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Interview With Lawrence Lindsey; Graham, Nickles Discuss U.S. Economy; Interview With King Abdullah of Jordan

Aired July 28, 2002 - 12:00   ET


WOLF BLITZER, HOST: It's noon in Washington and Somerset, Pennsylvania, 9:00 a.m. in Los Angeles, 5:00 p.m. in London and 6:00 p.m. in Paris. Wherever you're watching from around the world, thanks for joining us for LATE EDITION.

There's been a very dramatic development in southwestern Pennsylvania. Nine coal miners have been rescued following more than three days trapped underground. It's a story that has gripped Americans, and now there's a very happy ending.

Let's get all the details. CNN's Brian Palmer is standing by at the rescue command center in Pennsylvania.


BLITZER: Now let's bring in David Hess. He's the secretary of Pennsylvania's Department of Environmental Protection. He's been coordinating the rescue operation.

Secretary Hess, as we got this great news, I know I spoke to you several times over the past few days, tell us the truth. How surprised were you that this had such a happy ending?

DAVID HESS, SECRETARY, PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION: Well, I tell you, Wolf, we were very confident all the way along, because we had a terrific team of experts not only from Pennsylvania, but also MSHA (ph) and the folks from the federal government and from the coal-mining community, working on getting those guys out there.

We were confident, we were focused, and ultimately we were successful. Although, I have to tell you, we had a little lady luck working for us too at times.

BLITZER: Well, what was the most -- the biggest part of that lady luck that worked?

HESS: Well, I think it has to be the six-inch well, the very first thing that was done. We sunk a six-inch well where we thought the miners had gone to, and that -- the location of that well was determined by our experts. And putting themselves in the shoes of those miners, and understanding the lay of the mine and how fast the water was coming up, they made a very great and wonderful educated guess about where that well would be.

We sunk that well, and lo and behold, we heard tapping at the bottom of that well, and that just started the whole thing rolling. And it was just, I think, a tremendous effort.

BLITZER: Based on what you know now, Secretary Hess, how much longer could those miners have holed up -- have survived down some 240 feet below the surface of the earth?

HESS: Well, we will be investigating all this, but, based on some preliminary information that we have from the miners, they were perhaps hours or less from running out of air. Because if we didn't sink that well at that particular time to that particular location where they were, that location would have been flooded.

What saved them was the fact that the well was there, and we began pumping compressed air into that compartment so they could breathe and so we could hold back the water.

BLITZER: Was that compressed air heated, which also helped beat back the enormous fear that all of us had of hypothermia setting in, if they were stuck in a puddle of water? HESS: The other benefit of that compressed air is exactly that: It was heated air, it gave them some warmth. And according to Dr. Kunkel (ph), who heads the special medical response team here in Pennsylvania, that really saved them from having a problem with hypothermia.

Some of the miners, the nine miners, are suffering, I take it, a little bit from some minor hypothermia. Is that right?

HESS: That's right, and I'll tell you, though, Wolf, compared to what it could have been, a few scratches, a bump on the shoulder and a stomach ache are a very small price to pay for this. These guys are in terrific shape.

BLITZER: The 77 hours without food, effectively without water as well, right?

HESS: That's right. The medical team told us, and the hospital reported this morning, that they were suffering from elements of starvation, as well as dehydration. So, those were the first things that they addressed.

BLITZER: But, basically, they are, all of them, in relatively good condition, either stable or good condition right now. Walk us through the various states or the conditions of these nine very, very lucky men.

HESS: My understanding right now, Wolf, is that I think almost all of them will be officially upgraded to good condition. And in fact some of them may be released either today or tomorrow morning, which I think is, again, great news.

BLITZER: What happened? What was the cause of this tragic accident that got these nine miners in trouble to begin with? HESS: Well, what happened is, the new mine that they were in was right up against and next to a mine that was abandoned in the 1950s, and that abandoned mine was full of water. And as the folks in the new mine were mining, they broke into that abandoned mine, water came gushing in. About 50 or 60 million gallons of water came gushing in that new mine.

They thought they were far enough away from that mine that that wouldn't happen, but unfortunately, we understand, the mining map for the old mine wasn't accurate. So they weren't the required 200 feet away from that old abandoned mine.

BLITZER: So what lessons have you learned now from this incident to make sure it doesn't happen again?

HESS: I think it's too early to tell. Obviously, the mine map issue is the biggest one. But our agency, as well as the Federal Mine Safety Agency, will be conducting a full investigation of this incident. We'll come up with lessons learned.

We are also talking about a wider investigation to learn and examine the kind of permit reviews that are done. So this is going to get a thorough examination.

But the bottom line here, Wolf, is we got those guys out. Everything turned out fine. And we just thank God that it did turn out that way.

BLITZER: Indeed, it was a textbook lesson in a rescue operation. I'm sure that they'll be writing about this and studying it for many years down the road, presumably, as long as there are coal miners here in the United States and around the world.

Was there anything that you needed that you didn't have, that could have accelerated the rescue?

HESS: I tell you, Wolf, there was just excellent cooperation. We had people all across the country and around the world giving us ideas, giving us -- offering equipment to us, from pumps to drills.

We had so much equipment over there, at one point, it just clogged the roads and filled up a nearby church parking lot. It's hard to imagine that so much equipment came in in such a short period of time.

But that's a tribute to the preparation of the mine rescue teams that we have here in Pennsylvania and on the federal level.

BLITZER: David Hess, you've been on the scene from the beginning. You've been kind enough to share information with our viewers in the United States and around the world. Congratulations on this very, very good rescue operation. Could not have turned out any better. We appreciate your joining us today, as well. Thank you very much.

HESS: Thank you. It's a great day in Somerset. BLITZER: It's a great day in Somerset. It's a great day around the United States.

Nine for nine, we got all nine out. That's what a very elated, thrilled governor of Pennsylvania, Mark Schweiker, said after that rescue operation was completed.

This note, at the top of our 2 o'clock -- our third hour of LATE EDITION, we'll have extensive coverage, what happened at the coal mine in Somerset, Pennsylvania. We'll have interviews with rescue workers, with family members. We'll go back to the scene for extensive live coverage.

But when we come back, the U.S. economy and your money. The chief White House economic advisor, Larry Lindsey, talks about the slumping markets, corporate corruption, and whether the president's economic team is up to the task of doing something about it.

Stay with us.


BLITZER: Welcome back.

With Wall Street taking a beating and corporate scandals erupting on a nearly daily basis, Americans are looking to President Bush and the White House for some economic direction.

Earlier today I spoke to the president's chief economic advisor, Larry Lindsey, about the state of the U.S. economy, corporate responsibility and more.


BLITZER: Larry Lindsey, thanks for joining us on LATE EDITION.

The fundamentals, as you continue to point out, as other administration officials point out, of the U.S. economy are strong. But people are very nervous, they're losing their retirement funds, their 401(k) long-term investments. What's going on?

LAWRENCE LINDSEY, PRESIDENT'S CHIEF ECONOMIC ADVISER: Well, you're right on both counts. And I know a lot of people who are hurting. What we can say is, you know, investing is really for the long term. The stock market has gone down, the stock market will come back.

But the key to having that happen is to have economic policies that keep the economy going soundly. And it is. Real wages are growing robustly. Employment is reasonably good. Labor market isn't perfect, but it's pretty good. GDP is going to grow at something close to 4 percent this year according to the Blue Chip forecasters.

So we are doing everything we can to keep the economy going strong, and if we do that, the market's going to come back.

BLITZER: So why are people so nervous about the economy?

LINDSEY: Well, I can understand why people are nervous. I don't think that's in question. You know, people have seen a lot of -- you know, we're now in the third year of a stock market decline. Started in March 2000, the Dow peaked in January of 2000.

What we were able to do last year was to stabilize the economy. We had industrial production falling again from the second quarter of 2000 on through. With the tax cut, with good monetary policy, we were able to stabilize that economy. But keep your eye on the fundamentals here. We've had the first hit on American soil since the 1940s. We've had all the stuff that's going on...

BLITZER: You mean 9/11?

LINDSEY: 9/11. We've had -- and all that came with it. We've had a lot of problems in the stock market.

But still, we only had one quarter of negative growth, and this year we're going to grow at 4 percent. The fundamentals of this economy -- we should never underestimate America.

BLITZER: And you say the stock market's going to come back up. So is this a good time for investors to invest in the stock market?

LINDSEY: I, you know, as a government official, I can't say one thing or the other. But I do think that people should keep in mind the fundamentals of the economy are strong, and all the data support that.

BLITZER: A lot of people think, and they maybe incorrect, that one of the casualties of what's happened in the stock market is your proposal, the Bush administration's proposal, to let Social Security recipients invest part of that money in the stock market, in equities.

A poll that was released by the Wall Street Journal and NBC News: Do you favor or oppose allowing people to put their Social Security payroll taxes into personal retirement accounts? Favor, 41 percent; opposed, 55 percent.

So, has that proposal basically gone away?

LINDSEY: Oh, I don't think so. I mean, remember the key here, first of all, it's voluntary. Second of all, unlike the question, it's a portion of your account.

Third, this is investing for the long haul. This is what brokers would call dollar cost averaging, or investment advisors would call dollar cost averaging. You don't put all your money in the market, $11,000 and take it out at $8,000. You put a little bit in each year, year after year, and that's how it grows.

The last thing I'd point out. The market is lower than it is now. They key is, you know, you buy low and you sell high. And I think, if anything, what has happened in the market, we should think of this as a more attractive option. BLITZER: So, you think -- so this proposal's definitely still on the table, as far as the Bush administration is concerned, despite the -- what some would call the collapse of the markets recently?

LINDSEY: Wolf, we have no choice. If we don't do something to strengthen Social Security, to provide a better return in Social Security, we're going to face a 30 percent cut in benefits in a couple decades. That is current law. We have to do something to make sure that doesn't happen and the time to do it is now. And a sensible reform is the way to go.

BLITZER: A lot of critics out there have said that one of the problems is that the public is losing confidence in the president's economic team.

A New York Times article on Thursday wrote this: "Some Republican incumbents are accusing the White House of reacting too slowly and too tepidly. And they complain that Mr. O'Neill, the Treasury Secretary Paul O'Neill, has been missing in action as a public voice to reassure investors."

LINDSEY: Well, I think Paul O'Neill has been very public. He's been doing his job.

BLITZER: He was traveling around the world when the markets were really going down.

LINDSEY: An important part of the job of the treasury secretary is international economics. It's important to keep that in mind.

But if I can just look at the -- let's look at the record for a second. Back in December of '99, the president said in Des Moines, Iowa, the job of the president is to work for the best but prepare for the worst.

BLITZER: He was then a candidate?

LINDSEY: Right. It was a very unpopular thing to say at the time, but he's saying, you know, we have to be prepared if something happens.

He was prepared. He proposed a tax cut, got it enacted faster than any other president. Economic professionals called it the best- timed tax cut in history. He was ready.

After 9/11, we got hit with a lot. We managed that fine.

Back in January, he called Chairman Greenspan and other economic officials together to deal with the corporate governance problem. He proposed that in March. He proposed pension protections, starting in February.

BLITZER: But you know, that tax cut...


LINDSEY: ... ahead of the curve.

BLITZER: A lot of people, especially Democrats, are blaming that tax cut for the huge deficit, the $165 billion projected deficit that follows these years of surpluses.

LINDSEY: Well, let's keep in mind that we have had economic problems, we have a war on. The economics that I learned, the economics that I taught, the economics that are in all those textbooks that some of the critics taught, all say the same thing: When you have this kind of circumstance, it is appropriate to run a deficit.

But, you know, Wolf, on that point, the key here is to keep our eye on federal spending. If you just look at what the Senate has been doing on appropriations, they have appropriated already -- this is non-defense stuff -- $14 billion more for next year than what the president asked for. You extrapolate it out for a decade, we're talking $200 billion of extra spending.

So we do have to monitor the deficit. We have to spend money on defense. We have to spend money on Social Security. We have to make sure that our economy is sound. But we cannot afford to have wasteful spending here.

BLITZER: Speaking about the economic team in place by the Bush Administration, the new issue of Time magazine that's out today, among other things, its writes this, and we'll put it upon the screen: "Disputes among Lindsey," meaning you, "O'Neill," the treasury secretary, "Hubbard," Glen Hubbard, the chairman of the Council of Economic Advisors of the White House -- "have grown so acrimonious that they've begun seeping out of this famously buttoned-up White House. Lindsey can roll his eyes when asked about O'Neill's latest unscripted remark. And according to allies, he has complained that Hubbard's status-quo views have persuaded the president to reject even modest new policy steps as interventionist."

LINDSEY: Well, you know, it's very inside-Washington to talk about personalities. The fact is, we all get along very well. We have lunch together on Mondays. We meet together on Wednesdays and Fridays. You know, this is very inside-Washington stuff, and I don't think it's accurate.

BLITZER: But is it accurate to say you, O'Neill and Hubbard are all precisely on the same page?

LINDSEY: You get three economists together, you know, the old line is you're going to get four different opinions. And of course, we have different opinions, but that is the key to making sound policy.

Acrimonious, no. We get together, we get along very, well. And our job is to give the president the best advice we can, and that is happening.

BLITZER: We know the president meets regularly with his national security team. How regularly does he meet with his economic team?

LINDSEY: We get policy time with the president three or four times a week.

BLITZER: Is that enough?

LINDSEY: I think so. I think the president's well informed. He asks the right questions. I think he's very much on top of the situation.

BLITZER: Al Gore, the Democratic presidential candidate, last time around, the former vice president, was outspoken in offering you some advice, the administration, the White House the other day. Listen to what the former vice president said.


AL GORE, FORMER U.S. VICE PRESIDENT: The best thing they could do is to completely scrap their entire economic plan and start over again from scratch, and get rid of their entire economic team and start with a brand new one tomorrow that has some common sense to get our country back on track.


BLITZER: Good advice from the vice president?

LINDSEY: You know, this is an old Washington game. We're focused on solving the country's problems, and I think that's what our job should be.


BLITZER: Up next, more of my interview with the White House Economic Advisor Larry Lindsey. I'll ask him whether more corporate CEOs will be handcuffed and taken to jail.

LATE EDITION will be right back.


BLITZER: Welcome back to LATE EDITION.

Now more of my interview with the White House economic adviser, Larry Lindsey, on the White House response to (AUDIO GAP)


BLITZER: Are we going to see more high-profile arrests? A lot of our viewers, of course, saw the arrests of the Adelphia cable company executives. They were walked off in handcuffs. Their ties were taken off, shoelaces removed, like common criminals. And you can see the picture on our screen.

Is this the wave of the future?

LINDSEY: Well, when people break the law, they have to face the consequences. That's what's going on here. And there were probably other cases of people breaking the law. That's for the Justice Department to decide. And when they do, they'll be treated accordingly.

BLITZER: Is this, though, just the beginning of these kinds of high-profile corporate arrests, given what's going on, the fuzzy math and the accounting practices, for example?

LINDSEY: Well, the president, again, called his team together to have a corporate fraud task force to coordinate this. And I think what you're seeing is much more effective enforcement of the law than we've had in a very long time.

BLITZER: The president's going to convene a so-called economic forum in Waco, Texas, not far from his ranch in Crawford in August. Will the congressional leadership be invited?

LINDSEY: No. The president is going to Waco to listen to people outside the Beltway, from all walks of life -- small investors, folks from the labor movement, business people. You know, we hear from people inside the Beltway quite a bit here. And now is the chance to listen to Main Street, and not to Wall Street or to Pennsylvania Avenue.

BLITZER: So, not just Democrats, but Republicans also will be in effect snubbed from this economic forum?

LINDSEY: No one's being snubbed. I don't think the members of the Congress think that they have too little access to the president. He meets with them all the time. This is a chance to hear from the people that we don't get a chance to hear from in Washington as much, the real people of America, who are, after all, you know, the backbone of our economy.

BLITZER: Harvey Pitt, the chairman of the Securities & Exchange Commission, caused a little bit of an uproar this week, saying he should get a pay raise and that his status should be elevated to Cabinet level. The Senate Democratic leader, the majority leader, Tom Daschle, spoke out on this issue the other day. Listen to what he said.


SENATOR TOM DASCHLE (D-SD), MAJORITY LEADER: You've got businesses that are on the rocks. He's talking about a Cabinet-level status, that he needs some elevation? I mean, this is further proof and a clear illustration of why as many of us feel the time has come for a change in that position. I'm surprised and saddened by the insensitivity of Mr. Pitt.


BLITZER: Time for Mr. Pitt to go away?

LINDSEY: No, I think Harvey Pitt's doing a great job. I think that this proposal probably distracted the attention of the Senate from what it should be focusing on, which is passage of this bill, actually, the good job the SEC is doing on enforcement. Remember, Harvey Pitt didn't propose this for himself. What he proposed was that the SEC be promoted to a class-one agency, which is the status of the Fed.

You know, they're having -- there's a need, we all agree, to attract better people, to improve both the quantity and quality of talent at the SEC on the staff. And I think the folks at the SEC thought that this was a good way of doing it.

It probably was not the best time to suggest it.

BLITZER: A lot of our viewers who are watching this program, not only in the United States but around the world, are asking themselves, the president wants this authority to negotiate free trade agreements with other countries around the world and supports free trade, and if that is the case, why did the Bush administration impose these tariffs on steel imports? That effectively flies in the face of the kind of free-trade proposals that he ran on and says he supports right now.

LINDSEY: Well, what we do need is free trade.

What we have in steel is a case where America is seeing its steel industry shrink. We have 25 percent of our steel industry now in bankruptcy court. Other countries, our trading partners on the other side of the Atlantic, the other side of the Pacific, have for decades been throwing money into their steel industries. That's not free trade.

And what the president is saying is, "Enough is enough, guys. We all have to play by the same rules. And if you're going to do that, we are going to follow what our law says we should do, which is provide temporary relief."


LINDSEY: That's the proposal. Now...

BLITZER: Let me just interrupt for a second. You're an economist.


BLITZER: And you know the theory is, if they can more effectively manufacture steel than Americans can, why not let them do it and save some money for U.S. consumers and manufacturers in the process?

LINDSEY: Wolf, you said it very well, if they can more effectively manufacture steel. What is at issue is whether they can more effectively take money from their taxpayers and subsidize the production of steel. That's a very different issue, and I think it's important that we keep it in mind.

BLITZER: All right. We'll leave it right there.

LINDSEY: My pleasure. BLITZER: Larry Lindsey from the White House, thanks for joining us.

LINDSEY: It was great.


BLITZER: Coming up next, the view from Capitol Hill. We'll talk with two influential United States Senators, the Republican whip Don Nickles of Oklahoma, and Democratic Chairman Bob Graham of Florida. Stay with us.



BUSH: I'm not a stock broker or a stock picker, but I do believe that the fundamentals for economic growth are real.


BLITZER: President Bush speaking to reporters in Chicago on Monday. Welcome back to LATE EDITION.

Joining me now to discuss the corporate responsibility bill, the state of the markets, and more, are two key United States senators. In Miami, the Democratic Senator Bob Graham of Florida, he's the chairman of the Select Intelligence Committee. And here in Washington, Republican Senator Don Nickles of Oklahoma, he's the minority whip, the number-two Republican in the U.S. Senate.

Senators, welcome back to LATE EDITION.

And I want to get to the economic issues in just a moment, but let me ask both of you briefly, Senator Nickles first to you, when you heard the good news that those nine coal miners were rescued, they're alive and well -- God knows the United States needed some good news after all the bad news that's been coming forward in recent weeks and months.

SEN. DON NICKLES (R), OKLAHOMA: Well, it was great. I tried to stay awake last night. I heard the governor, Governor Schweiker said they're going to have some new announcements, you know, around midnight. I fell asleep before that happened. So first thing, turned on the news and heard of their release. I thought this is a real miracle, it's a real answer to prayer.

My compliments to the crews both that were underground for their courage and above ground for their great skill in getting them out.

BLITZER: They were always optimistic in their public statements, Senator Graham, but privately, a lot of nervousness was going on in Pennsylvania. How did you react when you heard the good news?

SEN. BOB GRAHAM (D), FLORIDA: This was a true miracle, that those men could have survived so many hours in those conditions and that the expertise of the men at the top who could have first located and then provided emergency assistance and finally rescue. My father was a mining engineer, used to work underground in the mines of Butte, Montana. And he told me about some of the experiences through which he lived. And it is just miraculous that these men have survived and they all deserve great congratulations from the American people for giving us this latest example of courage and heroism.

BLITZER: On that note, that note of bipartisanship and unity, let's move on and talk about some other issues that might not necessarily have such common agreement. Let's begin, first of all, on the economy.

Senator Graham, do you have confidence in President Bush's economic team -- the treasury secretary, the White House economic advisor, the chairman of the Council of Economic Advisors -- that they are giving the president the best possible advice?

GRAHAM: I think they are giving him the advice that they believe is the best. Whether they have in fact touched the sensitivity of the American people and understand why there is so much concern both in the financial markets and the future of our economy, I'm not so sure.

The action that Harvey Pitt took this week when he asked for Cabinet status and a substantial increases in his own compensation was not a good statement about his basic judgment and his basic awareness of just how that message would be received by the American people, a message that this is a man who is just fundamentally out of touch.

BLITZER: Well, let me let Senator Nickles weigh in. I assume you disagree with Senator Graham on this specific issue?

NICKLES: Well, I do. And I remember Chairman Greenspan, somebody asked him about a week ago, said, you know, what can Congress and/or the administration do to really help the economy? He said two things, you can promote trade and show some fiscal discipline.

I'm not faulting the administration near as much as Congress. We have not passed a budget. We're not showing fiscal discipline. It looks like at last we're going to pass trade promotion authority. And my compliments to the House. They finished about 4 o'clock in the morning. Did pass it. I would guess that we will pass that next week in the Senate.

But we have not shown fiscal discipline in Congress, House or Senate, frankly, but mostly the Senate.

BLITZER: Are you saying -- when you say "we," do you mean Democrats and Republicans?

NICKLES: Well, I criticize -- I'm critical of the Democrats. They're in charge of the Senate. They haven't even called the Senate budget resolution to the floor. And so, for the first time since 1974, we haven't passed a budget resolution, and that has lots of negative repercussions on a lot of issues -- prescription drugs and so on, appropriation bills. It's going to make it very difficult for us to get our work done. BLITZER: What about that, Senator Graham? An issue close to your heart, prescription drug benefits for the elderly out there, is it being held hostage to the fact that there isn't the kind of discipline that Senator Nickles and a lot of Republicans want the Democrats to have?

GRAHAM: I'd like to go back to the time that Mr. Lindsey talked about, December of 1999, when it wasn't President Bush, it was candidate Bush. He made a statement that he thought there were three keys to how we should be focused on our future economy and using what then appeared to be a substantial surplus.

One is to meet key domestic priorities, and he specifically mentioned providing a prescription drug benefit for senior Americans as one of those priorities. Two, reducing the deficit. And then he said, and if there are any funds left over we should consider a tax cut for the American people.

GRAHAM: What's happened is we've just reversed those three, and we've spent most of the surplus on funding a $1.6-plus trillion tax cut. We've made no progress, in fact, gone backwards, in terms of the deficit. And we're now saying that we cannot provide the senior Americans with what they have been seeking for the last 30 years, and that is an affordable, comprehensive, universal prescription drug benefit.

I think we need to get back to the principles that the president laid out while he was a candidate, and they would give us an appropriate direction for what Congress should be doing at this time.

BLITZER: Are you saying, Senator Graham, that the tax cut should be reversed, should be eliminated?

GRAHAM: I think that we ought to put a halt on the future increments of the tax cut. Let's face it, many of these don't even go into effect for four, five or 10 years. They're not going to have any beneficial effect today on the economy. Yet the big deficits that they portend for the future are a drag on the current economy.

BLITZER: Senator Nickles, $165 billion deficit projected this year. The Democrats, at least, say a big chunk of that is the result of the tax cuts the president successfully pushed through.

NICKLES: Well, that's not accurate. The big result of the deficit that we're in right now is the fact that revenues aren't coming in as near as great as anticipated, plus we've been on a spending spree.

And I go back to my original statement. We haven't passed a budget. You know, you can always throw rocks at the administration, and fine, but let's look at Congress. Congress has not passed a budget. And because we haven't passed a budget, we're spending money irresponsibly. And to me, that's not acceptable.

We can control -- we in Congress can control our budget. That's one of our constitutional responsibilities is to -- how much money we're going to spend, how much money we're going to tax.

I disagree with Senator Graham. I'm not in favor of a bunch of tax increases. I don't think that's the recipe for getting the economy to move. If you look at big deficits, the reason why -- the comparison between this year and last year is primarily because the revenues, the capital gains have not been coming in. The stock market is down and so on. So we need to help the economy. And how can we do that? There's a lot of things we can do, but fiscal discipline would be one. And we haven't been showing it. The Democrats have failed to call up a budget resolution, And because of that, we don't have fiscal discipline. And we've spent a lot of money, frankly, that I question.

BLITZER: Senator Graham, Senator Nickles...


GRAHAM: If we could just talk about some tangibles. The president had a chance to exercise fiscal discipline by vetoing the tax cut. He signed it.

The president had an opportunity to exercise fiscal discipline by vetoing a farm bill that many people, including myself, felt was excessive. He signed it.

The president has urged an energy bill, which will add substantially to the deficit. I voted against it. He has indicated he'd sign it.

I think there is a shared responsibility for fiscal discipline, and if we're going to achieve it, it's going to take both the White House and the Congress working together.

NICKLES: It will take both, but Congress passed the farm bill. I didn't vote for it, and, yes, the president signed it. I wish he hadn't. I urged him not to.

The energy bill hasn't been reported out of conference. I'm a conferee. We're working on it. Hopefully, we'll get it out. And I believe it will create jobs. It will help the economy. So hopefully, Congress can get that done.

Hopefully, Congress will do its work and pass trade promotion authority this week. That will help create jobs. That will keep us competitive. That will expand...

BLITZER: Will it pass? Because, as you say, it did pass the House narrowly, but it did pass. The former President Bill Clinton tried to get it through; he didn't succeed. Is it going to pass the Senate, Senator Nickles?

NICKLES: I think so. The Senate traditionally has been more free-trade than the House and traditionally has passed it. We passed it when it went the first time almost 2 to 1. And my guess is we'll be able to pass it with a similar vote this week.

BLITZER: Senator Graham, is he right?

GRAHAM: Yes, I would agree with Senator Nickles. I was the original Democratic sponsor of what is now called the trade promotion act.

The problem is that while it's important, it's not going to have an effect for the next three or four years because it's going to take at least that long to negotiate these complicated trade agreements. So while expanding opportunities through trade is a good thing for the American economy, it's not going to be a fix for our current problems.

BLITZER: The current problems you're blaming precisely on whom, Senator Graham?

GRAHAM: Well, I think there are a lot of culprits to be identified. But I believe the American people look to the president to be our leader, particularly on the economic well-being of our people. And we need some fresh ideas from a fresh team that has public confidence if we're going to begin to move forward.

And I believe focusing on things like how do we get this discipline in our tax and spending processes, how do we get some people involved who show that they deserve to have the confidence of the American people based on the judgment that they are demonstrating, will be important parts, in addition to the just-passed corporate governance law that is going to give us some additional preventive measures, such as avoiding conflicts of interest between accountants and the corporations they serve, as well as strengthened sanctions against those who break the law.

BLITZER: All right, Senators, we're going to take a break.

But we have a lot more to talk about, including your phone calls. I'll also ask both senators whether there will be prescription drug benefits for seniors. We'll be right back.


BLITZER: Welcome back to LATE EDITION. We're continuing our conversation with Democratic Senator Bob Graham of Florida and Republican Senator Don Nickles of Oklahoma.

Let's take a look at this poll, Senator Nickles. Has the stock market reached bottom? A new Gallup poll released on Friday. 17 percent say yes, 73 percent say no.

There are a lot of gloomy people out there.

NICKLES: Well, I'm one.


BLITZER: Are you one of them?

NICKLES: No, I think we're a lot closer to bottom today than we were, you know, a month ago. And everybody, every analyst, every professional you know, says it's going to hit bottom and it's going to go up. And people are trying to figure out where we are.

I think we're a lot closer to the bottom. Maybe we hit it last week. I hope so. But, you know, you can get in trouble guessing stocks. I was great in '98 and '99 at picking stocks, and I've been terrible since then.

BLITZER: Like everybody else.


NICKLES: Oh, I've been terrible. I don't think anybody could do worse the last couple of years. But I can't help but think that we're a lot closer to bottom now, and hopefully it will be turning. Maybe last week was its bottom.

BLITZER: You know, Senator Graham, despite the economic turndown, the gloom on Wall Street, take a look at these job approval numbers for President Bush, the latest Gallup poll: 69 percent approve of the way he's handling his job as president, 24 percent disapprove.

Sure, it's not the 90 percent right after 9/11. But those are still remarkably high numbers for this president, aren't they? GRAHAM: They are remarkably high, and they emphasize that we are in a war. It's a different kind of war, but it is the kind of situation where the American people have traditionally rallied behind the president.

As the war goes forward and we achieve some further successes and maybe even can begin to see the light at the end of the tunnel, then I think the American people's attention are going to increasingly focus on domestic issues, specifically the economy, and that will be the standard by which the president will be evaluated.

So I think it's not partisan advice, it's good advice to the president, that he ought to be using the next few days and weeks to rebuild his economic team and rebuild the confidence of the American people, so that we don't have 70 percent plus who feel that we're still in for a further downward slide in the stock market.

BLITZER: All right. Let's move on, Senator Graham. I want you to weigh in on the veto threat that the president made this past week on the new Homeland Security Department. If Senator Lieberman and a lot of Democrats have their way, the employees, the 170,000 projected employees of the Department of Homeland Security would have the same kind of civil-service protection that most other federal employees have.

Listen to what the president said about that.


BUSH: I'm not going to accept legislation that limits or weakens the president's well-established authorities, authorities to exempt parts of government from the federal labor management relations statute when it serves our national interests. (END VIDEO CLIP)

BLITZER: So is there going to be some sort of common ground on this issue involving this new proposed Homeland Security Department?

GRAHAM: Well, first, let's put this in context. Right after September 11th, a number of us, including myself and Senator Feinstein, introduced legislation that would have created a Cabinet- level agency to defend the homeland. The president resisted that, asked us to defer trying to pursue our legislative ideas.

And it was just a couple of months ago that there was a 180- degree turn, and the president came out in favor of a Cabinet-level department and would bring some 22 agencies together. So the president is a little bit late to the table to be arguing that now he is the leader in the domestic security issue.

On the question of how employees should be treated, which frankly is not an issue that is a core issue of domestic security, the president's threat for a veto, I think, rings somewhat hollow.

In the statement that you just put on the screen, he said that he wanted to have this authority in order to deal with national security issues. The bill that Senator Lieberman has reported has precisely that language in it, that gives to the president and the secretary of the new department the authority to make changes where you're dealing with people who have investigative and intelligence responsibilities that affect national security.

But what the president has asked for is across-the-board capability to change for all 170,000-plus members of this department.

BLITZER: All right. What about that, Senator Nickles? Is the president's veto threat ringing hollow?

NICKLES: No. I happened to go to the White House on Friday, when the president made the statement. There was nothing shallow about it, whatsoever. And the president is stating very emphatically -- and he's doing it before we finish the bill in the Senate, which is the appropriate thing to do -- said he wouldn't sign the bill if we take away authority that previous presidents have had.

Previous presidents have been able to waive collective bargaining agreements if they felt there was national emergency in some agencies, some of these same agencies we're dealing with.

Unfortunately I think some people are trying to take away that existing authority, at the request of some of the leaders of public employee unions. That's not acceptable to the president. It's not acceptable to the House. The House did not do that, and hopefully we won't do it in the Senate.

And the president's kind of drawing a line. He said he wants this bill. And Senator Graham's correct, he was one of the first to push for a new department. He's right in doing so. But we shouldn't be taking away the president's existing authority to be able to waive collective bargaining, if he has to move some people around in a national emergency.

BLITZER: All right. Senator Graham, we only have...

GRAHAM: Well, let me just...

BLITZER: Senator Graham, go ahead. Go ahead, very briefly, because I want to move on to prescription drug benefits.


BLITZER: Go ahead.

GRAHAM: Well, I was just going to say, use as an example the agency that will represent about 25 percent of all the new employees in this department, which is the Coast Guard. The Coast Guard also a 200-year-old agency with many, many relationships between its leadership and its personnel, that has developed over its time as a part of the Treasury Department, more recently part of the Department of Transportation. If we're about to say that we're going to give the president carte blanche authority to roll back 200 years of development of relationships, when many of those have to do with safety at sea and garden-variety law enforcement responsibilities, not the war on terrorism.

BLITZER: All right. I want to move on, Senator Graham, before our time runs out. On this issue of prescription drug benefits for seniors, are you now scaling back your initial proposal, make it more modest, so that you can reach a deal with the Republicans, find common ground, a compromise on this issue?

GRAHAM: What we're doing is focusing on those Americans who are the poorest and, therefore, have the least ability to pay for their prescription drugs and those Americans who are the sickest, those who have costs of over $4,000 a year in prescription drugs.

We are trying to arrive at a beginning point of providing prescription drug coverage for senior Americans that will give every senior American protection against catastrophic cost, while focusing most of our resources on those who are least able to pay.

BLITZER: All right. Senator Nickles, is there going to be a prescription drug legislation that's going to be signed into law anytime soon?

NICKLES: I certainly hope so, but I'm a little doubtful. Senator Daschle did not, one, didn't have a budget marked up. And so, we're still under any budget -- any prescription drug proposal that's over $300 billion has a point of order against it.

If he would tell the Finance Committee, report out a proposal under $300 billion, and no budget point of order would lie against it, we could pass it and get it done. Unfortunately, you (AUDIO GAP) the Finance Committee where Senator Graham and I serve and where a lot of people are interested in putting together a package.

Hopefully we'll be able to do it, but right now they're saying, oh, we have to do it in the next two days. That's almost mission impossible, very difficult.

BLITZER: Senator Nickles, Senator Graham, we have to leave it right there. Thanks to both of you for joining us on LATE EDITION. We'll continue this conversation on another occasion.

And coming up in the next hour of LATE EDITION, we'll have the latest on that dramatic rescue operation. Nine coal miners safe, they're sound, they're in good condition. We'll speak live with Pennsylvania Governor Mark Schweiker.

And also, amid escalating violence in the Middle East and growing tensions with Iraq, I'll have exclusive interviews with Jordan's King Abdullah and Israel's Foreign Minister Shimon Peres.

Then we'll discuss corporate responsibility and the state of the economy with the presidents of the AFL-CIO and the Business Roundtable.

All that and the latest on that coal miner rescue operation, it's all coming up in the next hour of LATE EDITION.


BLITZER: Welcome back to LATE EDITION.

Americans awoke this morning to great news, the rescue of nine Pennsylvania coal miners who had been trapped 250 feet below ground.

Let's get the latest on what precisely happened. Joining us once again from the scene, CNN's Brian Palmer.


BLITZER: And this additional note, in the next hour of LATE EDITION, at the top of the hour, we'll have extensive live coverage of the rescue. But now we turn to the situation in the Middle East, where violence continues with no end in sight.

Earlier in the week, Israel dropped a bomb in Gaza City, killing a Hamas leader, but it also killed nine children.

Earlier today, I spoke exclusively with Jordan's King Abdullah, who joined me from our London bureau.


BLITZER: Your Majesty, thank you so much for joining us on LATE EDITION.

Let me begin with the news in the Middle East this past week, as you know, with the Israeli bombing in Gaza. What can be done now to stop what seems to be an almost tinder-like situation from exploding?

KING ABDULLAH, JORDAN: Well, as has always been the case, the situation on the ground has been very, very frustrating for all of us. That means we just have to renew our efforts to try and move the process along.

What we are hoping to do in Washington is just add on to a series of visits to really get the quartet moving in the right direction, to get a sequence of events that we will hope would lead to maybe an international conference later on this year.

BLITZER: When you refer to the quartet, you're referring to the United States, Russia, the E.U. -- the European Union -- and the United Nations.

Specifically, Jordan, there's been some suggestion that Jordan might get directly involved, perhaps, in helping the Palestinian Authority establish a security force that could be more effective. Is Jordan ready to step back in and send some experts to the West Bank?

KING ABDULLAH: I think we'd be very concerned of getting ourselves into Palestinian business. We always have felt that it's the Palestinians to decide how to move and how to get a transparent society going. Obviously, our relationship with the Palestinians and the Israelis put us in a position where we can move the process forward.

There haven't been any specific requests of Jordan to do anything inside the West Bank. And we'd be very cautious on any direct involvement in the West Bank, so as not to give the wrong signals.

BLITZER: There was some suggestion that the Jordanians could help train the Palestinian security forces in the West Bank and the Egyptians could help train the Palestinian security forces in Gaza. But as far as -- you're telling me that has not really come up seriously.

KING ABDULLAH: Well, that did come up many years ago when the PA first went back straight after Oslo. We were asked to train Palestinian military units that are stationed in many Arab capitals -- Quat (ph) Bader (ph), we call them, the forces of Bader (ph).

We have a brigade-size unit in Jordan. And in those days, I was commander of special operations, and we did train that particular unit to go in as a police force, into the West Bank. But President Arafat, in those days, chose not to take them.

I presume that it probably the option that people are talking about now.

BLITZER: Since President Bush delivered his speech in which he said the Palestinians need new leadership, meaning leadership not including Yasser Arafat, where does the situation stand? Is that at all possible, that the Palestinians will come up with a new leadership?

KING ABDULLAH: Well, if the Palestinians decide to come up with a new leadership, it's really their business. I think it's unfortunate when we get into the cycle of, as outsiders, trying to decide who should be the leaders of other people's countries. I think the Palestinians realize that there is a final opportunity for a future for themselves, i.e. a viable Palestinian state, as the president articulated, in three years. They will want a transparent and efficient society. And I think we just have to leave it up to them to move that way.

But the only way that will happen is if we encourage them that there is actually a goal at the end of this hard path of trying to achieve peace and prosperity in the Middle East.

BLITZER: Former President Bill Clinton, who, as you know, was very active in trying to bring some sort of peace agreement to the region, spoke out on the subject in recent days. I want you to listen to what he said specifically about Yasser Arafat.


WILLIAM CLINTON, FORMER U.S. PRESIDENT: Mr. Arafat may find a way to share power that will be acceptable not only to America but to the Israelis. He, after all, is not getting any younger, and it's difficult to sustain the level of concentration and effort it takes to carry that workload every day.


BLITZER: Is the former president being overly optimistic that Yasser Arafat might step aside a little bit and delegate power to others?

KING ABDULLAH: Well, you must understand that, inside the Palestinian society, there's a lot of discussions on what they want as a transparent, effective form of government that will see them to a Palestinian state. And so, there is a lot of discussions, philosophically, on the role that Arafat needs to play.

He's in a difficult situation with his own people. But at the end of the day, I believe, you know, it's a Palestinian issue, to decide whether Arafat has a future with his people, whether Arafat feels that he can achieve for them a viable Palestinian state. We're getting too much into the game of trying to decide what is the future of the Palestinians. At the end of the day, that is their responsibility and their right.

BLITZER: You say that you're hoping that the so-called quartet could come up with some sort of international conference. But what would that achieve, in terms of easing the -- stopping the fighting, the violence that's been exploding in recent months?

KING ABDULLAH: Well, unfortunately, the fighting and the violence is going to continue until, I think, both Israelis and Palestinians feel that the end-game is viable and in sight.

Now, the president articulated a vision of a Palestinian state within three years. The Arabs have articulated normalization, peace and security with the Israelis. So the cards are all out there. But to be able to really put a stop to the violence -- in other words, giving the people the power to control the extremists on either side that do not want peace -- is to move the process along.

And what we hope to do is, with the United States and the quartet, is create a series of logical steps and responsibilities for Israelis and Palestinians to be able to move the process forward. And sooner or later, that will entail a ministerial meeting, international meeting, somewhere along the line, where you bring all the parties in to be able to set up the timeline and what is required of each side to do within the three-year timeframe that the president articulated.

BLITZER: As you know, many Palestinians, many Arabs don't believe that the Israeli prime minister, Ariel Sharon, is seriously interested in achieving a viable settlement. Do you have confidence that he is?

KING ABDULLAH: Well, again, this is what we're talking about. I think that, left to their own devices, Israelis and Palestinians will find it very difficult to move forward and to break the cycle of violence.

This is why the quartet, the international community must come together to create a series of steps that will articulate what the president just said in his speech, i.e. a viable Palestinian state and security for Israel. Left to their own devices, we're not that confident. And therefore, we need to be able to say to both sides, "Look, this is what's going to be required of you."

And we hope that our meetings in Washington will be just another opportunity to try and get some logical sequences established that will lead to stronger forms of coordination between the Israelis and the Palestinians to move the peace process forward.

BLITZER: Your Majesty, how does the stalemate, the violence between the Israelis and the Palestinians, affect the overall U.S. war on terror in your part of the world, especially against the remaining al Qaeda threat that's out there?

KING ABDULLAH: Well, without talking about specifics, al Qaeda or anything, definitely, the ongoing confrontation between the Israelis and the Palestinians has definitely delayed and hampered the international struggle against extremism.

I thought that the struggle was going extremely well after the 11th of September, but we've had our arms tied behind our backs, all of us in the international community, as a direct result of increased violence that is going on and the lack of moving the Palestinian- Israeli-Arab process forward.

So if, for the United States, terror and extremism is the number- one priority, we have to remind our friends in the United States that we need to move the Israeli-Palestinian-Arab issue forward if we're going to have a decent chance of eradicating extremism and terror around the world. BLITZER: Does the same notion hold, as far as a U.S. effort to overthrow Saddam Hussein in Iraq is concerned? Because, as you know, there are many senior officials here in Washington who want to get going on that front as well.

KING ABDULLAH: Well, I think we have been very clear in Jordan that we have always believed that dialogue with Iraq is the only option. And when I say "Jordan," I also can speak probably on behalf of anybody else in the international community, from China to Russia to all our colleagues in the European Union.

The problem is, is trying to take on the question of Iraq with the lack of positive movement on the Israeli-Palestinian, Israeli-Arab track seems, at this point, somewhat ludicrous.

BLITZER: I want to show our viewers around the world a map of the region where Iraq is. You see Iraq right in the middle. Right next door is Jordan. There's been some speculation, military planners here, saying that if the U.S. is going to invade or launch military action, Kuwait might be a launching pad, Turkey, Saudi Arabia, but Jordan as well.

Has there been any discussion at all between the U.S. and Jordan about using Jordan as a base, as far as Iraq is concerned?

KING ABDULLAH: No, there hasn't. And in actual fact, last week I spoke to city (ph) American officials and apologized for some statements that came out in American newspapers and English newspapers that alluded to American forces being built up in Jordan. And that has not happened and, I don't think, will ever happen.

We do obviously have multinational exercises with NATO and American troops and Arab armies. We have for many decades, and we'll continue to have those. But there are no American troops stationed in Jordan.

And we got an apology from some city (ph) American official that -- the way he described it to me is, "Some young officer in the American Pentagon probably tried to impress a girlfriend, wanted to come up with a story that there was something that he knew about and referenced Jordan." But we have no American troops in Jordan, at this stage.

BLITZER: So, just to be precise, Your Majesty, when you meet with President Bush in the coming days, you will discourage him from undertaking military action against this President Saddam Hussein of Iraq?

KING ABDULLAH: Well, again, I think we've been very clear, we have always felt that dialogue is the best way of dealing with Iraq, trying to bring Iraq back into the international community, that we've always been concerned that the use of force might create tremendous instability in the Middle East, especially in the light that the movement on the Israeli-Palestinian front is not moving the way that we want. When we go to Washington, we're not going to discuss Iraq. We're actually discussing twofold: One, moving the Israeli-Palestinian process forward, working with the quartet, hopefully leading to an international conference.

And the second part of the visit is really to explain the humanitarian suffering that the Palestinian people are experiencing at the moment. There's a tremendous humanitarian crisis going on in the West Bank and Gaza, and we need to find a financial mechanism to be able to alleviate the social and economic frustration that the Palestinians are going through at this particular time.

BLITZER: We have only a few seconds left, Your Majesty, but many of us who knew and admired your late father, King Hussein, are looking toward you and asking, will you be following directly in your father's footsteps in getting more personally involved in trying to bring peace to the region?

KING ABDULLAH: Well, obviously, this is something that we've all inherited from his late majesty, King Hussein, because he understood that bringing stability to our neighbors is stability for ourselves. And if we are ever as the Middle East -- Arabs, Israelis and anybody else in the area -- going to move forward, we have to resolve the problems on the ground.

So, yes, although my priority is moving my people and improving their lives, definitely, we are going to spend a lot of effort trying to help our neighbors resolve their differences, because that gives all of us a chance for the future.

BLITZER: Your Majesty, thank you so much for joining us. Good luck to you on your forthcoming visit to the United States, and hopefully we'll see you here in Washington as well.

KING ABDULLAH: Thank you. Thank you, Wolf, look forward to that.


BLITZER: Up next, the Israeli perspective. The foreign minister, Shimon Peres, joins us to discuss last week's Gaza attack that killed a Hamas leader. Does peace stand a chance?

LATE EDITION will be right back.


BLITZER: Welcome back to LATE EDITION. Earlier today, I spoke with the Israeli foreign minister, Shimon Peres. He was in our Paris bureau.


BLITZER: Foreign Minister Peres, thanks for joining us on LATE EDITION. Let's get right to a huge issue, the Israel decision to bomb that Hamas leader's home in Gaza earlier this week. Many of Israel's supporters are suggesting that Israel may have lost the moral high ground because of the large number of civilians, including nine children, who were killed.

Was it a blunder?

SHIMON PERES, ISRAELI FOREIGN MINISTER: I think it was a mistake, and all of us regret it. The heads of the army and the defense ministry said, would they know that this would be the result, the operation would never take place. Because, as you know, it was eight times postponed, because there was a danger that innocent people will be hit.

BLITZER: As you know, many people can't believe that the Israeli military, the intelligence, wouldn't know that a 2,000-pound bomb dropped from an F-16 would cause that kind of devastation in a populated area.

Did the Israeli military do enough to make sure that there weren't going to be civilians and children at that location?

PERES: Generally, this is the rule, and this is the norm. But unfortunately, in wars you have mistakes. As you know, the greatest mistake is war itself. I wish we wouldn't have to do it at all.

BLITZER: I want you to listen to what the White House press secretary, Ari Fleischer, said in an official statement immediately after the destruction was determined. Listen to what he said.


ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president has said repeatedly that Israel needs to be mindful of the consequences of its actions in order to preserve the path to peace in the Middle East. The president views this as a heavy-handed action that is not consistent with dedication to peace in the Middle East.


BLITZER: Many others are also saying that it came precisely at a time when there was some glimmer of hope, some progress in trying to resume peace negotiations.

Was this an effort, as some are suggesting, to torpedo that process?

PERES: I am convinced that this is not the case. Nobody has had such an intention whatsoever.

As a matter of fact, we are continuing our contacts and meetings. This morning, the government has decided to increase the number of workers that can work days (ph) in Israel from 7,000 to 12,000. We have decided to de-freeze (ph) the money and to take many other measures to ease the situation in the territories. I am sure that all of our commanders and all of our decision- makers are very mindful not to do things which are out of our basic moral norms, and we don't intend to kill civilians, and clearly not to attack children.

BLITZER: So are you convinced...

PERES: We regret it very much, as I have said.

BLITZER: Are you convinced that the Israeli military did do everything possible to try to find out who was in that house before the order was given to launch that bomb?

PERES: Apparently, that was the information available to them.

BLITZER: Let me read also...

PERES: I mean, there are no children and no civilians.

BLITZER: I want to read from an editorial in the Los Angeles Times on Thursday, which said this: "Israeli civilians will suffer most from their leaders' recklessness in using a 2000-pound bomb in crowded Gaza City to kill one terrorist leader. The assault was a military disaster, guaranteed to create more Palestinian suicide bombers."

And as you know, the prime minister has warned that Israel must now be on the highest state of alert. Are you anticipating major retaliatory efforts by the Palestinians?

PERES: I think -- well, let's not talk about the Palestinians. We have to talk about some Palestinian organizations. I do not believe that all of the Palestinians would like to see this sea of blood flowing around. But when it comes to Hamas and when it comes to Jihad and when it comes to the Popular Front, they are trying to do their very best in order to kill people.

You know, the Hamas has two headquarters, one in Syria, which is very extreme, and the other in the territories which may be less extreme. But they're trying all the time to do the utmost in order to destroy peace, the hope of peace. And in my judgment, they're destroying the chances and the position of the Palestinian people.

Nobody was more hurt by their act than the Palestinian autonomy and the Palestinian people. They make a mockery of the Palestinians. They showed to the rest of the world that the Palestinian leadership is incapable to control the situation. Very much because of it, the Palestinians and Arafat have lost their credibility in the United States, in Europe and, clearly, in Israel.

BLITZER: You've been meeting, as you point out, with some Palestinians in recent days, including Saeb Erekat. Is there any prospect whatsoever that some serious peace negotiations can get off the ground, direct negotiations between representatives of the Israeli government and representatives of the Palestinian Authority? PERES: Let me start by saying that the climate in our meeting was in a very fair approach by both sides. We are trying to talk down to earth, in a very pragmatic manner. And from what I understood, the Palestinians, too, emerged from those meetings with a great deal of hope and satisfaction.

Now for the first time, we do have a vision for the future. The address by the president of the United States, Bush, saying that in a matter of three years we shall have a two-state solution, namely a Palestinian state and the Israeli state, gives the Palestinians a clearer hope. They can know now where we're heading to.

And I think what is needed is really to have a road map how to arrive there. We are trying to really do whatever is possible to facilitate the situation economically, socially, psychologically and even politically.

You know, you met with -- you interviewed King -- the king of Jordan. If the Jordanians -- sorry, if the Palestinians would take an example of the Jordanians, we would be out of troubles (ph). Most of the Jordanians are probably Palestinian origin, and yet our relations with them are excellent.

There are two cities nearby, the Alat (ph) and Aqabah. The distance between them is maybe six miles, five miles. For the last 54 years, since the establishment of the state of Israel, there wasn't a single cartridge being fired from one side to another side. The whole area between the Red and the Dead Sea is an open area -- no fences, no trenches, no infiltration, no killing.

And if the Palestinians would take the example of their brothers in Jordan -- they don't (inaudible) -- the whole situation would be changed immediately, and we could've moved ahead toward a peaceful solution.

BLITZER: Do you still believe that the Palestinians should have early elections, perhaps in January?

Because, as you know, many experts believe if there were these elections, A, Yasser Arafat would almost certainly be re-elected the leader of the Palestinian Authority, and B, in local elections, some of the more extreme elements, like Hamas, would do very, very well.

PERES: I have my doubts, because I don't think that democracy means only elections. Elections is a door that opens to democracy. But if, in the wake of elections, there is no democratic system and procedure, so it's a waste of time.

What I mean by it, unless the Palestinian Authority will establish some democratic principles, especially concerning the economic situation, the financial situation and the security situation, elections will mean nothing. Unless they will control their forces, unless they will manage their money, what will the elections help?

And if this will not happen, our army will be forced to remain wherever it is today, and it will be difficult to run elections. So they have to put order in their own house before we can move ahead.

BLITZER: Jordan's King Abdullah told me today that he is hoping the so-called quartet -- the U.S., Russia, the Europeans and the United Nations -- could get together and have an international conference sooner rather than later to try to, in effect, put pressure on the Israelis and the Palestinians to get a peaceful process under way. The Israelis and the Palestinians, he says, can't do it. They need help from the outside.

Do you agree with him?

PERES: I agree partly, because I don't see what for it is needed to put pressure on Israel. We agree practically to everything -- to a cease-fire, to a negotiation, to a clear vision for the future.

The problem is with the Palestinian Authority. Can they or cannot they -- are they willing or unwilling to become in charge of all the arms and arms carriers? This is the real problem, the only problem, to start with.

BLITZER: As you know, the Reverend Jesse Jackson is now in Israel. He's trying to get some sort of peace process going between the Israelis and the Palestinians. Do you see him as contributing to this process?

PERES: I met him just this morning before I took off for Paris. He is speaking about a policy which is similar to the one that Gandhi and Nelson Mandela and Luther King adopted, namely non-violence. I welcome his call.

And if the Palestinians will follow suit, will take those leaders and their policies as an example, they will win much more by using arms, believe me. The minute they will stop using arms, they will begin to win politically. As long as they are using arms, they will lose politically, time and time again. They are mobilizing the whole world against them. I think the moral strength of Gandhi gave India more than hundreds of thousands of soldiers and rifles and guns.

BLITZER: Foreign Minister Peres, thanks so much for joining us. I know you're on your way to the United States. We'll look forward to seeing you here when you're in Washington. Thank you very much.


BLITZER: And still to come, complete coverage of that dramatic rescue of nine coal miners in Pennsylvania. I'll be speaking with Pennsylvania's Governor Mark Schweiker.

But up next, it was another wild Wall Street week. We'll discuss corporate responsibility, free trade and other labor issues with two top leaders in the business and labor communities. The AFL-CIO president, John Sweeney, and the Business Roundtable president, John Castellani.

LATE EDITION will be right back.



PAUL O'NEILL, TREASURY SECRETARY: The fundamental strength of our economy is good.


BLITZER: The treasury secretary, Paul O'Neill, on Thursday. Welcome back to LATE EDITION.

Joining me now to talk about corporate responsibility, homeland security, the state of the U.S. economy, our two special guests: John Castellani, he's president of the Business Roundtable, that's an organization that represents some 150 top CEOs across the country. And John Sweeney, he's president of the AFL-CIO.

Gentlemen, welcome to LATE EDITION.

Do you agree, President Sweeney, with the assessment of the Bush administration, the treasury secretary, that the fundamentals of the U.S. economy are strong right now?

JOHN SWEENEY, PRESIDENT, AFL-CIO: I don't believe that that's true, and I think that there are a lot of -- depends on what you're talking about when you talk about fundamentals. Is he talking about jobs? Is he talking about high wage, middle class...

BLITZER: I think he's fundamentally talking about economic growth projected by some of the Blue Chip forecasters at around 4 percent this year.

SWEENEY: Hopefully we're -- we can be optimistic, but I think there's a lot of questions out there, and it remains to be seen. And I think it's too soon to be calling it.

BLITZER: What do you think, Mr. Castellani?

JOHN CASTELLANI, PRESIDENT, BUSINESS ROUNDTABLE: I am optimistic. We've had 4 percent growth projected, as you said, against a backdrop of an incredible shock that we took after the attacks of last September.

The growth is there, we're starting to see more activity across broader sections of the economy. It's not as robust as we'd like to see, and that's why it's important to make sure that we do everything possible to keep consumer confidence up, to encourage business investment and encourage the growth of jobs.

BLITZER: Larry Lindsey, the White House economic advisor who was on this program earlier, said that the passage of the trade promotion authority, that the president is seeking the passage in the House of Representatives this weekend, expected to pass in the Senate, is going to help strengthen the U.S. economy by creating lots of jobs.

Are you in full agreement with them on that notion? SWEENEY: We're not in agreement, and we're not optimistic about it. We think that fast track is not the right track.

This is not about trade, it's about how we treat our workers and how we treat the basic rights of workers. We can do everything to protect capital and property rights and all of the other needs of business. But we're losing high-income, middle-class jobs, and whatever job increase there might be, it's low-wage without health benefits. And we're not supporting campaigns against child labor and forced labor and workers rights with our trading partners.

BLITZER: But, as you know, five American presidents, all five previous presidents including Bill Clinton, did have that authority to negotiate trade deals and then allow the Congress to either pass it or reject it without forcing through amendments.

What's wrong with giving the president that authority?

SWEENEY: I think taking away the right of Congress to amend a bad trade deal is giving up an important prerogative of the Congress. I think that if we look at the economy in the years that President Clinton did not have trade authority, the economy did very well since 1994.

BLITZER: Well, what about that, Mr. Castellani?

CASTELLANI: Well, this is a good bill. It's balanced. It does provide some help for those who lose their jobs because of trade- related activities. But more importantly, while it's not going to provide more jobs tomorrow, it's necessary for long-term growth.

You know, more than 190 trade agreements have been negotiated all around the world, and we're only part of a handful, five or six. The rest of the world has recognized that free trade, open trade, is a way for economic growth and bettering the circumstances of people whose jobs are created by that growth. We're the ones who have been behind.

So this is a good bill. I'm glad to see us back in the game.

BLITZER: You're resigned to the fact that the Senate is probably going to pass it and then the House-Senate will send it to the president for his signature?

SWEENEY: It looks that way.

BLITZER: So you're not going to be able to do much to stop that?

SWEENEY: We'll continue to advocate our position in support of workers and human rights. I just say that, why can't we address workers issues as we address capital business?

BLITZER: Let's talk about this corporate responsibility issue, some of the scandals that have been unfolded.

You know legislation, Senator Sarbanes of Maryland, pushing through legislation, tightening up a lot of the specific provisions that would make CEOs a lot more accountable. They would have to certify, for example, that the numbers they provide the public are accurate.

Some CEOs right now are saying that this legislation is going to do a lot more harm than good. Are you among those?

CASTELLANI: No. No, we supported the legislation; we supported the process.

You know, we were appalled. Our members were absolutely angered by the revelations that have come out over the last several months of corporate wrongdoing, and we support the people who did wrong being prosecuted to the fullest extent of the law.

CASTELLANI: This bill, what the president is expected to sign next week addresses three important areas.

First, it restores credibility to the accounting process and the outside auditing process.

Secondly, it enhances transparency, and transparency's the most important thing. You ought to be able to see -- what you see should be what you get.

And third, there's fairness in it. Wrongdoers will be punished. If they've made any money when they were doing wrong, they're going to be required to give it back.

BLITZER: So you support it.

What do you think about this? Is it enough? I assume maybe you want some more.

SWEENEY: You're right.


The Sarbanes bill was a very good bill, and I appreciate the responsible way in which John and the Business Roundtable has reacted and responded. But there was a lot of resistance to the Sarbanes bill, and it was very reluctantly that members of the House have come around, and the administration as well.

There is a lot more. This is not a BandAid approach. This is not a short-term response. For the long term, we have to get into addressing the issues of the 401(k) reform, pension reform. We should certainly be focused on stock options as an expense and -- or maybe abolished. But there is much more to do.

BLITZER: The notion that there have been a few rotten apples out there but that, by and large, the CEOs, the major corporate executives are doing the right thing, they're honest and they're hard-working, do you accept that?

SWEENEY: Well, we have to see. I hope that there are a lot of good apples out there, but it remains to be seen. And I think that corporate America has to be more responsible and more accountable.

And I think that the average worker and average person throughout the country is angry and concerned. If they got their 401(k) statement recently, they have more reason to be angry and concerned.

And I think that that's something that we should not just think that, now that we have the Sarbanes bill, we can ease off. There's a lot more to be done.

BLITZER: The Enrons, the WorldComs, are these a few rotten apples, a few bad cases, or is it more widespread than perhaps some think?

CASTELLANI: Well, first of all, one is too many. I mean, the people who have lost their savings, the people who have lost their jobs, as a result of this kind of action, are hurt the most of anybody in the country, and that's deplorable.

No, I don't believe it's widespread. I think the preponderance, the overwhelming majority of corporate chief executive officers take their jobs seriously. It's a privilege to be a chief executive officer.

And the important thing, where John and I do agree is, the Sarbanes bill isn't enough. It's now up to us in corporate America, it's up to the leaders of corporate America, to demonstrate that we hold ourselves to the highest ethical standards and we drive those standards throughout the company.

BLITZER: But can you do that without being forced to do it by the government?

Let me read to you what Warren Buffett wrote in the New York Times. He said, "To clean up their act on these fronts, CEOs don't need independent directors, oversight committees or auditors absolutely free of conflicts of interest. They simply need to do what's right. As Alan Greenspan forcefully declared last week, the attitudes and actions of CEOs are what determine corporate conduct."

And in this mentality, this, what some are calling "corporate greed mentality," these CEOs, at least some of them, the suggestion is, are running amok.

CASTELLANI: It's a few of them, very few of them. The vast majority of them operate in a highly ethical manner and are consistent with what Warren Buffett has said and what we would want everybody in America to do, and that's do what's right, not just what's required.

BLITZER: The homeland security...

SWEENEY: If I may just add...

BLITZER: Go ahead.

SWEENEY: Alan Greenspan also said that there's an atmosphere of infectious greed out there. And that's good reason to believe that this is more widespread.

BLITZER: We only have a few seconds left, but before we go, this homeland security bill, the president threatening to veto it if he doesn't have the flexibility to deal with the employees on this front, given the fact that there is a war against terror right now.

How determined are you to fight the president on this specific issue?

SWEENEY: I told Governor Ridge on Friday, when we had a meeting about this very issue, and there's a misguided position here on the part of the administration. These workers are as strong or supporters of national security as anyone in this country.

And their rights should be protected in terms of collective bargaining and in terms of laws that cover their employment. We give collective bargaining to the firefighters and to the police officers, and they've certainly displayed their heroism in national security. And that should be for any worker who wants to be protected by collective bargaining.

BLITZER: All right. We've got to leave it right there. John Sweeney, president of the AFL-CIO, thanks for joining us.

John Castellani of the Business Roundtable, thanks for joining us as well.

CASTELLANI: Thank you.

SWEENEY: Thank you.

BLITZER: Thank you.

Coming up next, Bruce Morton's essay.


BRUCE MORTON, CNN CORRESPONDENT: It's only when you get back to Washington that things start to look odd, but of course that's normal, too.


BLITZER: From the local race for mayor to national legislation, no one can claim Washington, D.C. is boring in the summer. Stay with us.


BLITZER: Bruce Morton took a break from Washington for a few days. When he came back, it was politics as usual.


MORTON (voice-over): Things are more or less normal in America these days. I was in Chicago last week -- same terrific food, terrific architecture. The Cubs had fired their manager; they often do. They lost when I was there. Sammy Sosa hit a homerun. Wrigley Field looks gorgeous. What else is new?

It's only when you get back to Washington that things start to look odd, but of course, that's normal, too.

Congress is debating a bill creating a Homeland Security Department, with the president insisting he needs to be able to get rid of civil-service regulations, hire and fire at will and so on.

You could, of course, go all the way back to what used to be called the spoils system: Party A wins, fires everybody, gives all the jobs to its party hacks; Party B wins, fires the A hacks, gives the jobs to its own and so on.

But will a department work better, if employees are telling each other, "If the boss calls, get his name?" Do you suppose that's how Enron worked?

Still, the president says he's got to have flexibility, nevermind a union and all that.

The House did one wise thing, ban programs which would have had Americans -- letter carriers, meter readers, truck drivers and so on -- spy on other Americans. Would the mailman have looked to see who was writing you? We'll never know now. Republican leaders favored privacy over snooping.

The Bush administration withheld $34 million in international family planning funds for the United Nations. The administration said the money would help implement coercive abortion in China. Columnist Ellen Goodman says, no, the money wouldn't go to China and it's against existing U.S. law to fund overseas abortions anyway. But, hey, abortion is one of those debates where logic often is an early casualty. If you want final proof that things are muddling along fairly normally, consider this. Anthony Williams, the mayor of Washington, D.C., a Democrat and a man who has no serious opposition in this fall's election, managed to mess up so badly that the D.C. Elections Board unanimously voted to deny him a spot on the ballot, saying his campaign workers may have broken the law.

Well, Tony Blair's name was on a petition and Kofi Annan's -- it does sound a little strange.

Oh, yes. And the chairman of the Securities and Exchange Commission wants to a raise in Cabinet status, presumably because things have been going so well on his beat.

Yes, terror is real and not over with, but we're muddling along at what passes for normal here.

I'm Bruce Morton.


BLITZER: Thank you very much, Bruce. It's time now to say goodbye to our international viewers. Thanks very much for watching.

Coming up for our North American audience, a special program. We'll have live coverage of that dramatic rescue operation in Pennsylvania. Stay with us.


BLITZER: Welcome back to LATE EDITION.

We'll have extensive coverage of that dramatic rescue operation in Pennsylvania, but first, let's go to CNN's Renay San Miguel in Atlanta with a news alert.


BLITZER: Let's begin our coverage of the dramatic rescue of nine trapped coal miners in Pennsylvania. Our Brian Palmer is standing by once again. He's on the scene.


BLITZER: Just a short while ago, I spoke with the man who oversaw the entire rescue operation, the Pennsylvania governor, Mark Schweiker.


BLITZER: Governor Schweiker, thanks for joining us. Congratulations.

First of all, how are those nine coal miners doing? I know you've had a chance to speak with some them.

GOV. MARK SCHWEIKER, PENNSYLVANIA: I'm literally sitting in a hospital in Pennsylvania and completing my visits to the nine formerly trapped miners, I'm proud to say, and they are doing just fine. Two have some remaining ailments, but seven are in real good shape. In fact, three of them have already been discharged.

BLITZER: Obviously, this is a lot better news than a lot of people anticipated. What were your thoughts behind the scenes? Were you confident always this would turn out well?

SCHWEIKER: Well, I think we had powerful reasons to be confident. I would be less than truthful, if I said that I didn't have fretful moments when we lost that drill bit and we ceased drilling for over 10 hours, it was a great concern to me.

But I believe we had legitimate reasons to be confident. Chief among them, we had assembled the finest minds, the finest technology and the finest high-impact equipment to get the job done and get them up. So I think with that in our stable, we had reason to be confident.

BLITZER: We are hearing that President Bush has been in touch with you.


BLITZER: Has he? What did he say?

SCHWEIKER: Well, we had one indirect exchange and a direct conversation. And the indirect exchange is this challenge was presented to us on Thursday. You know, we needed to have the support from the White House, and we certainly got it.

But in the direct conversation with the president, he had offered the support of the nation and certainly his administration and prayers and, importantly, the mechanical assets whether it's the decompression chambers that the Navy provided to the technical expertise that the mine safety people within the Department of Labor had provided. So the administration and the president certainly came through.

BLITZER: And have you spoken to the president since the good news?

SCHWEIKER: No. I've been -- with his schedule and my schedule, have just not been able to match. And keep in mind, I didn't finish my work, including some logistical decisions that had to be made, until 4:00 a.m. in the morning. So because of mission-critical steps and my involvement, we just haven't been able to hook up, but it's going to be sometime today.

BLITZER: I know that you've been speaking to these miners. They're recovering right now. Very briefly, give us the upshot. What's their message to you?

SCHWEIKER: Well, I think what they'd like me to do is acknowledge the sentimental expressions of support and the prayers that many Americans have provided. And I think it's safe to say that they are grateful for the entire rescue team, whether it's myself, as the governor, to the other 100 to 200 rescue professionals helping bring about this miraculous outcome.


BLITZER: That was Governor Schweiker, the Pennsylvania governor, obviously very, very elated over this good news. Those nine Pennsylvania miners in good shape, rescued all alive, obviously.

President Bush, by the way, according to a spokesman, was thrilled to learn of the successful rescue operation. According to a White House press spokesman, he was thrilled to know that all the miners had been rescued, were reunited with their families and were doing just fine.

The White House chief of staff, Andy Card, had briefed the president on the rescue operation, just before the president headed off to church earlier this morning. The White House had dispatched a top Department of Labor official, Dave Lauriski -- he's director of the Mine and Safety Administration -- over to Pennsylvania to coordinate, to make sure that everything the federal government could do was available, to make sure this rescue operation would succeed.

The statement from the White House goes on to say, "This is a wonderful example of federal, state and local officials working together cooperatively to conduct the rescue operation."

Shortly, we'll be speaking with David Lauriski about the federal government's role in this successful operation.

But now, let's bring in our medical correspondent, Dr. Sanjay Gupta.

Sanjay, this was an incredible operation. And I was amazed, I don't know if you were, that these nine coal miners, having spent 77 hours 240 feet below the ground in very dank circumstances and water and the air was in awful condition, they seemed to be in pretty good shape right now.

DR. SANJAY GUPTA, CNN MEDICAL CORRESPONDENT: Yes, no doubt, Wolf. That is pretty surprising. A lot of concerns with something like that -- air, obviously, being the biggest concern. They obviously found an air pocket, were able to breathe OK.

Dehydration, also a big problem. When you start to get 77 hours out without sufficient water, people can start to run significant risk of dehydration, which can lead to all sorts of problems, including cardiovascular problems with the heart, with the blood vessels, things like that.

Also, the pressure, as you mentioned, 240 feet down, when you start moving people from that sort of depth upwards, you do you risk certain things, like the bends. That's why those decompression chambers were brought to the scene. Certainly, as you come closer to the surface and the pressure changes within your body, that can cause problems like the bends.

And then the hypothermia, which people have been talking so much about. It's pretty amazing to me they had the foresight to go ahead and push that pressurized warm air down into the mine, prior to allowing those miners to actually have temperatures greater than 55 degrees, from what I understand. They still got quite hypothermic, but certainly without that warm pressurized air being blown down, they could have been much worse.

There probably are still some other concerns. Certainly, standing in one spot for that long, 77 hours, can cause some of the muscles to break down. That can cause some problems later on down the road. There's also an entity known as trench foot, which actually is caused by submersing your feet, literally, in cold water for long periods of time. So that's something we heard about from military days, from wars, people actually walking around with wet feet for long periods of time. That might be something later on down the road that might be of concern.

But no question, Wolf, pretty remarkable sort of rescue effort and recovery. All nine miners seem to be doing pretty well. BLITZER: Hypothermia, for those of our viewers who aren't familiar with that, Sanjay, what exactly is it, and what are the dangers from it?

GUPTA: Well, hypothermia, basically, is lowering your body temperature down. They say usually below 95 degrees. The typical body temperature is about 98.6 degrees.

As your body gets cooler and cooler, several things start to happen, including, first of all, poor judgment. You just start to lose lack of judgment. You start to get very cold. Your blood vessels, the blood in your blood vessels doesn't flow as well. That can start to lead to organ shutdown.

Usually what happens is someone that gets quite hypothermic, quite cold, their organs will fail, they will go into unconsciousness, and it will subsequently lead to death if they are not warmed up fairly rapidly.

And I can tell you, from what I've been hearing about these miners is, they've been able to be warmed up using passive means, meaning blankets, warmers, things like that. In more extreme cases, they've actually had to take warm IV fluid and actually inject that IV fluid into the blood vessels and quickly warm up the entire body using warmed IV fluid. From what I've read so far, they haven't had to do that in this case.

But no doubt the temperatures were quite cold, and the miners were quite hypothermic when they were brought to the surface, from what I understand, but not dangerously so.

BLITZER: Fortunately for that, thank God.

Dr. Sanjay Gupta, Sanjay, thanks for helping us better understand some of these medical predicaments. Appreciate it very much.

GUPTA: Thank you.

BLITZER: We have much more to report. We will take a quick break. When we come back, we'll hear some dramatic words from one of the rescued coal miners. And we'll also speak to two men involved in the dramatic rescue operations. Much more coverage. Stay with us.


BLITZER: Welcome back to LATE EDITION.

We're taking a look -- a close look at the successful rescue operation of nine coal miners who had been trapped for some 77 hours, 250 feet below the surface of the earth. They have emerged. They're all in relatively good shape.

Right now, just a short while ago, one of those nine coal miners, Leslie Mayhugh -- excuse me, Blaine Mayhugh, spoke out about how he feels.


BLAINE MAYHUGH, RESCUED COAL MINER: It was Thursday, around 12:00 noon, and the water started rising. And we was running out of room, so I asked the boss if he had a pen. And he said, what for, I said, well, I want to write my wife and kids, you know, to tell them I love them, you know.

And then my father-in-law, he tied us all together so we wouldn't float away from each other. And then the boss said, well, we got one more try. He said, the number one entry is higher, so, everybody, let's go there and give that a shot, you know.

And then we got there and the water seemed like it stopped. And then for about a day and a half it stayed at that level. And then we didn't know what to think.

QUESTION: When did you become aware of efforts to rescue you?

MAYHUGH: We heard the big drill on and off, but we thought maybe they couldn't find us or maybe they broke down or -- we didn't know what to think.

You had your high points and low points every day. I mean, you're like, OK, it sounds good, and then at one time the drill, I think we timed it, it was like 16 hours we never heard it run again. So we thought, well, maybe they gave up on us or something major happened. You know, we had no idea what to think.

QUESTION: (OFF-MIKE) got you through?

MAYHUGH: A miracle, I mean, God. Between God and my wife and kids, that's the only thing that got me through. QUESTION: (OFF- MIKE) any sort of prayers down there?


QUESTION: You all stated tapping on the drill when it came down. How did that...

MAYHUGH: When they first gave us the air shaft, the six-inch air shaft, we hit on that right away and we got a response. But it didn't go maybe an hour later and the water came up too high, and we had to get back out of there.

So then we proceeded on the roof back where we was, hoping they'd locate us over there, which we never got -- you're supposed to get shot blast from up above, which we never heard.

QUESTION: (OFF-MIKE) the water was so cold...

MAYHUGH: Well, we was on dry actually. We had maybe 50 feet by 20 feet compartment that was relatively, I'm not going say dry, but the bottom was moist.

QUESTION: How were you guys (OFF-MIKE) MAYHUGH: Snuggling each other, laying up against each other, sitting back to back to each other or anything to produce body heat, you know.


MAYHUGH: Anything imaginable. About your family, the last thing you said to your family, you know, before you left from work that day, you know. And the only day in my life I never kissed my wife before I went to work, that had to be the day.

QUESTION: Who was it that (OFF-MIKE)

MAYHUGH: Everybody. Everybody had strong moments. Any certain time maybe one guy got down and then the rest pulled together. And then that guy would get back up and maybe someone else would feel a little weaker. But it was a team effort, that's the only way it could have been.


BLITZER: He's holding back tears, but those are happy tears. Blaine Mayhugh standing next to his wife, Leslie. Very, very happy, of course, that he's one of those nine coal miners who emerged safe and sound, trapped underground for more than three days.

Joining me now, two special guests: In Sipesville (ph), Pennsylvania, the fire chief, Mark Zambanini. He was one of the volunteers who was deeply involved in the rescue operation. And David Lauriski, he's joining us on the phone. He's the assistant secretary of labor in charge of mine safety in the federal government. He was also on the scene. Chief Zambanini, let me begin with you. Talk to us about this rescue operation, what you and your volunteers did to make sure this was successful?

MARK ZAMBANINI, FIRE CHIEF: Well, good afternoon, Wolf.

First, started out the evening of the accident, I was paged by the Somerset 911 system and asked to call communications over the phone, which told me we were dealing with something right away out of the ordinary. And I called in by phone, and they told me that there was an accident at the Quecreek Mine. The mine flooded. We had miners trapped inside. Immediately I thought this is what I've been waiting for all along, my worst nightmare.

We went to the fire station. We had a quick officers' meeting, laid out a little strategy what we might do, thought about what resources we might need. Went straight to the mine face from there, talked to the people in charge of the mining operations. Confirmed the number of men we had trapped, what we were dealing with.

From there, we went to the site which was the rescue site. At that time, we set up lighting. The mining people come in with GPS, plotted out a hole, put a stake in. A drilling rigs came, in the wee hours of the morning, they started to arrive. We started the six-inch rescue -- or the six-inch hole that was put in first. That's when we got the taps on the pipe.

Immediately we started putting the air down, at 950 cubic feet a minute. Firefighters had to go in with air bags, crawl underneath the drill, slip the air bags down between the drill steels and the hole, inflate those bags. And that stopped the air from coming back up out and escaping. We continued pressurizing that hole from that time until today.

BLITZER: And did happily. Chief, stand by, I want to bring in David Lauriski. He was the top federal official who was brought to the scene.

At what point, David, were you brought there and told to do whatever you could do to make sure this was going to be a successful rescue operation?

DAVID LAURISKI, ASSISTANT SECRETARY OF LABOR FOR MINE SAFETY: Well, right, one of the charters that we have is, you know, we have oversight on all the mine safety and health across the country. And so, when this accident occurred there would have been an immediate notification of some -- of one of our local offices here in Pennsylvania.

As soon as -- as soon as there was a determination of what the conditions were, I would have received a phone call. And I received that phone call on Wednesday night, just shortly after getting off a plane in Denver, Colorado. I'd gone out to do some work there.

And so I was notified very quickly, and I stayed basically in phone contact for the first day, and then I flew in here early on Thursday, and I've been here ever since. And so, to oversee the operations with some of our folks out of our Washington office and out of our local offices here in Pennsylvania.

BLLITZER: You were always upbeat, or were you gloomy? Were you pessimistic that this would have a happy ending?

LAURISKI: Well, Wolf, I've been in this business a long time and I have a lot of mine rescue experience, and one thing I've learned over the course of my career is that you never give up hope. You have your highs and your lows, but one of the things that most important is that you never give up the opportunity for rescue unless you have information that tells you something different. And we never had that information in this case.

We always had positive information. It wasn't always information that was constant, but we never really had anything negative. And so, we were always optimistic that we would find this sort of a result, and you know, we did. And it's a great ending to a great story.

BLITZER: Chief Zambanini, did you have a chance to speak with any of the nine rescued coal miners?

ZAMBANINI: No, Wolf, I did not. I was on safety officer duty, on the litters, bringing them from rescue hole 1 to the Decon (ph) center. I had no verbal contact with any of the men to this point. BLITZER: Chief Zambanini and Secretary Lauriski, I want to thank both of you for joining us. Congratulations to both of you for a job well done. All Americans, of course, very proud, thrilled, by this successful rescue operation.

This programming note. Don't forget, tonight, a special CNN program on the coal-miner rescue operation. That's at 10:00 p.m. this evening, 10:00 p.m. Eastern, 7:00 p.m. on the West Coast, "Alive: Rescue at Quecreek," 10:00 p.m. Eastern.

Coming up next, our Final Round. Our panel sounds off on the hot news of the week. The Final Round, right after a news alert.


BLITZER: Welcome back. Time now for our Final Round.

Joining me, Julianne Malveaux, the syndicated columnist, Maria Echaveste, the former Clinton deputy White House chief of staff, Jonah Goldberg of the National Review Online, and Robert George of the New York Post.

The rescue of those miners put a smile on the face of America. Nine men back from the hellish depths of a flooded coalmine. Their survival is a bright spot in an often gloomy world of missing children, a limping economy and a war on terrorism.

Maria, what's the lesson that all of us should be learning from this very, very good news?

MARIA ECHAVESTE, FORMER DEPUTY WHITE HOUSE CHIEF OF STAFF: Well, I think what's tremendous is how everyone came together, including what a lot of people don't recognize is, our government resources. I mean, they even had nine decompression chambers from the Navy ready there, in case they -- luckily, didn't need them. But all the resources that -- especially those people who always rail against government ought to recognize it was working.

BLITZER: This was a great example of cooperation of the local, state and federal levels.

ROBERT GEORGE, NEW YORK POST: Sure. And even those of us what rail against government never rail against, say, the military, which of course the Navy is part of.

You know, but -- I mean, we can always, you know, look in to see the broader implications, but it's, you know, it's just a great story, you know, because I think almost everybody, their first thought was that hardly anybody's going to survive from this. And the fact that all nine came up is almost miraculous.

BLITZER: Given all of the bad news that we've had lately, Julianne, I know I was gloomy from the beginning. I was not very hopeful, but then again I don't know much about rescuing coal miners. This is what the country needs, some optimism right now, isn't it? JULIANNE MALVEAUX, SYNDICATED COLUMNIST: It was a very optimistic story. You know, Friday morning I saw it, I said they're never going to get these guys out. I mean, that was my initial reacton, I think almost everybody's initial reaction, just based on the barriers.

So there are all of these, you know, moral tales we can spin about resilience and all of those things, and those are good things to have now. I mean, would that the economy would rally (ph) back the same way the miners did.


JONAH GOLDBERG, NATIONAL REVIEW ONLINE: Well, first of all, Wolf, I think you know a lot about mining.


BLITZER: I don't know much about it.

GOLDBERG: Let's just be straight about it.

But, you know, I totally agree. I do think that the Navy is part of the small government that we railers against big government recognize.

But, you know, I think it was Eugene McCarthy, in the spirit of bipartisanship here...


GOLDBERG: ... who said America's the kind of country that can choke on a gnat but swallow tigers hole, by which he meant that America will rally around when it really needs to and put down all the trivial differences and do what it has to do.

BLITZER: Some badly needed good news.

Let's move on. The Bush administration might want to put the U.S. stock market in one of those rescue cages...


... from the Pennsylvania mine and hoist it up higher today. The treasury secretary, Paul O'Neill, was making the rounds selling America as a good buy and a solid investment.


PAUL O'NEILL, U.S. SECRETARY OF TREASURY: People who are invested in the American economy over time are going to win. There has never been an extended period of time in our history where investments in the U.S. economy didn't win. And people will win again.

(END VIDEO CLIP) BLITZER: But critics of O'Neill said he had been too slow to speak out and rally confidence in the markets.

Robert, is the secretary of the treasury playing catch up right now?

GEORGE: I think the difference between what was going on in Pennsylvania was, that was a miner miracle, and Paul O'Neill needs a major miracle...


... to reestablish his credibility.

I mean, his big problem is, he's not Robert Rubin and he's not Donald Rumsfeld. The both of those gentlemen, obviously, Rubin in the Clinton administration, Rumsfeld in the Bush administration, they are seen as hands-on people who basically send credibility, whether to the media or to, you know, to the given venue where they're discussing.

And unfortunately Mr. O'Neill, you know, he poses with Bono and things like that, but he doesn't really seem to send the necessary credibility everywhere.

BLITZER: Jonah, why doesn't this administration have, on the economic issues, a Robert Rubin or a Donald Rumsfeld?

GOLDBERG: Actually, I have a theory about that. It's that, when Democratic presidents come in, they need, going back to Kennedy and before, they need to reassure Wall Street, the financial markets, and so they tend to go for people of great stature, like Rubin, like Lloyd Bentsen, people the markets can trust.

But when Republicans come in, the markets trust the president.


They trust that the policy is going to be what they want it to be. And so they tend to find people slightly more political, slightly less -- with less gravitas on these things. And I think it's hurting them right now.

MALVEAUX: Well, but the president has no gravitas on these things, and so you've got a double whammy.

I mean, the problem here is that O'Neill has been a passive player on the economic team from the beginning. He comes from corporate America, which is getting banged up right now, in terms of issues of credibility. He's not made any of those statements -- gravitas or not, he just hasn't made the kind of statements that people want to hear.

And this last notion, when you invest with America, you're always going to be there, let's do Britain, why don't we, and talk about great empires that have crashed. This is not reassuring news to people. ECHAVESTE: Well, what's even worse about what O'Neill said was that that's good, I guess, a statement reassuring for those people who are going to be in the market for next 20, 30 years. But what about the people who were thinking of retiring next year or two years from now? There was no comfort in what he said.

So, I think that, not only is there a vacuum, in terms of leadership in this administration, who's speaking on economic issues, but what they're saying is not even -- it's not reassuring.

GOLDBERG: Well, I am no huge fan of Paul O'Neill, and I've been critical of him in the past. But this notion that's going around in the media that somehow the treasury secretary is supposed to be everybody's mommy and say everything is going to be all better is not quite right.

O'Neill, his problems not withstanding, is being intellectually and politically consistent. He has said from the get-go that he doesn't think that words move markets. To date, I don't know of any mutual funds that are pegged to what Paul O'Neill or any treasury secretary says.

GEORGE: Well, you know, Jonah, that's true, and I agree with you. But it's not just, you know, just to mom and pop at home. It's also the fact that I don't believe that O'Neill even has credibility within Wall Street. And that is an important aspect.

BLITZER: Hold on, let's move ahead. Let's expand this discussion to this. The feds sent a high-visibility signal this week on a new get-tough approach to business fraud. It was hard to miss those images of the Adelphia Communications founder and his sons brought out in handcuffs.

Today here on LATE EDITION, the White House economic adviser, Larry Lindsey, stopped just short of saying that was just the beginning.


LINDSEY: The president again called his team together to have a corporate fraud task force to coordinate this. And I think what you're seeing is much more affective enforcement of the law than we've had in a very long time.


BLITZER: Julianne, is this just sort of a public relations stunt or is this the beginning of a new get-tough policy?

MALVEAUX: Well, let's connect the dots. Enron, Texas, Adelphia, New York. If we really wanted to talk about ending this stuff, we would see some of these Enron and other folks walking around in handcuffs.

The fact of the matter is, this president has a corporate culture of permissiveness. A number of people have written about it. And obviously, at this point in time, you can't continue the permissiveness. So you've gotten some jawboning.

But the fact is that these folks get much less penalties than a common criminal would for doing something that's equivalent. And so we're in a climate now where, essentially, people are not going to be reassured, even by the spectacle of some old 76-year-old man being dragged across the floor in handcuffs.

GEORGE: Well, part of the problem is that the Adelphia thing was pretty, just, straightforward, easily identifiable, blatant fraud, whereas Enron, their off-the-books things are actually so complicated, it's really, literally, taking months to try and figure out, you know, the depths of the fraud.

However, I think it was reflective on markets that the day that these guys were being dragged off, the market jumped up 400 points.

BLITZER: But, Maria, you have to acknowledge, a lot of this alleged fraud was occurring not during the Bush administration but during the years of the Clinton administration.

ECHAVESTE: It's really extraordinary that people blame Clinton for the corporate fraud.

What we're seeing is corporate executives who used loopholes, used funny accounting because they were all caught up in the greed. What's, I think, more important is this underlying sense that they could get away with it and no one was going to be the wiser.

GEORGE: Where would they get that idea from?


MALVEAUX: Gee, deregulation, Big Bush?


BLITZER: All right. Hold your thoughts, because we're going to try to continue these conversations.

We're going to continue these conversations. We're going to take a quick break. We're coming back. Phone calls, e-mails. Our Final Round, we'll have more. Also, Iraq and homeland security. Stay with us.


BLITZER: Welcome back to our Final Round.

A front-page report in The Washington Post today says top military brass, including members of the Joint Chiefs of Staff, think the U.S. should stick with its policy of containing Saddam Hussein, and not attack the Iraqi leader.

The newspaper reports this: "Many senior U.S. military officers contend that President Saddam Hussein poses no immediate threat and that the United States should continue its policy of containment, rather than invade Iraq."

Jonah Goldberg, is this what the military is supposed to be doing, publicly questioning the president's stated goal of overthrowing the Iraqi regime?

GOLDBERG: Well, first of all, let's salute their patriotic fervor by voicing their reservations when the congressional Democrats won't even do it.

But secondly, you know, look, this has happened before. This always happens. You have sniping to come out of the Pentagon all the time. Colin Powell had reservations about the Persian Gulf War.

And this is what militaries do. There's this bias out there that seems to assume that the military is always gung-ho to drop bombs on people, when the reality is, it's civilian leadership that runs things. And that's a good thing, and so...

BLITZER: Donald Rumsfeld, the defense secretary, has been very, very outspoken in criticizing, condemning those who leak war plans against Iraq, and I'm sure he's probably very upset about this story today.

But shouldn't the military, the brass, if they disagree with what the president has in mind, keep it to themselves without going to the news media?

MALVEAUX: Well, that would be the Colin Powell model. I mean, he certainly has been the team player, even when he has disagreed.

But what you have here is a president using Iraq as his rhetorical Trojan horse to basically boost up his ratings, and you're hearing from his own people that it's wrong. And then, Jonah Goldberg, here, I mean, you could start out in the cotton patch, and you have somehow figured out a way to attack Democrats. Democrats are not...

GOLDBERG: My only sarcastic point was that Democrats who are against the war aren't saying a word.

MALVEAUX: But Democrats are not in this, when the problem here is the president's leadership in using Iraq...


GOLDBERG: But when he was at his most popular, he was already talking about war on Iraq. So how is he using the war on Iraq to boost his popularity, since he's been consistent since he first brought it up?

MALVEAUX: Because he continues to push this issue, when obviously his own team...

GOLDBERG: So he's supposed to drop it when his poll ratings go down?

MALVEAUX: His own team does not even think that this makes any sense at all.


BLITZER: One at a time. Robert?

MALVEAUX: We know that you cannot, dollar for dollar, going around the world, trying to pick wars.

GEORGE: Just keep in mind, Julianne, that this is, quote, not his own team. This is, of course, the military leadership, and as Jonah just pointed out, it's separate from the civilian leadership.

It is ultimately going to be, in a sense, a broadly speaking political -- and I don't say that just as -- it's not just a Republican thing. It's going to be a broadly speaking political decision, as to whether to go to war with Iraq, and then the military will then fall in.

ECHAVESTE: It's even more telling, because it maybe the military, but he is commander in chief. So this is even more galling, more upsetting, to have military leaders criticize and leak to the newspaper.

It's one thing for them do it to Bill Clinton, which we expected. We always worked closely with the military, because there was never a sense of quite the same kind of loyalty. But we expect, with a Republican president, the military to be closer.

And the fact that the military leaders have leaked these stories says to me that something is wrong and there is something wrong with the strategy.

MALVEAUX: Very wrong, very wrong.

BLITZER: Let's move on and talk about this. From attacking Iraq to defending the nation's homeland -- today the Democratic Senator Joe Lieberman of Connecticut criticized President Bush for threatening to veto the homeland defense bill unless it gives him flexibility to hire and fire union workers.


SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: The firefighters and the police officers whose heroism we celebrated in New York were all union members. The president paid tribute to them.

And it's really not only irrelevant but, in my opinion, an insult to public employees who are unionized to suggest that for some reason they can't carry out their job.


BLITZER: Julianne, is the whole Department of Homeland Security going to fall as a result of this issue?

MALVEAUX: It may well. The president has asked for absolute flexibility. Flexibility over what? Over wages, over job security, over terms and conditions of work? These are American people who basically want to support our government, but they have fought long and hard for their, you know, collective bargaining terms.

And I think it's absolutely unfair and, I would agree with Joe Lieberman, really insulting to say we want to bust those things that people have bargained so hard for.


GOLDBERG: I think it's not going to scrap this whole thing, because it's too trivial an argument to crash down what is supposed be the bulwark to defend the American homeland in the war on terror. Someone's going to blink. My guess is, it's going to be some middle- ground compromise.

But that doesn't mean that there aren't other problems with the Department of Homeland Security. And I think, between this sort of reform financial bill and the Department of Homeland Security bill, this is going to be known as the summer of unintended consequences 10 years from now.

ECHAVESTE: Well, I think what's -- to take away the right to organize, to seek to not respect collective bargaining, I mean, it's -- if the president issued a veto threat, which is hard -- it takes a lot to get a veto...

BLITZER: He has issued a veto threat.

ECHAVESTE: Yes, he issued a veto threat. So, if he lets it fall for this reason, I guess he wasn't really serious about creating this department and it was the political ploy many of us have suspected was behind it.

BLITZER: Well, you know, the president and his supporters and the Republicans, by and large, argue that other war-related agencies like the FBI, the CIA, the NSA, they don't have these kinds of rock- bottom union guarantees that they want for the Homeland Security Department.

GEORGE: Of course. Exactly. And that's why this really is a sop to the unions, on the Democratic side.

GEORGE: I mean, and the fact is, you also -- there's even another aspect of it where you'll be able to, basically, expand what they call Davis-Bacon union hiring, even for federal emergencies. So I mean, they're trying to -- it's actually the Democrats who are now are trying to sneak this stuff in, because it's under the homeland security bill.

MALVEAUX: The only sneakiness here is the fact that you have people who -- the government unions have bargained for rights and given things up, they've given things up in the bargaining process. And now the president wants to just superimpose all of that to his absolute flexibility. The problem I have is the words "absolute flexibility." I have no doubt that these unions are willing to be flexible. I think that all Americans are willing to look at the war on terrorism and be flexible. Absolute flexibility gives them nothing. That's unfair.

BLITZER: All right. We're going to take a quick break. I suspect there will be a compromise on this issue. There will be a Department of Homeland Security.

We're going to take another quick break. Our Lightning Round is just ahead. Stay with us.


BLITZER: Welcome back. Time now for our Lightning Round.

President Bush decided to withhold the $34 million in U.S. contributions to the United Nations population fund.

Maria, good policy, basic policy in an election year, because the argument that some of this money ostensibly goes for forced abortions in China?

ECHAVESTE: But it's well established that none of this money would be used in China. It is a total sop to his conservative base and heartless for all of the women and families around the world.

BLITZER: Robert?

GEORGE: I think it's a little bit questionable as to exactly how much controls they do have on some of that money. And it's not bad to put it down as a marker.

MALVEAUX: Wrong marker to put down. This makes a big difference in around the world, in terms of women's access to birth control, which is important. The smaller the family, the more literacy and everything else.

GOLDBERG: I agree with the smaller family and literacy and all that stuff.

In terms of China, look, pro-choicers are supposed to be pro- choice, which means you're not supposed to force people not to have babies or to have babies. And I think it's a good marker to put down.

MALVEAUX: Well, why do we -- we trade with them, Jonah. We trade with them.

GOLDBERG: I have problem with that, too.

BLITZER: But nobody supports forced abortions.

MALVEAUX: Well, no one supports it, but...

BLITZER: But they do it in China.

MALVEAUX: But they don't do it with this fund.


MALVEAUX: And the fact is that we go into China and we have this little multiple choice, "Well, we'll do this, but we won't do that." Of course, we'll do almost anything economic in China because that's 25 percent of the world market.

BLITZER: All right. Let's move on and talk about another sad case. Four murderers of Army spouses at Fort Bragg in North Carolina, three cases involving soldiers just back from Afghanistan.

Are we letting down our fighters and their families?

GEORGE: I don't think we know completely. I mean, this is, obviously, a horrific story, and it's something, obviously, in particular, that's going on at Fort Bragg and we don't know the exact -- but I hesitate to, you know, to jump and say that there's a, you know, there's an Afghanistan syndrome or something like that. I think this is a...

BLITZER: It's a little premature, isn't it?

MALVEAUX: I think it's a little premature, but violence against women is something that still is an issue in our country, and domestic murders. And I think that when we have legislation, Violence Against Women act, let's look at this and say we need to extend that legislation.


GOLDBERG: I think it's a mystery. I don't know what's going on. And it sounds tragic, but I don't know.

MALVEAUX: But you agree with me, right?



MALVEAUX: Nice try.

BLITZER: By definition.


ECHAVESTE: You know, I think that there is no question that there is more violence against women in our own country than we even recognize. And the fact that soldiers, I mean, our American defenders would come home to commit these heinous crimes -- we need some more research and study.

BLITZER: All right. Let's move on. Echoes from the past. This week, the former President Bill Clinton and the United States Senator Hillary Rodham Clinton have asked the federal government to ante up for some of those legal fees from the Whitewater investigation. Good idea?

MALVEAUX: The law says that if there are no indictments, that's the case. Reagan did it, Big Bush did it. If the Clintons do it, same thing. Good for the goose, good for the gander.

GOLDBERG: I agree. It's the law. It'd be nice if you could have a discount for all the foot-dragging and smokescreens they drew up. But they deserve to get at least some of their legal fees back if there are no indictments, because that's the law.

ECHAVESTE: They have a right to apply for it.

GEORGE: They have the right to apply for it, though, you might think that, considering how much money they're getting on their book deals, they may just -- they could at least...

MALVEAUX: That never stopped a Republican.

GEORGE: They could at least...

MALVEAUX: That never stopped a Republican.

GEORGE: I know, but the Democrats are so much better than Republicans. They need to set a good example.


MALVEAUX: Oh, Robert.


BLITZER: Speaking about good examples, a little less snooping going on at Princeton and Yale. A Princeton admissions official apparently tried to hack into the Yale admissions office to find out what was going on there.

Was this just a prank, or is there criminal action here?

GOLDBERG: I don't know. It could be the equivalent of trying to steal each other's mascot. I think it sounds weird. And considering my contempt for the Ivy League, I hope, you know, they throw the book at them.

BLITZER: Julianne?

MALVEAUX: You know, much ado about nothing, I think. All you had to do was punch up...

BLITZER: What do you mean "much ado about nothing"?

Let me just explain to our viewers what was going on. There is an enormous rivalry, a compensation for the elite students between Yale and Princeton. And there were apparently 11 students, in particular, both of these universities were seeking. If someone from Princeton was snooping around in the Yale admissions office, that's not the right thing to do. MALVEAUX: Well, listen, I care more about the kids at the bottom who haven't gotten into school. I care more about the attacks on affirmative action than I care about all this chicanery at the top.

And you know what? All you had to do was punch in somebody's Social Security number, duh, this is big a secret. I don't care.

GEORGE: The reason why I think this actually is a big issue is it calls into question things such as privacy, which I think you'd be real reflective of. And I don't think it's a prank. I think the person who did it should be fired.

ECHAVESTE: I think that this is...

BLITZER: These people might wind up in jail very quickly.

ECHAVESTE: They should.

MALVEAUX: Before the Enron people.

ECHAVESTE: I think this is a symptom, actually, of corruption, because how competitive does -- whatever it takes? Even breaking into computers?

BLITZER: All right, we've got to leave it right there.


GEORGE: ... establishments are corrupt right now, unfortunately.

BLITZER: Bad examples for young people, as well.

That's your LATE EDITION for Sunday, July 28th. Please join us again next Sunday and every Sunday at noon Eastern for the last word in Sunday Talk.

And please join me Monday through Friday, 5:00 p.m. Eastern, for Wolf Blitzer Reports.

For now, thanks very much for watching. Enjoy the rest of your weekend. I'm Wolf Blitzer in Washington.


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