xfdce CNNfn-LOU-DOBBS-TONIGHT-01

Show: LOU DOBBS TONIGHT>

Date: October 2, 2003>

Time: 18:00:00>

Tran: 100201cb.l10>

Type: SHOW>

Head: LOU DOBBS TONIGHT; CNNfn – Part 2>

Sect: Business>

Byline: Lou Dobbs, Bob Franken, David Ensor, Jamie McIntyre, Suzanne

Malveaux, David Grange, Christine Romans>

Guest: Joseph Lieberman, Manu Bammi, Paul Krugman>

Spec: Business; Stock Markets; Economy; Technology; World Affairs; SIC:

7375>

Time: 18:00:00>

(END VIDEOTAPE)DOBBS: And turning now to our series of special reports, “The Great American Giveaway.” Tonight, we focus on education.

Somewhere between 7 million and 10 million illegal aliens live in this country. They are here in violation of the law. However, the courts have decided that their children have the right to a free education.

Bill Tucker joins us now with the story — Bill.

BILL TUCKER, CNNfn CORRESPONDENT: Lou, the question is, are we educating for the future or simply giving the education away? It is a debate which raises the question of whether to punish the child for the sins of the parent.

(BEGIN VIDEOTAPE)

TUCKER (voice-over): More than a million kids in kindergarten through high school are illegal aliens according to an estimate by the Urban Institute. They are there because according to a Supreme Court ruling in 1982, they have the right to a free public school education. The court saying, in effect, that since the children were brought here by their parents and since it was clear that the government wasn`t deporting the parents, U.S. citizens should be responsible for educating their children.

MELISSA LARAZIN, NATIONAL COUNCIL OF LA RAZA: It`s not Americans who hold these students accountable for a decision that they did not make. These students are here to stay. They are part of our country. We might as well educate them while they`re here. It benefits us all.

TUCKER: Seven states currently offer illegal aliens in-state tuition prices at state colleges. Fifteen more states are considering similar legislation.

And then there`s the Dream Act, co-sponsored by senators Orrin Hatch and Richard Durbin. The act would grant residency status to illegal aliens of good moral character, between the ages of 12 and 21 who have lived in the United States for at least five years, and a high school graduates under the age of 25 who are enrolled in a college or university.

As compelling as the arguments may be, critics point out, there is a cost.

DAN STEIN, FED. FOR AMER. IMMIGRATION REFORM: Educating the children of illegal immigrants is costing U.S. taxpayers $7.5 billion a year — $7.5 billion a year. We could be putting a computer on the desk of every junior high school kid in America if we had that money to educate our folks today.

(END VIDEOTAPE)

TUCKER: In California, for example, the Federation for Americans for Immigrants Reform statements that the state spends more than $2 billion each year educating illegal aliens. That`s 20 percent of the state`s budget deficit where, by the way, they are making budget cuts in education — Lou.

DOBBS: Bill, thanks. Bill Tucker.

Tonight`s thought is on education in this country. “In my days, schools taught two things, love of country and penmanship — now they don`t teach either.” That from author Cleveland Amory.

Tomorrow on “The Great American Giveaway,” exporting your confidential personal records. Some American companies are outsourcing work overseas and guess what? Your medical records, your financial records, your personal information are being exported right along with the jobs. That special report tomorrow night. Please join us.

An astonishing threat from Europe tonight over a Congressional proposal to force the Pentagon to buy essential weapons components in this country. The European Union is reportedly threatening legal action against the United States if the Buy America proposal becomes law. Foreign companies are heavily involved in U.S. military projects such as the joint strike fighter. But the House of Representatives says the Pentagon has become too dependent on foreign contractors and lawmakers are concerned those companies may cut off supplies if their governments disagree with U.S. policy.

The exporting of America also taking place on Wall Street. A number of brokerages are outsourcing their research to India. My guest tonight says this outsourcing will, in fact, lead to job creation here in this country.

Manu Bammi is the chief executive officer and co-founder of research firm SmartAnalyst. Good to have you with us.

MANU BAMMI, CEO, SMARTANALYST: Thanks, Lou.

Well, I think it`s all about innovation and this is a very dynamic economy and what our innovation is to look at research and knowledge and how that`s done and figure out how to do it more efficiently and in a more cost effective way. And I think companies can use this to do increased productivity and cut costs and create more jobs here.

DOBBS: In your own firm, for example you`re creating research for Wall Street firms as some of this comes as a result of the settlement with Wall Street by New York Attorney General Eliot Spitzer and the divestment between investment banking and research.

You`re sending actually research on equities in particular over to India, right?

BAMMI: Well, we are not making any recommendation that we don`t write the research reports. What we provide is what we call research support services, which means that, you know, these companies that have to figure out a new business model of how equity resent should be done, they can cover more stocks, do more in-depth research if they can use our services.

DOBBS: That`s work that was at one time being done by Americans, certainly at higher salaries than are paid in India, correct?

BAMMI: Much higher salaries.

DOBBS: And that fact leads us to what conclusion? That that will create jobs in this country? I`m afraid I don`t understand that.

BAMMI: The job — the issue related to the job cuts had already happened before we came along.

DOBBS: Right.

BAMMI: And I think what people are looking at as the economy expands, you know, are they going back to the `90s model or is it going to be some new way to actually provide expanded coverage without taking on the overhead that they had before?

But I think that we can provide better services, cheaper costs, and more efficiently and they can cover more stocks than they were doing previously.

DOBBS: But the sum effect of what has transpired in this case, Manu Bammi – – bear with me on this — is jobs that were once held in this country are now in India. They are paying the Wall Street firms — ultimately paying for that research — are paying far less for it in India than they are in the United States. And this is the metaphor, the paradigm we`re seeing across vast numbers of industries, literally hundreds of thousands of jobs involved.

How do we rationalize that to Americans who don`t have work, who are watching jobs being exported in all of these industries overseas? How do we explain that to those people?

BAMMI: I don`t mean to plug McKinsey (ph)…

DOBBS: Plug them.

BAMMI: They have just done a study called “Offshoring: A Win/Win Solution” …

DOBBS: Right.

BAMMI: …where they have cranked the numbers and analyzed for every dollar spent — spent outside, there`s 1.5 dollars in value creation and most of that is actually coming back to America.

DOBBS: In what form?

BAMMI: In — in forms of, you know, reduced costs so there`s more available and also in the form of redeployment of people to, in fact, even higher value jobs and wages.

DOBBS: Now that you`ve plugged McKinsey, perhaps I can be critical of McKinsey. In point of fact, it sounds like an absolute call to export jobs overseas. And it doesn`t, to me, seem to require the intellectual firepower of one of the premier consulting firms to suggest to a CEO or CFO that he or she cut jobs in order to improve profitability or productivity in the first instance.

Does that seem to you to be a very complicated financial concept?

BAMMI: Well, I think it`s an interesting argument that you`re making. I would look at it in a different way. I mean, America`s all about globalization. America is all about competitive advantage. America`s all about innovation. And all of these three things play into what we are trying to do and what others are trying to do. And I think, you know, it has — it has been beneficial over the last 10 years and it`s going to be beneficial over the next 10 years, too.

DOBBS: Manu Bammi, we hope you`re right. We also hope that there is a vigorous public dialogue in this country about what does make the best sense and what determines what this country really is about.

Manu Bammi, thank you very much.

BAMMI: Thank you very much.

DOBBS: Coming up next here, “The Great Unraveling.” “New York Times” columnist Paul Krugman takes aim at — guess who? — the Bush administration. He`s never done that before. Paul says the right wing is a revolutionary power, and he joins us next.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: Paul Krugman has a new book. He calls it “The Great Unraveling: Losing Our Way in the New Century.” “New York Times” columnist Paul Krugman in that book assembles a collect of columns over the past three years. A central theme, the Bush administration and what Krugman characterizes as a radical political movement. Paul, radical?

PAUL KRUGMAN, AUTHOR: Radical. Look, these guys have led us into a deficit, which is about 25 percent of government spending. About a third of non Social Security budget deficit. There`s no way that gap can be closed without massive cuts in social programs or large increases in taxes.

And if you look at the people behind — I don`t know what Bush understands — if look at the people behind they talk about wanting to roll back the great society, wanting to role back the new deal.

DOBBS: What part of the new deal has been rolled back?

KRUGMAN: Nothing has happened yet.

DOBBS: So, what would you have the government do? A war against terror, caring out operations in Iraq and Afghanistan with, whether you agree with them or not, the policy of the country, how is he going to pay for it?

KRUGMAN: Look, next year the tax cuts, the Bush tax cuts will subtract about $280 billion from government revenue. That dwarfs even the $87 billion that we were suddenly sprung on us for the Iraq war. So, the truth is, the budget crisis is much more the result of tax cuts than special demands is.

DOBBS: But, in that assumption, you as a Princeton economist extraordinaire, if I may say, know that that money will be in private hands and we could see with an uptick here more than that moving…

KRUGMAN: In fact…

DOBBS: I think that`s wishful thinking.

KRUGMAN: That`s enormously wishful thinking. The Congressional Budget Office has — the White House`s hand picked economist heading it and he doesn`t think so. This is not — this is wildly irresponsible policy unless the intent is to starve the government programs.

DOBBS; Starving government programs, this administration has expanded government farther than any administration.

KRUGMAN: Not really in new programs.

DOBBS: Budgets scale…

KRUGMAN: They`re sloppy.

DOBBS: I`ve got to ask you this, because I am, as you know, a faithful reader of your column. Is there anything the administration`s ever done that you like? Just one.

KRUGMAN: It`s pretty rough. You know, my colleagues at Princeton said, say something nice about them. I said what. They said free trade. They`re not free traders. I`m a better free trader than Bush is. Clinton was a better free trader than Bush is.

DOBBS; Well, we`re trading away $503 billion in the last current account deficit. How free do you want this trade to get?

KRUGMAN: Oh, come on. The current account deficit is a reflection of budget deficit, of irresponsible policies at home.

DOBBS: The deficit at that point was only $200 billion. We`re double that now. What`s going to be next year?

KRUGMAN: Well, it`s amazing. I wonder what if those numbers have been understated, too.

DOBBS: You and I both know the numbers are probably understated and totally — I shouldn`t say totally, but definitely not the absolute reading…

KRUGMAN: Well, a lot of what you why talking about outsourcing, I don`t think that`s showing in the commerce department numbers.

DOBBS: Not yet. In terms of the Bush administration`s next step which is to move into solid recovery, job growth in 2004, preparing for a tremendous victory, is that the way you see it in 2004 presidential election?

KRUGMAN: You know, state of the economy right now technically, I would say it is weird. Different numbers pointing different directions, job numbers, output numbers, that`s going to get reconciled. I don`t know which direct.

DOBBS: Paul Krugman, thank you for joining with us. The book is “The Unraveling of America.” I thought you`d find one nice thing to say about president George W. Bush.

KRUGMAN: I found it pretty hard.

DOBBS: Good to have you here with us, Paul.

KRUGMAN: Great.

DOBBS: A reminder to vote in our poll. The question, whom do you believe is most out of touch on the issue of Iraq, the media, U.S. consumers, Defense Secretary Donald Rumsfeld. Cast your vote at cnn.com/lou. We`ll have the results coming up shortly.

Coming up next, “Grange On Point” tonight, the unfair burden being carried by thousands of our reservists and members of the National Guard. General David Grange is next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight in “Grange On Point,” challenging times for this country`s National Guard and our reserves. 200,000 national guardsmen and reservists are on active duty right now around the world. They make up of a third of all U.S. forces in the Persian Gulf and central Asia.

The National Guard and reserves have taken on a greater role and burden in the two years since September 11. Now here`s General David Grange.

Dave, this seems like an unfair burden for men and women who are supposed to be citizen soldiers.

GEN. DAVID GRANGE, MILITARY ANALYST: Well, it just the expectations are different now, Lou. Before you had what`s known as weekend warriors, you trained one weekend a month, you went for two-week annual training deployment somewhere in the United States and that was about it. If there was a war like Desert Storm, you had a quick mobilization of quite a few troops, but then nothing happened for a while. Now it`s an every day occurrence

DOBBS: An every day occurrence. We have a Pentagon saying they don`t need more troops meanwhile calling up more reserves, calling upon the guard. This does to the layman, if you will, this doesn`t make a lot of sense to say you don`t need more troops, but keep calling up reserves and your guard.

GRANGE: Well, some of the reserves and National Guard that are called up fill certain specialties that are not found or not found in large numbers in the active force and so they have to call up the guard and reserves. In other cases they`re rotating out with active duty units because of the operational tempo the amount of deployments that are occurring, filling those units places overseas. And so the whole face of the reserve components has changed in today`s environment.

DOBBS: It`s changed. Has it changed for the better? And are we going to see as a result of this difficulty in recruiting for both the guard, for the reserves, and retaining those young men and women?

GRANGE: There`s no retention problems right now, but in the future, I would predict there would be. The reason is because of maybe a burnout or just constant use of the reserves and guard units unless certain things happen, benefits are equaled out among reservists and active duty, as well as you have predictability in deployments and upfront training. So it`s not a knee-jerk reaction to mobilize certain units and send them somewhere very quickly.

DOBBS: We have about 30 seconds, Dave. Do we have, in your judgment, the right mix of citizen soldiers and professional military?

GRANGE: No, I think there has to be a rebalance. You have to move some of the reservist skills back to the active side. You still want to keep certain skills in the reserves and the National Guard, there`s homeland defense issues, there`s big war issues, but there has to be some rebalance. Yes, you do.

DOBBS; Dave Grange, General Dave “Grange on Point,” thank you very much.

GRANGE: My pleasure, Lou.

DOBBS: “Tonight`s Quote” from Baghdad where the commander of U.S. forces there made comments on the ever-changing enemy that U.S. forces are fighting. We quote “The enemy has evolved. It is a little bit more lethal, little bit more complex, little bit more sophisticated and in some cases a little bet more tenacious.” Lieutenant General Ricardo Sanchez.

A remarkable story of good fortune for one American soldier tonight. Army Sargent Steven Moore, he is now on a 30-day leave from South Korea is the sole winner of the $150 million Megamillions Jackpot. Sergeant Moore bought the winning ticket at a convenience store in Fitzgerald, Georgia. Moore who works as a chemical specialist chose the cash option. He was awarded $90 million before taxes. The sergeant plans to use his winnings to builds to a new home for his wife and two daughters.

Coming up next, hear “Your Thoughts” on our series of special reports “The Great American Giveaway.”

We have had an overwhelming response from you. We`ll share some of “Your Thoughts” next.

(COMMERCIAL BREAK)

DOBBS: Now the results of “Tonight`s Poll.” The question, whom do you believe is most out of touch on the issue in Iraq?

Nineteen percent of you for some reason said the media, 1 percent said U.S. Commanders in Iraq, 80 percent of you said Defense Secretary Donald Rumsfeld for some reason.

On Wall Street, the major stock averages held steady today. The Dow up 18, Nasdaq up almost 4, the S&P adding over two points.

Christine Romans joins us with the market, Christine.

CHRISTINE ROMANS, CNNfn CORRESPONDENT: The market building on yesterday`s gains. But it was a quiet day overall, a day before that job`s report, Lou. Barely 1.3 billion shares changing hands.

Upstairs the New York Stock Exchange board met for the first time with its new leader, John Reed. On the table at the big board, big reforms. Everything from a smaller board to possibly splitting the chairman and CEO roles, board members want to keep the New York Stock Exchange regulatory power in-house and initial public offering of the stock exchange, not on the table at this point. And, Lou, we still don`t know the paychecks of top New York Stock Exchange management.

I asked John Reed why should it take so long to give the public readily available information?

(BEGIN VIDEO CLIP)

JOHN REED, INTERIM NYSE CHAIRMAN: We could release it right away. If so, I`d like to talk to the management people involved, to make sure they`re comfortable, their kids are going to be saying, gee daddy I didn`t know you earned that much money. That`s what kids used to say. I don`t know why theirs would be any different.

(END VIDEO CLIP)

ROMANS: Of course, speculation they make millions of dollars. He said we would know maybe in a month.

DOBBS: Did the interim chairman the reason they`re not divulging to the public what the five top executives of the what the New York Exchange make he`s concerned about what their children would think?

ROMANS: I think he was trying to stall a bit. We asked a couple weeks ago, Lou, Carl McCall he said he would ask the board to find out what everybody made, and now we`re still continuing to ask that question.

So John Reed said maybe it a month.

DOBBS: And reform at the big board but not to include being divested regulatory power, turning it over to the SEC.

ROMANS: Doesn`t sound like they want to do that.

DOBBS: Sounds like tepid early turns at the Big Board, perhaps a bolder moves wait.

ROMANS: The final report has not been released but they`re discussing 27 proposals.

DOBBS: Speaking of reform, the mutual fund industry, this just gets worse and worse.

ROMANS: Yes, we have been hearing about this all week and more on this today. Millennium Partners, a hedge fund in New York, a top trader has pleaded guilty to fraud. Citibank (Company: Citigroup Inc.; Ticker: C; URL: http://www.citi.com/) fired a Smith Barney broker for allegedly canceling trades after the market close. And earlier this week there was suspensions or job losses at Prudential and I Alliance Capital. On the Street, Lou, a lot of folks saying this is the just the beginning of all of this.

DOBBS: Well, after two years of corporate scandals and Wall Street reform, it doesn`t feel like the beginning to me. Christine, thanks a lot, good work.

Take a look now at some of “your thoughts,” from Russia, Ohio, “Thanks Lou for your Exporting America reports. I`m thankful that someone out there is speaking for all of us working stiffs in manufacturing. We used to be the backbone of America. Now were just the bottom line.” That from Cindy Landsiedel.

From Hawaii, “Lou, how can someone who is illegal receive anything that is considered legal? I am so confused. It defeats our entire justice system. If they are considered illegal why are they still here?” Marion Basiliali.

And from Douglasville, Georgia, “Dear Lou, instead of a tax break why doesn`t the government provide a tax incentive to companies to hire Americans and keep the jobs in the U.S.” That from John Budahazy.

From Houghton, Michigan, “I believe most Americans would rather have greater job security than inexpensive imported furniture, clothes, and electronics. Buy American! The job you save may be your own!” Kevin McRae.

We appreciate “Your Thoughts.” E-mail us at loudobbscnn.com. That`s are show for tonight. For all of us here, good night from New York. “ANDERSON COOPER 360” is next.

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