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On the Story

Bush Kicks Off Tour of Europe in Brussels; U.N. Official Charged With Sexual Harassment

Aired February 20, 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.


BETTY NGUYEN, CNN ANCHOR: Well, good morning, everyone. I'm Betty Nguyen, here at the CNN Center in Atlanta. ON THE STORY begins in just 60 seconds. But first, here's what's happening "Now in the News."
President Bush is now in the air and on his way to Europe. Mr. Bush's five-day trip is aimed at rebuilding the frayed Transatlantic Alliance. His three stops include Belgium, Germany and the Slovak Republic. CNN's Suzanne Malveaux has a live report from Brussels. That is straight ahead.

Also, in the Middle East today, Israel's pullback from Gaza and parts of the West Bank gets the go-ahead from the Israeli cabinet. Ministers approved the controversial plan about an hour ago. The evacuation of about 9,000 Jewish settlers begins in July.

We'll have more news coming up in 30 minutes. ON THE STORY begins right now.

DANA BASH, 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 Dana Bash, on the story of President Bush's latest step to overhaul the nation's 15 intelligence agencies.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux, on the story in Brussels, where President Bush kicks off his Europe trip, of course, to try to repair the damaged relations with European allies.

LIZ NEISLOSS, CNN CORRESPONDENT: I'm Liz Neisloss, in New York, on the story of a sexual harassment charge against a senior United Nations official.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, in Detroit, on the story of how words about the economy and inflation in Washington this week hit home here in the Motor City.

We will go to Iraq, where Jane Arraf is on the story of U.S. forces just arriving and getting a crash course in survival from those headed home.

Later in the hour, CNN producer Alex Quade is on the story of U.S. medics who consider their time in Iraq their honeymoon.

E-mail us at onthestory@cnn.com. Now straight to Suzanne Malveaux and President Bush in Europe.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: My first goal is to remind both Americans and Europeans that the transatlantic relationship is very important for our mutual security and for peace, and that we have differences sometimes, but we don't differ on values.

(END VIDEO CLIP)

MALVEAUX: That, of course, President Bush, setting the stage for his Europe trip, talking about the differences between the United States and European allies. Perhaps an understatement. The president, of course, going to be arriving here in Brussels in about four hours to try to confront some of those differences, as well as talk about common values.

NEISLOSS: Suzanne, a lot of Europeans are still remembering the post-Iraq splits, and clearly you just mentioned Bush has his work cut out for him. But it's very hard, I think, for them to forget the "punish France and ignore Germany" days. So what is it that Bush is going to try to do in his meeting, for example, with Chirac?

MALVEAUX: Well, you know, that's really a very good point, because there was a top European Union official who said earlier this week -- he described Secretary Rice's trip to Europe as very successful, very positive, but he also described it in a way saying, you know, romance blossoms once two people decide that they are going to get married, that there's a marriage on the way.

And the big question, of course, is just how long is this honeymoon going to last between the president and some of his European allies? You are absolutely right, do they expect a lot here? That same official, of course, saying, no, when it comes to substance and policy matters, they don't expect a lot.

But they also say as well not to underestimate really the stage craft of all of this, and what his mere presence means. The fact that he is visiting the European Union headquarters, the fact that he is meeting with NATO, really is seen as legitimizing those international bodies. And you remember, so many times when it was just last year, that the president basically called those organizations irrelevant. So in some ways they see the trip alone as being something that is very significant.

HAYS: And, of course, Suzanne, Condoleezza Rice didn't waste any time getting straight to Europe to start mending fences, paved the way for this trip. What role has she played, and what role has she played in convincing the president that this is an important part of his second term, to reestablish good ties with Europe?

MALVEAUX: Well, you know, one thing that was really important that she did, is she essentially set the stage for President Bush. She, as well as Secretary Rumsfeld, who was in Germany last week, and said, look, when it came to the comment about old Europe, he said, "Well, that was the old Rumsfeld," really trying to put those differences aside.

I think what she has done essentially is said, look, these...

BASH: I think we have lost Suzanne's audio for a moment. We are going to keep talking, of course, about the president's trip.

You are looking at pictures now of Condoleezza Rice and Jacques Chirac. Of course, that was the precursor, if you will, to President Bush's trip to Europe. He is on his way there, as Suzanne was talking about, as we speak. And we are talking not only about that meeting, but the slew of meetings that President Bush is going to have with a number of leaders.

NEISLOSS: Dana, really you hear this as well in your coverage of the White House. One of the real challenges is going to be on the subject of Iran, where the U.S. and European allies have kind of a split. And this is a real issue that the U.S. isn't able to grapple with. They need Europe, and yet they have a difference over how to approach it.

BASH: Sounds familiar, doesn't it, Liz? But the interesting thing about Iran is that President Bush took pains in a number of pre- trip interviews that he did with some European television and print reporters in trying to make the point that he's not -- that you shouldn't worry.

Even though there are polls that say like 70 percent of Germans, for example, think that he's absolutely going to invade Iran, he is not going to do that. He is really trying to focus right now on the diplomatic front.

But how they get there, that is really the big key. Because they do have very difference -- different opinions in how they are going to do that.

And I think that we have Suzanne back up in Brussels.

Suzanne, are you there?

MALVEAUX: Yes, I'm here.

BASH: OK. One thing I was going to ask you, which I think -- which I'm probably most fascinated by, and I know that you are, too, is a meeting at the end of President Bush's trip, and that is with President Putin, the Russian president, whom he called his good friend. But over the past four years, you have seen, perhaps, a loosening of the -- of the democracy, if you will, in Russia at a time when President Bush is talking about democracy, making that really the staple of his presidency, pushing democracy around the world.

So what are you going to be looking for in terms of what President Bush is going to say publicly with President Putin, criticizing him, if you will?

MALVEAUX: Well, that's right. I mean, here you have somebody who said when they first met that this is man that he saw into his soul. And, of course, what everybody is going to be looking at is, well, what do we see in terms of the results of these discussions?

President Bush has been asked that question a couple of times this week leading up to the meetings. And he says, of course, that these are the kinds of things that he'll talk about privately. But people are looking for that indication, whether or not he's going to speak publicly about this to push this one step further.

There are a lot of problems, tension between the United States and Russia, as you know, of course. And it's not really just dealing with the kind of slide-back of those democratic reforms, but also just with the case of Iran this week.

We heard Putin say that he did not believe they were trying to actually establish nuclear weapons, that they were going to continue to support their nuclear energy program. There are a lot of things that the president is going to have to go ahead and address.

We think he will. He says he will. But whether or not he's actually going to be standing face to face with Putin in front of the cameras and be critical is probably not the best approach, at least not now.

HAYS: Suzanne, what about standing in front of the cameras? What about the show? What about the stage craft versus the substance? What do you expect to see there?

MALVEAUX: Well, one thing that this trip is going to do -- and the president has said it, but also a lot of his aides behind the scenes say that all they really want to do is try to set the tone for the second administration. There are officials from the European Union who also say as well, you know, we've got to work with him. We realize that three different things have changed since the last go- around.

First, they say that he won the election, that he really -- it was a validation of his policies by the American people.

They also talk about the fact that he has both parties in his control, the Republican party.

And then third, they point to the Iranian elections, and they say -- rather, the Iraqi elections, and they say that it really was in some way a validation of his policy.

So they have to deal with him. They realize that. I think both sides are looking at this as just an opportunity, perhaps, to set the stage and to change the tone. Whether there's going to be substantive changes in policy, that's much later down the road.

BASH: Thank you, Suzanne. We will certainly be watching you on the story in the next coming days.

As you know, I can relate to what you are going through, very exciting. But a little bit of sleep deprivation. So hang in there and have a good time.

MALVEAUX: Thanks. Thanks a lot.

BASH: Thanks, Suzanne.

And just ahead we're going to go to Iraq, where CNN's Jane Arraf is on the story.

And at the end of the hour, our "What's Her Story?" segment looks at "New York Times" reporter Judith Miller, ordered by a federal appeals court this week to give up her sources or face jail.

All coming up, all ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: For more than half of these new troops, this is their second deployment in Iraq. But they left a year and a half ago, and they are going to find that a lot has changed.

(voice-over): One of the most important things the new troops are learning is who not to shoot, that an armed man wearing a ski mask might be an Iraqi policemen trying to protect his identity and not a criminal. Just before heading out on the road, Sergeant Major Derrick Vaughn (ph) reminds the men how to recognize an Iraqi soldier. They wear old model U.S. uniforms from the first Gulf War.

UNIDENTIFIED MALE: AK-47, look for the uniform. These (UNINTELLIGIBLE) uniform.

ARRAF: Colonel Muhl (ph) tells them what danger signs to look for in the crowded market where they're going.

UNIDENTIFIED MALE: A sure sign that something is not right is people will start running. If people start running before you hear a round go off, start looking for a guy with an RPG.

(END VIDEO CLIP)

BASH: Looking out for a man with an RPG, a rocket-propelled grenade.

Welcome back. We're ON THE STORY.

And reporting on that story is Jane Arraf in Baquba, north of Baghdad, by videophone.

And Jane, you, of course, as we just saw, have been reporting on a new influx of U.S. troops coming in. But they are not so new. They have been here before. It must be incredibly ironic or really hard for them to understand that what's the same is really not the same, what they are finding in Iraq.

ARRAF: Absolutely. Now, some of them have been here before, and for some of them it's as if they have landed on another planet. I mean, you can imagine how hard it would be. They don't know who the enemy is, they don't know who to trust, they don't know the landscape.

We got into one Humvee today and one of the captains was asking a senior officer how they were supposed to be holding their weapons. It's all very much a learning process.

And this country to a young American soldier can be very threatening and very scary, the way it isn't after you have been here for a year and you know pretty well who is threatening and who is not. It is at times an alarming process, but certainly an interesting one, as tens of thousands of soldiers and Marines switch out across this country.

HAYS: So, Jane, what are they saying to you about their concerns? We just saw more terrible violence from the insurgents the last couple of days, you know, on the eve of the Shiites most -- one of their most holy days. I think it must be so daunting for them to realize they're in a situation that is changing so quickly, hard to know who the enemy is, and when the enemy might change.

ARRAF: It is really very daunting. The unit that has just come here to replace the 1st Infantry Division Brigade that's switching out has already had two casualties. And that's just in the first few weeks.

But really, what you sense is a desperate hope that this time around will be the last one. Although, not really a certainty that it will be.

A lot of these soldiers expect to be coming back again, and this is a different country than the one they left. It is more dangerous. There are more enemies. The enemy is harder to pick out.

One of the big dangers around here is still roadside bombs. And insurgents are doing things such as laying them beneath the pavement. It means that when you get in your Humvee, when you go out on the road, if you are a 19-year-old soldier, or however hold you are, where you're from, that means death can come at any time.

And that makes it a little bit hard for them to see the more positive aspects, perhaps, of the things going on here. Again, that's just a process of time, hopefully.

NEISLOSS: Jane, you have been embedded with troops on several occasions in many different parts of Iraq. Do you have any sense in this first post-election phase that that is having any impact on what the troops are seeing and even in the way they feel, that, did the elections have any impact?

ARRAF: You know, it seems to be. And one of the great things about these embeds and the reason I keep doing them is we actually get to talk to more Iraqis than we would if we weren't embedded, because we go out with military civil affairs, for instance, or psychological operations, or even people doing patrols. And Iraqis want to talk. And there does seem to be a different feeling out there. One of the things we've noticed is that people are focusing less on the U.S. forces, perhaps because they are a little less visible, and more on the Iraqi forces. And there is a feeling that this is their country, they are in charge.

And they may not have got it back from the Americans in the shape thy would have wanted it in, but there does seem to be a feeling out there that things turned after that election. And that's a feeling that's reflected in the American forces, as well.

BASH: And Jane, there are reports that perhaps the U.S. military is back-channeling to some of the insurgents, trying at least to sort of put out feelers to see if there is any way possible to have any kind of truce. What where you hearing about that?

ARRAF: You know, that's a really interesting thing. Out here in Baquba, where we have spent quite a lot of time, which is the heart of the Sunni Triangle, the U.S. Army brigade commander here has been doing that for quite a while.

In fact, he has organized with his Iraqi counterparts regular meetings in which insurgents are invited to come and sign a piece of paper saying that they renounce violence. In return, the American -- the coalition forces and the Iraqi forces pledge not to go to try to arrest them.

Now, that applies to people who are not deemed responsible for the deaths of American soldiers. And the commander here believes that he has spoken at various times to relatively important insurgent leaders.

There does seem to be a growing feeling that something has to be done besides killing them all. That perhaps it's time to draw a difference between insurgents and what they call terrorists and get people who can be converted on board. And that's what we've been seeing here for quite a long time.

HAYS: And meanwhile, Jane, of course the election behind the Iraqis, trying to build coalitions ahead of them. What is the latest on the horse trading among the Shiite majority, the Kurds up north who are sitting on some rich oil fields, the Sunnis in the middle of the country -- actually all over the country, but still the ones who didn't participate and now have to be incorporated in the process as well?

ARRAF: It's really interesting out here. Again, this is a Sunni majority, 40 percent Sunni. They are the biggest single bloc here.

They didn't go out in huge numbers to vote. Those that did vote, some of them voted for a Shia slate.

And as we've been traveling around -- and a couple of days ago we were in a Kurdish town north of here which wants to secede to Kurdistan, to Iraqi Kurdistan as Arabs are being expelled from that town. You really get a sense of this increasing sense of power of the Shias, and of the Kurds, which leaves out the Sunnis to some extent.

Now, one of the really interesting things they are doing here, again -- and it's driven by a top U.S. military commander in some sense -- is to try to get the Ba'ath Party back, to say, hey, do you want the Ba'ath Party? Put the Ba'ath Party on the next ballot and let's see how much support it gets.

BASH: Jane, that's fascinating. We want you to stay with us, because coming up we are going to talk about the U.S. ambassador to Iraq, John Negroponte, who is coming home to streamline the nation's 15 separate intelligence agencies.

And, of course, you can stay tuned to CNN day and night for the most reliable news about your security.

I'm back on that story after this.

ANNOUNCER: Dana Bash is a CNN White House correspondent. Previously, she was a Capitol Hill producer for CNN. The National Press Foundation gave her its Dirksen Award in 2002 for distinguished reporting on Congress. She graduated cum laude from George Washington University.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: For the war against terrorists who target innocent civilians and continue to seek weapons of mass murder, intelligence is our first line of defense.

(END VIDEO CLIP)

BASH: President Bush talking about homeland security as he announced that John Negroponte would be the first national director of intelligence.

Welcome back. I'm Dana Bash. And we're ON THE STORY.

ARRAF: Hey, Dana, I'm just wondering who is going to replace him. And is this a job that a lot of people want? I mean, here's a country where a lot of Iraqis aren't sure they even want Americans here.

BASH: Well, in terms of who is going to replace him, that's actually an open question. But you've sort of brought up an interesting point there, which is, why would you take somebody out of a job where a lot of people, perhaps, don't want and is a really hard job at a very critical time?

John Negroponte, of course, being right now the ambassador to Iraq, the first ambassador to Iraq. But, you know, when you really think about it, it fits a Bush pattern, which is that he very much relies on loyalty. He very much likes the idea of people who he throws into very tough situations then being brought back in, in his second term, if you look at the pattern, to be near him. And this is a very, very difficult job. It's a job that is ill- defined in a lot of ways, and the president tried to, at that press conference you are looking at, tried to help define it a little bit more by saying that Negroponte would be -- would have his ear, he would be the head of the intelligence agencies no matter what, that he would be the person briefing him every day.

But you're right, he was a compromise choice for this job. A lot of people, we understand, were asked, at least a few of them, and they didn't want the job. Like former CIA Director Robert Gates. So he was perhaps an unlikely choice when you look at the particular post. But when you look at the Bush pattern, maybe not so much.

NEISLOSS: Dana, I have to actually sort of second that thought, the questions about what happens to that diplomatic role in Iraq. Because at the United Nations I was going around asking diplomats, "What do you think of this?" They really weren't that focused on the choice of Negroponte for a new job.

But the first question I got, for example, from a Chinese diplomat, was, "Who is going to replace him in Iraq?" The feeling that, hey, isn't it a little early to pull someone from this really critical role?

So what is it now that Negroponte is going to have to do? He does have some intelligence ties from his many diplomatic posts, but what is it that Bush is really going to be needing him to accomplish at this point?

BASH: Where do we start? I mean, really, this, obviously, is a new post designed by the intelligence reform legislation that the president signed last year, which many said perhaps he didn't want to, he was sort of forced to do by political pressure. But obviously he did.

And the primary job of John Negroponte is to try to streamline all of these intelligence agencies. The big criticism of the 9/11 Commission, of their final report, is that there was just -- there was no central place for them, they were sort of too disparate. So that's going to be the primary job.

And you talked about his intelligence background. He's been a consumer of intelligence. One of the criticisms not only was that he perhaps was in a role that he shouldn't have been taken out of in Iraq, but also that perhaps he isn't necessarily known for intelligence.

Well, the White House, we should also mention, put a deputy in there, the National Security Agency head right now, General Michael Hayden. He is somebody nobody -- everybody understands knows the intelligence community backwards and forwards. He is going to be Negroponte's deputy, so the White House feel that they are sort of a good combo, a good team to do this.

HAYS: Dana, let's look at the latest on Social Security. That's obviously a big battle for the president. He's made it, you know, the number one priority of his domestic agenda. The politics seen to be getting more and more complicated, challenging him to be the guy who's going to lead not just Democrats, but Republicans forward who are resisting.

BASH: You know, they are in the classic pickle right now at the White House, Kathleen. The president has said all along in terms of trying to game out what he will and will not go for in terms of reform, that he wouldn't raise taxes, he wouldn't raise payroll taxes. But this week he opened the door to raising the cap, which is $90,000 a year, on payroll taxes.

Well, a lot of Republicans, his own Republicans in the House, did not think that was a good idea. In fact, we have a sound bite from Tom DeLay, the House majority leader. Let's listen.

(BEGIN VIDEO CLIP)

REP. TOM DELAY (R-TX), MAJORITY LEADER: I, for one, am one of those that didn't come here to raise taxes. And it wouldn't do any good if you raised -- took the cap completely off. It would push the problem down maybe five to six years. It doesn't fundamentally fix the problem.

(END VIDEO CLIP)

BASH: So raising taxes, whatever you call it, however you do it, is heresy for most Republicans. But they're also -- the House Republicans are telling the White House that they need to make sure that this is going to get through the Senate.

So what does the White House have to do? They have to appease and appeal to Senate Democrats. Well, this is a way to try to do that.

So they are really in a classic pickle right now. But, I'm telling you, this week, while the president is off talking about international stories, and on the international stage, it's going to be a very critical week for his domestic agenda, because all of those members of Congress are going to be back home in their districts, talking to the people and trying to figure out whether or not there really is an appetite for reform.

And that is why it's absolutely critical for the White House to get their message out through their constituents, through the members of Congress. They are even actually sending out DVDs, or CDs of the president talking about the need for reform with these members of Congress.

HAYS: Like we have said a lot, it's obviously a big priority for the president.

Look, Jane Arraf, we want to thank you for joining us. Great to see you, as always, on a Sunday morning. And we will be watching what you are up to in the coming week.

Now we're going to go from Washington to Detroit, and how words about the economy are hitting home here.

Also coming up, why a U.S. senator rips into the United Nations.

And how one family keeps up with dad. E-mails from the home front to the war front.

Plus, a check on what's making news right now straight ahead.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: All tolled the economy seems to have entered 2005 expanding at a reasonably good pace with inflation and inflation expectations (UNINTELLIGIBLE).

(END VIDEO CLIP)

HAYS: An expanding economy, says Fed Chairman Alan Greenspan. That was early in the week. At the end of the week, we learned that wholesale price inflation had its biggest increase in six years.

Welcome back. We're ON THE STORY. I'm Kathleen Hays in Detroit.

BASH: OK, so the oracle speaks, Kathleen. Alan Greenspan says the economy is expanding, how?

HAYS: Well, you know, we had a lot of good news on the economy this week to back him up. Industrial production, the manufacturing sector is moving ahead. New claims for unemployment benefits, an important indicator for the labor market, continue to fall.

As for inflation, I think that was very striking that in his testimony the Fed Chairman said that overall inflation had subsided and the core inflation rate, which economists watch so closely (UNINTELLIGIBLE) energy that it was even getting tamer.

That's why Wall Street was really struck when this producer price index had this large jump. Auto prices rose, tobacco prices because it really drove home the point that the Federal Reserve is going to keep hiking interest rates.

As it keeps hiking interest rates, what we may finally see is that longer term rates, like mortgage rates, start rising. Ultimately, people figure this has to hit the interest rate sensitive sectors, like housing, like autos.

NEISLOSS: Greenspan also gave kind of a qualified boost to the privatization of Social Security, so tell us what does he like about the idea?

HAYS: Well, you know, he seems to think that this really should be part of any Social Security reform that is on the table. Now, remember, he was the guy who co-headed the Social Security Reform Commission back in 1983 when Social Security was really headed for a crisis so he is considered an authority on this question.

He's also considered a Republican. There has been editorials criticizing him already saying this is supporting the president's agenda much as he supported the president's agenda to cut taxes back when we had a budget surplus before it turned into a deficit but his main point is this.

Right now, Social Security is a pay-as-you-go system. Money goes in. Money goes out. If the government sets up private accounts for part of your Social Security taxes, it will start becoming a funded system. In other words, money is being set aside now that can be paid out later. Of course, the Democrats hammered him on this point. They hammered him on the transition costs. Won't it cost too much?

Greenspan said we should move slowly that the money that it would cost to borrow to set these accounts up could be troubling to them markets. He wasn't sure but he did say he thinks they could help low and middle-income people and he could conceive of them being extraordinarily popular. He's clearly putting his weight and his approval behind this proposal.

BASH: But, Kathleen, it's fascinating to me that Alan Greenspan is like a Rorschach test for all political parties. They sort of listen and they take what they want to sort of support what they want to do on Social Security or anything else.

But I want to ask you about interest rates. He talked about or at least hinted the idea that perhaps they will be raised. How is that going to affect the economy, particularly where you are in Detroit, the auto industry for example?

HAYS: Well, you know, the auto industry had actually a pretty decent year last year but, let's face it, most people don't take cash out of their pocket to buy a car. They finance it in one way or another and, as rates continue to rise, auto financing rates will start rising too potentially.

When that happens, your monthly payment gets higher, so what does Detroit do? Well, they can make the incentives sweeter to get you to buy a car but when they cut the price of a car it cuts into their profits.

The auto companies are facing a lot of big challenges, not the least of which are the kinds of things Washington is grappling with now, pension costs, companies that can barely pay their retirees. Health care costs, the auto companies say this is killing them.

Again, this was something that Greenspan was asked about this week but rising interest rates could definitely have an impact in an industry that is already facing some big challenges.

NEISLOSS: What do you hear about another win this week for the Bush administration limiting those class-action lawsuits, a boost for big business really?

HAYS: Those are big business and the opponents of them say they can finally get those trial lawyers, you know, back in their corner. The criticism has been that trial lawyers shop these cases around and they try to find counties where they can get a jury that will award an outsized award.

Now the supporters to this say wait a minute. This is how the little guy fights back against the big guy. I think one of the reasons why this had support, not just from big business, is that people have a sense that when these class-action rewards come down, you know, maybe you get $13 or a discount coupon and the lawyers make all the money.

But I think there's another bill coming up that people should be watching very closely and that's the bankruptcy legislation that passed the Senate Judiciary Committee this week.

NEISLOSS: Well, Kathleen, we'll be watching you there in Motown where you are right now in Detroit.

From business to international diplomacy and a sexual harassment charge against a senior United Nations official. We're back on that story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Can you demonstrate to us what a friendly gesture is? Can you show us what happened?

RUUD LUBBERS, U.N. OFFICIAL: Come here. Are you afraid?

UNIDENTIFIED MALE: Well, slightly, I have to say yes I am.

(END VIDEO CLIP)

NEISLOSS: OK, that was admittedly one of the more bizarre press moments at the United Nations. That was a U.N. official Ruud Lubbers yesterday demonstrating with a reporter what he called a friendly hand on the back gesture. This is at the center of a sexual harassment charge against him. He is accused of groping a woman who works in the U.N. agency he leads. That's the U.N. Refugee Agency.

Welcome back, I'm Liz Neisloss in New York and we are ON THE STORY.

BASH: Bizarre to say the least, Liz. Take us back a little bit. This is not a new story. These are not new charges but they're resurfacing. Explain briefly what exactly the charges are against him.

NEISLOSS: OK. Well, first of all, I think people need to understand who this guy is. He is the head of an agency that's caring for 17 million of the world's refugees, so you have an issue of reputation there.

Also, this guy was one of the Netherlands longest standing prime ministers, a tough politician who was in a very top post, so a very visible guy. He was accused last year by a woman of groping her. Now he calls it a friendly gesture. She described it as literally he came from behind and pulled her up against his groin.

Now, she had two witnesses, who apparently didn't give resounding backing to her story. There was an internal U.N. investigation. The internal U.N. investigation went out and said, well, does anybody else have a claim? They found four other women who said, yes, we've had problems with him. The problem is these women were intimidated. They didn't want to testify.

So, Kofi Annan looked at this report. This is the U.N. Secretary-General because, remember, the U.N. really in some ways is a world unto itself, so he can take this internal investigation. He can look at it. And he decided with his lawyers, look, I'm up against this tough longstanding politician with his lawyers. These charges are not going to hold up, so he dismissed this report.

HAYS: Well, not what the U.N. really needed right now, isn't it, right in the middle of the Oil-for-Food investigation? What's the latest there, Liz?

NEISLOSS: Well, the U.N. definitely didn't need this. There has been a cloud hanging over the U.N. with, as you say Kathleen, Oil-for- Food. You have even more serious a scandal involving peacekeepers accused of sexually abusing refugees.

And, on top of that, an internal report, the one I just referred to, has been made public this week. So, the U.N. is really going to decide what to do about Ruud Lubbers. It has come back to haunt them. They want to take care of the problem.

BASH: But talk a little bit about you talked about the U.N. being a world unto itself. The women don't seem to have very much in the way of recourse here, right, and they're still working there as far as you know?

NEISLOSS: They are still working there and they really don't unless they come forward if they want to push forward on a complaint. There is a long, internal process that they have to go through but there's really no national law that can come in and help them.

And from all the whistle-blowers I've talked to at the U.N., it's a very difficult problem. It's a very difficult process and very depressing for a lot of people who really want to come out and complain.

HAYS: So, where does this take us? Let's get back to the big story the Oil-for-Food scandal.

NEISLOSS: Right.

HAYS: Saddam Hussein, the millions and maybe billions that he siphoned off, it always has struck me that many people in the oil industry knew this was a dirty deal from the start. Now it's in focus. Where is that going? NEISLOSS: Well, you're getting a lot of back and forth. Remember, we have many congressional investigations. You have the U.N.'s investigation. But this week, once again, we had a hearing in Washington and you had a Senator, this is Senator Norm Coleman, let's listen what he had to say. This is once again a gripe against the U.N.

(BEGIN VIDEO CLIP)

SEN. NORM COLEMAN (R), MINNESOTA: While the U.N. publicly asserts it is cooperating with congressional investigations, in fact this committee continues to be frustrated by the United Nations' refusal to make witnesses and documents available.

(END VIDEO CLIP)

NEISLOSS: So, once again the Congress is saying, look, the U.N. isn't cooperating but the U.N. is coming back and saying "We're going to try. We're going to try and work more with you. We have been working with you."

There are some issues over immunity, whether U.N. officials, and this is very hard to explain in the real world, the outside world, but whether or not U.N. officials can actually go into a national parliament, they would call it, and testify because the U.N. says, look, if we do that, we're going to end up doing this in 190 other countries.

So, they're working on ways to provide information. But what was interesting, I have to say, in this week's congressional hearings was that we started to see a little bit about the problem that everyone who has at least been covering Oil-for-Food knew about and that will get much more attention and that is the oil that was sold outside of the Oil-for-Food Program, $8 billion in illegal oil sales that the U.S. knew about, that many countries knew about.

I recently asked a diplomat about that. Wasn't that talked about at the United Nations? And this was the former deputy U.S. ambassador to the U.N. Didn't you know about the illegal oil sales outside of Oil-for-Food?

And he said to me, you know, "When we brought up the problems that we were having with the Russians and their sanctions busting, the Russians would turn around and say to us well what about Turkey and what about Jordan, those illegal oil sales that you're turning a blind eye to?" And the conversation would just end there.

BASH: Liz, thanks. We're going to be obviously following that in the days to come.

And now we're going to go from diplomacy to marriage. We're back ON THE STORY with CNN Producer Alex Quade's story of how marriages endure for one couple even amidst the dangers of Iraq.

(BEGIN VIDEO CLIP) ALEX QUADE, CNN PRODUCER (voice-over): Meet Sergeant (UNINTELLIGIBLE) and Sergeant (UNINTELLIGIBLE) two helicopter flight medics, married, and yes together in a war zone.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOAN PARKER: This is all e-mails. I get at least one a day from him usually unless he's, you know, out in the field, usually twice. It's usually one when he wakes up and one when he goes to bed.

(END VIDEO CLIP)

BASH: Joan Parker showing off that notebook full of letters and e-mails from her husband Marine Major Tim Parker.

Welcome back we're ON THE STORY and CNN Producer Alex Quade followed this family from their home in North Carolina to the front lines of fighting in Iraq and, Alex, this was really, it seems to me, extraordinary contact that these two people had considering what they're both doing and how far apart they are. Is this typical this kind of contact?

QUADE: This is not typical, Dana. Really it's the nature of the deployment and when we were embedded with the Marines at this forward operating base this is a very well established operating base. They've got computers, specifically for morale.

Now most Marines, most soldiers they go out on patrols, on missions, they may be at a base or camp that is not so well established, so for the Major Parker whom we profiled this is a real luxury that he does get to e-mail back and forth twice a day and really try to stay part of his children's lives.

HAYS: Well, speaking of being part of your children's lives, I have a 14-year-old daughter. Recently she came home and told us she wants to get a second hole pierced in one of her ears. That's just one more reason why this piece, Alex, is so poignant. Let's listen to this interchange.

(BEGIN VIDEO CLIP)

QUADE (voice-over): Fourteen-year-old daughter Katie.

KATIE PARKER: It's important for me to get letters from him.

QUADE: New Year's after dealing with January's election in Iraq, Tim gets an urgent e-mail from Katie. She wants to get her ear pierced again.

"I really want just one hole" she writes, "two if you let me and I mean it would be on my ear and not my lip or my eyebrow. Please I really want another hold in my ear." Dad's answer, "No." (END VIDEO CLIP)

HAYS: You see dads, whether they're in Iraq or back home in the states, they don't change too much do they? But how did you get so intimately involved in this family's life? We're there with them and we're all relating.

QUADE: We really are, Kathleen. It started last year at Camp Lejeune in North Carolina. We made contact with this family. We knew that Major Parker and the Marines were going to be heading over for a seven or eight-month deployment and we really just tried to lay the groundwork, tried to let these, you know, these folks, this entire family feel comfortable with us, let them know that they can trust us.

And then, of course, we caught up with Major Parker over at Camp (UNINTELLIGIBLE) which is near Ramadi and Falluja over in Iraq and we spent a little time with them. We let them know that, you know, we understand that they are people. They are families with families back home, you know, husbands and wives who want to spend more time with each other.

And then have, even though yes they are war hardened, they are out there doing missions, these are Marines. These are soldiers who just like any of us they have lives back home that they also need to deal with.

NEISLOSS: Alex are there any plans to do anything with all these letters? It's really an interesting kind of history.

QUADE: And it's amazing how many letters back and forth they've had. Yes, Joan Parker who is Major Tim Parker's wife. She plans to submit all of these letters, all of these e-mails to the NEA, the National Endowment of the Arts.

The hope is that it will get into the Library of Congress and that in the future historians, writers, educators they can look back at this time and look at the average view from the guy and the gal in the foxhole to see what these folks were thinking and not just the official what's coming out of Washington.

BASH: And how to also focus and spend some time with a married couple in Iraq. Let's listen to an excerpt from that.

(BEGIN VIDEO CLIP)

MELINDA GATES: This is our honeymoon here for the meantime.

QUADE: Some honeymoon, he works day, she nights.

RICK GATES: We don't get time off together that's the thing. She's a medic. I'm a medic. So, we're all in crews. If I'm on duty, she's off and vice versa. Having her out here, it's a double-edged sword. On one end, you know, it's awesome, I get to see my wife and we're newlyweds so it's all the happy time. But, on the other end, as you know, if she's away from me or even if we're here, rockets come in, mortars. QUADE: They live under threat of incoming or their unarmed Medivacs being shot down.

(END VIDEO CLIP)

BASH: Alex, a married couple in Iraq, how common is that?

QUADE: Dana, it's really not very common at all. I mean there is actually quite a few married folks but they're not deployed together. The military policy is to try to have them separated. In this case for Sergeant Gates and Sergeant Gates one works days, the other one works nights.

This is very specifically so that they don't get distracted going out on missions. I mean it's dangerous over there and military, you know, the other thing is that usually they're at separate camps, separate locations.

But they also, so much for a honeymoon, they also have the women in the women's tents, the men in the men's tents, so it's not quite the honeymoon in the war zone that most folks might expect.

HAYS: What about the relationships between men and women? Have they really evolved? Has this been a really landmark deployment do you think for troops because more and more contact, more and more time together, women not really in combat just yet but getting fired up? Is it changing things do you think?

QUADE: Kathleen, I think that just having women over there, I mean there's been women in wars basically from the Civil War on in various capacities, but in this war specifically women are doing a lot more of things towards the front line. I mean you remember, you know, Private Jessica Lynch and support roles that they end up at the front lines.

So, it really has melted together and I think that, you know, obviously we're going to be seeing more of this and more merit based deployments and things like this but it's interesting to see the interaction within the units as well and women are accepted just as well as men.

BASH: Alex, thank you. Your reports are wonderful. We really get an insight that we don't get very many other places, so thank you very much.

And we're going to be back ON THE STORY right after this.

(BEGIN VIDEO CLIP)

ANNOUNCER (voice-over): A prominent journalist faces jail time. What's her story? More when we return.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER (voice-over): Judith Miller what's her story? The "New York Times" reporter is facing prison for refusing to reveal her sources about the leak of CIA operative Valerie Plame's name. This week a federal appeals court ruled that the First Amendment does not protect journalists from revealing sources in a criminal investigation.

JUDITH MILLER, "NEW YORK TIMES": I have to be willing to go to prison. I think the principles at stake in this case are so important to the functioning of the free press and to confidentiality of sources that I just have to be willing to do that.

ANNOUNCER: The "New York Times" and "Time" magazine are appealing the ruling but Miller and "Time's" Matthew Cooper could be sentenced to 18 months in prison.

(END VIDEO CLIP)

BASH: Thanks to my colleagues and thank you for watching ON THE STORY. We'll be right back here next week on this new day, Sunday.

Up next on CNN, "CNN LIVE SUNDAY."

And at 12:00 Noon Eastern, 9:00 a.m. Pacific, "LATE EDITION" with Wolf Blitzer.

Straight ahead a check on what's making news right now.

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Aired February 20, 2005 - 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: Well, good morning, everyone. I'm Betty Nguyen, here at the CNN Center in Atlanta. ON THE STORY begins in just 60 seconds. But first, here's what's happening "Now in the News."
President Bush is now in the air and on his way to Europe. Mr. Bush's five-day trip is aimed at rebuilding the frayed Transatlantic Alliance. His three stops include Belgium, Germany and the Slovak Republic. CNN's Suzanne Malveaux has a live report from Brussels. That is straight ahead.

Also, in the Middle East today, Israel's pullback from Gaza and parts of the West Bank gets the go-ahead from the Israeli cabinet. Ministers approved the controversial plan about an hour ago. The evacuation of about 9,000 Jewish settlers begins in July.

We'll have more news coming up in 30 minutes. ON THE STORY begins right now.

DANA BASH, 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 Dana Bash, on the story of President Bush's latest step to overhaul the nation's 15 intelligence agencies.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux, on the story in Brussels, where President Bush kicks off his Europe trip, of course, to try to repair the damaged relations with European allies.

LIZ NEISLOSS, CNN CORRESPONDENT: I'm Liz Neisloss, in New York, on the story of a sexual harassment charge against a senior United Nations official.

KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, in Detroit, on the story of how words about the economy and inflation in Washington this week hit home here in the Motor City.

We will go to Iraq, where Jane Arraf is on the story of U.S. forces just arriving and getting a crash course in survival from those headed home.

Later in the hour, CNN producer Alex Quade is on the story of U.S. medics who consider their time in Iraq their honeymoon.

E-mail us at onthestory@cnn.com. Now straight to Suzanne Malveaux and President Bush in Europe.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: My first goal is to remind both Americans and Europeans that the transatlantic relationship is very important for our mutual security and for peace, and that we have differences sometimes, but we don't differ on values.

(END VIDEO CLIP)

MALVEAUX: That, of course, President Bush, setting the stage for his Europe trip, talking about the differences between the United States and European allies. Perhaps an understatement. The president, of course, going to be arriving here in Brussels in about four hours to try to confront some of those differences, as well as talk about common values.

NEISLOSS: Suzanne, a lot of Europeans are still remembering the post-Iraq splits, and clearly you just mentioned Bush has his work cut out for him. But it's very hard, I think, for them to forget the "punish France and ignore Germany" days. So what is it that Bush is going to try to do in his meeting, for example, with Chirac?

MALVEAUX: Well, you know, that's really a very good point, because there was a top European Union official who said earlier this week -- he described Secretary Rice's trip to Europe as very successful, very positive, but he also described it in a way saying, you know, romance blossoms once two people decide that they are going to get married, that there's a marriage on the way.

And the big question, of course, is just how long is this honeymoon going to last between the president and some of his European allies? You are absolutely right, do they expect a lot here? That same official, of course, saying, no, when it comes to substance and policy matters, they don't expect a lot.

But they also say as well not to underestimate really the stage craft of all of this, and what his mere presence means. The fact that he is visiting the European Union headquarters, the fact that he is meeting with NATO, really is seen as legitimizing those international bodies. And you remember, so many times when it was just last year, that the president basically called those organizations irrelevant. So in some ways they see the trip alone as being something that is very significant.

HAYS: And, of course, Suzanne, Condoleezza Rice didn't waste any time getting straight to Europe to start mending fences, paved the way for this trip. What role has she played, and what role has she played in convincing the president that this is an important part of his second term, to reestablish good ties with Europe?

MALVEAUX: Well, you know, one thing that was really important that she did, is she essentially set the stage for President Bush. She, as well as Secretary Rumsfeld, who was in Germany last week, and said, look, when it came to the comment about old Europe, he said, "Well, that was the old Rumsfeld," really trying to put those differences aside.

I think what she has done essentially is said, look, these...

BASH: I think we have lost Suzanne's audio for a moment. We are going to keep talking, of course, about the president's trip.

You are looking at pictures now of Condoleezza Rice and Jacques Chirac. Of course, that was the precursor, if you will, to President Bush's trip to Europe. He is on his way there, as Suzanne was talking about, as we speak. And we are talking not only about that meeting, but the slew of meetings that President Bush is going to have with a number of leaders.

NEISLOSS: Dana, really you hear this as well in your coverage of the White House. One of the real challenges is going to be on the subject of Iran, where the U.S. and European allies have kind of a split. And this is a real issue that the U.S. isn't able to grapple with. They need Europe, and yet they have a difference over how to approach it.

BASH: Sounds familiar, doesn't it, Liz? But the interesting thing about Iran is that President Bush took pains in a number of pre- trip interviews that he did with some European television and print reporters in trying to make the point that he's not -- that you shouldn't worry.

Even though there are polls that say like 70 percent of Germans, for example, think that he's absolutely going to invade Iran, he is not going to do that. He is really trying to focus right now on the diplomatic front.

But how they get there, that is really the big key. Because they do have very difference -- different opinions in how they are going to do that.

And I think that we have Suzanne back up in Brussels.

Suzanne, are you there?

MALVEAUX: Yes, I'm here.

BASH: OK. One thing I was going to ask you, which I think -- which I'm probably most fascinated by, and I know that you are, too, is a meeting at the end of President Bush's trip, and that is with President Putin, the Russian president, whom he called his good friend. But over the past four years, you have seen, perhaps, a loosening of the -- of the democracy, if you will, in Russia at a time when President Bush is talking about democracy, making that really the staple of his presidency, pushing democracy around the world.

So what are you going to be looking for in terms of what President Bush is going to say publicly with President Putin, criticizing him, if you will?

MALVEAUX: Well, that's right. I mean, here you have somebody who said when they first met that this is man that he saw into his soul. And, of course, what everybody is going to be looking at is, well, what do we see in terms of the results of these discussions?

President Bush has been asked that question a couple of times this week leading up to the meetings. And he says, of course, that these are the kinds of things that he'll talk about privately. But people are looking for that indication, whether or not he's going to speak publicly about this to push this one step further.

There are a lot of problems, tension between the United States and Russia, as you know, of course. And it's not really just dealing with the kind of slide-back of those democratic reforms, but also just with the case of Iran this week.

We heard Putin say that he did not believe they were trying to actually establish nuclear weapons, that they were going to continue to support their nuclear energy program. There are a lot of things that the president is going to have to go ahead and address.

We think he will. He says he will. But whether or not he's actually going to be standing face to face with Putin in front of the cameras and be critical is probably not the best approach, at least not now.

HAYS: Suzanne, what about standing in front of the cameras? What about the show? What about the stage craft versus the substance? What do you expect to see there?

MALVEAUX: Well, one thing that this trip is going to do -- and the president has said it, but also a lot of his aides behind the scenes say that all they really want to do is try to set the tone for the second administration. There are officials from the European Union who also say as well, you know, we've got to work with him. We realize that three different things have changed since the last go- around.

First, they say that he won the election, that he really -- it was a validation of his policies by the American people.

They also talk about the fact that he has both parties in his control, the Republican party.

And then third, they point to the Iranian elections, and they say -- rather, the Iraqi elections, and they say that it really was in some way a validation of his policy.

So they have to deal with him. They realize that. I think both sides are looking at this as just an opportunity, perhaps, to set the stage and to change the tone. Whether there's going to be substantive changes in policy, that's much later down the road.

BASH: Thank you, Suzanne. We will certainly be watching you on the story in the next coming days.

As you know, I can relate to what you are going through, very exciting. But a little bit of sleep deprivation. So hang in there and have a good time.

MALVEAUX: Thanks. Thanks a lot.

BASH: Thanks, Suzanne.

And just ahead we're going to go to Iraq, where CNN's Jane Arraf is on the story.

And at the end of the hour, our "What's Her Story?" segment looks at "New York Times" reporter Judith Miller, ordered by a federal appeals court this week to give up her sources or face jail.

All coming up, all ON THE STORY.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: For more than half of these new troops, this is their second deployment in Iraq. But they left a year and a half ago, and they are going to find that a lot has changed.

(voice-over): One of the most important things the new troops are learning is who not to shoot, that an armed man wearing a ski mask might be an Iraqi policemen trying to protect his identity and not a criminal. Just before heading out on the road, Sergeant Major Derrick Vaughn (ph) reminds the men how to recognize an Iraqi soldier. They wear old model U.S. uniforms from the first Gulf War.

UNIDENTIFIED MALE: AK-47, look for the uniform. These (UNINTELLIGIBLE) uniform.

ARRAF: Colonel Muhl (ph) tells them what danger signs to look for in the crowded market where they're going.

UNIDENTIFIED MALE: A sure sign that something is not right is people will start running. If people start running before you hear a round go off, start looking for a guy with an RPG.

(END VIDEO CLIP)

BASH: Looking out for a man with an RPG, a rocket-propelled grenade.

Welcome back. We're ON THE STORY.

And reporting on that story is Jane Arraf in Baquba, north of Baghdad, by videophone.

And Jane, you, of course, as we just saw, have been reporting on a new influx of U.S. troops coming in. But they are not so new. They have been here before. It must be incredibly ironic or really hard for them to understand that what's the same is really not the same, what they are finding in Iraq.

ARRAF: Absolutely. Now, some of them have been here before, and for some of them it's as if they have landed on another planet. I mean, you can imagine how hard it would be. They don't know who the enemy is, they don't know who to trust, they don't know the landscape.

We got into one Humvee today and one of the captains was asking a senior officer how they were supposed to be holding their weapons. It's all very much a learning process.

And this country to a young American soldier can be very threatening and very scary, the way it isn't after you have been here for a year and you know pretty well who is threatening and who is not. It is at times an alarming process, but certainly an interesting one, as tens of thousands of soldiers and Marines switch out across this country.

HAYS: So, Jane, what are they saying to you about their concerns? We just saw more terrible violence from the insurgents the last couple of days, you know, on the eve of the Shiites most -- one of their most holy days. I think it must be so daunting for them to realize they're in a situation that is changing so quickly, hard to know who the enemy is, and when the enemy might change.

ARRAF: It is really very daunting. The unit that has just come here to replace the 1st Infantry Division Brigade that's switching out has already had two casualties. And that's just in the first few weeks.

But really, what you sense is a desperate hope that this time around will be the last one. Although, not really a certainty that it will be.

A lot of these soldiers expect to be coming back again, and this is a different country than the one they left. It is more dangerous. There are more enemies. The enemy is harder to pick out.

One of the big dangers around here is still roadside bombs. And insurgents are doing things such as laying them beneath the pavement. It means that when you get in your Humvee, when you go out on the road, if you are a 19-year-old soldier, or however hold you are, where you're from, that means death can come at any time.

And that makes it a little bit hard for them to see the more positive aspects, perhaps, of the things going on here. Again, that's just a process of time, hopefully.

NEISLOSS: Jane, you have been embedded with troops on several occasions in many different parts of Iraq. Do you have any sense in this first post-election phase that that is having any impact on what the troops are seeing and even in the way they feel, that, did the elections have any impact?

ARRAF: You know, it seems to be. And one of the great things about these embeds and the reason I keep doing them is we actually get to talk to more Iraqis than we would if we weren't embedded, because we go out with military civil affairs, for instance, or psychological operations, or even people doing patrols. And Iraqis want to talk. And there does seem to be a different feeling out there. One of the things we've noticed is that people are focusing less on the U.S. forces, perhaps because they are a little less visible, and more on the Iraqi forces. And there is a feeling that this is their country, they are in charge.

And they may not have got it back from the Americans in the shape thy would have wanted it in, but there does seem to be a feeling out there that things turned after that election. And that's a feeling that's reflected in the American forces, as well.

BASH: And Jane, there are reports that perhaps the U.S. military is back-channeling to some of the insurgents, trying at least to sort of put out feelers to see if there is any way possible to have any kind of truce. What where you hearing about that?

ARRAF: You know, that's a really interesting thing. Out here in Baquba, where we have spent quite a lot of time, which is the heart of the Sunni Triangle, the U.S. Army brigade commander here has been doing that for quite a while.

In fact, he has organized with his Iraqi counterparts regular meetings in which insurgents are invited to come and sign a piece of paper saying that they renounce violence. In return, the American -- the coalition forces and the Iraqi forces pledge not to go to try to arrest them.

Now, that applies to people who are not deemed responsible for the deaths of American soldiers. And the commander here believes that he has spoken at various times to relatively important insurgent leaders.

There does seem to be a growing feeling that something has to be done besides killing them all. That perhaps it's time to draw a difference between insurgents and what they call terrorists and get people who can be converted on board. And that's what we've been seeing here for quite a long time.

HAYS: And meanwhile, Jane, of course the election behind the Iraqis, trying to build coalitions ahead of them. What is the latest on the horse trading among the Shiite majority, the Kurds up north who are sitting on some rich oil fields, the Sunnis in the middle of the country -- actually all over the country, but still the ones who didn't participate and now have to be incorporated in the process as well?

ARRAF: It's really interesting out here. Again, this is a Sunni majority, 40 percent Sunni. They are the biggest single bloc here.

They didn't go out in huge numbers to vote. Those that did vote, some of them voted for a Shia slate.

And as we've been traveling around -- and a couple of days ago we were in a Kurdish town north of here which wants to secede to Kurdistan, to Iraqi Kurdistan as Arabs are being expelled from that town. You really get a sense of this increasing sense of power of the Shias, and of the Kurds, which leaves out the Sunnis to some extent.

Now, one of the really interesting things they are doing here, again -- and it's driven by a top U.S. military commander in some sense -- is to try to get the Ba'ath Party back, to say, hey, do you want the Ba'ath Party? Put the Ba'ath Party on the next ballot and let's see how much support it gets.

BASH: Jane, that's fascinating. We want you to stay with us, because coming up we are going to talk about the U.S. ambassador to Iraq, John Negroponte, who is coming home to streamline the nation's 15 separate intelligence agencies.

And, of course, you can stay tuned to CNN day and night for the most reliable news about your security.

I'm back on that story after this.

ANNOUNCER: Dana Bash is a CNN White House correspondent. Previously, she was a Capitol Hill producer for CNN. The National Press Foundation gave her its Dirksen Award in 2002 for distinguished reporting on Congress. She graduated cum laude from George Washington University.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: For the war against terrorists who target innocent civilians and continue to seek weapons of mass murder, intelligence is our first line of defense.

(END VIDEO CLIP)

BASH: President Bush talking about homeland security as he announced that John Negroponte would be the first national director of intelligence.

Welcome back. I'm Dana Bash. And we're ON THE STORY.

ARRAF: Hey, Dana, I'm just wondering who is going to replace him. And is this a job that a lot of people want? I mean, here's a country where a lot of Iraqis aren't sure they even want Americans here.

BASH: Well, in terms of who is going to replace him, that's actually an open question. But you've sort of brought up an interesting point there, which is, why would you take somebody out of a job where a lot of people, perhaps, don't want and is a really hard job at a very critical time?

John Negroponte, of course, being right now the ambassador to Iraq, the first ambassador to Iraq. But, you know, when you really think about it, it fits a Bush pattern, which is that he very much relies on loyalty. He very much likes the idea of people who he throws into very tough situations then being brought back in, in his second term, if you look at the pattern, to be near him. And this is a very, very difficult job. It's a job that is ill- defined in a lot of ways, and the president tried to, at that press conference you are looking at, tried to help define it a little bit more by saying that Negroponte would be -- would have his ear, he would be the head of the intelligence agencies no matter what, that he would be the person briefing him every day.

But you're right, he was a compromise choice for this job. A lot of people, we understand, were asked, at least a few of them, and they didn't want the job. Like former CIA Director Robert Gates. So he was perhaps an unlikely choice when you look at the particular post. But when you look at the Bush pattern, maybe not so much.

NEISLOSS: Dana, I have to actually sort of second that thought, the questions about what happens to that diplomatic role in Iraq. Because at the United Nations I was going around asking diplomats, "What do you think of this?" They really weren't that focused on the choice of Negroponte for a new job.

But the first question I got, for example, from a Chinese diplomat, was, "Who is going to replace him in Iraq?" The feeling that, hey, isn't it a little early to pull someone from this really critical role?

So what is it now that Negroponte is going to have to do? He does have some intelligence ties from his many diplomatic posts, but what is it that Bush is really going to be needing him to accomplish at this point?

BASH: Where do we start? I mean, really, this, obviously, is a new post designed by the intelligence reform legislation that the president signed last year, which many said perhaps he didn't want to, he was sort of forced to do by political pressure. But obviously he did.

And the primary job of John Negroponte is to try to streamline all of these intelligence agencies. The big criticism of the 9/11 Commission, of their final report, is that there was just -- there was no central place for them, they were sort of too disparate. So that's going to be the primary job.

And you talked about his intelligence background. He's been a consumer of intelligence. One of the criticisms not only was that he perhaps was in a role that he shouldn't have been taken out of in Iraq, but also that perhaps he isn't necessarily known for intelligence.

Well, the White House, we should also mention, put a deputy in there, the National Security Agency head right now, General Michael Hayden. He is somebody nobody -- everybody understands knows the intelligence community backwards and forwards. He is going to be Negroponte's deputy, so the White House feel that they are sort of a good combo, a good team to do this.

HAYS: Dana, let's look at the latest on Social Security. That's obviously a big battle for the president. He's made it, you know, the number one priority of his domestic agenda. The politics seen to be getting more and more complicated, challenging him to be the guy who's going to lead not just Democrats, but Republicans forward who are resisting.

BASH: You know, they are in the classic pickle right now at the White House, Kathleen. The president has said all along in terms of trying to game out what he will and will not go for in terms of reform, that he wouldn't raise taxes, he wouldn't raise payroll taxes. But this week he opened the door to raising the cap, which is $90,000 a year, on payroll taxes.

Well, a lot of Republicans, his own Republicans in the House, did not think that was a good idea. In fact, we have a sound bite from Tom DeLay, the House majority leader. Let's listen.

(BEGIN VIDEO CLIP)

REP. TOM DELAY (R-TX), MAJORITY LEADER: I, for one, am one of those that didn't come here to raise taxes. And it wouldn't do any good if you raised -- took the cap completely off. It would push the problem down maybe five to six years. It doesn't fundamentally fix the problem.

(END VIDEO CLIP)

BASH: So raising taxes, whatever you call it, however you do it, is heresy for most Republicans. But they're also -- the House Republicans are telling the White House that they need to make sure that this is going to get through the Senate.

So what does the White House have to do? They have to appease and appeal to Senate Democrats. Well, this is a way to try to do that.

So they are really in a classic pickle right now. But, I'm telling you, this week, while the president is off talking about international stories, and on the international stage, it's going to be a very critical week for his domestic agenda, because all of those members of Congress are going to be back home in their districts, talking to the people and trying to figure out whether or not there really is an appetite for reform.

And that is why it's absolutely critical for the White House to get their message out through their constituents, through the members of Congress. They are even actually sending out DVDs, or CDs of the president talking about the need for reform with these members of Congress.

HAYS: Like we have said a lot, it's obviously a big priority for the president.

Look, Jane Arraf, we want to thank you for joining us. Great to see you, as always, on a Sunday morning. And we will be watching what you are up to in the coming week.

Now we're going to go from Washington to Detroit, and how words about the economy are hitting home here.

Also coming up, why a U.S. senator rips into the United Nations.

And how one family keeps up with dad. E-mails from the home front to the war front.

Plus, a check on what's making news right now straight ahead.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: All tolled the economy seems to have entered 2005 expanding at a reasonably good pace with inflation and inflation expectations (UNINTELLIGIBLE).

(END VIDEO CLIP)

HAYS: An expanding economy, says Fed Chairman Alan Greenspan. That was early in the week. At the end of the week, we learned that wholesale price inflation had its biggest increase in six years.

Welcome back. We're ON THE STORY. I'm Kathleen Hays in Detroit.

BASH: OK, so the oracle speaks, Kathleen. Alan Greenspan says the economy is expanding, how?

HAYS: Well, you know, we had a lot of good news on the economy this week to back him up. Industrial production, the manufacturing sector is moving ahead. New claims for unemployment benefits, an important indicator for the labor market, continue to fall.

As for inflation, I think that was very striking that in his testimony the Fed Chairman said that overall inflation had subsided and the core inflation rate, which economists watch so closely (UNINTELLIGIBLE) energy that it was even getting tamer.

That's why Wall Street was really struck when this producer price index had this large jump. Auto prices rose, tobacco prices because it really drove home the point that the Federal Reserve is going to keep hiking interest rates.

As it keeps hiking interest rates, what we may finally see is that longer term rates, like mortgage rates, start rising. Ultimately, people figure this has to hit the interest rate sensitive sectors, like housing, like autos.

NEISLOSS: Greenspan also gave kind of a qualified boost to the privatization of Social Security, so tell us what does he like about the idea?

HAYS: Well, you know, he seems to think that this really should be part of any Social Security reform that is on the table. Now, remember, he was the guy who co-headed the Social Security Reform Commission back in 1983 when Social Security was really headed for a crisis so he is considered an authority on this question.

He's also considered a Republican. There has been editorials criticizing him already saying this is supporting the president's agenda much as he supported the president's agenda to cut taxes back when we had a budget surplus before it turned into a deficit but his main point is this.

Right now, Social Security is a pay-as-you-go system. Money goes in. Money goes out. If the government sets up private accounts for part of your Social Security taxes, it will start becoming a funded system. In other words, money is being set aside now that can be paid out later. Of course, the Democrats hammered him on this point. They hammered him on the transition costs. Won't it cost too much?

Greenspan said we should move slowly that the money that it would cost to borrow to set these accounts up could be troubling to them markets. He wasn't sure but he did say he thinks they could help low and middle-income people and he could conceive of them being extraordinarily popular. He's clearly putting his weight and his approval behind this proposal.

BASH: But, Kathleen, it's fascinating to me that Alan Greenspan is like a Rorschach test for all political parties. They sort of listen and they take what they want to sort of support what they want to do on Social Security or anything else.

But I want to ask you about interest rates. He talked about or at least hinted the idea that perhaps they will be raised. How is that going to affect the economy, particularly where you are in Detroit, the auto industry for example?

HAYS: Well, you know, the auto industry had actually a pretty decent year last year but, let's face it, most people don't take cash out of their pocket to buy a car. They finance it in one way or another and, as rates continue to rise, auto financing rates will start rising too potentially.

When that happens, your monthly payment gets higher, so what does Detroit do? Well, they can make the incentives sweeter to get you to buy a car but when they cut the price of a car it cuts into their profits.

The auto companies are facing a lot of big challenges, not the least of which are the kinds of things Washington is grappling with now, pension costs, companies that can barely pay their retirees. Health care costs, the auto companies say this is killing them.

Again, this was something that Greenspan was asked about this week but rising interest rates could definitely have an impact in an industry that is already facing some big challenges.

NEISLOSS: What do you hear about another win this week for the Bush administration limiting those class-action lawsuits, a boost for big business really?

HAYS: Those are big business and the opponents of them say they can finally get those trial lawyers, you know, back in their corner. The criticism has been that trial lawyers shop these cases around and they try to find counties where they can get a jury that will award an outsized award.

Now the supporters to this say wait a minute. This is how the little guy fights back against the big guy. I think one of the reasons why this had support, not just from big business, is that people have a sense that when these class-action rewards come down, you know, maybe you get $13 or a discount coupon and the lawyers make all the money.

But I think there's another bill coming up that people should be watching very closely and that's the bankruptcy legislation that passed the Senate Judiciary Committee this week.

NEISLOSS: Well, Kathleen, we'll be watching you there in Motown where you are right now in Detroit.

From business to international diplomacy and a sexual harassment charge against a senior United Nations official. We're back on that story after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Can you demonstrate to us what a friendly gesture is? Can you show us what happened?

RUUD LUBBERS, U.N. OFFICIAL: Come here. Are you afraid?

UNIDENTIFIED MALE: Well, slightly, I have to say yes I am.

(END VIDEO CLIP)

NEISLOSS: OK, that was admittedly one of the more bizarre press moments at the United Nations. That was a U.N. official Ruud Lubbers yesterday demonstrating with a reporter what he called a friendly hand on the back gesture. This is at the center of a sexual harassment charge against him. He is accused of groping a woman who works in the U.N. agency he leads. That's the U.N. Refugee Agency.

Welcome back, I'm Liz Neisloss in New York and we are ON THE STORY.

BASH: Bizarre to say the least, Liz. Take us back a little bit. This is not a new story. These are not new charges but they're resurfacing. Explain briefly what exactly the charges are against him.

NEISLOSS: OK. Well, first of all, I think people need to understand who this guy is. He is the head of an agency that's caring for 17 million of the world's refugees, so you have an issue of reputation there.

Also, this guy was one of the Netherlands longest standing prime ministers, a tough politician who was in a very top post, so a very visible guy. He was accused last year by a woman of groping her. Now he calls it a friendly gesture. She described it as literally he came from behind and pulled her up against his groin.

Now, she had two witnesses, who apparently didn't give resounding backing to her story. There was an internal U.N. investigation. The internal U.N. investigation went out and said, well, does anybody else have a claim? They found four other women who said, yes, we've had problems with him. The problem is these women were intimidated. They didn't want to testify.

So, Kofi Annan looked at this report. This is the U.N. Secretary-General because, remember, the U.N. really in some ways is a world unto itself, so he can take this internal investigation. He can look at it. And he decided with his lawyers, look, I'm up against this tough longstanding politician with his lawyers. These charges are not going to hold up, so he dismissed this report.

HAYS: Well, not what the U.N. really needed right now, isn't it, right in the middle of the Oil-for-Food investigation? What's the latest there, Liz?

NEISLOSS: Well, the U.N. definitely didn't need this. There has been a cloud hanging over the U.N. with, as you say Kathleen, Oil-for- Food. You have even more serious a scandal involving peacekeepers accused of sexually abusing refugees.

And, on top of that, an internal report, the one I just referred to, has been made public this week. So, the U.N. is really going to decide what to do about Ruud Lubbers. It has come back to haunt them. They want to take care of the problem.

BASH: But talk a little bit about you talked about the U.N. being a world unto itself. The women don't seem to have very much in the way of recourse here, right, and they're still working there as far as you know?

NEISLOSS: They are still working there and they really don't unless they come forward if they want to push forward on a complaint. There is a long, internal process that they have to go through but there's really no national law that can come in and help them.

And from all the whistle-blowers I've talked to at the U.N., it's a very difficult problem. It's a very difficult process and very depressing for a lot of people who really want to come out and complain.

HAYS: So, where does this take us? Let's get back to the big story the Oil-for-Food scandal.

NEISLOSS: Right.

HAYS: Saddam Hussein, the millions and maybe billions that he siphoned off, it always has struck me that many people in the oil industry knew this was a dirty deal from the start. Now it's in focus. Where is that going? NEISLOSS: Well, you're getting a lot of back and forth. Remember, we have many congressional investigations. You have the U.N.'s investigation. But this week, once again, we had a hearing in Washington and you had a Senator, this is Senator Norm Coleman, let's listen what he had to say. This is once again a gripe against the U.N.

(BEGIN VIDEO CLIP)

SEN. NORM COLEMAN (R), MINNESOTA: While the U.N. publicly asserts it is cooperating with congressional investigations, in fact this committee continues to be frustrated by the United Nations' refusal to make witnesses and documents available.

(END VIDEO CLIP)

NEISLOSS: So, once again the Congress is saying, look, the U.N. isn't cooperating but the U.N. is coming back and saying "We're going to try. We're going to try and work more with you. We have been working with you."

There are some issues over immunity, whether U.N. officials, and this is very hard to explain in the real world, the outside world, but whether or not U.N. officials can actually go into a national parliament, they would call it, and testify because the U.N. says, look, if we do that, we're going to end up doing this in 190 other countries.

So, they're working on ways to provide information. But what was interesting, I have to say, in this week's congressional hearings was that we started to see a little bit about the problem that everyone who has at least been covering Oil-for-Food knew about and that will get much more attention and that is the oil that was sold outside of the Oil-for-Food Program, $8 billion in illegal oil sales that the U.S. knew about, that many countries knew about.

I recently asked a diplomat about that. Wasn't that talked about at the United Nations? And this was the former deputy U.S. ambassador to the U.N. Didn't you know about the illegal oil sales outside of Oil-for-Food?

And he said to me, you know, "When we brought up the problems that we were having with the Russians and their sanctions busting, the Russians would turn around and say to us well what about Turkey and what about Jordan, those illegal oil sales that you're turning a blind eye to?" And the conversation would just end there.

BASH: Liz, thanks. We're going to be obviously following that in the days to come.

And now we're going to go from diplomacy to marriage. We're back ON THE STORY with CNN Producer Alex Quade's story of how marriages endure for one couple even amidst the dangers of Iraq.

(BEGIN VIDEO CLIP) ALEX QUADE, CNN PRODUCER (voice-over): Meet Sergeant (UNINTELLIGIBLE) and Sergeant (UNINTELLIGIBLE) two helicopter flight medics, married, and yes together in a war zone.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOAN PARKER: This is all e-mails. I get at least one a day from him usually unless he's, you know, out in the field, usually twice. It's usually one when he wakes up and one when he goes to bed.

(END VIDEO CLIP)

BASH: Joan Parker showing off that notebook full of letters and e-mails from her husband Marine Major Tim Parker.

Welcome back we're ON THE STORY and CNN Producer Alex Quade followed this family from their home in North Carolina to the front lines of fighting in Iraq and, Alex, this was really, it seems to me, extraordinary contact that these two people had considering what they're both doing and how far apart they are. Is this typical this kind of contact?

QUADE: This is not typical, Dana. Really it's the nature of the deployment and when we were embedded with the Marines at this forward operating base this is a very well established operating base. They've got computers, specifically for morale.

Now most Marines, most soldiers they go out on patrols, on missions, they may be at a base or camp that is not so well established, so for the Major Parker whom we profiled this is a real luxury that he does get to e-mail back and forth twice a day and really try to stay part of his children's lives.

HAYS: Well, speaking of being part of your children's lives, I have a 14-year-old daughter. Recently she came home and told us she wants to get a second hole pierced in one of her ears. That's just one more reason why this piece, Alex, is so poignant. Let's listen to this interchange.

(BEGIN VIDEO CLIP)

QUADE (voice-over): Fourteen-year-old daughter Katie.

KATIE PARKER: It's important for me to get letters from him.

QUADE: New Year's after dealing with January's election in Iraq, Tim gets an urgent e-mail from Katie. She wants to get her ear pierced again.

"I really want just one hole" she writes, "two if you let me and I mean it would be on my ear and not my lip or my eyebrow. Please I really want another hold in my ear." Dad's answer, "No." (END VIDEO CLIP)

HAYS: You see dads, whether they're in Iraq or back home in the states, they don't change too much do they? But how did you get so intimately involved in this family's life? We're there with them and we're all relating.

QUADE: We really are, Kathleen. It started last year at Camp Lejeune in North Carolina. We made contact with this family. We knew that Major Parker and the Marines were going to be heading over for a seven or eight-month deployment and we really just tried to lay the groundwork, tried to let these, you know, these folks, this entire family feel comfortable with us, let them know that they can trust us.

And then, of course, we caught up with Major Parker over at Camp (UNINTELLIGIBLE) which is near Ramadi and Falluja over in Iraq and we spent a little time with them. We let them know that, you know, we understand that they are people. They are families with families back home, you know, husbands and wives who want to spend more time with each other.

And then have, even though yes they are war hardened, they are out there doing missions, these are Marines. These are soldiers who just like any of us they have lives back home that they also need to deal with.

NEISLOSS: Alex are there any plans to do anything with all these letters? It's really an interesting kind of history.

QUADE: And it's amazing how many letters back and forth they've had. Yes, Joan Parker who is Major Tim Parker's wife. She plans to submit all of these letters, all of these e-mails to the NEA, the National Endowment of the Arts.

The hope is that it will get into the Library of Congress and that in the future historians, writers, educators they can look back at this time and look at the average view from the guy and the gal in the foxhole to see what these folks were thinking and not just the official what's coming out of Washington.

BASH: And how to also focus and spend some time with a married couple in Iraq. Let's listen to an excerpt from that.

(BEGIN VIDEO CLIP)

MELINDA GATES: This is our honeymoon here for the meantime.

QUADE: Some honeymoon, he works day, she nights.

RICK GATES: We don't get time off together that's the thing. She's a medic. I'm a medic. So, we're all in crews. If I'm on duty, she's off and vice versa. Having her out here, it's a double-edged sword. On one end, you know, it's awesome, I get to see my wife and we're newlyweds so it's all the happy time. But, on the other end, as you know, if she's away from me or even if we're here, rockets come in, mortars. QUADE: They live under threat of incoming or their unarmed Medivacs being shot down.

(END VIDEO CLIP)

BASH: Alex, a married couple in Iraq, how common is that?

QUADE: Dana, it's really not very common at all. I mean there is actually quite a few married folks but they're not deployed together. The military policy is to try to have them separated. In this case for Sergeant Gates and Sergeant Gates one works days, the other one works nights.

This is very specifically so that they don't get distracted going out on missions. I mean it's dangerous over there and military, you know, the other thing is that usually they're at separate camps, separate locations.

But they also, so much for a honeymoon, they also have the women in the women's tents, the men in the men's tents, so it's not quite the honeymoon in the war zone that most folks might expect.

HAYS: What about the relationships between men and women? Have they really evolved? Has this been a really landmark deployment do you think for troops because more and more contact, more and more time together, women not really in combat just yet but getting fired up? Is it changing things do you think?

QUADE: Kathleen, I think that just having women over there, I mean there's been women in wars basically from the Civil War on in various capacities, but in this war specifically women are doing a lot more of things towards the front line. I mean you remember, you know, Private Jessica Lynch and support roles that they end up at the front lines.

So, it really has melted together and I think that, you know, obviously we're going to be seeing more of this and more merit based deployments and things like this but it's interesting to see the interaction within the units as well and women are accepted just as well as men.

BASH: Alex, thank you. Your reports are wonderful. We really get an insight that we don't get very many other places, so thank you very much.

And we're going to be back ON THE STORY right after this.

(BEGIN VIDEO CLIP)

ANNOUNCER (voice-over): A prominent journalist faces jail time. What's her story? More when we return.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER (voice-over): Judith Miller what's her story? The "New York Times" reporter is facing prison for refusing to reveal her sources about the leak of CIA operative Valerie Plame's name. This week a federal appeals court ruled that the First Amendment does not protect journalists from revealing sources in a criminal investigation.

JUDITH MILLER, "NEW YORK TIMES": I have to be willing to go to prison. I think the principles at stake in this case are so important to the functioning of the free press and to confidentiality of sources that I just have to be willing to do that.

ANNOUNCER: The "New York Times" and "Time" magazine are appealing the ruling but Miller and "Time's" Matthew Cooper could be sentenced to 18 months in prison.

(END VIDEO CLIP)

BASH: Thanks to my colleagues and thank you for watching ON THE STORY. We'll be right back here next week on this new day, Sunday.

Up next on CNN, "CNN LIVE SUNDAY."

And at 12:00 Noon Eastern, 9:00 a.m. Pacific, "LATE EDITION" with Wolf Blitzer.

Straight ahead a check on what's making news right now.

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