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LOU DOBBS TONIGHT

Assault on Radical Iraqi Cleric Begins; Congress Defeats Overtime Overhaul

Aired May 5, 2004 - 18:00   ET

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


(BEGIN VIDEOTAPE)
LOU DOBBS, CNN ANCHOR (voice-over): Tonight, more American troops killed in Iraq, a major assault against the forces of Muqtada al-Sadr under way. I'll talk with former Iraqi Ambassador Edward Peck, who says the United States cannot impose democracy on the Iraqis.

In "Face-Off" tonight, opposing views on whether the United States should send more troops to Iraq.

And tonight, I'll comment on the value of admitting mistakes and upholding American values even in apology.

"Exporting America," a rare U.S. success story in the call center business.

And tonight, one for the good guys. The Senate defeats proposals to roll back overtime pay. Senate Bob Graham joins me.

On Capitol Hill, the first public hearing today on e-voting and the rising concerns about the future of democracy.

UNIDENTIFIED MALE: The most bang for the buck you can get is by adding paper, voter-verifiable paper, into the process.

DOBBS: And Why the Walt Disney Company is blocking the distribution of Michael Moore's new film.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Wednesday, May 5. Here now for an hour of news, debate and opinion, Lou Dobbs.

DOBBS: Good evening.

One week after images of prisoner abuse in Iraq shocked the world, President Bush today told Iraqis that the United States does not tolerate such behavior. President Bush said the actions of a few American soldiers in Iraq do not reflect the values of the America he knows. The president made his remarks in rare interviews with two networks, Al-Arabiya and the U.S.-funded Al-Hurra.

Senior White House correspondent John King has the report -- John. JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: And, Lou, the president granting those interviews and taking the lead role in what everyone here concedes is a damage control effort by the White House not only focuses on Iraq, but across the Arab world, because of the outrage and the fallout across the Arab world to the publication of those photos and the stories of the graphic abuses of some Iraqi prisoners.

Now, Mr. Bush gave those interviews after a morning meeting in the Oval Office with the defense secretary, Donald Rumsfeld. At that meeting, the president says he told Secretary Rumsfeld to find the truth, to make the truth public, to let the people of Iraq and the United States know about the truth, and hold those responsible accountable.

The president also conceding in those interviews with the two Arab-language television networks that these graphic images and reports of abuses have sullied America's image across the world, especially in the Arab world, giving evidence, the president says, to the critics who says the United States invaded Iraq not to liberate it, but to dominate it.

Lou, I'm sorry. I thought we had some sound from one of the president's interviews there. Apparently, we do not. Mr. Bush also making the case that the United States will get to the bottom of this, and, as you noted, making the case that it is the exception, not the norm, for U.S. military personnel to behave this way.

Here at the White House, this issue of, of course, dominated the briefing. One interesting question. The White House still cannot give us a date certain of when the president was told about these abuses. It says the military started its investigation in late January and that the president found out sometime after that date from Secretary Rumsfeld. But they say here they cannot give us the exact date of when the president did find out.

And, Lou, publicly the president defended Secretary Rumsfeld today. The White House defended Secretary Rumsfeld. But we are told by senior administration officials that in that morning meeting in the Oval Office, Mr. Bush made very clear we are told to Secretary Rumsfeld that he was not happy, that he feels he was not informed about critical information, should have known about those graphic photographs before they were aired in the CBS News report.

The president voicing his displeasure, Lou. We should also note another issue that came up in that meeting with Secretary Rumsfeld, the administration now asking for an additional $25 billion to fund military operations in Afghanistan and Iraq. The administration sending that request to Congress late this afternoon -- Lou.

DOBBS: The president's reaction to the fact that he did not know about the broadcast of those pictures last week suggests that he didn't know much about it previously, correct?

KING: It certainly does suggest that. The White House has been saying that the president knew there were allegations and that those allegations were being investigated. What we are told tonight by senior officials, that the president does not feel that he was given good information on the scope of the allegations and certainly on the fact that there were pictures documenting the abuses, because the abuses certainly are grave and abhorrent, as the president put it today.

But the political factor in this, Lou, of course, is publication of these photos across the Arab image has sullied America's image. Already, this administration has a huge problem across the Arab world. And, again, we are the president told Secretary Rumsfeld that he should have known more about this at a much earlier date.

We are also told, though, that Secretary Rumsfeld said that he feels he has been kept in the dark by some people in the military as well.

DOBBS: John, not to put too fine a point on it, but the Arab world has not been exactly embracing of the United States in either our foreign policy, and, frankly, anti-American for some years now. Isn't that correct?

KING: It certainly is correct, and especially since you've had the proliferation of Arab news channels like Al-Jazeera and others, who are harshly critical of the United States.

So, more and more, as technology spreads throughout the Arab world and they, like we in the United States, have cable television and 24-hour networks, the images and what they hear about the United States is certainly anything but flattering. That's one of the reasons the president himself did not conduct an interview with Al- Jazeera, which is by many considered to be the leading cable network in the Arab world.

Condoleezza Rice, his national security adviser, would go on Al- Jazeera. But at the White House they have voiced so many complaints about the content on Al-Jazeera that they said under no circumstances would the president give that network an interview.

DOBBS: John, very quickly, you reported another $25 billion requested for additional spending in Iraq and Afghanistan. Why is the White House asking for this money, this much money now?

KING: You say this much money. This is only a modest request. There will be more to come, Lou.

The White House says existing funds will get it through October 1, the beginning of the next fiscal year. This money would be for October and November of late this year, while the administration decides exactly how much it needs for the rest of fiscal 2005. So $87 billion already approved, that should the military says get us through the end of September, $25 billion to cover October and November, perhaps a little longer, while the administration figures out exactly how much this war will cost through the next fiscal year.

And remember now 135,000-plus troops in Iraq for another year. The price tag will only go up, Lou.

DOBBS: John, thank you very much -- John King, senior White House correspondent.

President Bush did not apologize for the abuse of Iraqi prisoners today. And, in my opinion, in the words of the president, the America that I know prizes its honesty and accountability and expects our leaders to take responsibility. As I said earlier this week, an apology is in order to the Iraqis and the 130,000 men and women who serve this country in Iraq.

(BEGIN VIDEOTAPE)

DOBBS (voice-over): On Arab television, National Security Adviser Condoleezza Rice said with graceful simplicity what had to be said: "We are deeply sorry for has happened to these people and what the families must be feeling. It's just not right and we will get to the bottom of what happened."

Secretary of Defense Rumsfeld came close to a direct apology.

DONALD RUMSFELD, SECRETARY OF DEFENSE: And any American who sees the photographs that we've seen has to feel apologetic to the Iraqi people who were abused and recognize that that is something that is unacceptable and, certainly, un-American.

DOBBS: Secretary of State Powell didn't go as far as Rumsfeld.

COLIN POWELL, SECRETARY OF STATE: And, as you've heard the president, you've heard Secretary Rumsfeld, myself and others say, it's unacceptable. We are a nation that believes in justice. We are a nation that is governed by the rule of law, and nowhere is that more the case than in the armed forces of the United States.

DOBBS: And the president didn't go beyond a call for justice.

DOUGLAS BRINKLEY, PRESIDENTIAL HISTORIAN: Well, traditionally, American presidents don't like to say they're sorry. When they do, it will only be that line that gets plastered all over the world. Instead, President Bush has his administration figures saying it, people like Condi Rice, who at national security, but not directly himself.

DOBBS: But another presidential historian says President Bush may have policed an opportunity to demonstrate real leadership in the American tradition.

ALLAN LICHTMAN, HISTORY PROFESSOR, AMERICAN UNIVERSITY: President Kennedy took personal responsibility for the Bay of Pigs fiasco and his approval rating soared to a record 83 percent. Ronald Reagan took responsibility for the arms for hostages deal, saying, my heart might have been saying one thing but, in fact, the evidence says something else. And many say that speech saved his presidency.

DOBBS: Taking the most responsibility and offering the most direct apology, of course, the one man who had absolutely nothing to do with the scandal. He's just taken over the Abu Ghraib Prison.

MAJ. GEN. GEOFFREY MILLER, U.S. ARMY: I would like to personally apologize to the people of Iraq for the actions of a small number of leaders and soldiers who violated our policy and may have committed criminal acts. We are investigating those acts as rapidly as possible, and we'll bring those responsible to the bar of justice.

(END VIDEOTAPE)

DOBBS: General Miller and Condoleezza Rice demonstrating the directness and forthrightness that are among the best of American values today, even when an apology is owed and due, at least in my opinion.

As John King reported, President Bush today said he has confidence in Defense Secretary Donald Rumsfeld. A rising number of lawmakers say Secretary Rumsfeld, however, should be held accountable for the prisoner abuse scandal. Tonight, there is word that Secretary Rumsfeld will testify in public Friday.

Our congressional correspondent Joe Johns is following the latest developments tonight on Capitol Hill. Jamie McIntyre at the Pentagon as the defense secretary now faces one of the biggest challenge of his career.

We begin on Capitol Hill -- Joe.

JOE JOHNS, CNN CAPITOL HILL CORRESPONDENT: Lou, some Senate Republicans tonight are expressing sighs of relief. A day of negotiation ended with the decision for Secretary Rumsfeld to come to Capitol Hill. It will be late in the morning on Friday, 11:45 Eastern time.

He is expected to be accompanied by the chairman of the Joint Chiefs of Staff, along with the acting secretary of the Army, the Army chief of staff and a representative of CENTCOM who has yet to be named. All of these things have been going on, on Capitol Hill because Republicans are very concerned about getting as much information about the alleged Iraqi abuses out as possible as quickly as possible.

Now that the news has come that he will testify, many Senate Republicans are expressing relief, also indicating they plan tough some questions for the secretary of defense.

Let's listen now to Senator Saxby Chambliss.

(BEGIN VIDEO CLIP)

SEN. SAXBY CHAMBLISS (R), GEORGIA: We should have been advised of this situation long ago. And I'm not sure when the secretary find out about it. But he is going to be grilled pretty good about what happened, how it happened, and how far up the chain it looks like it went.

(END VIDEO CLIP) JOHNS: Not all congressional Republicans are happy with this decision. Some congressional Republicans have suggested that there's no need for the secretary of defense to come to Capitol Hill, at least at this time, to testify in open session, as the secretary of defense is planning to do.

Among the people who have voiced dissent is Congressman Bob Ney of Ohio.

(BEGIN VIDEO CLIP)

REP. BOB NEY (R), OHIO: I think to bring him down here, and then we start constant days or potential weeks of hearings on this particular issue is going to be counterproductive. I just don't think personally that Capitol Hill can daily micromanage a war in a situation like this. I have faith Rumsfeld, Secretary Rumsfeld will get down to the bottom of this.

(END VIDEO CLIP)

JOHNS: Now, the congressional Republican who have been pushing for the secretary of defense to come to Capitol Hill and tell them what he knows say they are not beating up on him. It is simply the science of a scandal, some say. It is important to get information out as quickly as possible in order to clear the air -- back to you, Lou.

DOBBS: Thank you very much, Joe.

Some lawmakers have been calling for the president to appoint a new defense secretary because of the way Rumsfeld has handled the prisoner abuse handle.

Senior Pentagon correspondent Jamie McIntyre joins me now -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, publicly, President Bush is standing by his defense secretary, saying that he has full confidence in him.

But, as we heard John King report privately, the president did express some displeasure with the way that this was handled and, particularly, how he was informed. And, certainly, members of Congress share that concern. Among the questions they'll have for Rumsfeld when he testifies on Friday is why he didn't see fit to inform Congress of the gravity of the situation regarding the abuse much earlier in the process, why Secretary Rumsfeld himself didn't take the time to read fully the Army's very damning report on the investigation of that, which has been out more than a month, and how high the leadership failures go.

And, as you've suggested, some members of Congress, particularly Senator Joe Biden of Delaware, have suggested that maybe it's time for Rumsfeld to step down, Biden noting that Rumsfeld is a former Naval officer, noted that there is a tradition in the Navy that if a captain runs his ship on the shoals, he loses his command even if he's not directly responsible for the mistake.

Rumsfeld, for his part, rarely admits any mistakes and insists to this moment that the Pentagon has done nothing wrong in this process and that he was limited by how much he could inform the Congress by the fact that this was a criminal procedure and the photographs were criminal evidence and the report was making its way through the chain of command, of which he is, as the secretary of defense, the ultimate judicial authority and, therefore, he has to be careful how he intervenes.

But the critics say that Rumsfeld has been too narrowly looking at this as technically how it's done routinely, not realizing the extraordinary implications of what's happened here at the prison -- Lou.

DOBBS: Jamie, thank you.

If I could, I would like -- Joe, are you there? I would like to bring back Joe Johns from Capitol Hill as well.

Joe, I want to ask you both to address an issue from both your perspectives at the Pentagon and Capitol Hill. One, the president has expressed confidence but at the same time expressed displeasure, as John King reported, about the way this has been handled.

First, Joe, how serious, how upset do you sense the leadership on Capitol Hill is? We've heard from Senator Warner, Senator McCain in particular, Senator Biden.

And, Jamie, from your perspective, how concerned is Secretary Rumsfeld and the Pentagon about this issue and his forthcoming testimony?

Joe, if we can turn to you first.

JOHNS: There is a certain degree of anger here. And it is shared by some Republicans, in fact, which is, as you know, the party in power.

They are particularly angry about the issue of notice and disclosure. They are very upset about not being informed of this scandal that was brewing, knowing that pictures were going to be released. The Pentagon was, essentially, having some type of negotiation with CBS about when those ought to be released. And Senators here say they just ought to have been informed of this. And that is one of the key things they want to ask about. Why is it that there is a communication problem on certain sensitive issues between the Pentagon and the Capitol?

That is one of the big things they want to address. And they want to know what's going to be done about this, how is this thing going to be fixed. Some senators have suggested it's not enough for some low-level, noncommissioned officers, or whatever, to be disciplined and that be the end of it, Lou.

DOBBS: Thank you very much, Joe. Jamie, your thoughts.

MCINTYRE: Well, here at the Pentagon, most of Rumsfeld's aides do not believe that he's in any serious jeopardy of losing his job, despite the president's displeasure on this.

Rumsfeld himself is described to me by aides as somewhat perplexed about being called up before Congress, insisting that he has very little he can tell them about the investigations themselves and what happened at the prison. But, of course, he seems to be missing the point in that the Congress and, to some extent, other members of the administration, just feel that this wasn't handled as proactively as it should have been, given the potential it has to undercut U.S. credibility and even the success of the mission in Iraq, that it should have been handled much differently.

Rumsfeld wanted time, we're told, to make sure he was adequately prepared to answer their questions, one of the reasons he was reluctant to cancel a speech he had scheduled for tomorrow, to appear tomorrow. He would have rather appeared next week. But the compromise was for him to testify on Friday.

DOBBS: Secretary Rumsfeld, Jamie, perplexed, a man who prides himself on his breadth of intellect, confounded by requests for information and details and those who are to provide -- advise and consent and oversight? He finds that perplexing?

MCINTYRE: Well, it is Rumsfeld's style to be profess to be amazed at why people are so interested in what he will portray as routine things.

Just think back, for instance, when there was all the controversy about the looting in Baghdad. Rumsfeld would continually come out and say, look, this just happens. It's not that big a deal. That seems to be his style of dealing with things. Sometimes it is effective. Other times it makes him look like he's a little bit tone-deaf.

DOBBS: Well understated.

Jamie McIntyre, senior Pentagon correspondent, Joe Johns on Capitol Hill, thank you very much, gentlemen.

As politicians were discussing the prisoner abuse scandal, the war continued in Iraq and more Americans were killed in Iraq. Insurgents today killed four American soldiers as U.S. troops launched a series of attacks against gunmen loyal to the radical cleric Muqtada al-Sadr. The results were heavy fighting near Najaf, that after insurgents ambushed an American convoy.

Jane Arraf reports from Najaf.

(BEGIN VIDEOTAPE)

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: The U.S. military has launch offensive operations against the militia loyal to radical Shia cleric Muqtada al-Sadr. In an effort to pressure Sadr and to defuse his threats on the military, they have moved into the cities of Diwaniya and Karbala. In Diwaniya, we were with the 2nd Armored Cavalry Regiment as they moved in tanks and aircraft. They attacked the headquarters of the Sadr bureau. They hit it with guns from a C-130 aircraft, as well as cannon fire to send a message that the militia could no longer operate in that city.

In a nearby girls school, U.S. military officials say they found early this morning three mortar guns, as well as 17 mortar rounds and 10 rocket-propelled grenades. They say that that girls school in Diwaniya has been used to launch mortars against Spanish forces who had been in a base now occupied by the U.S. military.

Two soldiers were wounded in those offensive operations in Diwaniya, one soldier killed in Karbala. U.S. military officials say they will continue those offensive operations against the militia, continue to put pressure on Muqtada al-Sadr. And they say they will also continue other projects to win support from the residents of Najaf, including building public works project, putting people back to work, and sending the message that the residents here have a better future with Iraqi defense forces back in control of Najaf than they do with a banned militia.

Jane Arraf, CNN, reporting from Najaf.

(END VIDEOTAPE)

DOBBS: When we continue, Ambassador Edward Peck, former diplomat in Iraq, says the United States' actions in Iraq are stirring up more terrorism in the Middle East. He's our guest.

And the first ever public hearing on the impact of electronic voting on the future of our democracy.

That report and a great deal more coming up next.

(COMMERCIAL BREAK)

DOBBS: The first public hearing yet on electronic voting held in Washington today. Computer experts have raised serious concerns about the reliability and the security of the ATM-like voting machines, machines that could be used by more than 50 million voters in November.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Thirty percent of all voters are expected to cast their ballots electronically in this year's presidential race. But very few counties using electronic machines have backup paper records should a recount be necessary. At a rally in Washington, critics said the electronic voting system is vulnerable to glitches and fraud. KEVIN SHELLEY, CALIFORNIA SECRETARY OF STATE: Anything this valuable should be capable of being audited, whether it's your business or your personal bank account.

SYLVESTER: Last week, California's secretary of state, Kevin Shelley, declared 14,000 electronic voting machines unfit because of their unreliability. California is not the only place that has experienced problems.

AVIEL RUBIN, JOHNS HOPKINS UNIVERSITY: One county where many, many more votes were tallied than there were registered voters. Another time, there were votes that switched from one candidate to another.

SYLVESTER: A new federal agency, the Election Assistance Commission, has been established to oversee election upgrades. At the commission's first hearing, the company that makes the machine insisted a backup paper system would be unnecessary.

WILLIAM WELSH, ELECTIONS SYSTEMS & SOFTWARE: We believe this option is not necessary, as it will add clearly to the cost and complexity to what is already a secure process.

SYLVESTER: Local voting officials worry about paper jams and the mountain of paper that would be created under a dual system.

CONNY MCCORMACK, L.A. COUNTY CLERK & REGISTRAR: This whole ballot just to printout the voter's choice in voter-verified small print, English only for this ballot is 37 inches long.

SYLVESTER: But without a way to verify votes, critics say it would be impossible to conduct a recount. That means no more hanging and dangling chads, but it also means no way of verifying an election outcome.

(END VIDEOTAPE)

SYLVESTER: The Election Assistance Commission is only now weighing in on the issue because its members were not appointed until just last December. It is also underfunded and understaffed. The agency has received less than $2 million of its appropriated $10 million budget and is having to borrow staff members from other federal agencies -- Lou.

DOBBS: And has now less than six months to make sure that we get it right this time, Lisa.

(CROSSTALK)

SYLVESTER: That is correct, Lou. In fact, one of the things that they are going to look at this week is, on Wednesday, the Appropriations Committee will be meeting hoping to boost some of their funding -- Lou.

DOBBS: Lisa, thank you very much -- Lisa Sylvester from Washington. Just ahead, the Pentagon says 135,000 troops will remain in Iraq through 2005. Some, however, some say that isn't enough. Two opposing views next in tonight's "Face-Off."

And Mickey vs. Michael? Michael Moore, the Walt Disney company. Moore says Disney is blocking the distribution about his movie about 9/11, a movie critical of President Bush.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: The House Armed Services Committee says it will ask for an additional 39,000 troops over the next three years. The committee says operations in Iraq and Afghanistan are straining the U.S. military. The Pentagon, however, remans opposed to a long-term boost in forces.

And that is the subject of tonight's "Face-Off."

Joining me, Ivo Daalder, senior fellow with the Brookings Institution, who says at last 200,000 more troops are needed in Iraq. Christopher Preble says our presence in Iraq makes America less secure and we should withdraw out troops after the handoff of sovereignty late next month.

Good to have you both with us.

(CROSSTALK)

DOBBS: Let me begin first, if I may, with you, Ivo.

And that is, we have heard a number of estimates. The Pentagon seems adamant about maintaining something close to this force level; 200,000 troops, that's more than we have there now.

IVO DAALDER, SENIOR FELLOW, BROOKINGS INSTITUTION: That's right.

We, from day one, have had an insufficient number of troops. It is one of the reasons this mission has become so difficult and really has gone off track. We didn't have enough troops to stop the looting. We don't have to prevent a counterinsurgency. We don't have enough to do protect the reconstruction effort. We need more troops.

And I think what we need at least is not just 138,000 that the administration finally admits needs to be there, but probably 200,000, including about a quarter of which ought to be, to the maximum extent possible, non-American.

DOBBS: Let me to turn you, Christopher.

What Ivo is saying suggests that there be greater security for the Americans who are there. Force protection would be assured. Doesn't that convince you.

CHRISTOPHER PREBLE: Well, no. Force protection would not be ensured. The presence of our troops in Iraq has generated increasing amounts of hostility towards the United States, not because of the most recent incidents. Just our presence there alone. We are an occupying army. We were once invaders but for every day we stay we are more and more like occupiers. This is a catch-22 for the United States. The longer we stay, the less and less likely the Iraqis are to cooperate with us. I think it is important that we convey a message that Iraqis will soon have full sovereignty, responsibility for their own government.

DOBBS: And U.S. Forces after June 30 you really believe should withdraw immediately?

PREBLE: I believe there should be a withdrawal process, not immediately. But we should be drawing down our forces and redeploying those forces where they're needed in places against al Qaeda. We know that al Qaeda has been able to regroup in eastern Afghanistan, western Pakistan, and part of that is because part of those forces were withdrawn and resources were withdrawn from that fight.

DOBBS: Ivo, your reaction.

DAALDER: Part of the problem was if we withdraw and leave the chaos that is there now and will probably be worse, than al Qaeda will move into Iraq. That's the situation we're facing. The possibility, indeed the probability is, that if we withdraw precipitously before we succeed in the mission we started, now some 13 months ago, we're going to leave a failed state behind with lots of violence among the Iraqis and no security for those Iraqis. And within that failed state, it is that much more likely that the kind of terrorist we didn't finish off in Afghanistan will be starting to regroup there. So, I don't think it is a question of deploy the troops against a terrorist threat. We now have a situation if we don't get the job down in Iraq, we're going to create it right there.

DOBBS: Christopher, you get the last word here tonight. Without U.S. security forces, most experts from whom we've heard say there is no way in the that world an interim government with United Nations direction or not could possibly survive the chaos that would ensue.

What's your reaction?

PREBLE: I don't think that's necessarily true. I think they are facing difficult choices in Iraq, as we are here in the United States. I do not think it is automatic that al Qaeda will be able to operate in Iraq. Far from it. I think the United States has to declare to the new government in Iraq, whoever that might be, that they must not allow that to happen. Meanwhile, we retain the ability to go after al Qaeda at place and in time of our choosing, as we did with the Taliban where we obviously didn't have troops.

DOBBS: Ivo Daalder, Christopher Preble, we thank you both very much for being with us tonight.

That brings us to the subject of "Tonight's Poll." Do you believe the size of the U.S. Military itself should be larger smaller, or remain the same in cast your vote at cnn.com/lou. We'll have results later in the broadcast.

Ahead tonight, Ambassador Edward Peck, former top U.S. diplomat in Iraq, who says the United States should withdraw as soon as possible. He's our guest.

Senator Bob Graham has a plan that would save manufacturing jobs. That plan however, voted down in the Senate a short while ago. Senator Graham joins us.

And Film maker Michael Moore's battle with Disney over his new controversial film. We may never see it. We'll have the story next.

(COMMERCIAL BREAK)

DOBBS: Our next guest calls the situation in Iraq a disaster. He says the best way to support our troops there is to get them entirely out of harm's way. Edward Peck is the former chief admission to Iraq, our top diplomat in Iraq. Joining us from Washington. Ambassador, good to have you with us.

AMB. EDWARD PECK, FORMER CHIEF OF U.S. MISSION TO IRAQ: Thank you, sir.

DOBBS: We are, obviously, committed in Iraq, entrenched, if you will and, as you suggest, facing inordinate challenges to say the very least.

What can we do?

What can this administration do?

What can this Pentagon do to stabilize, along with the Iraqis the situation in Iraq?

PECK: Well, Lou, we know -- a lot of people you mentioned are facing this problem. You really can't overlook the fact we shouldn't have gone there to begin with. But, now, we're there, what do you do about it? I think Christopher Preble has a way to look for a way to ease ourselves out. Mr. Daalder said to you, you know, by gosh there would be chaos if we left. Well what do you got now, now we have chaos with Americans dying in a relatively -- terribly large numbers. We have the loss of American prestige and credibility. We have the erosion of the image we've tried to create for ourselves around the world, this business with the prisons is almost (UNINTELLIGIBLE). It's just a terrible thing. Ease yourself out of there. It is not going to get better, it is going to get worse.

DOBBS: If that policy were to be followed, what would be the impact on relations with the Arab states in the region?

What would be the future of the Israeli, Palestinian conflict, and what would be the response of the region itself to U.S. interests in the years ahead?

PECK: Well, you've got a very powerful question there. It is difficult for me to imagine as an American patriot, as a veteran, how in the world we could do anything worse to ourselves than we've already done. So if -- the damage has already been created. What I'm concerned about is how you make it less bad. The president's agreement with Mr. Sharon has turned out to be a multiple catastrophe, requiring that we now back away and say, well, we did sell the farm and didn't get anything for it. It is difficult for me, with all my years in that area, to understand how we could possibly have made this big a mess of it, but we have. And the efforts now that you're talking about, regaining credibility, prestige, and the rest of it is going to be a long difficult process which will become longer, in my view, and more difficult the longer we stay there being killed and killing. That is not the way you win hearts and minds.

DOBBS: And given all that you've said, ambassador, and for the moment, assuming what you say is absolutely correct, what are the first step that is this administration should take to set matters on a correct course in terms of U.S. foreign policy in Iraq and in the region?

PECK: Sir, it is almost impossible to imagine how we can salvage a great deal out of this. The tremendous attention being paid to the fact we're turning over sovereignty on the 30th of June, a little package called sovereignty. We're going to try to find somebody to hand it to. But there isn't anything in that package. They won't be responsible for anything. And the headline in our local newspaper, "The Washington Post, on Monday said, U.S. and U.N. to pick Iraqi leaders. Goodness gracious. Those are leaders, all right, if we choose them, and on the basis of what?

What is required, in my mind, for our nation, for my nation to salvage something from this incredible mess with the Israelis and the Palestinians and the Iraqis is to concentrate heavily on what you mention, Lou.

How do you work this out over the long haul to reduce the negative impact or to minimize the negative impact that is yet to come from all of the people who are going to rush in from other parts of the world, not because they're terrorists, except by our labeling, but because they want to fight this nation, my nation, which is doing directly all those terrible things in Iraq and is indirectly responsible for all the terrible things happening in Palestine. People don't like that. It's going to be hard for them to forgive us for doing it.

DOBBS: Ambassador Edward Peck, thank you for being here offering what are stark choices for policymakers and the direction of our policy in the Middle East.

PECK: Thank you, sir.

DOBBS: Still ahead, the Senate debating a bill to revive this nation's manufacturing. I will talk with Senator Bob Graham who sponsored an amendment to that legislation.

And for now, you will have to go to France if you want to see Michael Moore's new film. That's because Disney has blocked distribution of the film in this country. We'll tell you why next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The Senate this week began debating a bill intended to revive this country's manufacturing industry. The bipartisan bill, called Jump Start Our Business Strength Act, also known as the jobs bill, would reduce corporate income taxes for manufacturers.

Senator Bob Graham sponsored an amendment to the legislation, which was voted down late today. Joining us now from our Washington, D.C. studios is Senator Graham. Good to have you here.

SEN. BOB GRAHAM, (D) FLORIDA: Thank you, Lou.

DOBBS: The amendment that was voted down by a wide margin, what did you hope to accomplish?

GRAHAM: First, was to achieve the purpose of the bill, which was to create jobs in the United States of America. The bill that we got before us will create an additional $37 billion of incentives for U.S. firms to move their manufacturing activities to a foreign country.

It was also intended to avoid a ability to repatriate at about 15 percent of the normal tax rate, 5 percent instead of 35 percent. The profits that companies have earned abroad and now could bring back at this favorable tax rate.

It also was intended to put the emphasis on creating jobs by saying for a company to get some form of tax credit or tax deduction they had to do it in a way that related to their maintenance or creation of jobs in the United States.

DOBBS: Now, that seems like an extraordinarily good idea to me. Why wouldn't there be enthusiastic support for such provisions?

GRAHAM: Well, there are a lot of reasons. One reason is that some people find a bill with the word jobs on it even if the book doesn't live up to the title to be irresistible. There also are some people who are genuinely not only internationalists but they are proactive internationalists. They don't want to just wait until the economics might cause jobs to move overseas. They want to create positive incentives for jobs to be moved overseas.

DOBBS: So what you're saying, Senator, is that this legislation, in your judgment, will encourage outsourcing of jobs?

GRAHAM: Absolutely. We already have plenty of incentives for companies to move jobs out of the country, as you have demonstrated over the past several months. We just added another $37 billion of your taxpayer money to the pot of those incentives.

DOBBS: How much again, Senator?

GRAHAM: If this bill passes in the form it is before the Senate today, it will add another $37 billion of incentives for U.S. firms to move jobs outside the country. DOBBS: And what are we going to do about it?

GRAHAM: Well, I hope that we can defeat this bill. It's still got a long way to go. It has to pass the Senate and go to the House, which has, in some ways, an even more generous set of additional incentives of outsourcing of jobs.

The president, apparently, will sign whatever the Congress passes. If the American people are genuinely upset about outsourcing, and I think they should be, they should be outraged at the fact that they are about to put an additional $37 billion in the kitty to encourage outsourcing.

DOBBS: Utterly unbelievable. And the idea -- you mentioned the strength of those internationalists, as you called them. Let's talk about those who are supporting U.S. multinationals exporting American jobs. Where is the countervailing influence, Senator? You have been in Washington through a great career. Where is the countervailing influence, now, to those corporate interests that are in too many instances, as least, and outsourcing is one of them, indifferent to the quality of life for working men and women in this country?

GRAHAM: That is one of the key problems, Lou. That is the fact that these multinationals have tremendous influence in Washington. As we were debating my amendment today, a person would come up a say, and say I can't vote for your amendment because -- and he would point to a specific provision and say, that is in there for a pharmaceutical company that has a plant in my state.

Time after time specific provisions have gotten the name of the multinational that is intending to take maximum advantage of it. There needs to be an uprising of the American people, particularly working men and women, that we are not going to tolerate the United States government creating subsidized incentives for firms to leave our country.

DOBBS: Why would not the integrity, the principles of our elected representatives in Washington be all that's required, making an uprising outrage unnecessary, because that's what we, frankly, created the system to do, was to provide representation for all people, but the middle class to be protected, for even-handed apportionment of interest. What has gone wrong?

GRAHAM: Lou, first, I don't want to represent that the people who voted on the other side of this issue are bad people or have evil motives. We are faced with a situation in which there is tremendous political power in the hands of those who benefit the most from outsourcing.

We also have long lists of companies in this same bill that are getting very specific targeted tax breaks completely unrelated to the issue of saving jobs in the United States. We've got a long road and a tough hill to climb to overcome the forces that are encouraging U.S. jobs to go overseas.

DOBBS: Rolling back, as the Senate did, the overtime initiatives was a good, healthy start. I'm sure the assault of the initiative will not die with that defeat. Senator, Bob Graham, thank you very much sir, for being with us.

GRAHAM: Thank you very much, Lou.

DOBBS: Still ahead here, "Exporting America." Not all companies are willing to export the jobs of their American employees to cheap overseas labor markets. Some firms prize quality and reliability above all else. That story is next.

And controversy over another Michael Moore film. We'll tell you why Disney is saying no, thanks. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight, in exporting America, we wanted to tell you about the company that considered sending jobs to cheap overseas labor markets but made the right decision to stay in the United States. The company says its decision isn't about patriotism but good business. Casey Wian has the story.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): 1-800-DENTIST, the nation's largest dental referral service handles 120,000 phone calls a month. Unlike many call centers, 1-800-DENTIST refuses to move to India or another country where costs are cheaper because many people detest dental visits, the company tries to make its interaction with patients painless.

UNIDENTIFIED FEMALE: We're in luck. The doctor's going to be able to see you today.

WIAN: Operators must prove their ability to remain pleasant on the phone.

FRED JOYAL, CEO, 1-800-DENTIST: That's an integral part of our business. And to turn it into something automated or to send it overseas or to outsource it in any way really diminishes it to what we consider to be a drastic degree. We probably could have cut the call center cost in half, down to 25 percent. What it would represent in terms of a loss of business, we feel, would have been totally offset.

WIAN: Operators make $10 an hour with generous benefits. Management encourages a playful work environment. New employees spend their first few days training in a room full of toys and crayons.

LARRY TWERSKY, PRESIDENT, 1-800-DENTIST: This is the introduction into that philosophy. It says, here, we're going to show you how to play. The happier they are, the better they are on the phone.

So they would spend the first three days in this room. They meet everybody from every department. So they understand how the whole organism works. WIAN: Just try doing that from India. The playful culture extends to company leaders. Their phone switching and server room doubles as a wine cellar. Many companies with U.S. call centers have moved to low-cost states such as Nevada. 1-800-DENTIST isn't even doing that. Instead operating from this complex in one of the nation's priciest real estate markets. The company is profitable and growing, proof that cheap labor isn't always the answer. Casey Wians, CNN, Los Angeles.

(END VIDEOTAPE)

DOBBS: Now for a look at some of your thoughts. Gordon Price of Lebanon, Pennsylvania. "Thank you for defending the American worker. There are those of us who have already lost our jobs and are in retraining programs that are full of flaws. We've lost almost have. We desperately want to go back to work but there's nowhere to go."

Richard Aylesworth of Ontario, Canada. "What planet do you live on, Lou? Your moralistic stand on outsourcing is absurd. If companies don't use cheap offshore labor their competition will and put them out of business. If American labor has priced itself out of the market, well, that's the way it works in the competitive, free- market, capitalistic system I thought you supported."

Well, Richard, let me respond, if I may, quickly. I do support free enterprise democracy to the utmost. I also recognize that our economy has to work for everyone and must be, when appropriate and where, regulated. Unfettered capitalism is a license for the greedy and unprincipled to secure financial advantage, too often at the expense of the powerless and unrepresented in our importantly proven free enterprise democracy. We love hearing from you. E-mail us at loudobbs@CNN.com.

Filmmaker Michael Moore says the Walt Disney company is blocking distribution of his new movie on the aftermath of September 11. Moore claims Disney objects to his criticism of President Bush in the film. Kitty Pilgrim has the story.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Filmmaker Michael Moore says Disney objects to his new film, "Fahrenheit 9/11" and is blocking distribution in the United States. Disney says they passed on it a while ago.

MICHAEL EISNER, CEO, THE WALT DISNEY CO.: That was a year ago. We informed all of our companies that that film would easily be distributed by anybody. Everybody wanted that film. We just chose not to be involved.

PILGRIM: It's no secret how Michael Moore feels about President Bush. The filmmaker, on many public occasions, criticized Bush, calling him a fictitious president. "Fahrenheit 9/11" looks at the aftermath of 9/11, linking George Bush with powerful Saudi families. Some say Disney wants to avoid the political controversy. MARTIN GROVE, "HOLLYWOOD REPORTER": They have a theme park, they have a hotel, they have various other ventures. Who knows what they might be planning in the way of future expansion and good relations with the governor of Florida, who happens to be President Bush's brother, Jeb. That's, like, a good thing to have.

PILGRIM: Moore craves controversy. His Oscar-winning "Bowling for Columbine" is a two-hour long howl of outrage over guns and violence in American culture. Moore's website states quote, "some people may be afraid of this movie because of what it will show but there's nothing they can do about it now because it's done, it's awesome, and if I have anything to say about it you'll see it this summer because after all, it is a free country." Unquote.

MATTHEW FELLING, CENTER FOR MEDIA AND PUBLIC AFFAIRS: I think that Michael Moore's point about free speech is well taken. You would like to think after someone succeeds and has an Oscar in his hand you probably can't be squelched by the powers that be. But what this show is that even the biggest filmmakers can get squashed by the titans in Hollywood if they decide to push the envelope too far.

(END VIDEOTAPE)

PILGRIM: The timing of the film would put it in the market just before the election. The film will debut at the Cannes Film Festival later this spring. Some industry experts say Moore is generating controversy now simply to create a buzz about the film -- Lou.

DOBBS: You don't suppose this is about business, do you?

PILGRIM: It could be.

DOBBS: Why did Disney support the thing to begin with? There are no surprises in Hollywood.

PILGRIM: And there are no surprises with Michael Moore. So a lot of people are asking that question.

DOBBS: Is that our way of saying we don't know?

PILGRIM: Maybe.

DOBBS: Thanks very much.

Just ahead, the results of tonight's poll. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Do you believe the size of the U.S. military should be larger? 56 percent say so. That's our show for tonight. Thanks for being with us. Good night from New York. "ANDERSON COOPER 360" next.

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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