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Aired November 1, 2001 - 04:30   ET


TOM HAYNES, CO-HOST: Hello, everybody, and welcome to CNN NEWSROOM for Thursday. I'm Tom Haynes.

Well the Bush administration is urging Congress to pass an economic stimulus package before the Thanksgiving recess. The government report released Wednesday shows the economy shrank four- tenths of a percent in the third quarter. That's the biggest drop in gross domestic product since 1991. Now GDP reflects the nation's total output of goods and services. President Bush told Congress the report underscores the need to jumpstart the economy.

Tim O'Brien has more on that now from Washington.


TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The Bush administration wants Congress to put aside political differences and act swiftly on an economic stimulus package.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And so my call to Congress is get to work and get something done. The American people expect us to do just that.


O'BRIEN: And, as the president spoke, Treasury Secretary Paul O'Neill was telling reporters swift action could still avert a recession.

PAUL O'NEILL, TREASURY SECRETARY: If we can get this stimulus bill in place quickly, there is still a plausible argument that the fourth quarter could be mildly positive. But we need to act.

O'BRIEN: But Democrats and Republicans in both the House and Senate are light-years apart on what should be in any stimulus bill -- exhibit A: Democrats' reaction to the latest proposal from Senate Republicans.

SEN. KENT CONRAD (D), NORTH DAKOTA: People's payroll taxes are being taken to give income tax cuts to the wealthiest 1 percent. That's not a stimulus package; that's a rip-off.

O'BRIEN: Senate Democrats may have better luck dealing with the Republican in the White House than with Republicans in their own house. The president acknowledged that government dollars need to be directed to those with low income, who are most likely to spend them and most vulnerable to an economic downturn, as Democrats have long argued.

But the president also reiterated the need to cut, if not eliminate, the alternative minimum tax for business, which has fierce opposition from Democrats, who control the Senate. Mr. Bush has forged close alliances with the leadership of both parties in both the House and the Senate. Although often vague, he also seems to accept many of the stimulus principles advanced by both Democrats and Republicans.


O'BRIEN (on camera): In short, the president may have set himself up as the one person, the only person genuinely well positioned to hammer out a compromise. Around here, that can be risky. If you succeed, sure you get some credit, if you don't, you get all the blame.

Tim O'Brien, CNN Financial News, Capitol Hill.


HAYNES: The U.S. Postal Service was losing money even before the events of September 11, but those attacks, coupled with the anthrax scare, are hitting post offices across the nation especially hard. In fact, some postal service officials say their operations may never be the same.

Hillary Lane looks at the troubles the industry is now facing.


HILLARY LANE, CNN CORRESPONDENT (voice-over): From door to door, street to street, state to state, there is timelessness to the mailman. The country has had a postal service in some form since 1672. Today, the quasi-government agency employs nearly 900,000 workers, delivering 680 million pieces of mail a day.

It's an inflexible giant, lumbering along in a far more nimble world. Snail mail, unable to compete with the fax machine, e-mail, or even in the package business -- the younger upstarts, such as Federal Express and UPS, now deliver the vast majority of packages, especially for businesses.

GENE DEL POLITO, ASSOCIATION FOR POSTAL COMMERCE: They can go in there and negotiate very, very favorable rates, much more favorable than the Postal Service is able to offer them.

LANE: The anthrax scare has made matters even worse. Unions representing postal employees are now suing to close mail sorting facilities where anthrax fears have driven up worker absenteeism, adding to concerns about the safety of the mail.

(on camera): The Postal Service gets just 1 percent of its budget from the U.S. Treasury. Its revenues come from stamp sales and other mailing services. But adding a few pennies to the price of delivery isn't enough to pay off the Service's $11 billion in debt.

(voice-over): And the bleeding continues. Losses in the most recent fiscal year: an estimated $1.5 billion. Since September 11, the Service has lost $150 million a week. First, planes were grounded, then came a slowdown in volume and an increase in security.

A bill in the U.S. House proposes extensive changes to the postal system, giving it more independence in pricing and contracting out services. In the words of one postal commissioner, everything's on the table.

GEORGE OMAS, POSTAL RATE COMMISSIONER: I said to Sen. Thompson that I thought that maybe some consideration should be given to let the Postal Service do what they do best, and that's through the last mile -- the delivery -- and that maybe the processing and things that they can't get a grip on should be something that they should contract out.

LANE: Surviving as a smaller, swifter service behind the scenes, but maintaining the familiar face out front.

Hillary Lane for CNN, New York.


HAYNES: As you know, the airline industry was also hit very hard by the terrorist attacks. Yesterday, some mixed news from Delta Airlines, the company announced it will be laying off 2,000 people. That's far fewer than the 13,000 Delta originally planned to let go. Delta attributes the reduction to the large number of employees who took early retirement or one year leaves of absence.

Meantime, airport security continues to tighten across the U.S., but peace of mind is not coming cheap. In California alone, for example, the bill for added patrols could top $500 million by the end of next year, but will this really improve aviation security?

Kathleen Koch takes a look.


KATHLEEN KOCH, CNN CORRESPONDENT (voice-over): Despite toughened measures since September 11, when it comes to aviation security, the current system is still far from perfect. Transportation Secretary Norman Mineta.

NORMAN MINETA, TRANSPORTATION SECRETARY: Someone may undergo a strict screening in Kansas City while someone else can slip a pistol by the screeners in New Orleans. And this is intolerable.

KOCH: Mineta wants more FAA agents inspecting screening operations and is threatening to empty and rescreen entire concourses full of passengers if failures continue. Airlines say they are doing their best. CAROL HALLETT, AIR TRANSPORT ASSOCIATION: We all have a zero tolerance plan. Unfortunately, it is almost impossible to always have a 100 percent perfect system.

KOCH: The federal government has taken numerous steps to tighten aviation security, limiting carry-ons to one bag, banning knives and cutting instruments, allowing only ticketed passengers beyond screening checkpoints.

UNIDENTIFIED POLICE OFFICER: Police! Don't move! Put your hands on top of your head!

KOCH: More air marshals are being hired and put on aircraft, while National Guard troops are being deployed in airports. Cockpit doors have been reinforced. Private aircraft flights are still banned over parts of Boston, Washington and New York City. Temporary flight restrictions also apply near nuclear sites and large public outdoor and sporting events like the World Series. Violators can now be intercepted and, as a last resort, shot down by military aircraft.

But problems remain. Most checked bags and cargo is never screened. Sophisticated machines to scan them are slow, under utilized and not in place at all U.S. airports. Simple I.D.s allow access to secure areas of airports.

DUANE WOERTH, AIRLINE PILOTS ASSOCIATION: Electronic identification of employees for around the aircraft in secure areas, we need that, whether that be biometrics, fingerprinting or iris scans.

KOCH: Flight attendants say they need training and non-lethal weapons to deal with intruders.

PATRICIA FRIEND, ASSOCIATION OF FLIGHT ATTENDANTS: That part is being completely ignored and really leaving us completely vulnerable to any sort of violent intruder in the cabin of the aircraft.

KOCH: And bag screening is still done by high turnover, low wage employees.

(on camera): Closing those security loopholes won't come quickly or easily. Congress votes this week on federalizing baggage screeners while scanning all checked luggage won't happen before 2004 at the earliest.

Kathleen Koch, CNN, Reagan National Airport.



UNIDENTIFIED MALE: All traffic halts and pedestrians immediately seek shelter.

UNIDENTIFIED CORRESPONDENT (voice-over): If you don't remember this, your parents might. UNIDENTIFIED PEOPLE: Duck and cover.

UNIDENTIFIED CORRESPONDENT: In school drills, children ducked and covered.

UNIDENTIFIED MALE: A simulated enemy bombing in progress.

UNIDENTIFIED CORRESPONDENT: Practicing what to do in a nuclear attack.

It was a time when Americans knew who the enemy was. They also knew the enemy had the bomb.

UNIDENTIFIED MALE: Duck and cover. Remember what to do, friends. Now tell me right out loud, what are you supposed to do when you see the flash?


UNIDENTIFIED CORRESPONDENT: During the Cold War, homeland defense was civil defense and drills kept Americans on their toes and on edge, orderly preparation for the total disorder of a nuclear exchange.

Before the Cold War, the United States had always had a natural barrier from attack, vast oceans to the east and west. Americans took comfort in the fact that not since the War of 1812 when the British destroyed East Coast port towns, even the White House and the Capitol Building, had the nation's mainland been attacked.

The sneak attack on Pearl Harbor stunned Americans even though it was a military base. Thousands of miles from the West Coast itself, it brought a new sense of vulnerability and it brought the nation into World War II.

Following September 11, analysts say the rules changed again, danger from unpredictable terrorists rather than from nation's whose intentions could be analyzed and interpreted.


TOM RIDGE: I, Tom Ridge, do solemnly swear.


UNIDENTIFIED CORRESPONDENT: In his role as director of the newly created office of Homeland Security, Tom Ridge will develop a new civil defense model to deal with newer threats. It will, for example, not be soldiers and sailors who are the first line of defense in terror attacks, say some analysts, but rather police and firefighters, doctors and ordinary citizens.

For guidance, Ridge could borrow methods from countries and cities that have more experience with terror, Belfast, London, Paris, Jerusalem, in the hope that America's hometowns can avoid the pain and anxiety those cities have endured. (END VIDEOTAPE)

HAYNES: The U.S. and Iran were once allies but that was quite a long time ago. The sharpest rift goes back 21 years when Iranians took over the U.S. Embassy and held Americans hostage for 444 days. The U.S. would like Iran's support and Iran could use some as well. Problems with local tribes on its border with Afghanistan are becoming quite a security threat now.

Our Joel Hochmuth takes a look at the history between Iran and the United States.


JOEL HOCHMUTH, CNN CORRESPONDENT (voice-over): There are conflicting signals from Iran about its possible desire to start official talks with the U.S. in the wake of the terrorist attacks September 11.

Monday, a special commission of Iran's Parliament said the international fight against terror demands the country begin negotiations with the U.S. again. But now the country's supreme leader, Ayatollah Ali Khamenei, is condemning that idea and says improving ties or even negotiating with the U.S. is against Iran's national interest. He's threatening to fire any official who even speaks in favor of such talks.

The apparent contradiction comes as no surprise. Iran, which shares a 500-mile border with Afghanistan, has a population of about 75 million, almost all are Muslims, but it is deeply divided politically. On the one hand is Khamenei who still controls the courts and the military. He's supported by conservative fundamentalists who harbor deep hatred for the U.S. Khamenei is the successor to Ayatollah Khomeini, infamous during the late '70s and early '80s when Iranian students held 52 Americans hostage. The two nations haven't had diplomatic relations since.

On the other side is the more moderate parliament, which largely supports President Mohammad Khatami. Khatami is a reformist who enjoys the support of a growing number of young people born after the overthrow of the Shah in 1979.

ABBAS MILANI, COLLEGE OF NOTRE DAME: We have had for the last 22 years a constant battle in Iran between the voices of democracy, people who want to have their voices heard and the spiritual leader, Ayatollah Khomeini and now Ayatollah Khamenei who are oblivious to the voice of the people and make policy by fear (ph).

HOCHMUTH: Just which side will win out in the current dispute remains to be seen, but experts point out even Iranian fundamentalists have a common interest with the U.S. and Afghanistan.

COLIN BARRACLOUGH, JOURNALIST: The Iranians -- the Iranians are not -- their true position is not the position that they're actually saying in public. They hate the Taliban, basically. There is a strong dislike to the Taliban. They are not sad to see the Taliban leave Afghanistan.

HOCHMUTH: Iranian Muslims are largely from the Shiite sect while Muslims in the Taliban are Suni.

BARRACLOUGH: There's also a little bit of snobbism, it has to be said. The Iranians see themselves as a very civilized culture, full of literature and poetry and so on, and they look down on the Talibans who are basically farmers, peasants from the east in Afghanistan.

HOCHMUTH: Iran has officially condemned the terrorist attacks in the U.S. but has also condemned the air strikes in Afghanistan.

BARRACLOUGH: Iran remains suspicious about U.S. intentions. They are very worried that this military operations will leave the U.S. with a substantial presence on Iran's eastern border and on Iran's northern border.

HOCHMUTH: Still, since September 11, Washington and Tehran have been holding low-level, indirect talks about what role Iran can play in the current conflict. Iran will provide the U.S. search and rescue support within its borders if needed.

Still, there are no illusions that two decades of hatred are suddenly ending. After all, many Iranian fundamentalists still call the U.S. "The Great Satan," and Iran is still near the top of the State Department's list of nations that sponsor terrorism.


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HAYNES: "In the Headlines" today, we told you last week about a group called the Revolutionary Association of the Women of Afghanistan, also known as RAWA. We talked to RAWA member Tahmeena Faryal about the conditions women face in Afghanistan. Well Faryal was honored Monday night as one of "Glamour" magazine's women of the year. Her fight for women's rights in Afghanistan was thrust into an international spotlight after the September 11 attacks.

On Wednesday, armored cars hauled away about $200 million worth of gold from the site of the Word Trade Center towers. The gold was stashed in a vault belonging to the Bank of Nova Scotia. The vault wasn't in the Twin Towers, but it was in a building that was reduced to mostly rubble when the towers went down. Well the anthrax crisis is affecting America's postal service is throwing a curveball to many perspective college students. Applications sent in the mail may not get there in time, and as a result, many colleges have agreed to extend their deadlines.

We continue our special look inside Peru today. Peru's president has brought a new sense of pride to its people. Alejandro Toledo is of Incan descent, and it's the first time in 500 years that someone of indigenous blood has been in power in the region. He's facing the daunting task of repairing a badly damaged financial and political system many say was neglected by his predecessor.

Still, as our Janice McDonald reports, Toledo is optimistic and hopeful.


JANICE MCDONALD, CNN CORRESPONDENT (voice-over): This celebration at Machu Picchu has taken the country of Peru to new heights, not just from the sacred location of the Incan sedital (ph) high in the mountains, but it is a turning point for the country itself.

It celebrates the heritage of the country's new president, a heritage he shares with more than 80 percent of the population. Alejandro Toledo is a cholo, meaning he is of indigenous descent, the first person of such heritage to freely govern Peru since the Spanish conquered the Incas in the early 1500s.

ALEJANDRO TOLEDO, PRESIDENT OF PERU: For 500 years those who have run the destiny of this country have belonged to a very small group of 5 percent, to a large extent, to the exclusion of the majority.

MCDONALD: That majority is now putting their hopes in him and he knows it.

TOLEDO: This what constitutes an enormous (INAUDIBLE). This also it's an enormous responsibility on our shoulders because it's not only the short-term expectations of jobs over (INAUDIBLE) poverty or decentralizing a country or rebuilding institutions, they are the hopes of a hundred years. I'm sentenced not to fail.

MCDONALD: There have been few failures in Toledo's life, but he refers to himself as a statistical error. One of 16 children of mixed Spanish and Quechuan (ph) blood, he made a living on the streets until Peace Corp workers helped him move to the U.S. for his education. That was 40 years, a B.A. in economics, two Masters and a Ph.D. and stints at Harvard, the U.N. and the World Bank, ago.

TOLEDO: My first Ph.D. I obtain it at 5 years old when I was -- I had to become prematurely adult in the streets, shoe shining, selling newspaper and lottery, selling ice cones, tamales, whatever, and then continue a very difficult path full of obstacle because this is a society that is very (INAUDIBLE), very unequal. MCDONALD: Fifty-four percent of Peruvians live below the poverty line. The vast majority of those are of indigenous descent like Toledo.

TOLEDO: I'm very proud of my origins. And I want to be remembered as a president who lifts the self-esteem, the pride and the dignity those 95 percent Peruvians who have been for 500 years marginalized (ph) from a political, economic activity.

MCDONALD: He believes increasing educational opportunities is the key to changing that.

TOLEDO: There is no coincidence that the poor are indigenous. I want to be the president of all the Peruvians for sure, but I have a bias, yes, and I need to level this out.

MCDONALD: He also wants to make sure that while getting their education, students are allowed to study the language of their ancestors, a move he feels will also help increase pride in their heritage.

TOLEDO: I am the walking (INAUDIBLE) evidence of what education is capable to do. If I wouldn't have had education by this statistical error, if I wouldn't have had this, you wouldn't be interviewing me today. I wouldn't have had the chance to see the (INAUDIBLE) state in the world. I wouldn't be president of the country. I wouldn't have the opportunity to lead a movement to rescue the self-esteem of the people that I'm concerned with.

MCDONALD: Toledo has a formidable task, having inherited a country racked by corruption by the previous administration of Alberto Fujimori. His supporters call him Pachucutec, a tribute to the man considered to be the greatest of Incas.

TOLEDO: I would be absolutely pretentious even to get close to his ability. (INAUDIBLE) admire (INAUDIBLE). It is, however, the Inca that have put (INAUDIBLE) together in a rather difficult moment. He was characterized for providing cohesiveness (INAUDIBLE) rebuild the empire. I wish I could just do 1 percent of that.

MCDONALD: A statistician himself, Alejandro Toledo knows however that he will have to do much, much more.

Janice McDonald, CNN NEWSROOM, Lima, Peru.


HAYNES: Mystical, magical, majestic, all of these words have been used to describe the ancient Incan city of Machu Picchu, but how much is actually known about the remote village which draws so many visitors to Peru.

Once again, here's Janice McDonald.

(BEGIN VIDEOTAPE) MCDONALD (voice-over): When you round the bend of the mountain pass, nothing prepares you for the breathtaking view before you. The ancient city of Machu Picchu located in the mountains on the verge of an Amazonian rain forest is considered one of the most sacred places of the Incas. It was virtually hidden from the outside world until 1911 when explorer Hiram Bingham was led there by farm workers. This is what he saw, the city covered with centuries of growth.

Roxanna Dubrill's grandfather was the last private owner of the lands where the mountain stands.

ROXANNA DUBRILL NUNEZ, DIRECTOR, INKA MUSEUM: In this document, we can find that he sold him all this farm but it was not included in the selling, oh let me see, here, Article No. 5 (ph) says that I'm selling this farm named Aquinty (ph) but I'm not selling Machu Picchu (INAUDIBLE).

You still consider books of Hiram Bingham that says that he met in Machu Picchu when he first came with two persons that were working that were (INAUDIBLE) and they were cleaning up the forest of the (INAUDIBLE). Those were the employees of my great-grandfather in that moment.

MCDONALD: While Bingham was given credit for discovering Machu Picchu, Peruvians say they knew it was there all along, he was just the first tourist. There is evidence it was used for farming long after it was abandoned as a city and was most likely deserted before the conquistadors arrived in Peru.

While there are no written accounts regarding visits by Spaniards to Machu Picchu, Dubrill disputes the long held claims that Spaniards didn't know it existed in the 16th century.

NUNEZ: We know that Machu Picchu was the farm of the Inca Pachucutec, the most important emperor that we have in our Inca's history. After that, during the Colonial time, we have that it belonged to one of the Pizzaros as a farm. After that, it was sold to some other Spaniard.

MCDONALD: Also in dispute is why the city was built in the first place. Bingham called it a sedital and believed it to be a fortress, but it was more likely a religious outpost. Its location is considered a spot for great spiritual energy, surrounded on three sides by the Urubamba river, at the end of the sacred valley and close to several sacred mountain peaks.

NUNEZ: This is a holy place. There are many temples. It's like to be concentrated, you know, here the powers, the energies of all our deities beginning things with (INAUDIBLE) the creator of the world.

MCDONALD: There is the Temple of the Sun, the Temple of the Condor, the Temple of Three Windows. This rock above what was the principle temple is called the hitching post of the sun where the Incas would ritually tie the sun on the winter solstice to bring the sun back for the next year.

The city was divided into two parts, the urban area and the agricultural area, both engineering marvels.

ERIC BIKIS, HYDROLOGIST: I think some of the cities in America today aren't as well planned as this one.

MCDONALD: Eric Bikis is a water engineer from the United States. He's studying the hydraulic engineering the Incas used to provide water to the city.

BIKIS: Well, we know it now, but the (INAUDIBLE) they knew it then. This city was designed around the elevation of a spring, which is in the hillside of Machu Picchu, and the elevations for the 16 fountains that are laid out in the city were based upon the elevation of that spring.

MCDONALD: One theory about the abandonment of Machu Picchu is that the spring dried up and the people were forced to move on. Other theories include that illness killed off the inhabitants or that someone brought shame to the settlement so everyone had to leave.

(on camera): There are 216 buildings here in Machu Picchu, and archeologists estimate that at the city's height about 600 people lived here. But they also say that the city was inhabited for less than 60 years.

(voice-over): When the occupants left, they left behind very few clues about their existence, just the lasting mystery of the true story behind their amazing city.

Janice McDonald, CNN NEWSROOM, Machu Picchu, Peru.


HAYNES: Good stuff. Check in with us again tomorrow for more on the Incas, and we'll see you then.

Take care.




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