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CNN LOU DOBBS MONEYLINE

U.S. Warns Iran to Crack Down on al Qaeda; Interview With Michael Powell

Aired May 27, 2003 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU DOBBS, CNN ANCHOR: Good evening, everyone.
Tonight, Iran has been warned. The United States told Tehran to crack down on al Qaeda and to stop meddling in Iraq, Kitty Pilgrim reports.

And former defense secretary and regular contributor to this broadcast William Cohen joins us.

Bigger media, fewer voices, the chairman of the Federal Communications Commission Michael Powell joins us tonight. He wants to ease rules that prevent the growth of media monopolies. Michael Powell joins us.

And, we begin a series of special reports on middle-class ills, tonight the plight of middle income families who cannot afford to pay the full price of prescription drugs in this country. Maine says it has a solution. Maine's Governor John Baldacci is my guest.

But first tonight, the United States has put Iran on notice to change its behavior. The White House said Iran must do more to round up al Qaeda terrorists.

It also said Iran has failed to satisfy concerns it has a nuclear weapons program. And, at the same time, Defense Secretary Donald Rumsfeld said any effort to interfere in Iraq will be aggressively put down -- Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Seven weeks after the fall of Baghdad a series of warnings to Tehran. Presidential spokesman Ari Fleischer said the Bush administration believes al Qaeda is being given shelter in Iran.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: We continue to press Iran to cease its harboring of terrorists and we will continue to (unintelligible) that message to the Iranians through multiple channels.

PILGRIM: A series of press reports in recent days seems to suggest that Iran is "next after Iraq as a target." Administration officials stopped short of a direct threat. Today, Secretary of State Colin Powell making it clear it's a tough line but not a new one. COLIN POWELL, SECRETARY OF STATE: Our policies with respect to Iran have not changed. We do not approve of their support of terrorist activities. We have made it clear over the years that we disapprove of their efforts to develop a nuclear capability.

PILGRIM: And, Defense Secretary Donald Rumsfeld, speaking in New York, said he had discussed Iran this morning with National Security Adviser Condoleezza Rice and Secretary of State Powell.

Rumsfeld admitted to "stepping into Secretary Powell's lane" but gave a stern warning on Iran saying it is being "unhelpful today with respect to Iraq," a reference to reports Iran is trying to influence Iraqi Shiites to shape a new government being formed in Iraq.

DONALD RUMSFELD, DEFENSE SECRETARY: Interference in Iraq by its neighbors or their proxies will not be permitted. Indeed, Iran should be on notice that efforts to try to remake Iraq in Iran's image will be aggressively put down.

PILGRIM: Iran is one of the axis of evil countries named by President Bush in his first State of the Union speech. The United States is highly skeptical of Iran's claim that its nuclear power program is for peaceful energy purposes only, the administration calling that today a "cover story."

(END VIDEOTAPE)

PILGRIM: Now, Iran has signed a nuclear nonproliferation treaty. The nuclear watchdog agency, the IAEA, meets in June to discuss whether Iran is in compliance with that treaty -- Lou.

DOBBS: Kitty, thank you very much.

An Iranian opposition group says Iran is not in compliance and that Iran is, in fact, building secretly two more nuclear sites. The National Council of Resistance of Iran said these new sites are designed to protect Iran's nuclear program in the event of an attack on existing facilities. It said these new sites may already be partially operational.

A meeting tomorrow between Ariel Sharon and Mahmoud Abbas today was delayed. The delay did not concern the White House, however. President Bush may soon, in fact, meet with Israeli and Palestinian prime ministers.

Senior White House Correspondent John King has the report -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Lou, that dramatic meeting could come, in fact, one week from today. We are told by senior administration officials tonight, and other diplomats, that the president is planning to meet with Prime Minister Sharon of Israel, Prime Minister Mahmoud Abbas of the Palestinian Authority in Jordan.

One week from today is the tentative date for that meeting. It could change based on security concerns and other developments in the region, but the White House might, in fact, even announce this stop as early as tomorrow, and it will not be the president's only hands-on injection, if you will, into the delicate politics of the Middle East.

Before that three-way peace summit, Mr. Bush is also making plans to stop in the Egyptian Red Sea resort of Sharm El Sheikh to meet with key Arab leaders to try to encourage them to join him in trying to revive the Israeli-Palestinian peace process.

Remember now this is a president who many have said has been too reluctant to get personally involved in Middle East diplomacy. White House Press Secretary Ari Fleischer saying the president now sees an opening, an opportunity to revive the peace process because Yasser Arafat has been pushed to the sidelines.

(BEGIN VIDEO CLIP)

FLEISCHER: The biggest difference has historically been the United States role to help the parties come together. The biggest difference is Yasser Arafat is not party to the current discussions and it was Yasser Arafat who did the most to destroy the prospects of an agreement being reached when it was very close to being reached. That's the principal difference.

(END VIDEO CLIP)

KING: Again, that three-way Mideast peace summit could come one week from today in Jordan. U.S. officials say what is critical in the meantime is improvements in the security situation on the ground. They are also quite encouraged here by strong statements from President Ariel Sharon saying the Israeli "occupation of the Palestinian territories can not go on indefinitely."

Lou, about a week from today, the president's most dramatic, most personal investment in Middle East diplomacy -- Lou.

DOBBS: A dramatic, striking turn in policy by this White House, any expressions there of concern about the president putting his prestige, his administration, forward on this critical issue?

KING: Well, remember this was the administration, it was Ari Fleischer who said President Clinton had tried to "shoot the moon" by trying to pull together a Camp David accord at the end of the Clinton administration.

So, certainly there is concern here that the president is banking his own personal prestige on this. That's one of the reasons though, Lou, the president will go to Sharm El Sheikh first if all this plays out as planned.

They believe here that one of the mistakes of the Clinton administration was that the president tried to personally negotiate between the Israelis and the Palestinians and when he needed help from the Arabs to nudge Yasser Arafat, the Arabs said why are you calling us now? Why were not we invested from day one in the process?

So, President Bush will try to get the Arabs invested on the front end this time. The White House is hoping that pays off down the road.

DOBBS: John, thank you very much, John King our Senior White House Correspondent.

Three U.S. soldiers today were killed in Iraq. Two died in Fallujah where gunmen opened fire on a checkpoint. Nine other soldiers were wounded in the attack. Two of the attackers were killed, six were captured. Another soldier died when a man threw a bomb under a humvee near Baghdad International Airport. Three soldiers were also injured in that attack.

In other developments tonight, coalition forces have captured another two former members of Saddam Hussein's regime. They are numbers 46 and 55 on the list of most wanted Iraqi leaders. Coalition forces have now captured 27 of the 55 most wanted former members of the regime and Central Command says three of those most wanted may be dead.

A remarkable story tonight about an Iraqi who avoided capture for 20 years, Jawad Amir (ph) went into hiding after a judge ordered his execution for supporting a prominent Shiite cleric.

The BBC reported Amir hid in the space between two walls in his parents' home with a radio to keep in touch with the outside world. Only his family knew he was there. He decided to come out when he heard that Saddam Hussein's statue had been toppled in Baghdad.

In this country, the remaining economic sanctions against Iraq are about to be toppled. Treasury Secretary John Snow said the order will allow U.S. companies to do business with Iraq without obtaining government approval first.

(BEGIN VIDEO CLIP)

JOHN SNOW, TREASURY SECRETARY: It is no longer a crime for U.S. companies and individuals to do business in Iraq. The United States has taken the steps to quickly and rapidly implement the lifting of the U.N. sanctions. Now, it's imperative that other nations take similar steps to restart the free flow of trade and commerce with a liberated Iraq.

(END VIDEO CLIP)

DOBBS: Well, some of those other countries have problems of their own. In Europe, France in chaos today as trade unions stepped up their protests against the government's pension reforms.

Tens of thousands of travelers were stranded at airports. Children were locked out of their schools, and garbage piled up in the streets. France's powerful trade unions are angry about government plans to force people to work longer to earn their full pensions. The current work week in France is 35 hours.

The former French colony of Algeria continues to deal with deadly aftershocks. At least three people were killed, nearly 200 more injured, when another earthquake struck Algeria today. This aftershock measured 5.8 on the Richter scale. It's in the same area that was devastated by that earthquake less than a week ago, an earthquake that killed 2,200 people and 9,000 people injured.

More than 8,000 people worldwide have been infected with Severe Acute Respiratory Syndrome. Seven hundred and thirty-five of them have now died but tonight, a possible breakthrough in the fight against SARS.

Scientists in Hong Kong have developed a potential vaccine for the virus and they say they're ready to test it on animals. For the first time since China began calculating figures and reporting them on SARS, no new cases reported in the country outside of Beijing. Nine new infections and four deaths were reported in Beijing today.

Canada back on the list of SARS-affected areas, World Health officials made that decision after eight new infections and two additional deaths were reported in Toronto.

And, the Women's World Cup Soccer Tournament that made stars of Mia Hamm and her teammates is coming back to the United States because of the SARS virus. The tournament had been scheduled to be played in China this fall.

Some pet food being recalled because of possible Mad Cow Disease contamination. Parts of the Canadian cow that tested positive for Mad Cow Disease may have been used in the dog food that was sold in this country. The suspect dog food was made between February 4 and March 12 and sold here in 50-pound bags. Canadian officials say none of the food made its way to products consumed by humans.

Still ahead here tonight, middle-class ills, we begin tonight a series of special reports on the growing health care problems in this country. Tonight, we focus on the state of Maine. Maine has a revolutionary plan to help its citizens who can not afford prescription medicine, the drugs they so desperately need. Could it work for your state? Maine's Governor John Baldacci joins us.

And, the case against Scott Peterson, the judge in the murder trial has made a key ruling. We'll have a live report for you on that and much more still ahead here. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Two strong readings on the housing market and a six-month high in consumer confidence sent stock prices surging today. The Dow sent -- it went up 179.97 and the NASDAQ gained almost 47 points, while the S&P 500 rose more than 18 points on the day, Christine Romans here with the good news on the market today.

CHRISTINE ROMANS, CNN CORRESPONDENT: Well, Lou, this is a nine- month high for the S&P, an 11-month high for the Nasdaq, and the volume really picked up toward the later part of the day when the markets were hitting those highs.

For the year now you've got the Dow up five percent, the S&P up eight percent, the Nasdaq up 17 percent this year, and the numbers inside the market are still strong, volume 1.5 billion shares. That's above the three-month average. Two hundred forty-seven stocks hit new 52-week highs on the big board today, only four new lows.

And, the buying was diverse. Biotech at 11-month highs, semiconductors soared six percent, and only a handful of the about 200 industry groups closed lower today.

Now another gainer, Lou, Tenet Healthcare, the company is being investigated by at least three federal agencies. Its stock is down 66 percent in the past year but news today its CEO is leaving sparked a rally.

Meanwhile, for a bit today, it took more than $1.19 to buy one Euro. That was a new record. The dollar selling fizzled out a little bit as stocks rallied -- Lou.

DOBBS: That dollar just keeps getting hammered.

ROMANS: Yes, it really does.

DOBBS: And it's not all bad news, so Treasury Secretary John Snow says. Thank you very much Christine.

ROMANS: You're welcome.

DOBBS: Former investment banker Frank Quattrone arraigned today in New York City. Quattrone was indicted earlier this month on charges of obstruction of justice and with tampering with a witness. Quattrone is the highest-ranking Wall Street executive to be charged since Enron filed for bankruptcy 540 days ago now, one of 65 executives in all of corporate America that's been charged. Fifteen of those executives from Enron, no one you may have noticed is in jail.

President Bush today signed into law the largest ever increase on the national debt limit. The national debt can now legally rise to more than $7.3 trillion. The debt has already swelled to its previous limit of $6.4 trillion and we, of course, will continue to report the growth of the national debt right here on this program. We have about $900 billion more to go before they have to raise the limit again. We'll keep you posted.

Coming up next, our "Quote of the Day" on fostering the entrepreneurial spirit even in the most challenging of times.

And, former Defense Secretary William Cohen joins us. We'll be discussing North Korea, Iran, the latest threats from the so-called axis of evil.

And, big media could be even bigger by this time next week, we'll be talking with FCC Chairman Michael Powell about a proposed set of rules that he wants to expand the reach of media giants.

(COMMERCIAL BREAK)

DOBBS: South Korea toughened its attitude toward North Korea today. South Korea said it would delay rice shipments to the north if the communist government escalates its nuclear weapons program, the Russian and Chinese presidents also today urging North Korea to abandon its nuclear weapons.

They also called for a peaceful solution to the nuclear standoff with North Korea saying that violence by North Korea would not be tolerated. Thirty seven thousands U.S. troops remain based in South Korea.

Joining me now to talk about the North Korean nuclear standoff and other issues, former defense secretary, and regular contributor to this broadcast, William Cohen, Bill good to have you here.

WILLIAM COHEN, FORMER SECRETARY OF DEFENSE: Good evening, Lou.

DOBBS: This looks like a turning point in South Korean policy.

COHEN: I think it is. I believe that the visit on the part of president (unintelligible) to the United States meeting with President Bush is paying some dividends now and we're seeing a toughening of that position, that in conjunction with, of course, the Japanese leadership also having visited President Bush.

So, we're seeing the trilateral support that is necessary, Japan, South Korea, and the United States in conjunction with, as you just mentioned, China and Russia. All of that is going to be important to containing this nuclear program on the part of the North Koreans.

DOBBS: In an obvious toughening and policy towards Iran by the Bush administration today, what do you make of that?

COHEN: Well, it's a restatement as a matter of fact of the policy that's been in place. We understand that the Iranians over the years have been the supporters of terrorism. We see their support of Hamas and Hezbollah. That has to stop before we're going to see any hope for peace in the Middle East their dedication to building weapons of mass destruction and a nuclear capability.

So, this is then our objection all along. We hope that we can have a better relationship with the Iranian people. There's a new generation coming up, one that we hope that we can appeal to.

But any talk of having a covert destabilization program I think is counterproductive. It undermines the very people that we look to in helping to bring about, hoping that they can bring about a change in their government's policies.

DOBBS: Well, obviously what you've just said is counter to what we are led to believe is the policy of this administration and, in particular, Defense Secretary Donald Rumsfeld. Do you think a policy that ill serves the United States here?

COHEN: I think Secretary Rumsfeld's statement that we will not tolerate any attempt on the part of the Iranians to undermine this opportunity to have a Democratic government in Iraq is the right message. The notion, however, that we are going to adopt a formal policy, be it covert, and it's really quite ludicrous if you're talking about it openly it's no longer covert, whether a covert or overt policy of destabilization I think undermines the people who, in fact, want a change in Iran and it will be a big mistake for us to adopt that.

I think we can bring about the kind of change that would be necessary over a period of time by telling the truth, by appealing to their sense of where the future lies with the Iranian people, but a notion of a destabilization program I think is counterproductive.

DOBBS: Well, Bill, if you're talking about talking to the Iranian people and communicating with them to take some action, it's unlikely that the Ayatollahs and the clerics of the Iranian regime would be responsive to talk, right?

COHEN: They may not be responsive to talk but the people that certainly who are tuning in to satellite coverage, to the Internet, to looking at the world and seeing that they're going to be left behind.

In the event that they continue to support the clerics who are in power, I think you can see over a period of time a change in Iran but one that we have to be very careful how we approach it. If we are seen as pushing this change or trying to topple that regime, I think they'll crack down even harder on the reformers.

DOBBS: One thing is very clear here. This administration is doing precisely what it said it would do a year ago and that is injecting a forceful policy initiative into the Middle East, including of course and most specifically after Iraq the Israeli-Palestinian conflict.

Are you somewhat taken aback, somewhat surprised at the leadership that President Bush is taking on this issue, committing his personal prestige now to resolving this longstanding and tractable crisis?

COHEN: Well, I want to commend him. I think it's a very courageous step on his part and he, I hope, will stay the course through a very difficult period of time no doubt that will be coming up.

I also think that Ariel Sharon made quite a statement by saying that he wanted, he knew that the occupation of the West Bank and Gaza had to come to an end at some point. That's the first time an Israeli prime minister, I think, in recent times has used the word occupation. Now, they were quick to point out that that did not mean occupied territory but I think we're playing word games here.

DOBBS: Exactly.

COHEN: We call them outposts. When does an outpost become a settlement, a settlement then become an occupation? The fact is that those settlements have to be frozen and then withdrawn over a period of time if we're going to have peace. DOBBS: And for the first time, Bill, a statement by the Israeli government that it would recognize a Palestinian state. These are seemingly only statements but they are momentous statements, are they not?

COHEN: I think they are and, again, I commend Ariel Sharon for his leadership in this regard. This is an opportunity which ought not to be wasted, and so any technical delay by delaying a date between the meeting between the two prime ministers, Abbas and Sharon, I hope the technical delay does not become a substantive defeat for the Middle East peace process.

But I am encouraged by Ariel Sharon's statements and also I am very pleased with President Bush injecting himself into this process. It's the only way that we'll ever see any hope for peace in the Middle East.

DOBBS: Bill Cohen, thank you very much.

COHEN: My pleasure.

DOBBS: Turning now to our "Quote of the Day" from a Treasury official who today announced most of the remaining U.S. sanctions against Iraq will be lifted, the quote:

"Oil can now be exported to finance reconstruction and humanitarian aid, vital goods and services can be imported and the entrepreneurial spirit, inherent in people everywhere, can flourish once again in the country.

For example, Iraqi entrepreneurs, innovators and dreamers, no longer stifled by a Stalinesque command economy can now access capital abroad to make their visions a reality," that from Treasury Secretary John Snow.

When we continue, a key ruling in the case against Scott Peterson, we'll have a live report for you from Modesto, California next.

And, our series of special reports on middle-class ills, Jan Hopkins reports on why Maine is the test case for a new approach to making prescription drugs affordable to those who do not have insurance.

And, we'll hear from the state's governor, Governor John Baldacci, about babbling Washington bureaucrats, big pharmaceutical companies, and the status quo, all of that and more still ahead here. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The California judge presiding over the murder trial of Scott Peterson today said he's considering imposing a gag order in the case. The judge also ruled in a pretrial hearing that prosecutors must turn over to the defense transcripts of telephone conversations between Peterson and an attorney shortly after his wife disappeared. Elaine Quijano is live in Modesto, California, and joins us with the latest -- Elaine.

ELAINE QUIJANO, CNN CORRESPONDENT: Hello to you, Lou. Well, this pretrial hearing was to take place in open court and really the main issues that were expected to be focused on were whether or not the unsealed, the search warrants and the autopsy results on Laci Peterson and her unborn baby Connor were to be unsealed. In the end, the judge did not make a ruling on those particular documents.

As for Scott Peterson, this morning he entered the courthouse here in Modesto looking a little bit different than we've seen in past court appearances. He had a new haircut and his hair was actually a different color, darker than we've seen in previous weeks.

Now, shortly after the proceeding began this morning, it actually moved out of public view to the judge's chambers, part of a prosecution request to discuss 69 intercepted phone conversations between Scott Peterson and his defense team.

The defense is concerned that those calls were possible confidential under attorney/client privilege, and when they all emerged the judge, as you said, ordered that any information relating to those calls be turned over to the defense.

As I mentioned, the judge did not rule on whether to unseal the search warrants and the autopsy results. The defense team interestingly enough says that will give them more time to follow up on what they say are tips in their own separate investigation.

(BEGIN VIDEO CLIP)

MARK GERAGOS, SCOTT PETERSON'S ATTORNEY: What happened in court I think was significant from our standpoint in that it allows the investigator to go forward.

The judge I believe will rule, if he holds to what the tentative ruling was that the items are going to remain under seal, so that both the prosecution and the defense can continue to investigate this case. And, it's our fervent hope find the actual perpetrators whoever did to Laci and baby Connor.

(END VIDEO CLIP)

QUIJANO: Now, the prosecution for its part says its own investigation still continues. In fact, it was just last week that divers were back out in the water in San Francisco Bay trying to collect any evidence they could find, the prosecution today saying that those reports continue to come in and that investigation goes on as well.

In the meantime, a couple of big dates coming up on the calendar, one of them notably July 9, that is when a hearing will take place, is set to take place, regarding the issue of whether or not cameras wi continue to be allowed in the courtroom itself. And then the main issue, preliminary hearing set to take place on July 16. That will be a chance for the prosecution to lay out more details of its case -- Lou.

DOBBS: Thank you very much.

And now we begin a week-long series of special reports called "Middle Class Ills" in which we'll be dealing with the issues that the middle class in this country is contending with in health care.

The Supreme Court has cleared the way for health officials in the state of Maine to negotiate drug discounts for all of that state's residents who don't have drug coverage in their insurance. That plan has drawn the attention of other states who want to emulate Maine. It has also drawn the attention of the bush Administration and the big pharmaceutical companies. Jan Hopkins reports from Portland, Maine.

(BEGIN VIDEOTAPE)

JAN HOPKINS, CNNfn CORRESPONDENT (voice-over): Seventy-nine- year-old Frances Dwartberg (ph) lives in subsidized housing in Portland, Maine. But her prescription drug bill of $450 a month is not subsidized. She's hoping Maine Rx will help. It would give Frances access to state negotiated drug discounts. One quarter of Maine's residents would also be eligible because they don't have drug coverage.

A few years ago Maine's seniors organized bus tours to Canada to buy cheaper drugs.

JOHN CARR, MAINE COUNCIL OF SENIOR CITIZENS: The last bus trip that we took in October we had 19 people. And over the total course of a year, if you figured everything out on a yearly basis they saved $38,000.

HOPKINS: Paulette Beaudoin saves $5,000 a year by taking the bus to Canada. She knows people who can't make the trip and are forced to make a choice.

PAULETTE BEAUDOIN, MAINE SENIOR: Some people told me they're not taking their medicine anymore, and one of them was for blood pressure. And I said, what are you doing? She said, I can't afford them.

HOPKINS: In 2000 the Maine legislature ordered the state to negotiate lower prices from drug companies. The drug companies went to court to block the plan. They argued these prices would kill research on new drugs.

ROBERT GOLDBERG, MANHATTAN INSTITUTE: As we've seen in Canada and in Europe, once you basically say these markets are off limits unless you pay the government price, the markets begin to disappear and the research dries up.

HOPKINS: Last week the Supreme Court sided with Maine.

CHELLIE PINGREE, PRESIDENT, COMMON CAUSE: We feel like it's a David and Goliath story. You've got a little bitty state like Maine, basically the activism of the senior citizens taking on the big pharmaceutical manufacturers who don't lose very often, and they lost.

HOPKINS: Pingree, now head of Common Cause, doesn't believe Congress will act anytime soon to lower drug costs. Common Cause figures drug companies spent $94 million in the last election lobbying Congress for the status quo. That's why there's so much at stake in Maine.

(on camera): Half the states in the country are looking at the Maine program to see if they can copy it. Ohio has a referendum in the fall, Hawaii has a similar program set to start next year.

(voice-over): The federal government still wants to review Maine Rx. But work has begun to offer discounts by this fall for the 325,000 people in Maine who pay full price for drugs.

Jan Hopkins, CNN, Portland, Maine.

(END VIDEOTAPE)

DOBBS: That Supreme Court decision was a defeat for the pharmaceutical companies. And earlier I asked Maine's governor, John Baldacci, about whether the Supreme Court decision means he can now move forward with the Maine Rx program.

(BEGIN VIDEOTAPE)

GOV. JOHN BALDACCI (D), MAINE: We think it basically allows the state to move forward. The plan allowed for negotiations to take place between the pharmaceutical industry and the state. And I've asked the department to prepare the legislation that would enable us to move forward. We pulled together a working group that was involved in the original Rx statute. And we've been getting some good advice and strategies, and will begin implementing that in the next couple of weeks.

DOBBS: The Bush administration has opposed the plan. You didn't seek federal government approval for it. What do you think will be the result?

BALDACCI: Well, I think at least from the court's decision they're saying that the states have the ability and that they should get some concurrence from the federal government. But we are not even at that stage yet. The legislation that the court reviewed allowed for the state to begin the negotiations and seek the discounts from the pharmaceutical industry.

DOBBS: Any indication that the pharmaceutical industry, which has fought you all the way through this process, will be forthcoming and helpful in implementing the plan?

BALDACCI: Well, it's my hope, Lou, this is a new administration, in Augusta. I mean, I'm there to serve our citizens and businesses and families throughout the state. And I'm willing to engage in a serious, constructive negotiation with the pharmaceutical industry. But at the end of the day, you know, I've got to make sure that it's in the public interest. And I'm willing to at least extend the hand and see if there is an opportunity to be constructive. If not, I mean, the state will be prepared to move forward.

DOBBS: And what does it mean, Governor, when you say the state to move forward?

BALDACCI: Well, I think, again, it's going to demonstrate to Washington and to other states that, you know, states can solve problems, states can bring issues on a national level and begin to awaken a national consciousness on these issues whether it's prescription drugs or whether it's health care or health insurance for small businesses and working families.

I think the states are in the position where they're not going to wait for their ship to come in from Washington or anywhere else, that they have the capabilities of their citizens and businesses to sort of build it themselves.

DOBBS: Are you surprised at the reaction first of Washington and frankly, both parties, the Democrats and Republicans, as well as the Bush administration and the pharmaceutical interests? The plan as you've laid it out to this point would cut just about let's call it at a mean 3 percent from the operating profits of the pharmaceutical companies in your state. And would also take the burden off the federal government for a solution that hasn't been forthcoming.

BALDACCI: Well, you know, I guess that so many traditions and practices have gone on for so long, Lou, it's going to be hard to change it. People in northern Maine have said it's a mile into the woods, it will be a mile out. But I believe that the Maine Rx Plan and the leadership that the state has taken -- and it's not just me, it's the citizens of this state -- is a step forward in terms of the national public interest.

DOBBS: Do you have the support of the business community in Maine?

BALDACCI: The business community has been supportive, and they've been working with us. The Maine Chamber and their president have been working with us, Dana Connors (ph). We're actively engaged in reducing cost. And that's what businesses care about, reduced cost so that they can pass that along in terms of their workers and in terms of their customers so that they can be more competitive. So it works for them.

DOBBS: Governor, how do you respond finally to what the pharmaceutical companies are charging, that the Maine Rx Plan puts health care in this case prescription drugs in the hands of the government and government officials rather than doctors and caregivers?

BALDACCI: You know, Lou, I was in Washington for eight years. There's billions of dollars that the citizens of this country are spending for research so that the pharmaceutical industry can then develop upon that research drugs which then they market.

I think out of fairness that the federal government in representing the citizens of this country ought to at least get a share in some of what's being developed to benefit the citizens. The seniors who are cutting their pills, the seniors who aren't going to be to the doctor's office, that can't afford the drugs that are going to be prescribed.

We're talking about -- if you're talking about a healthy economy, in our state we know that we need to have healthy people, and we believe that this program sends that message out, not just in Maine but throughout the country.

DOBBS: Well, we wish you all the luck. The problems you're tackling are not exactly small or simple or straightforward. So we thank you very much, Governor John Baldacci, thank you very much.

BALDACCI: Thank you very much, Lou.

(END VIDEOTAPE)

DOBBS: And an issue, a drug issue north of the border as well. Canadian lawmakers are now considering whether to decriminalize marijuana. Under the bill people caught with 15 grams or less of marijuana would be fined the equivalent of $300 U.S. and would receive no criminal record.

Canada's justice minister said the law would allow police to focus their resources on prosecuting large marijuana growers. The United States has said that bill could force tighter security at its border with Canada and could in fact hurt trade between the two countries.

And our largest trading partner is of course Canada. That leads us to our check on the level of the U.S. trade deficit tonight. Our estimates put it at more than $204 billion so far this year.

When we continue, "Our Thought of the Day." This time on media ownership and media concentration. FCC Chairman Michael Powell joins us. We'll be talking about new rules that would relax media ownership restrictions and change local television, radio, newspapers perhaps.

And trust and the media. A certain presidential election marking a turning point in the public's trust of the media. The trend continues three years later. Bill Schneider will be here with the details for us. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The FCC is prepared to enact significant changes, sweeping changes next week on how many media outlets one owner can possess in one market.

Tim O'Brien reports from Washington.

(BEGIN VIDEOTAPE) TIM O'BRIEN, CNNfn CORRESPONDENT (voice-over): Opposition to relaxing the rules has brought together strange bedfellows, Common Cause joined by the National Rifle Association, the liberal National Organization for Women, and the conservative Family Research Council.

BRENT BOZELL, PARENTS TELEVISION COUNCIL: When all of us are united on an issue, then one of two things has happened. Either the Earth has spun off its axis and we have all lost our minds or there is universal support for a concept.

O'BRIEN: The concept to unite these disparate groups is that allowing any more media concentration would be wrong.

Under the proposed new rules, media giants could own enough television stations to reach up to 45 percent of the U.S. television market. The maximum is now 35 percent. They would be allowed to own television stations and newspapers in all but the smallest markets. In large markets, individual companies could own several radio and television stations.

One of the groups represented at the hearing, moveon.org, has launched a media blitz, claiming media dynasties like Rupert Murdoch's Newscorp, are already too powerful.

(BEGIN VIDEO CLIP, AD)

NARRATOR: So on June 2 Republicans on the FCC plan to get rid of an important regulation so Rupert Murdoch can buy more TV stations, radio stations, newspapers, giving him control over much of the news you hear. This monopoly is no game.

(END VIDEO CLIP)

O'BRIEN: The proposals are being pushed by FCC Chairman Michael Powell, who says the current restrictions are outdated, a relic of the '60s, when three broadcast networks controlled most of what was seen on television.

The FCC did submit its proposals for public comment and got hundreds of thousands of replies.

(END VIDEOTAPE)

O'BRIEN: One in support seemed to come from a most unlikely source; Michael Eisner. And it included a vitriolic attack on the television networks. Hollywood and TVland generally were abuzz, stunned really. Why would the chairman of Disney which owns ABC, be so violently against his own interests? Turns out, different Michael Eisener. Not the chairman of Disney but a geologist from Maryland -- Lou.

DOBBS: Thank you very much, Tim.

We turn now to Washington, D.C., FCC Chairman Michael Powell joins us.

And it is good to have you with us, Mr. Chairman.

MICHAEL POWELL, CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION: It's good to be with you, Lou, thank you.

DOBBS: Let me ask, first of all, the furor that has built up here in recent weeks and months over these proposals to deregulate, have you been caught by surprise?

POWELL: No, I'm actually not surprised at all. I think that media issues naturally spark the interest of a broad cross section of American citizens. They are correct to suggest that the proper media foundations and the right regulatory framework for the regulation of that media industry is important to the marketplace of ideas. So the interest doesn't surprise me. And I think that that's healthy. It doesn't change the difficult task that we have before us, which Congress directed us to complete, which is to make very specific judgments about the specific rules and do so in a manner that sustains judicial review.

DOBBS: As you know, the Commerce Committee focused on that and somewhat expressing considerable concern about these actions that are being taken. But Mr. Chairman, let me ask you this. One public hearing, there has been no official promulgation of these changes that you're seeking to put into effect on June 2, why not?

POWELL: First of all, because I don't think that is an accurate representation of the proceeding. This proceeding has gone on for 18 months. And in a way that an administrative agency operates, we have put notices of proposed rulemakings, we have solicited public comment. If we hadn't solicited public comment, you wouldn't have the visuals of the hundreds of pages of note cards and letters that we've received on the proceeding. I think we have been very open in public. I think we have received an extraordinary amount of public comment. I will say it's more than I've seen in the six years that I've been on the commission on any issue. But I do think that it's our responsibility not to govern by polls and surveys, it's our responsibility to make a decision when the record is complete. I believe the record is complete. I believe that we have a substantial record that includes public comment. And I think it's time to act on that record.

DOBBS: The -- you're not concerned at all about concentration, raising the limit to 45, permitting unprecedented cross ownership of newspapers and television stations, these are momentous decisions you're talking about making here?

POWELL: Again, I would disagree. I think we're very concerned about media consolidation. It's not true to say that we're not. If we weren't, I think we would be proposing the elimination of any cap whatsoever, or the kinds of restrictions, and we would rely on antitrust authorities like we do for every other sector of the economy other than the media. I think we are concerned. But in 1996 Congress gave us a very difficult task which is to bring these rules up to date in the modern media marketplace. Some of the rules you mentioned were first adopted in the early '70s. They don't only -- not only predate the Internet, they predate cable television. And when 87 percent of Americans are receiving content over cable television or satellite television, it's just irresponsible for the commission or the government not to take that into consideration when it makes the judgments about what limits on concentration it's going to enforce. But I assure you and the viewers of one thing, there will be limits when we're through and they will strike a decent balance between the public interest and an efficient market structure.

DOBBS: A balance. But in this country, by far, the predominant percentage of media, that is in all forms, radio, television, Internet, the fact of -- newspapers and magazines, eight companies, eight companies control the national media in this country. To raise the ownership levels will only serve to further concentrate that ownership, will it not?

POWELL: Again, I mean, the problem with this debate is that the facts and figures are being thrown around loosely. It's not true that eight percent of -- that eight companies control all the channels. What is true...

DOBBS: Well, I didn't say all, I said the predominant media in this country...

POWELL: Well, let me finish. It is...

DOBBS: Well, I'll let you finish, but that's not what I said. I just want to -- I am sure you want to finish correctly.

POWELL: That's a fair point. But my point is the same, which is, eight companies do not control the majority of the channels, that statistic is that they are the most popular channels. They have 80 percent of the viewing share. They actually own 25 percent of the channels among five of them. And what really is being cited is that they happen to be the networks that the individual citizens choose when given a choice. I think we have to be careful about these statistics because I don't think we want to suggest that there ought to be regulatory restrictions premised on a company's popularity. If it has a monopolization or control of channel capacity, I think that's a rightful thing to be concerned about. But I think we should be careful if what we see is that there is choice, but there are a number of companies that prove to be most popular among our citizens. And that's the truth about the eight media companies.

DOBBS: Well, for example, Mr. Chairman, radio ownership giving some companies, and there's no need going into who they are, but they would include certainly Infinity and Clear Channel, giving them the ability to concentrate ownership, sales, power in a market, you don't think that's appropriate to regulate?

POWELL: I absolutely believe it's appropriate to regulate. Let me make clear again. When we're through with the proceeding, we will not have eliminated a single rule. We, in fact, will have kept some exactly as they are. We will have modified others. But we believe that there should be responsible restrictions. And there will be for radio, television and the other media we regulate. One can always have a healthy discussion about where to strike that balance, but I'm confident we will have rules that serve the public interest.

DOBBS: Michael Powell, chairman of the FCC, we thank you very much for being here to further the public interest tonight.

That brings us to our "Thought of the Day." It happens to be on media ownership and it is "The hand that rules the press, the radio, the screen and the far-spread magazine, rules the country." That from none other than U.S. federal court Judge Learned Hand.

Ahead here, we'll be talking to CNN senior political analyst Bill Schneider about the public's view of the media.

Here on this broadcast, we think it's healthy to be skeptical of the media. And that is indeed the subject of tonight's poll. The question is, "What is your view of the press?" Trusting, accepting, skeptical, or mad as hell.

Cast your vote at cnn.com/moneyline. We'll have the preliminary results later in the broadcast.

When we continue, controversy at the "New York Times" leads a Pulitzer Prize winning reporter to say he'll resign. We'll have the story and more on the fallout from the Jayson Blair scandal.

And an unlikely meeting to say the least. We'll tell you why Whitney Houston and Israeli Prime Minister Ariel Sharon are hooking up. Stay with us.

(COMMERCIAL BREAK)

A Pulitzer Prize winning "New York Times" reporter says he will resign because of what he calls the knoxious atmosphere at the paper since the Jayson Blair scandal.

National correspondent Rick Bragg, rebukd by the times for a common practice in newspaper writing. Bragg wrote an article based partly on reporting done by an uncredited freelance journalist. The "New York Times," issued an editor's note last week saying the freelance reporter should have been credited.

Senior political analyst Bill Schneider has been tracking public attitudes about the media and joins us now with the latest.

Bill, I take it these are not what we would call an improving attitude?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: No, they are not. You know, for almost 15 years the "Gallup" poll has been asking Americans, do you think news organizations get the facts straight or are there stories and reports often inaccurate?

Now, take a look at the number of people who say the press is often inaccurate, currently, it's 62 percent, which sounds pretty high. But the number critical of the press has been up around 60 percent since, note the date, December 2000. Before that, in 1998, going all the way back to 1989, that number had stayed in the 40s. Clearly, something happened at the end of 2000 to ratchet up ill will towards the media.

What was it?

Well, it was the 2000 election. When people are asked, does the press often get things wrong, they immediately think, Florida. The impact of that election appears to have persisted. It ratcheted up press criticism to a higher level than ever before. Which means, my god, Lou, the problem isn't Jayson Blair, it's me.

DOBBS: Well, or more accurately, us.

SCHNEIDER: Us.

DOBBS: At the same time, I am absolutely not distressed by this poll at all because I think that skepticism, real skepticism on the part of an audience, whether it be in print or electronic media, is absolutely healthy and appropriate.

SCHNEIDER: It's where do you draw the line between skepticism and cynicism?

One of the most interesting facets of the Jayson Blair story is that he had been really violating the rules, fabricating quotes, stealing them from other newspapers, reporting on meetings that he had never attended, for a couple of years at the "New York Times" and nobody complained. That's the mystery.

Why didn't the people who were misquoted or misrepresented complaining to the "New York Times"?

Well, they've been contacted since, and they've generally given the same answer.

They've said, what good would it do?

What would it mean?

Doesn't the press always misrepresent things to get a story?

That cynicism, and I think that's bad.

DOBBS: Bill Schneider, what you've just done here is good, and we appreciate it.

SCHNEIDER: Thank you.

DOBBS: A reminder now to vote in our poll tonight. The question, "what is your view of the press?" Trusting, accepting, skeptical, or mad as hell.

Cast your vote at cnn.com/moneyline. We'll have the preliminary results coming up in just a few minutes.

The roadmap to peace took a temporary back seat to other events in Israel today. Israeli Prime Minister Ariel Sharon met with Whitney Houston and her husband, Bobby Brown. The couple in Israel to visit a religious African-American community. Both wore the traditional robes of black Hebrews. When we continue, the preliminary results of our poll and your thoughts on our series of special reports on "Exporting America." Stay with us.

(COMMERCIAL BREAK)

DOBBS: The preliminary results of our poll tonight, what is your view of the press? Three percent of you said trusting, 10 percent said accepting, 45 percent skeptical, 42 percent mad as hell.

Now for a look at some of your thoughts on our series of special reports on "Exporting America."

David Lee of New Jersey wrote, "After successfully exporting American labor overseas we are now exporting American brainpower, and doing a very good job of it. What's Next? In another few years we will be exporting American management and excutives. Watch out, American CEO's! Think of the cost savings and productivty gains."

And Will Kernen of Ohio writes, "Dear Lou. How long before Americans are sneaking across the border to find jobs in Mexico?"

We appreciate hearing from you. E-mail us at loudobbs@cnn.com. Thanks for being with us tonight for all us hear, good night from New York.

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



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