can, what's the mood? There were jubilation we saw on the day of elections. But, again, that point you raise, are people worried that the post-election will be a period of increased violence?

ARRAF: I think the mood is that people are really waiting to see how this is going to fall out. We saw those election results. I'm not sure if you heard them there being read out. And it was an absolutely bewildering array of political parties. Political parties many Iraqis would not have heard of.

Now, they went to the polls. They braved the risk of being attacked by insurgents. They had to deal with an extremely complicated election list.

We're talking 111 parties on the national level. Huge ballots. Many of them didn't know who they would vote for.

They got that the done, and there really has been a really interesting change it seems. Many of the places that we've gone to here -- and we've been traveling around quite a lot -- one of the things I've really noticed is that Iraqis aren't complaining so much about American forces anymore or American politicians. They're complaining about their own leaders.

They're going to have a lot of expectations. But a lot of people still aren't sure how this is all going to shake out.

COHEN: Jane, can you talk about why that Sunni turnout was so low?

ARRAF: You know, part of the reason was they just did not have people they felt confident in voting for. Which means they didn't believe they had people they thought would represent them.

Now, we have met Sunnis who've said that they were going to vote for the Shia slate. We have even met Sunnis who said that they were going to vote for Kurdish politicians.

So it isn't that clear-cut across the board. But really what's happened here in the heartland, in the Sunni heartland, is that with the disintegration, with the dissolving of the Ba'ath Party, the dissolving of all of those institution, the army, all sorts of other institutions that had prominent Sunnis in them -- and Sunnis a large proportion of them -- a lot of people, a lot of Sunnis have felt that hey are not a part of the future of this country, that they have no role to play. And they felt that way to some extent in these elections.

Now, the other thing to note is that, just like anybody, when we went out and talked to people, they said, "Who cares about the elections? We want electricity. We want water. We want those basic things." And democracy took a backseat in a sense.

HAYS: Jane, what about the 1st Infantry Division you have been spending time with? Soldiers get ready to go home, what they're feeling, what you've picked up at this moment for them, which must be fraught with emotion, excitement, tension?

ARRAF: All of those, you are absolutely right. We're talking about something close to 20,000 soldiers who are going home after a very intense year in Iraq. And we're getting down to the last few days.

So all over these military bases, and we're at Forward Operating Base Danger with the 1st Infantry Division. They're incredibly excited about going home.

A lot of them in the other bases who go out all of the time are worried, desperately worried that something might happen to them. That they will have survived a year in Iraq and something might happen in the next few days.

They're not quite sure in some cases what's going to await them at home. I mean, think of the terrible cost of being away from your family for a whole year. And some of them do believe that they might be back in Iraq again. The soldiers who are replacing them, we are seeing some of them coming back for their second deployments here.

Yes, very intention emotion all throughout this area. All among any soldiers who have been here for a year and are going home are facing a mixture, a wide range of very intense emotions.

BASH: Jane, thank you so much for the update on the results that we were just getting back in Iraq. What -- as you were just saying that you're with the 1st Infantry Division in the north. But what are you going to be doing in the next couple of days over there?

ARRAF: We're going to be seeing how this electioneering shakes out. Essentially, whether these political parties are going to make good on their promises to incorporate some of the voters in this region. For instance, only 32 percent of the voters here turned out, as opposed to more than 90 percent in Kirkuk.

We're going to be talking to Iraqis in the street hopefully about what their hopes are and what their fears are. And we're going to be talking to quite a lot of incoming U.S. soldiers, a lot of them from the National Guard who -- some of whom are coming here for the first time.

BASH: Jane, thank you very much.

Well, we're going from the Iraqi elections to how much the overall mission is costing taxpayers here in the United States and how the rest of the federal budget was received this week. I'm back on that story in a moment.

And later, in our "What's Her Story?" segment, on 'round the world sailor Ellen MacArthur, ready to relax after weeks of almost no sleep.

(BEGIN VIDEO CLIP) ELLEN MACARTHUR, SAILOR: Not worried about boat speed. Not worried about what's going to happen with the next weather system. Not worried about if you are about to hit something in the water, all those things you're constantly, constantly on guard. You hardly get any sleep, and now on land it feels like it doesn't matter if I don't sleep for the next month because it's over, it's done.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I have a responsibility to submit a budget. I did.

It's lean. It's focused. It's set priorities. And it says, if we've got programs that aren't working, let's get rid of them for the sake of the taxpayers.

(END VIDEO CLIP)

BASH: President Bush Thursday in North Carolina selling his budget. And by words and deeds, signaling he's ready to go right to the voters put pressure on Congress to get what he wants.

COHEN: Dana, we just heard the president say if there are programs that aren't working, let's get rid of them. Which programs does he want to get rid of?

BASH: Elizabeth, they put out 154 programs to either eliminate or reduce. And it really goes across the board from farm subsidies to education programs he says are not working, to Amtrak subsidiaries, health care, veterans benefits, prescription drugs for those who are wealthy.

And what's really interesting here is that they also proposed cuts almost as many last year. But this time, you hear the White House, you hear the president talking about it, not in terms of one big number to try to reduce spending all over, but talking about specific programs.

This is not an election year perhaps for him. Perhaps it's easier to do that. But also, I'm hearing from some Republicans that it's not so much about reducing the deficit, but it's about making sure his base, the Republican base, understands that he is not a big- spending Republican, that he wants to reduce the size of government. They were very upset about the fact that he spent four years in the White House and never vetoed any spending bills.

HAYS: Well, talk about being a big spender, Dana. Even the Libertarian group Cato -- you know, they're not exactly flaming liberals -- pointed out that his spending has grown twice as fast as spending under President Clinton.

Now we find out that Medicare isn't going to cost $400 billion or $513 billion. It's going to cost, what, $760 billion. This is not what he sold Congress on.

BASH: No. And what was so interesting was that the irony of the timing of that -- of that fact and figure coming out, that the cost of the Medicare prescription drug bill that he signed into law was going to be more expensive than they had originally thought. And it was so interesting to watch the president on Friday saying -- coming out and saying that he will veto any attempt to disrupt that Medicare bill.

So you have Republicans look at him saying, OK, so you're telling us that you want us to cut spending, you're making a big deal out of that. Now your first veto threat is if we -- if we don't -- if we reduce spending on Medicare.

That Medicare news was very -- was very -- was not very well received in Congress among Republicans, because they looked at that and said, look, we told you so. We said that this was going to be very tough not to get out of control, that it was a big new entitlement that Republicans were putting on the books. And this is exactly what happened.

And they also were told by the president that this was going to be a political boon for them, and they all said it was a political dud, that it did nothing for them in the elections at all.

WALLACE: Dana, you know of course, Democrats criticizing the president for his budget outlook. In particular, noting he's not including costs for the ongoing conflict in Iraq, and also his plans to overhaul Social Security. And I want to ask you about that, because it seems that the biggest challenge for the president for when it comes to Social Security is not winning over Democrats but winning members of his own party.

BASH: You know, Kelly, this is something that we heard grumblings from some Republicans about a month ago once the president really started to hit this hard. Then after the State of the Union, the White House thought, well, now that we've given specifics, it will be an easier sell.

But we're hearing from Republicans on the Hill, who of course will have to actually make this into legislation, that they're still very concerned. We heard the House speaker saying that Americans don't want anything rammed down their throats.

And just to sort of illustrate how hard this is for the White House to explain to House Republicans that they actually have to do this, they gave them in a closed-door meeting this past week a tape of President Bush traveling around the country, explaining why Social Security needs to be reformed, why his idea will work. Showing them, illustrating to them, hitting them over the head with the fact that the president is trying to give them the political cover that they have been asking for.

So it certainly is not easy at all.

COHEN: Dana, how can you have a federal budget without including the cost of fighting the war in Iraq that's such an incredibly large amount of money? How did the president explain excluding that?

BASH: This is something -- this is the way the White House and Congress have been essentially paying for the war since the beginning. They do it with an additional spending request. They call it a supplemental spending request.

Right now it will total about $105 billion just this year alone. It's because they say the costs are unknown and they have to sort of keep updating it.

But what the White House is saying is that their projection for the deficit right now is very high. But it's -- that they include the cost of Iraq in there. But they are also saying, admitting that they don't know if they can actually reduce the deficit next year because they just don't know how much Iraq is going to cost. And, Elizabeth, that's a problem for them.

HAYS: Speaking of a global stage, Iran is not going to give up its nuclear program, it says. North Korea says "We have nuclear weapons." Condi Rice had her grand tour to make nice with the Europeans. President Bush's next step?

BASH: Well, first of all, a week from today he's going to Europe, and he's going to be meeting with a lot of the leaders who of course opposed him in Iraq, and a lot of the leaders who he is going to need to keep going on a diplomatic front, as they are signaling they do want to do on Iran. And it's really interesting to watch what is happening in Iraq. Obviously, you see the beginnings of democracy there after -- after a war.

And the White House is, at this point, still trying desperately to work through diplomatic channels on the other two members of the axis of evil, Iran and North Korea. But they're having trouble convincing the allies. And there is a lot of concern that perhaps the intelligence, the bad intelligence on Iraq, is tainting what they're trying to do with the diplomats on these other two countries.

WALLACE: Only just settling in, and already there is speculation about, get this, 2008, especially surrounding Rudy Giuliani and Hillary Clinton.

Also, Democrats bracing for life with Dr. Dean at the national controls. I'm back on those stories right after this.

Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

WALLACE: Is it ever too early to start thinking about the next presidential election? Absolutely not! And according to a new poll, Republicans consider Rudy Giuliani the current front-runner for the GOP in '08. What does the former New York City mayor think about this? Well, he's not saying.

RUDY GIULIANI (R), FMR. NEW YORK CITY MAYOR: We're Americans, the land of the free and the home of the brave!

WALLACE: From last summer's convention to last month's inauguration, covering him is kind of like a hit-and-run exercise.

GIULIANI: I don't think we start thinking about the next one until sometime from now.

WALLACE: He can be very visible at the big events, unable to avoid a quick question about his future. But he also tries to keep his business and his private life just that, private, at least for now.

(END VIDEOTAPE)

WALLACE: And those phrases keep popping up. When you ask about his future, one aide I talked to this past week says he's very focused on his business and not presidential politics at the moment.

Welcome back. We are ON THE STORY.

BASH: And Kelly, I remembered back during the campaign Giuliani going to places you would not expect him, in the South, and campaigning for Republicans, very conservative Republicans you wouldn't think he'd be campaigning for, almost trying to sort of lay the groundwork with those people who don't agree with him on social issues. What are you hearing about his potential to rise above the social differences because of his experience on 9/11 and his ability to sell himself as the guy to fight terrorism?

WALLACE: Dana, say it isn't so. Could he have be thinking about 2008 last year in 2004? Just teasing you, of course.

No, this is a big, big challenge for Rudy Giuliani. As our viewers might not know, he takes positions that are not in lockstep with conservatives, cultural conservatives of his party. He supports abortion rights, supports gay marriage, supports gun control.

One cultural conservative I interviewed this past week said only if Rudy Giuliani has a conversion, suddenly becomes anti-abortion rights and anti-gay marriage will he get the support and be able to become the Republican nominee. But there are others who point to just what you noted, how he was campaigning in conservative parts of the country, how he was helping President Bush.

And because he has this popularity, his tremendous popularity following September 11, strong credentials on national security, a lot of charisma, that may -- perhaps some conservatives could look past their differences on social issues and embrace him for those other reasons.

COHEN: Now Kelly, when you asked Giuliani's aide is he thinking about running for president, and he said, no, no, he's focused on his business at the moment, when he added the phrase "at the moment," did that make bells go off in your head?

WALLACE: Well, you know, it's a woman, this aide. And you know, this is the question they are all getting.

You saw in our lead-up there, Rudy Giuliani, everywhere he goes, from the presidential inauguration, to going across the country, he is being asked, "What are your plans for 2008?" Not focused on that. Not focused on that. That is sort of the politically correct answer.

But all signs indicating he could certainly be looking at a run for the White House. In fact, if you looked at CNN's poll this past week, it was showing Rudy Giuliani as the front-runner, with 34 percent of the support, beating right now John McCain.

Now, a lot of people say this is all name recognition and popularity. But again, right now at this moment, he is doing well.

And if you look at the past, apparently back in 1993, when such a poll was taken, Bob Dole was the front-runner. He became the nominee. And then, 1997, the leader at that time George W. Bush, who ultimately became the nominee. So...

HAYS: Could it be, though, that Rudy Giuliani's moderation on some of these issues could appeal to the moderate part of the Republican Party, which was getting vocal in this last election, which continues to say that it has sort of been coopted, that there are moderates, that there are pro-choice Republicans, that maybe that could be Rudy Giuliani's ultimate strength?

WALLACE: Well, Kathleen, moderates would like to think so. And there are those who think Rudy Giuliani would be a very, very strong Republican candidate in a general election. It is the issue of winning those primary battles. And he will be going up against more conservative candidates.

What cultural conservatives will say, Kathleen, is moral values, issues about abortion, issues about gay marriage played a very big role and motivated evangelical Christians to get to the polls for President Bush. So they believe they have more power than the moderates of the party looking ahead to 2008.

BASH: Talking about moderates and maybe the more traditional part of the base, Howard Dean is of course now officially the DNC chairman. Kelly, what -- you know, there's been a lot of talk about what he sold himself as during the primary, and what perhaps he was in terms of being more moderate when he was governor of Vermont.

What is your sense in talking to Democrats as to what they really hope to see from Howard Dean?

WALLACE: Well, and also, Dana, the only reason I laugh at your intro, politics is so fun, because who would have thunk it, right? Howard Dean, his presidential campaign ends, everybody thinks it's fizzled. Things -- forget Howard Dean, forget Howard Dean in the future. And even in the beginning when he was running to become chair of the Democratic National Committee, you know Democrats publicly and privately saying the same thing, no way, he is not the person for the party. Well, it appears that he did the hard work. He really did over the past several months, talking to the party activists, going around campaigning for this. And there are those Democrats who think, you know what, it's good to have Howard Dean.

Again, as you said, he has some moderate position. He's trying to put those forward. He talks about how Democrats know how to balance budgets and accusing the Republicans of fiscal recklessness.

So he is trying to put forward a little more moderate message. He didn't even mention yesterday as he became chairman the Iraq war, which he strongly opposed. So he's trying to put forward this more moderate message, and they think he'll be able to rally the party hopefully for the future.

COHEN: Now Kelly, Rudy Giuliani is leading the Republican list. Who's leading the Democratic list?

WALLACE: Oh, no surprise perhaps there. Hillary Clinton, she is well ahead, we should point out, of senators Kerry and John Edwards, who were obviously the presidential and vice presidential candidate for the Democrats.

So Hillary Clinton, though, just like Rudy Giuliani, says she is not at all thinking about 2008. She says she has a re-election race for 2006. That's her focus. But a lot of people are looking at every word she utters right now and think she is trying to sort of appeal to the more moderate wing of the party as well.

HAYS: Well, Kelly, we're going to go now from politics to the boardroom, and how a woman at the highest level of U.S. business is out with tens of millions of dollars to cushion the ouster.

Also coming up, will the Grammys remember Ray?

All ahead ON THE STORY. Plus, a check on what's making news right now.

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(NEWSBREAK)

(BEGIN VIDEO CLIP)

CARLY FIORINA: We stepped up and made tough choices. We are executing a strategy and we are successful in that strategy.

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HAYS: Carly Fiorina that was a couple weeks back when she was interviewed in Switzerland. And this week, one of the most powerful, most publicized women in U.S. business was out.

Welcome back. I'm Kathleen Hays and we're ON THE STORY.

WALLACE: Kathleen, what happened? I think we were all startled when we learned this week that she was out. She has really been the face for American women when it comes to CEOs.

HAYS: Absolutely because she was the CEO of a very big, powerful, you know, computer technology company. This is the woman who was brought in, in 1999, to take one of the icons of Silicon Valley, a company started back in the '30s by William Hewlett and David Packard in their garage, you know, built into a powerhouse. But people felt in many ways it was a leading company, number one in its printer division but maybe number two or three in some of the other divisions, like PCs.

Her whole career was staked on buying another computer company, Compaq, because she said that will give us the scale to compete. The merger never quite lived up to it. She didn't meet her own profit targets. The board wanted her to cede some responsibility to top deputies and she balked at that and the next thing you know Carly's out of a job.

COHEN: Now, how did HP employees react when they heard the news that she was out?

HAYS: Well, I think things ranged from champagne toasts to, I heard one saying "ding, dong the witch is dead." Now, in fairness to Carly, it's always tough if you come in to a company that has been known for being focused on employees, known for holding onto them, cut thousands of jobs, cut thousands more in this merger.

Another rap against her though the rock star CEO. Carly was very good about going out, speaking to large audience, talking to clients but the board said "We need someone who is here executing day-to-day strategy."

She was accused of being arrogant. She was accused of letting talent go. She was accused of blaming other people for problems in the company, say missing your earnings, when people say, "Hey, you're the boss. You should have shouldered more of that."

So, another big cheer came up from Wall Street. The day this was announced the stock had about a seven percent bounce, so clearly analysts, the big investors are now looking for some new directions from this company now that Carly's gone.

BASH: What's interesting, Kathleen, is certainly there were comments about her hair, about her clothes that you wouldn't hear perhaps about male CEOs. But, by and large, it seems as though her tenure and perhaps the fact that she was fired might not be that different than it would have been if she were a male.

HAYS: Well, that's one thing that's really delicious about this story I think. What Carly Fiorina has shown is, guess what, women can be as driven, as self-centered if you want to make that criticism of her. They can make big mistakes just like men. And just like men they can be second guessed.

She's still got people saying, look, she took the company in the right direction. She streamlined it. They had to make a move. She should have been given more time. Also like the male CEOs, now remember the stock is down 50 percent from the point when Carly took it over, you would think pay for performance would mean low pay. She's going to walk away with anywhere from $21 million to $42 million just like a lot of men have walked away.

One employee described this as yet another CEO walking away and leaving wreckage in its wake. So, I just think the Carly had done exactly what a lot of men have done and done it very, very well depending on how you gauge it.

WALLACE: Kathleen, switching gears a big, we always put you on the spot but you're always so good at explaining what Washington politics and economics will mean for the average person in this country.

We have talked a lot about the president's budget. If you boil it down to the average person on the streets right now, why should he or she care and what will it mean?

HAYS: Oh, I think -- well, as Dana pointed out, 154 programs are going to face some kind of cut and, of course, the president's team says but wait a minute, in some cases we're cutting one program to build up another.

The fact that they're going to change the way Medicaid is funded apparently could result in Medicaid cuts. That's going to hurt low- income people. Cutting back food stamps that's going to be very problematic. I think that's one reason why Wall Street is still kind of skeptical whether or not this budget goes through in its entirety.

There's one program I'd like to point out to everybody though, which is a very important one for a lot of people who have been to college and have student loans because in this budget there's a proposal to change the way you can consolidate loans.

Right now if you have thousands of dollars in student loans, you can consolidate them all at current low interest rates, a fixed rate. If this goes through, you'll be able to consolidate but at a variable rate, so if rates rise, you'll have to pay more money.

I think for something like that this is probably a wakeup call for people. Take a look at those loans. Maybe it's a good time to think about doing it before the law changes.

COHEN: Now, Kathleen, Valentine's Day is coming up and some economists, some very romantic economists have managed to put a price tag on a happy marriage. How did they do that?

HAYS: They just looked at I guess how happy people said they are relative to other people, how well you can sort of economize the scales of life when you're married. They say it's worth about $100,000.

Other economists say, in fact, that people who love, love, are much happier than people who love money but, guess what, divorce can wash it all away and you can end up more unhappy, not even than married people but people who were never married at all. So, be good to your valentine.

COHEN: That's right.

Well, we're going to go from love to murder and how a trial in South Carolina with a teenage defendant has focused new attention on the risk for children on antidepressants. I'm back on that story in a moment.

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ANNOUNCER: Elizabeth Cohen is a CNN Medical Correspondent. She joined CNN in 1991. Earlier she worked as a newspaper reporter in Washington and Albany. She has a Master's degree in public health.

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DANIELLE PITTMAN FINCHUM: In talking to him, he'd be sitting like fidgeting with his hands the whole time. He was constantly up and down in that house. He was just crazy.

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COHEN: He was just crazy. Those were the words of Danielle Pittman Finchum talking about her brother Chris Pittman on trial for the murder of their grandparents. Central to the defense is whether or not Chris Pittman knew right from wrong because he had started taking the widely-prescribed antidepressant Zoloft.

Welcome back. I'm Elizabeth Cohen and we're ON THE STORY.

BASH: And, Elizabeth, you have been down in the courtroom listening, watching. I can't even imagine how gut-wrenching this is in terms of the emotion because you're talking about families here that were really ripped apart. But talk about from the medical perspective what they have been able to discuss or at least learn about Zoloft and the real impact on this case.

COHEN: Dana, it has really been the battle of the psychiatrists. No fewer than five mental health professionals have testified about what state of mind Chris Pittman was in when he killed his grandparents.

Now, he admitted that he killed them. He shot them in the head twice both of them while they were sleeping and then set the house on fire. And so, you have some psychiatrists saying, you know, he was just a bad kid.

He was mean. He was aggressive. He had problem with authority. He was mad at his grandparents because they wanted to send him back to live with his father and he was mad at them so he -- so he killed them.

And then you have psychiatrists saying, no, he was really a sweet boy. He was a good boy. He didn't really have many problems -- many problems in school or discipline problems before this happened and that going on this drug, and he had just gone on it a couple of weeks before, and that going on this drug made him manic, made his psychotic, made him hear voices saying "kill, kill, kill."

So, it's really pretty incredible. You know we all just sat there in the courtroom saying how could they all be talking about the same boy? It just seems like an incredible thing that you can have so many different interpretations of the same set of facts.

WALLACE: And, Elizabeth, take us a little bit inside that courtroom in describing the mood because this is a case that is getting attention from across the country and could very well have implications for the use of this drug in the future one would imagine.

COHEN: That's right, Kelly.

This is one very emotional courtroom. As a matter of fact, the judge several times has had to ask people to calm down. He said, "I know that there's a lot of passion on both sides."

As a matter of fact, several families have flown in, some from California, some from New Jersey because they say that their children killed themselves while they were on these antidepressants and they've come to support Chris.

In fact, one of those families put up the rent for his family to rent a house so that he could be let out on bail and go live with his family during the trial. In fact, this same woman she put up the bail for Chris Pittman.

So, these families who really don't -- haven't known him all that long are being very, very supportive so there's a lot of emotions running on both sides of this.

His family is there every day. He has an aunt who's sitting in the front row, his sister who we saw earlier, his maternal grandmother. They're sitting there in the front row. They're very supportive of him. They think he should be found not guilty.

HAYS: Well, Elizabeth, many families across the country and I'm sure some of these families have kids who were troubled, depressed, trouble taking tests, were put on Zoloft and they say within days sometimes committed suicide. Now, what about the science, what about the competing science and the risk that Zoloft does this or doesn't do this? Can you blame a drug for murder?

COHEN: Right. Well this is basically what the jury heard about for days and days and it got very technical and I'll try to boil it down. You had a psychiatrist, Dr. Steve Romano from Pfizer, he works for the company say, look, "We did clinical trials. We did two clinical trials. We had approximately about 200 kids who were taking Zoloft and they didn't have any statistically significant higher risk of having suicidal thoughts or aggressive, hostile thoughts than the kids who were just taking a placebo, taking a sugar pill." So that's one set of testimony that the jury is hearing.

But the jury is also hearing, hey look, the Food and Drug Administration was concerned enough about reports of violent acts coming in after kids were taking these drugs, reports of suicide, reports of aggressiveness that they now have what's called the black box warning and the wording on that was just finalized recently.

This is the highest level of warning you can put on a drug without actually yanking it off the shelves and this warning says that parents should look for signs of aggressiveness and hostility in their children. So, it's two sort of different messages that the jury got and that's what they get to sort out and they're supposed to start doing that Monday.

BASH: Elizabeth, my question is if there is any question about whether or not this drug will send children or anyone else into this kind of depression or rage that they will actually commit murder, why is it being prescribed at all?

COHEN: Well, you know what, there was a lot of eloquent testimony at the trial, Dana, that said look this drug has saved the lives of many, many people. Many people were depressed, on the verge of suicide perhaps, started taking Zoloft or a drug like it and now they're doing OK.

So, basically what many people will say is, look, it's a good drug. It helps a lot of people. But, on the other hand, perhaps it has this effect in a small number of people particularly young people.

BASH: Elizabeth thank you very much.

And we're going to go from the courtroom to the recording studio with a big celebration of music. The Grammys is tonight and our Brooke Anderson is on that story just ahead.

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WALLACE: And that is Kanye West. He is hoping that his song "Jesus Walks" will win him a couple of Grammys tonight for Song of the Year and Best Rap Song. He is up for ten Grammys in all and he's got an ego and a sense of humor to match.

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KANYE WEST, GRAMMY NOMINEE: My name up until Sunday is no longer Kanye. It's the face, the face of the Grammys.

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WALLACE: The face of the Grammys, OK.

Well our face of the Grammys is Entertainment Correspondent Brooke Anderson ON THE STORY in Los Angeles, Brooke great to see you. This is a day when we all envy the job you have. So, tell us is Kanye West going to live up to the billing of being the face of the Grammys tonight?

BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: Kelly, first of all, can you believe that trash talk? I mean this isn't the sports world.

WALLACE: Oh, it makes it fun. It makes it fun, right?

ANDERSON: It does make it fun. I don't know if that will work here like it may work in the Super Bowl or whatnot. He does lead the nominees with ten nominations, like you say. He probably won't reach double digits but he will pick up some Grammys.

The song "Jesus Walks" very, very powerful. His disc is called "The College Dropout" and the critics absolutely love it. Many call it brilliant. And, you know, he has named himself the face of the Grammys. It's hard to believe but if he wins, he'll be very, very happy, Kelly.

If he doesn't, he's going to let us all know about it like he did recently at the American Music Awards where he lost the Best New Artist award to Gretchen Wilson. He was very upset, visibly, publicly, basically said he got robbed. I'm sure, you know, that didn't make Gretchen Wilson feel that well but he's since made up with her. He's since moved on from the American Music Awards, very excited about the Grammys tonight where he's up for Best New Artist here as well...

HAYS: Brooke.

ANDERSON: ...in addition to the biggie album of the year.

HAYS: Speaking of the Grammys, is it just my imagination or are the Grammys just getting kind of to be a bigger and bigger deal every year, more you know pre-Grammy coverage leading up to it? We've got such a variety of faces at this from, you know, old faces like Rod Stewart, Kanye West a new face. We've got Queen Latifah, who is hosting. She's up for a Grammy and she's performing. It just seems that it's more of a spectacle and the world is paying more attention.

ANDERSON: Oh, Kathleen, you're right and, you know what? I think part of that is because the recording academy is trying to change its image. It used to be called the Grannies, not the Grammys.

Now, if they were talking about my grandmothers that means it was a hip, cool show but they weren't talking about my grandmothers. So, in, you know, in the past it's been kind of stodgy, old-fashioned and they're trying to move into a younger audience, a hipper audience. They've embraced hip-hop, which reflects what consumers have embraced as well.

You know and the recording academy, 20,000 members, this includes CEOs, producers, engineers, so they're very credible people, although sometimes it does take them a minute or two, a year or two to pick up on what everybody else is laying down, so to speak.

COHEN: Now, Brooke, let's try to live vicariously through you since we don't get to go to the Grammys. What are you looking forward to the most about going to the Grammys?

ANDERSON: You know I'm looking forward to seeing so many of the artists walk down the red carpet. They're always so excited to be there, to be nominated. Like everyone says it is an honor just to be nominated. And I know you hear that and you say, oh whatever, they really want to win but they enjoy being there. They enjoy hanging out with each other, seeing their friends.

And you know, Kathleen mentioned Rod Stewart. This guy has never won a Grammy before, if you can believe it. He's been making music for so many years, never won a Grammy. Now he's turned to the songbooks. Basically, he's recording standards showing that these classic songs really do have staying power.

His current album "The Great American Songbook, Volume 3" some of the favorites there include "Blue Moon" and "What a Wonderful World." Many believe this is what a wonderful disc, so to speak. Many hope he picks up best traditional pop vocal album. But you know what guys, if he doesn't, never fear I think a volume 4 is in the works. He could have a chance in the future.

BASH: Brooke, Rod Stewart is exactly what I was going to ask you about because you were talking about hip-hop and everybody focusing on new music but Rod Stewart is somebody who has been nominated, what, 13 times and not won? He's sort of the Susan Lucci of the Grammys.

ANDERSON: Sort of the Susan Lucci.

BASH: So, is there an expectation that perhaps for that reason that maybe he'll get it this time?

ANDERSON: Maybe it finally is his year and, you know, with other award shows, such as the Oscars and the Golden Globes, when people have been nominated so many times in the past, sometimes the voters say, you know what, this person is due. This person needs this award. They're talented. It's time. Let's go ahead and give it to them. So, very, very possibly yes.

And you know I do want to mention Loretta Lynn, the country music legend. She has collaborated with Jack White of the White Stripes, what an unlikely collaboration but what a terrific collaboration you guys. I'm really looking forward to this.

They have made the disk "Van Lear Rose" and how it happened Jack White actually approached Loretta Lynn. He said "Hey, I want us to do this together. I want you to write all the songs. I'm going to produce it. We're going to do it together" and they have and they are up for five Grammy awards.

COHEN: Well, Brooke Anderson thank you very much and you can be sure we'll be watching your reports from the Grammys.

We're back ON THE STORY after this.

(BEGIN VIDEO CLIP)

ANNOUNCER: A British woman battles nature and breaks a world record. What's her story? More when we return.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: Ellen MacArthur what's her story? MacArthur set the record for the fastest solo sail around the world. She fought rough waters, cramped corridors and exhaustion during her 71-day journey.

ELLEN MACARTHUR: There were some time out there that were excruciatingly difficult. There's no doubt about it. I have never in my life had to dig as deep as I did in this trip and not just once or twice but over consecutive weeks.

ANNOUNCER: Her 75-foot sailing vessel was designed specifically for her small frame and to maximize speed for the 27,000 mile voyage. Born in England, MacArthur fell in love with sailing as an 8-year-old girl when her aunt took her out on a small dingy. She saved her lunch money to buy her first boat.

(END VIDEO CLIP)

HAYS: Thanks to all my colleagues for their fascinating show. And thank you for joining us today to watch ON THE STORY. We'll be back next week.

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And at 12:00 Noon, Eastern, 9:00 a.m. Pacific, "LATE EDITION" with Wolf Blitzer. Among Wolf's guests, the South Korean Minister Ban-Ki Moon.

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