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President Bush Holds End-of-the-Year News Conference

Aired December 20, 2004 - 10:00   ET


BILL HEMMER, CNN ANCHOR: Here's Daryn, and who's with you today, Tony Harris?

HEMMER: Good morning, guys.

HARRIS: Present and accounted for.

HEMMER: How are you doing, Tony?


DARYN KAGAN, CNN CO-ANCHOR: Next couple weeks he will be co-host du jour.

HARRIS: That's right.

KAGAN: I'm very lucky to have Tony Harris.

HARRIS: Oh, isn't that kind?


HARRIS: The holiday season and all. Oh, my.

KAGAN: From the bottom of my heart.


KAGAN: You guys have a great day in New York City.

HEMMER: You the same. Bye-bye.


KAGAN: Enjoy the holiday season.

Good to have you here with us.

HARRIS: Good to be with you!

KAGAN: We are looking forward 10:30, President Bush has decided to hold a news conference. Questions and answers for the president.

HARRIS: Sort of wrapping up the year...

KAGAN: Yes. Looking forward to as well.

HARRIS: ... from the Man of the Year.

KAGAN: So we look forward to that. Right now let's take a look at what's happening now in the news.

HARRIS: President Bush will speak to reporters at the bottom of the hour. The White House describes the event as the end of the year news conference. CNN will carry the president's remarks, of course, live.

An Iraqi election official is killed execution style on a busy Baghdad street. The killing comes six weeks before scheduled elections. Despite the recent upsurge in violence, Iraqi officials say that vote will go on as scheduled. The head of the National Election Commission is asking security forces to protect his workers.

The Kansas woman accused of killing a pregnant woman, then cutting the unborn child from her womb, has a hearing this morning. The baby girl was returned to her father and he's being cared for in a hospital.

Hustle time at the post office. The Postal Service says today will likely be the busiest day of the year. You're looking at a live picture from inside a post office on Wisconsin Avenue in the nation's capital -- Daryn.

KAGAN: Yes, I have a few more cards to send.

HARRIS: Two hundred eighty million postmarked cards and letters are expected to be processed. The busiest day for mail delivery is expected to be on Wednesday.

And good morning once again, everyone. I'm Tony Harris in for Rick Sanchez.

KAGAN: Good to have you along. I'm Daryn Kagan. Good morning, everyone.

We're going to begin with the presidential news conference. It has just been announced and will be delivered at the bottom of the hour. President Bush is to speak for about 20 minutes, or it's going to happen about 20 minutes from now. It is being called an end of year news conference.

Our Elaine Quijano is at the White House. She has more on that.

Elaine, good morning.

ELAINE QUIJANO, CNN CORRESPONDENT (on camera): Good morning to you, Daryn. That's right. This will be President Bush's second news conference since his re-election. You'll recall the president appeared with reporters -- before reporters, rather, about two days after the elections. Spent about 45 minutes by giving a statement, but also taking question. Aides are saying this time around the president will be talking about where he sees the nation now and what may lie ahead. The president, we're told, also expected to talk about Iraq. Now this, of course, a critical time in that country, ahead of the scheduled January 30 elections. And domestically the White House, of course, has a lot politically at stake. A lot riding on whether or not successful elections take place in that country. There, of course, has been continued violence in that country.

And the White House continues to face criticism about its handling of the Iraq situation, specifically the post-war handling of Iraq.

Now on the domestic agenda for the president, some ambitious goals lie ahead for the president's second term. They include, of course, partially privatizing Social Security, also tort reform.

So, Daryn, expect those to be some of the topics that will likely come up as the president talks to reporters about half an hour from now.

KAGAN: And we will be listening. Elaine Quijano at the White House, thank you.

CNN will have live coverage of President Bush's news conference. It's scheduled for the bottom of the hour, 10:30 Eastern, 7:30 Pacific.

HARRIS: In Najaf, wisps of smoke still rise from the scene of yesterday's car bombing and Iraqi police have detained at least 50 people for questioning.

Fifty-two people died Najaf, 16 in a separate car bombing in Karbala. Those attacks follow this brazen ambush in downtown Baghdad recorded in A.P. photographs. Gunmen making no attempt to hide their faces grabbed a senior election official and his bodyguards from a car then made them kneel, then killed them.

Also yesterday, militants released this videotape of gunmen holding 10 employees of a U.S. company hostage. The captors say they will kill the men if the U.S.-based Sandy Company does not leave Iraq.

KAGAN: Well, not surprisingly, security is tight. Tensions are high across Iraq where roadblocks and checkpoints now dot the landscape. This surge in violence underscores the approach of January elections and the pivotal role they could play in charting Iraq's future.

Our Karl Penhaul is in Baghdad to set the scene for that.

Karl, hello.

KARL PENHAUL, CNN CORRESPONDENT: Hi there, Daryn. The city of Najaf has been on virtual lockdown all day. Security officials have told us, many of the main exit and entry routes in the city have been closed to all traffic. And particularly, those streets that lead to the Holy Imam Ali Shrine in the center of the city, close to where yesterday's bombing took place, have also been closed. In conjunction with that we're told that about 35 checkpoints have been set up within the city itself.

And there's been a dragnet of arrests and suspects of yesterday's bombing. We're told by security officials again that about 50 people have been arrested, all of those Iraqis. Apart from one person who is described as an Arab, although his exact nationality hasn't been described to us.

That security operation though, going on at the time when the funerals of many of yesterday's victims were also taking place. Hospital officials have confirmed to us that in Najaf blast yesterday 52 people were killed and 145 others were wounded. And then in the blast that occurred a couple of hours earlier in the sister city of Karbala, 16 people were killed there, 30 others wounded.

Now, there are a couple of theories as to who may have been behind the attacks. One of the main focuses of speculation is that this was a Sunni-based resistance group trying to stir up sectarian strife ahead of the elections. But some leaders within the Shiia community have said that tribal factions could be at work from within the Shiia community itself. And that's what caused yesterday's bombs -- Daryn.

KAGAN: Karl Penhaul with the latest from Baghdad, thank you.

HARRIS: One issue that reverberates from the Middle East to Washington is security and safety of Americans working in the region. It took on lethal importance with the recent terrorist attack on the U.S. consulate in Saudi Arabia, and the warnings that were subsequently issued for Americans in that region.

CNN Pentagon correspondent Barbara Starr is in Kuwait City looking for answers. She joins us via videophone.

Hi, Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Hello to you, Tony. Well, it was just about five days ago that the U.S. Embassy here in Kuwait indeed issued that ruling to 13,000 American citizens living and working in this country, to be aware of their surroundings, to be very careful to not congregate in public places. The U.S. Embassy warning saying that there was, quote, "credible information that terrorists might be planning so-called near-term attacks in this country."

So we've been here, we've been looking around, talking to people on the streets, talking to Kuwaitis. Talking to foreign workers here who are not Kuwaiti citizens, and also talking to Americans.

What we have found is that the Americans indeed are very concerned. Diplomatic sources saying that attack in Jeddah several days ago in Saudi Arabia, against the U.S. consulate was a wake-up call. That there still might be more attacks planned against Western and specifically U.S. targets in this part of the world. But it's very interesting, Tony. What we are finding is that the Kuwaitis here are not so concerned. They have a great sense of security. They feel that their government does look after them. And they don't feel that they would be the target of any possible al Qaeda attack. But that is not the feeling shared by Western business here.

We can tell you that Western businesses, including the Western Hotel that we are staying in, have definitely stepped up their security measures in recent days following that embassy warning. So Westerners, being very cautious and very careful here in Kuwait today -- Tony.

HARRIS: That's good to know. Barbara Starr in Kuwait City. Barbara, thank you.

KAGAN: There is more controversy brewing around Donald Rumsfeld. Some lawmakers are blasting the defense secretary after he admitted he has not personally signed condolence letters to families of troops killed in action. His signature is mechanically reproduced. Critics say it's another sign that Rumsfeld should step down and that criticism over his handling of the Iraq War.

Meanwhile Rumsfeld issued a statement about the letters. He said, quote, "While I have not individually signed each one, in the interest of ensuring expeditious contact with grieving family members, I have directed that in the future I sign each letter," end quote from the secretary.

HARRIS: A Kansas woman is to appear in federal court this morning to face charges in a grisly and bizarre crime. She's accused of strangling a pregnant woman and stealing the baby from her womb and claiming it as her own.

CNN's Jonathan Freed is outside the courthouse in Kansas City, Missouri.

Good morning, Jonathan.

JONATHAN FREED, CNN CORRESPONDENT: Good morning, Tony. I can tell you right now we've had an update from the U.S. Attorney's Office and he has told us that Lisa Montgomery, who has been held at a detention center across the river from us in Kansas City, Kansas -- well, remember that she was arrested in Kansas, although the alleged crimes happened here in Missouri, she has been at that detention center.

We're told that she is going to make an initial appearance in court on the Kansas side this morning. And then she is expected to be brought here to the federal courthouse in Kansas City, Missouri, and appear before a U.S. magistrate judge.

Now Tony, two things are expected to happen here today. One, Lisa Montgomery is expected to have a public defender appointed for her in this case. And two, the charges will be read out in court here on the Missouri side. And that would be kidnapping resulting in death. Now, Lisa Montgomery is accused of strangling 23-year-old Bobbie Jo Stinnett and of cutting her 8-month-old fetus out of her womb. Now the FBI also told CNN today, Tony, that an internet trail was key in tracking down and arresting Montgomery.


Jeff LANZA, FBI SPECIAL AGENT: They met online, and that the victim was involved in selling dogs. And that she had postings on the internet, an internet web page that had been set up and the suspect may have used this web page. There were actually contacts we were able to pick up off the suspects computer indicating that she had received internet messages from the suspect.


FREED: Now, Tony, the U.S. Attorney's Office also told CNN today that at this point anyway, they have not decided whether or not to seek the death penalty in this case -- Tony.

HARRIS: And Jonathan, she's facing charges in her home state, as well, isn't she?

FREED: Well, yes. She is. And it is not clear at this point whether or not there might be two trial tracks happening. The U.S. attorney has told us that because the murder and kidnapping happened here in Missouri, there will definitely be proceedings in Missouri. But it's not clear at this point whether or not there might also be something, a track, a trial track happening in Kansas, as well.

HARRIS: Jonathan Freed for us this morning. Jonathan Freed, thank you.

KAGAN: We go to Pennsylvania now. An overnight search has turned up no leads in finding a missing boy who is autistic and unable to speak. Logan Mitchletree was last season on Saturday wearing only a long sleeve shirt, jeans and slippers. Temperatures last night dipped into the teens. Hundreds of volunteers have fanned out across the local county and authorities have used night vision goggles and thermal imaging cameras.

HARRIS: Well, it is busy today in California courtrooms. Still to come on CNN LIVE TODAY, we'll go inside the cases of pop star Michael Jackson and actor Robert Blake with "Celebrity Justice's" Harvey Levin.

KAGAN: Plus, you made your list and you're checking it twice. But will your presents make it on time? Some holiday mailing tips straight ahead.

HARRIS: And you made my list, didn't you?

KAGAN: I just did shopping for you.

HARRIS: And later diamonds are meant to last forever. So how much would you shell out for that perfect gem? A few men in New York City take the test.


HARRIS: And here's what's on the docket today in our look at "Legal Briefs."

A hearing in the Michael Jackson molestation case begins at the top of the hour. Prosecutors will ask the judge to allow evidence from a 1993 molestation case against Jackson that was settled out of court. Defense attorneys want to delay the trial's January 31 opening to deal with evidence filed by prosecutors.

Rapper, Young Buck is due in court today in connection with the brawl that erupted at the Vibe Music Awards last month. He faces one count of attempted murder and one count of assault with a deadly weapon. Buck is accused of stabbing a man who punched producer Dr. Dre, as he was about to receive a Lifetime Achievement Award.

KAGAN: All right. It's been 31/2 years since the death of the wife of actor Robert Blake. And today, he goes on trial for her murder. Opening statements are scheduled to begin in a Los Angeles courtroom about an hour and a half from now. We'll be talking about this case, about the Michael Jackson case with Harvey Levin, the executive producer of "celebrity justice." We're going to talk with him in just a minute.

Right now though, let's check in on the weather.


KAGAN: We now have Harvey Levin, executive producer of "Celebrity Justice" to talk about some of the big celebrity trials on our legal docket today.



KAGAN: Happy Holidays. Good to have you here with us.

LEVIN: Same to you.

KAGAN: Robert Blake, 31/2 years after this murder takes place, this one finally has opening statements set for today. Why the delay, Harvey?

LEVIN: Well, part of it is, you know he's gone through half the lawyers in the L.A. phone directory.

KAGAN: You're the only one who he hasn't hired.


LEVIN: Right. It's -- I mean it really is crazy. And he's had a couple of really good lawyers that just couldn't handle the case. He's a very difficult client. Nonetheless, this case looks like it's going today. And Daryn, I have to tell you, this is not a slam-dunk for prosecutors.

KAGAN: OK, let's just get this in. No physical evidence. But as we saw in the Scott Peterson case, apparently you don't need that to get a murder conviction in the state of California.

LEVIN: You don't. But remember the difference with Scott Peterson is, you know, those bodies washed up within a mile of where his boat was. And that's pretty powerful circumstantial evidence.

Here you don't have Robert Blake with any ballistics evidence on him. You've got three witnesses who say that Blake solicited them to commit the murder. Yet the prosecutors are saying Blake pulled the trigger. Which is a little inconsistent. And those three witnesses all have credibility problems on top of everything else.

And this is a very, very different from the Peterson case. When you look at that picture of Laci Peterson, you ached. This is a victim who did a lot of bad things in her life. And the sympathy factor, like it or not, will play to this jury.

KAGAN: Yes. But it shouldn't mean she didn't deserve to get shot in the head, despite kind of all the strange things she did.

LEVIN: Absolutely.

KAGAN: No death penalty in this case.

LEVIN: No death penalty in this case. But he faces life in prison; that's serious stuff. He's been out on house arrest now for a little bit more than a year.

What I find really interesting is his first lawyer Harland Braun quit because Robert Blake was insistent on doing the Barbara Walters jailhouse interview. Well, it's coming back to bite Blake because now they want to use that interview, prosecutors do to prove that he hated the Blakely family. And that he lied to Barbara Walters when he said oh, everything was hunky dory.

KAGAN: OK, quickly now. Michael Jackson, a hearing in his case in Santa Maria today. Prosecutors in that case want to be able to bring up previous charges that were never filed. Isn't that like the first thing they teach you on the first day of law school, you're not allowed to do that?

LEVIN: No. You can do it. It's called Prior Bad Acts. And you don't have to actually be criminally charged with it. If you can prove that the defendant has some kind of an M.O. that he always follows.

In this case I can tell you what the prosecutors think the M.O. is, plying the alleged victim with wine. Showing them pictures of naked women. And if you can show that, then the judge can allow it in. My feeling is that it may be admissible, but I don't think it's smart at all for prosecutors to do it. You open up a Pandora's box.

The first case, the '93 case has a lot of problems. The kid took money, ran away from the case. The parents had their own issues. and I'm not so sure it's real smart for prosecutors to go down that road.

KAGAN: Well, and speaking of parents and smart, this goes on where all these parents allowing what? About 200 children to come to Neverland in light of everything, he was able to entertain more children?

LEVIN: You know, Daryn, celebrity has unbelievable power. There's just no doubt about it. And you know, I suppose that, you know, in the defense of anybody who did that, they could say, look, security are in numbers. Now everybody is watching. But the power of celebrity in this town, it never ceases to amaze me.

KAGAN: Well, apparently in the San Inez Valley about an hour and a half north.

LEVIN: It goes that far.

KAGAN: Harvey thank you very much for your insight.

LEVIN: My pleasure, Daryn.

KAGAN: Thanks.

LEVIN: See you.

HARRIS: He's going to do his thing his way, I suppose.

KAGAN: I guess so. There will always be people who want to stop on by Neverland.

HARRIS: Absolutely.

In about nine minutes, we want to remind you that we'll be taking you to the Eisenhower Building for President Bush's news conference. It is being described as an end of the year news conference. And maybe the president will be expansive and answer lots of questions. We would love that.

KAGAN: He will be getting a lot of questions we have no doubt. We have our own top reporters on the scene. And we'll get to that in just a few minutes. Right now a quick break.


KAGAN: We are standing by. President Bush will be holding a news conference less than five minutes from now.

Our Elaine Quijano is at the White House with an advanced look at what we can expect the president to talk about and the kind of questions he'll face.

QUIJANO: Good morning to you Daryn. That's right. In these news conference, first of all, is a rarity for this Bush White House. The president in his first term only had a little over a dozen news conferences. Now we have his second news conference since his re- election.

Aides are saying this is an end of the year news conference. A chance for the president to talk about where the nation is now and where he sees things ahead down the road. Now on the domestic agenda, the president, the White House facing some continued questions about one of the president's ambitious goals. That is the Social Security partial privatization that President Bush supports. Critics say that that proposal has not yet been made clear as to how the Bush administration is going to fund that. So expect some questions on that.

Also on the international front, of course, expect questions on Iraq. Specifically, the president expected to talk about the upcoming Iraqi elections at the end of January. Now that, of course, a critical moment for this administration. It has a lot riding politically on whether or not successful elections can take place there.

So, Daryn, those are the kinds of questions we're expecting to see the president just a short time from now. And there, in fact we see walking over the to the White House at this moment -- Daryn.

KAGAN: Actually is he walking from the White House over to the Eisenhower Building -- Elaine?

QUIJANO: Yes, that's correct.

KAGAN: And the news conference will be held there today, and not at the White House.

QUIJANO: That's right. That's right. But President Bush, at his last news conference two days after the election, was quite buoyant in talking with reporters and laying out some of his larger goals for the upcoming administration. Now though, we expect perhaps some pointed questions. As I said, Social Security reform, one of the questions -- one of the main questions, how will the administration pay for it -- Daryn?

KAGAN: And we will look for those questions, as well as a number of internationally based questions. Elaine, stand by. We'll be back to you -- Tony.

HARRIS: And, Daryn, that's one of the things you hope for at this news conference in just a couple of minutes, is that you do get an opportunity to get some pointed questions directed to the president. And that he will take the time to be expansive and answer those questions.

We're going to go to Kathleen Koch at the Pentagon in just a moment. And there she is.

Kathleen, what are some of the questions that you think the president will be facing, say on the war in Iraq and the up tick in violence there ahead of these elections in about a month?

KATHLEEN KOCH, CNN WHITE HOUSE CORRESPONDENT: Well, Tony, obviously there is a great deal of concern with the violence that occurred over the weekend. The city's car bombings, these outright murders in the streets of Iraq, about whether or not the January 30 elections can be held, can be held safely. Can the people of Iraq go to the polls, believe that their votes will all count and they themselves will not become targets.

We're also expecting the president will get questions about the fate of Defense Secretary Donald Rumsfeld. There have been increasing calls for his resignation. Also, just a lot of concern expressed, indeed on the part of a lot of Republicans: Senators Hagel, Senator Lott, Senator McCain saying that they no longer have confidence in the defense secretary. This not only as a result of their concerns over his handling of the war in Iraq, but also some recent flaps.

Obviously there was that encounter with the soldier in Kuwait, who expressed concerns about the lack of armored vehicles. Then over the weekend, it was -- it came out that the defense secretary didn't sign personally these condolence letters to the families of the more than 1,300 soldiers killed in Iraq. But instead followed the standard Washington practice, I must say, of using an automated signature machine. The secretary now says that he will change that practice.

But there has been quite a lot of piling on when it comes to Defense Secretary Rumsfeld in recent weeks. And indeed over this past year, certainly after the Abu Ghraib prison scandal broke. So we are expecting that the president will get some questions about whether or not he still has confidence in his defense secretary -- Tony.

HARRIS: And Kathleen, I suspect there will be some questions about the Pentagon, and how it relates to what the shape of this new National Director of Intelligence, what that person will be responsible for in terms of how it all will trickle down for the Pentagon, and what will it mean in terms of a shuffle of those agencies there. And I suspect there will be some questions on that, as well.

KOCH: Certainly will be. Of course, the president did just sign that legislation into law. And one of the sticking points that nearly kept from becoming law was that very deep and abiding concern on the part of the senior chairman of the House and then Senate Armed Services Committees over whether or not the Pentagon would still have enough control that actionable intelligence, that forces -- on the ground forces on the battleground needed in order to attack, to protect themselves, and again, they say that those issues were settled. But those kind of things will be very important as this new director does take his -- take office, indeed, obviously that director not yet named. But the Pentagon does have a lot of concerns that they still have that kind of control and access to that very important intelligence.

HARRIS: Kathleen, stand by. Stand by. We'll be talking to you after the press briefing in just a couple of minutes. KAGAN: And we're getting closer to that news briefing and that news conference. Our John King, our senior White House correspondent standing by.

John, another topic we expect to come up, the issue of a homeland defense secretary. The original nomination of Bernard Kerik -- as we look at a live picture of Condoleezza Rice, the national security adviser soon to be, if President Bush gets his wish, the new head of the State Department.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: That confirmation, Daryn, probably about a month away. We're less than two minutes from the president's news conference, and that subject could dome up, number one. The president could get asked if he'll have his choice for Department of Homeland Security this week or before the Christmas holiday. And No. 2, there could be questions revisiting the whole controversy over the Bernie Kerik nomination.

The president, of course, wanted to use this event as his tradition, the year-end news conference to look back a little bit on the year past. Obviously a critical year for the president, winning re-election, but much more important from his perspective, to look ahead, as Elaine and Kathleen were discussing. Some controversies in the news. But also the president's second-term agenda very much in the news. He wants to build momentum between now, the inaugural and the State of the Union, for tax reform, for the Social Security reform efforts, for lawsuit reforms, as the president would call them. Others would criticize the policy.

So we're about to have a very aggressive agenda from the president beginning in early January when Congress returns, and he has the stage and the opportunity right now to try to shape that debate, as he closes out the year with a news conference here at the White House before heading up to Camp David, and then Crawford, Texas for the Christmas holiday.

KAGAN: And, John, it's one thing to have the agenda; it's another to be able to get things done. It would appear to be to some a slam dunk when you look at the gains Republicans have made on Capitol Hill, and yet even since the election, we've seen some challenges to the president's authority, either on the 9/11 bill, or currently what we're seeing some from Republican senators in coming out and criticizing his secretary of defense, Don Rumsfeld.

KING: And two dynamics there. There are some on Capitol Hill, even some Republicans, say the president hasn't spent enough time perhaps developing the personal relationships necessary to avoid those bumps in the road. And the other fact is the Republicans have been the majority for 10 years now on Capitol Hill, and some of those lawmakers, especially committee chairmen have ideas of their own.

Here's the president.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Thank you. Please be seated. Good morning and happy holidays to you all. I thought I'd come and answer some of your questions. Before I do so I've got a statement I'd like to make.

We're nearing the end of a year of substantial progress at home and abroad. In 2004, the United States grew in prosperity, enhanced our security and served the cause of freedom and peace. Our duties continue in the new year. I'm optimistic about achieving results.

America's economy is on solid footing. Growth is strong and the nation's entrepreneurs have generated more than 2 million jobs in this year alone.

There's more we must do to keep this economy flexible, innovative and competitive in the world. In a time of change, we must reform systems that were created to meet the needs of another era.

Soon, I will appoint a citizens panel to recommend ways we can transform the outdated tax code.

BUSH: I will work with the new Congress to make health care more accessible and affordable, to reform the legal system, to raise standards of achievement in public schools, especially our high schools, and to fix the Social Security system for our children and our grandchildren.

Early in the year, I will also submit a budget that fits the times.

We will provide every tool and resource for our military. We'll protect the homeland. And we'll meet other priorities of the government.

My budget will maintain strict discipline in the spending of tax dollars and keep our commitment to cutting the deficit in half over five years.

All of these goals require the energy and dedication of members of both political parties. Working in the spirit of bipartisanship we will build the foundation of a stronger, more prosperous country. We'll meet our obligations to future generations as we do so.

BUSH: Our duties to future generations include a sustained effort to protect our country against new dangers.

Last week I signed legislation that continues the essential reorganization of our government by improving the nation's intelligence operations.

Because we acted, our vast intelligence enterprise will be more unified, coordinated and effective than ever before and the American people will be more secure as a result.

Our country is also safer because of the historic changes that have come around the world in places like Afghanistan. This year brought the first presidential election in the 5,000- year history of that country. And the government of President Hamid Karzai is a steadfast ally in the war on terror.

President Karzai and the Afghan people can be certain of America's continued friendship and America's support as they build a secure and hopeful democracy.

In Iraq, a people that endured decades of oppression are also preparing to choose their own leaders.

BUSH: Next month, Iraqis will go to the polls and express their will in free elections. Preparations are under way for an energetic campaign and the participation is wide and varied. More than 80 parties and coalitions have been formed and more than 7,000 candidates have registered for the elections.

When Iraqis vote on January the 30th they will elect 275 members to a transitional national assembly, as well as local legislatures throughout the country.

The new national assembly will be responsible for drafting a constitution for a free Iraq. By next October the constitution will be submitted to the people for ratification. If it is approved, then by December the voters of Iraq will elect a fully democratic, constitutional government.

My point is the elections in January are just the beginning of a process. And it's important for the American people to understand that.

As the Iraqi people take these important steps on the path to democracy, the enemies of freedom know exactly what is at stake. They know that a democratic Iraq will be a decisive blow to their ambitions, because free people will never choose to live in tyranny.

BUSH: And so the terrorists will attempt to delay the elections, to intimidate people in their country, to disrupt the democratic process in any way they can.

No one can predict every turn in the months ahead, and I certainly don't expect the process to be trouble-free. Yet I am confident of the result. I'm confident that terrorists will fail, the elections will go forward and Iraq will be a democracy that reflects the values and traditions of its people.

America and our coalition have a strategy in place to aid the rise of a stable democracy in Iraq.

To help the Iraqi government provide security during the election period, we will increase U.S. troop strength. Coalition forces will continue hunting the terrorists and the insurgents. We'll continue training Iraqi security forces so the Iraqi people can eventually take responsibility for their own security.

We have a vital interest in the success of a free Iraq. You see, free societies do not export terror. Free governments respect the aspirations of their citizens and serve their hopes for a better life. Free nations are peaceful nations. And free nations in the heart of the Middle East will show what is possible to others who want to live in a free society.

BUSH: In Iraq and elsewhere, we've asked a great deal of the men and women of our armed forces. Especially during this holiday season, those on duty far from home will be in our thoughts and our prayers.

Our people in uniform and our military families are making many sacrifices for our country. They have the gratitude of our whole country.

Now I'll be glad to answer some questions.

QUESTION: A month ago, in Chile, you asked Vladimir Putin to explain why he has taken actions widely seen as a move away from democracy. What do you think Mr. Putin's intentions are? And do you think that Russia's behavior has chilled relations with the United States?

BUSH: As you know, Vladimir Putin and I have got a good personal relationship, starting with our meeting in Slovenia. I intend to keep it that way.

BUSH: It's important for Russia and the United States to have the kind of relationship where if we disagree with decisions we can do so in a friendly and positive way.

When Vladimir made the decision, for example, on the -- whether to elect governors or appoint governors, I issued a statement that said in a free society, in a society based upon Western values, we believe in the proper balance of power.

I think he took that on and absorbed that in the spirit in which it was offered, the spirit of two people who have grown to appreciate each other and respect each other.

I'll continue to work with him in a new term.

And obviously we have some disagreements. He probably has disagreements over some of the decisions I've made. Clearly one such decision was in Iraq.

But this is a vital and important relationship, and it's a relationship where, you know it's complicated. It's complex rather than complicated. It's complex because we have joint efforts when it comes to sharing intelligence to fight terrorism.

BUSH: We've got work to do to secure nuclear materials. I look forward to working with the Russians to continue to expand cooperation.

I think one of the things we need to do is to give the Russians equal access to our sites -- our nuclear storage sites -- to see what works and what doesn't work, to build confidence between our two governments.

Obviously there's a lot of trade that's taking place trade that's taking place between Russia and the West and the United States. And that trade relationship is an important relationship.

I told Vladimir that we would work in a new term to see if Russia could be admitted to the WTO. I think that would be a positive step for relations between our two countries.

And I'll continue to express my belief that, you know, balanced government, the sharing of power amongst government, will lead to stability in Russia.

BUSH: And the relationship's an important relationship, and I would call the relationship a good relationship.

QUESTION: Several Republican lawmakers recently have criticized Secretary Rumsfeld. What does he need to do to rebuild their trust?

BUSH: Well, first of all, when I asked the secretary to stay on as secretary of defense, I was very pleased when he said yes. And I asked him to stay on because I understand the nature of the job of the secretary of defense and I believe he's doing a really fine job.

The secretary of defense is a complex job. It's complex in times of peace and it's complex even more so in times of war.

And the secretary has managed this department during two major battles in the war on terror, Afghanistan and Iraq. And at the same time he's working to transform our military so it functions better, it's lighter, it's ready to strike on a moment's notice; in other words, that the force structure meets the demands we face in the 21st century.

BUSH: Not only is he working to transform the nature of the forces, we're working to transform where our forces are based.

As you know, we've recently worked with the South Korean government, for example, to replace manpower with equipment, to keep the peninsula secure and the Far East secure, but at the same time recognizing we have a different series of threats.

And he's done a fine job and I look forward to continue to work with him.

And I know the secretary understands the Hill. He's been around in Washington a long period of time. And he will continue to reach out to members of the Hill, explaining the decisions he's made. And I believe that in the new term, members of the Senate and the House will recognize what a good job he's doing.

QUESTION: Any lessons you have learned, sir, from the failed nomination of Bernard Kerik?

As you look forward now to pick a new director of the Homeland Security Department, and also as you pick a director of national intelligence, any lessons learned in terms of vetting?

QUESTION: And particularly with the DNI, what sort of qualities are you going to be looking for in that man or that woman that you choose?

BUSH: Well, first, let me say that I was disappointed that the nomination of Bernard Kerik didn't go forward. In retrospect, he made the right decision to pull his name down. And he made the decision.

When the process gets going, our counsel asks a lot of questions and the prospective nominee listens to the questions and answers them and takes a look at what we feel is necessary to be cleared before the FBI check and before the hearings take place on the Hill.

And Bernard Kerik, after answering questions and thinking about the questions, decided to pull his name down.

I think he would have done a fine job as the secretary of homeland security, and I appreciate his service to our country.

We vetted a lot of people in this administration. I mean, we vetted people in the first term. We're vetting people in the second term. And I've got great confidence in our vetting process.

And so, the lessons learned is continue to vet and ask good questions, and get these candidates, the prospective nominees, to understand what we expect a candidate will face during a background check -- FBI background check, as well as congressional hearings.

BUSH: Now, in terms of the DNI, I'm going to find somebody who knows something about intelligence, and capable and honest and ready to do the job.

And I'll let you know at the appropriate time when I find such a person.

QUESTION: A year ago we were in this room -- almost to the day -- and you were heralding the capture of Saddam Hussein and announcing the end of Baathist tyranny in Iraq.

A year later, the chairman of the Armed Service Committee in the Senate said after returning from Iraq that -- talking about Iraqi troops -- the raw material is lacking and the willpower and commitment after they receive military training.

At the same time, here at home, a high percentage of Americans is less confident of a successful conclusion in Iraq: 48 percent less confident to 41 percent.

What's going wrong?

BUSH: Well, first let me talk about the Iraqi troops.

BUSH: The ultimate success in Iraq is for the Iraqis to secure their country. I recognize that. The American people recognize that. That's the strategy. The strategy is to work to provide security for a political process to go forward. The strategy is to help rebuild Iraq. And the strategy is to train Iraqis so they can fight off the thugs and the killers and the terrorists who want to destroy the progress of a free society.

Now, I would call the results mixed in terms of standing up Iraqi units who are willing to fight. There have been some cases where, when the heat got on, they left the battlefield. That's unacceptable. Iraq will never secure itself if they have troops that, when the heat gets on, they leave the battlefield. I fully understand that.

On the other hand, there were some really fine units in Fallujah, for example, in Najaf, that did their duty.

BUSH: And so, our military trainers, our military leaders have analyzed what worked and what didn't work.

And I met with General Abizaid and General Casey in the White House last week. And I think it was before the -- I think it was Thursday morning, if I'm not mistaken. And I was going to say before the interminable press conference -- I mean press party -- anyway.


Here's what -- first of all, recruiting is strong. The place where the generals told me that we need to do better is to make sure that there is a command structure that connects the soldier to the strategy in a better way, I guess the best way to describe it.

In other words, they've got some generals in place and they've got foot soldiers in place, but the whole command structure necessary to have a viable military is not in place.

BUSH: And so they're going to spend a lot of time and effort on achieving that objective.

And so the American people are taking a look at Iraq and wondering whether the Iraqis are eventually going to be able to fight off these bombers and killers. And our objective is to give them the tools and the training necessary to do so.

QUESTION: What about that percentage, though: 48 to 41, more Americans losing confidence?

BUSH: You know, polls change. Polls go up, polls go down.

You know, I can understand why people -- they're looking on your TV screen and seeing indiscriminate bombing, where thousands of innocent or hundreds of innocent Iraqis are getting killed, and they're saying whether or not we're able to achieve the objective.

What they don't see are the -- you know, the small businesses starting, 15 of the 18 provinces are relatively stable, where progress is being made. Life is better now than it was under Saddam Hussein.

And so there are very hopeful signs.

But no question about it. The bombers are having an effect. You know, these people are targeting innocent Iraqis. They're trying to shake the will of the Iraqi people and, frankly, trying to shake the will of the American people.

And car bombs that destroy young children or car bombs that indiscriminately bomb in religious sites are effective propaganda tools.

BUSH: But we must meet the objective, which is to help the Iraqis defend themselves and at the same time have a political process to go forward. It's in our long-term interest that we succeed. And I'm confident we will.

I saw an interesting comment today by somebody I think in the Karbala area or Najaf area who said, "Look, what they're trying to do," they being the terrorists, "are trying to create sectarian violence." He said, "They're not going to intimidate us from voting."

People want to vote. People want to live in a free society. And our job in these tough times is complete our strategy.

QUESTION: You mentioned that meeting with General Abizaid and General Casey. One of their complaints now, and a complaint we have heard dating back more than a year ago, even to when combat was under way in Iraq, is what some call meddling, interference from Syria and Iran. People coming across the border. People going back across the border. Sometimes money. Now they say meddling in the political process.

What specifically is the problem now, in your view?

And there are some who watch this and see a series of complaints from the administration, but they say, "Will there ever be consequences?"

BUSH: Yes, I spent some time talking to our generals about whether or not there are former Saddam loyalists in Syria, for example, funneling money to the insurgents.

BUSH: And my attitude is if there's any question that they're there, we ought to be working with the Syrian government to prevent them from either sending money and/or support of any kind.

We have sent messages to the Syrians in the past and we will continue to do so. We have tools at our disposal -- a variety of tools, ranging from diplomatic tools to economic pressure.

Nothing's taken off the table. And when I said the other day that I expect these countries to honor the political process in Iraq without meddling, I meant it. And hopefully those governments heard what I said.

QUESTION: You've made Social Security reform the top of your domestic agenda for a second term. You've been talking extensively about the benefits of private accounts. But by most estimations, private accounts may leave something for young workers at the end, but wouldn't do much to solve the overall financial problem with Social Security.

And I'm just wondering, as you're promoting these private accounts, why aren't you talking about some of the tough measures that may have to be taken to preserve the solvency of Social Security, such as increasing the retirement age, cutting benefits or means testing for Social Security?

BUSH: I appreciate that question.

First of all, let me put the Social Security issue in proper perspective. It is a very important issue. But it's not the only issue -- very important issue we'll be dealing with.

BUSH: I expect the Congress to bring forth meaningful tort reform. I want the legal system reformed in such a way that we're competitive in the world.

I'll be talking about the budget, of course. There's a lot of concern in the financial markets about our deficit, short-term and long-term deficits. The long-term deficit, of course, is caused by some of the entitlement programs -- the unfunded liabilities inherent in our entitlement programs.

I will continue to push on an education agenda. There is no doubt in my mind that the No Child Left Behind Act is meaningful, real reform that is having real results. And I look forward to strengthening No Child Left Behind.

Immigration reform is a very important agenda item as we move forward.

But Social Security, as well, is a big item. And I campaigned on it, as you're painfully aware, since you had to suffer through many of my speeches. I didn't duck the issue like others have done in the past. I said, "This is a vital issue and we need to work together to solve it."

Now, the temptation is going to be, by well-meaning people such as yourself and others here, as we run up to the issue, to get me to negotiate with myself in public. To say, you know, "What's this mean, Mr. President? What's that mean?"

I'm not going to do that. I don't get to write the law.

I'll propose a solution at the appropriate time.

BUSH: But the law will be written in the halls of Congress. And I will negotiate with them, with the members of Congress. And they will want me to start playing my hand. "Will you accept this? Will you not accept that? Why don't you do this hard thing? Why don't you do that?"

I fully recognize this is going to be a decision that requires difficult choices. Inherent in your question is do I recognize that? You bet I do. Otherwise it would have been done.

And so, I just want to try to condition you. I'm not doing a very good job, because the other day in the Oval, when the press pool came in, I was asked about this -- the -- a series of questions -- a question on Social Security with these different aspects to it. And I said, "I'm not going to negotiate with myself. And I will negotiate at the appropriate time with the law writers."

And so, thank you for trying.

The principles I laid out in the course of the campaign, and the principles we laid out at the recent economic summit are still the principles I believe in. And that is: nothing will change for those near or on Social Security, payroll tax -- I believe you're the one who asked me about the payroll taxes, if I'm not mistaken -- will not go up.

The -- and I know there's a big definition about what that means.

BUSH: Well, again, I will repeat, don't bother to ask me.

Oh, you can ask me, I can't tell you what to ask. It's not the holiday spirit.


It is all part of trying to get me to set the parameters, you know, apart from the Congress, which is not a good way to get substantive reform done.

As to personal accounts, it is a judgment essential to make the system viable in the out-years to allow younger workers to earn an interest rate more significant than that which is being earned with their own money now inside the Social Security trust.

But the first step in this process is for members of Congress to realize we have a problem. And so for a while, I think it's important for me to continue to work with members of both parties to explain the problem. Because if people don't think there's a problem, we can, you know, talk about this issue until we're blue in the face and nothing will get done.

And there is a problem. There is a problem because now it requires three workers per retiree to keep Social Security promises. In 2040 it will require two workers per employee to meet the promises. And when the system was set up and designed I think it was like 15 or more workers per employee.

That is a problem. The system goes into the red.

BUSH: In other words, there's more money going out than coming in in 2018. There is an unfunded liability of $11 trillion.

And I understand how this works. You know, many times legislative bodies will not react unless the crisis is apparent, crisis is upon them. I believe the crisis is. And so, for a period of time, we're going to have to explain to members of Congress the crisis is here.

It's a lot less painful to act now than if we wait.

QUESTION: Mr. President, on that point, there is already a lot of opposition to the idea of personal accounts, some of it fairly entrenched among the Democrats. I wonder what your strategy is to try to convince them to your view.

And specifically, they say that personal accounts would destroy Social Security. You argue they would help save the system. Can you explain how?

BUSH: I will try to explain how without negotiating with myself. It's a very tricky way to get me to play my cards. I understand that.

I think what you all people ought to do is to go look at the Moynihan commission report. The other day, in the discussions at the economic summit, we discussed the role of a personal account; in other words, how a personal account would work. And that is that people can set aside a negotiated amount of their own money in an account that would be managed by the person, but under, you know, serious guidelines.

BUSH: As I said, you know, you can't use the money to go to the lottery or take it to the track. There would be -- it's like some of the guidelines with some of the thrift savings plans right here in the federal government.

And the younger worker would gain a greater return, which would be more substantial than the rate of return of the money now being earned in the Social Security trust. And over time, that rate of return would enable that person to have an account that would make up for the deficiencies in the current system.

In other words, the current system can't sustain that which has been promised to the workers. That's what's important for people to understand. And the higher rate of return on the negotiated amount of money set aside would enable that worker to more likely get that which was promised.

Now, the benefits, as far as I'm concerned, of the personal savings account is, one, it encourages an ownership society. One of the philosophies of this government is if you own something, it is -- it makes the country -- more people own something, the country is better off; a stake in the future of the country if you own something.

Secondly, it's capital available for -- when people save, it provides capital for entrepreneurial growth and entrepreneurial expansion, which is positive. In other words, it enhances savings.

BUSH: And, thirdly, it means that people can take their own assets -- their own retirement assets and pass them on, if they so choose, to their family members, for example. That's positive. That's a step. The Social Security system was designed, obviously, in an era that is long gone. And it's worked in many ways.

It's now in a precarious position. And the question is whether or not our society has got the will necessary to adjust from a defined benefit plan to a defined contribution plan.

And I believe the will will be there. But I'm under no illusions, it's going to take hard work, it's going to take hard work to convince a lot of people, some of whom would rather not deal with the issue -- why deal with the issue unless there's a crisis? -- and some of whom have got preconceived notions about the benefits of what may be possible.

QUESTION: It's -- 140,000 Americans are spending this Christmas in Iraq, as you know; some of them their second Christmas there. Now, you outlined your vision for Iraq both in your statement and in response to David Gregory. My question is, how long do you think it will take that vision to be realized? And how long will those troops be there?

BUSH: That's a very legitimate question. I get asked that by family members I meet with and people say, "Wow long do you think it'll take?"

BUSH: And my answer is, you know, we'd like to achieve our objective as quickly as possible.

And it is -- our commander -- but, again I can -- the best people that reflect the answer to that question are people like Abizaid and Casey, who are right there on the ground. And they are optimistic and positive about the gains we're making.

Again, I repeat, we're under no illusions that this Iraqi force is not ready to fight. In toto, there are units that are, and that they believe they'll have a command structure stood up pretty quickly, that the training is intense, that the recruitment is good, the equipping of troops is taking place. So they're optimistic that as soon as possible it be can be achieved.

But I'm also wise enough not to give you a specific moment in time, because sure enough, if we don't achieve it, I'll spend the next press conference I have with you answering why we didn't achieve the specific moment.

QUESTION: You spent a good deal of time before the Iraq war, some in this room, explaining to us why the combination of Saddam Hussein as a dictator and the weapons that you thought at the time he had assembled made a case for regime change.

QUESTION: In the case of North Korea and Iran, you have not declared yourself on the question of regime change. Though North Korea, your intelligence agencies believe, may have added six or seven nuclear weapons in the past two years, and Iran seems to have a covert program, or at least your government believes it does.

Where do you stand on regime change? And how would it be accomplished?

BUSH: I'll tell you where I stand. I stand on continuing the six-party talks with North Korea to convince Kim Jong Il to give up his weapons systems.

As you might remember, our country has tried a strategy of bilateral relationships in hopes that we can convince Kim Jong Il. It didn't work.

As a matter of fact, when we thought we had, in good faith, agreed to an agreement -- agreed to a plan that would work, he himself was enriching uranium or saw to it that the uranium was enriched. In other words, he broke the agreement.

I think it's an important lesson for this administration to learn. And that the best way to convince him to disarm is to get others to weigh in as well.

BUSH: With the Iranian situation as well, we're relying upon others, because we've sanctioned ourselves out of influence with Iran, to send a message that we expect them to -- in other words, we don't have much leverage with the Iranians right now and we expect them to listen to those voices who are a part of the universal acclaim.

I believe that -- and so therefore we're dealing -- this is how we're dealing with the issue. And it's much different between the situation in Iraq and Iran because of this. Diplomacy had failed for 13 years in Iraq. As you might remember -- I'm sure you do -- all the U.N. resolutions that were passed out of the United Nations, totally ignored by Saddam Hussein.

And so diplomacy must be the first choice, always the first choice of an administration trying to solve an issue of, in this case, nuclear armament. And we'll continue to press on diplomacy.

Now, in terms of, you know, my vision for the future of the world, I believe everybody ought to be free. I believe the world is more peaceful as liberty takes hold. Free societies don't fight each other.

And so we'll work to continue to send a message to reformers around the world that America stands strong in our belief that freedom is universal and that we hope at some point in time everybody is free.

QUESTION: You talked earlier about the importance of spending discipline in the federal budget. But you went your entire first term without vetoing a single spending bill, even know you had a lot of tough talk on that issue in your first term.

And I'm wondering this time around, what are you going to do to convince Congress you really are serious about cutting federal spending? Will you veto spending bills this time?

BUSH: Here's what happened. I submitted a budget and Congress hit our number, which is a tribute to Senator Hastert and -- I mean, Senator Frist and Speaker Hastert's leadership. In other words, we worked together, we came up with a budget like we're doing now, we went through the process of asking our agencies, "Can you live with this, and if you don't like it counterpropose?"

And then we came up with a budget that we thought was necessary and we took it to the leadership and they accepted the budget. And they passed bills that met our budget targets.

So how can you veto a series appropriations bills if the Congress has done what you've asked them to do?

Now, I think the president ought to have the line item veto because within the appropriations bills there may be differences of opinion on how the money is being spent.

BUSH: But overall, they have done a superb job of working with the White House to meet the budget numbers we've submitted.

And so the appropriations bill I just signed was one that conformed with the budget agreement we had with the United States Congress.

And I really do appreciate the leadership, not only Speaker Hastert and Senator Frist, but also the Budget Committee chairman. I talked to Senator Gregg this morning, as a matter of fact. He'll be heading the Budget Committee in the United States Senate.

And we're working very closely with members of Congress as we develop the budget.

And it's going to be a tough budget, no question about it. And it's a budget that I think will send the right signal to the financial markets and to those concerned about our short-term deficits.

As well, we have to deal with the long-term deficit issues. That's the issue that John Roberts talked about, which is the unfunded liabilities when it comes to some of the entitlement programs.

QUESTION: I'd like to ask you on Social Security. You said that you don't like to come to the table with having negotiated with yourself. Yet you have ruled out tax cuts and no cuts in benefits for the retired and the near retired. I wonder how you square that statement.

QUESTION: And also, in your mind, what is "near retired"?

BUSH: Well, that's going to fall in the "negotiating with myself" category.

But, look, it was very important for me in the course of the campaign, and it's going to be important for all of us who feel like we have a problem that needs to be fixed, to assure Americans who are on Social Security that nothing will change.

Part of the problem politically with this issue in the past, as you know, is the minute you bring up Social Security reform, people go running around the country saying, "Really what he says is he's going to take away your check or that which you have become dependent upon will no longer be available for you to live on."

And so, therefore, part of setting the stage or laying the groundwork for there to be a successful reform effort is assuring our seniors that they just don't have to worry about anything.

When they hear the debate that is taking place on the floor of the Congress, they just need to know that the check they're getting won't change, that promises will be met, that, you know, if there's to be an increase in their check, they'll get their check.

In other words, the formula that has enabled them to a certain extent -- the formula they're relying on won't change.

BUSH: Let me put it that way. I'm trying to be really brilliant.

Now, what was the other part of your question?

QUESTION: If I could just follow up...

BUSH: Is this a follow-up or part of the question?

QUESTION: You asked?

BUSH: Well, OK. Yes. You're right.

QUESTION: Why did you choose to take on Social Security and not Medicare, which some people believe is a worse problem?

BUSH: Well, I appreciate that, but we did take on Medicare and it was the Medicare reform bill that really began to change Medicare as we knew it. It introduced market forces for the first time, provided a prescription drug coverage for our seniors, which I believe will be cost-effective. I recognize some of the actuaries haven't come to that conclusion yet, but the logic is irrefutable.

It seems like to me that if the government's willing to pay $100,000 for heart surgery but not a dime for the prescription drug that would prevent the heart surgery from happening in the first place, aren't we saving money when we provide the money necessary to prevent the surgery from being needed in the first place?

BUSH: I think we are. That's one of the differences of opinion that I had with the actuaries. I readily concede I'm out of my lane. I'm not pretending to be an actuary. But I know that we made progress in modernizing the Medicare system. And there's more work to be done, no question about it.

But as you know, it's a three-year phase-in on Medicare -- or two-year phase-in from now. And in 2006, the prescription drug coverage will become available for our seniors. And I look forward to working with members of Congress to make sure the Medicare system is solvent in the long run. QUESTION: Mr. President, since early in your first term you've talked about immigration reform. But yet people in your own party on the hill seem opposed to this idea and you've got an opposition, even on the other side.

Do you plan to expend some of your political capital this time to see this through?

BUSH: Yes, I appreciate that question.

First of all, welcome. I'd like to welcome all the new faces -- some prettier than others, I might add. But...


Yes, I intend to work with members of Congress to get something done. I think this is an issue that will make it easier for us to enforce our borders.

BUSH: And I believe it's an issue that will show the -- if when we get it right, the compassion and heart of the American people.

And no question, it's a tough issue, just like some of the other issues we're taking on. But my job is to confront tough issues. And to ask Congress to work together to confront tough issues.

Now, let me talk about the immigration issue.

First we want our Border Patrol agents chasing crooks and thieves and drug runners and terrorists, not good-hearted people who are coming here to work. And, therefore, it makes sense to allow the good-hearted people who are coming here to do jobs that Americans won't do a legal way to do so. And providing that legal avenue, it takes the pressure off the border.

Now, we need to make sure the border is modern and we need to upgrade our Border Patrol. But if we expect the Border Patrol to be able to enforce a long border, particularly in the south -- and the north, for that matter -- we ought to have a system that recognizes people are coming here to do jobs that Americans will not do. And there ought to be a legal way for them to do so.

To me that, is -- and not only that, but once the person is here, if he or she feels like he or she needs to go back to see their family, to the country of origin, they should be able to do so within a prescribed -- the card and the permit would last for a prescribed period of time.

BUSH: It's a compassionate way to treat people who come to our country. It recognizes the reality of the world in which we live. There are some jobs in America that Americans won't do and others are willing to do.

Now, one of the important aspects of my vision is that this is not automatic citizenship. The American people must understand that, that if somebody who is here working wants to be a citizen, they can get in line like those who have been here legally and have been working to become a citizenship (sic) in a legal manner.

And this is a very important issue, and I look forward to working with members of Congress. I fully understand the politics of immigration reform. I mean, I was the governor of Texas, right there on the front lines of border politics. You know, I know what it means to have mothers and fathers come to my state and across the border of my state to work.

Family values do not stop at the Rio Grande river, is what I used to tell the people of my state.

People are coming to put food on the table. They're doing jobs Americans will not do. And to me, it makes sense for us to recognize that reality and to help those who are needing to enforce our borders, legalize the process of people doing jobs Americans won't do, take the pressure off of employers so they're not having to rely upon false I.D.s, cut out the coyotes who are the smugglers of these people, putting them in the back of tractor-trailers in the middle of August in Texas, allowing people to suffocate in the back of the truck, stop the process of people feeling like they got to walk miles across desert in Arizona and Texas in order just to feed their family, and they find them dead out there, you know.

I mean, this is a system that can be much better.

BUSH: And I'm passionate on it because the nature of this country is one that is good-hearted and compassionate. Our people are compassionate.

The system we have today is not a compassionate system. It's not working. And as a result, the country is less secure than it could be with a rational system.

QUESTION: I wonder whether I could ask you two central questions about the war on terrorism. The first one is, do you have a sense of where Osama bin Laden is and why the trail on him seems to have gone cold?

And, secondly, how concerned are you by the reports of torture, to use your word, the interminable delays to justice, for detainees held in Guantanamo and how much that damages America's reputation as a nation which stands for liberty and justice internationally?

BUSH: If I had to guess, I would guess Osama bin Laden is in a remote region on the Afghan-Pakistan border.

But I don't have to guess at the damage we have done to his organization. Many of his senior operators have been killed or detained. The Pakistan government has been aggressive in pursuit of Al Qaeda targets in Waziristan.

BUSH: And I appreciate the work of President Musharraf. He came the other day to the -- Saturday morning to the White House. And it was a opportunity to thank him once again for some of the bold steps he's taken. And Al Qaeda's dangerous, no question about it, but we've got a good strategy. And it's a strategy that requires cooperation with other nations and the cooperation has been great when it comes to sharing intelligence and cutting off finances and arresting people or killing people. And we'll stay on the hunt.

And in terms of the second part, the damage, yes, look: We are a nation of laws. And to the extent that people say, "Well, America is no longer a nation of laws," that does hurt our reputation.

But I think it's an unfair criticism. As you might remember, our courts have made a ruling, they looked at the jurisdiction -- the right of people in Guantanamo to have habeas review and so we're now complying with the courts' decisions. We want to fully vet the court decision because I believe I have the right to set up military tribunals.

And so the law is working to determine what presidential powers are available and what's not available.

We're reviewing the status of the people in Guantanamo on a regular basis. I think 200 and some-odd have been released.

But you're got to understand the dilemma we're in. These are people that got scooped up off a battlefield attempting to kill U.S. troops. And I want to make sure, before they're released, that they don't come back to kill again.

BUSH: And so I think it's important to let the world know that we fully understand our obligations in a society that honors rule of law to do that.

But I also have an obligation to protect the American people, to make sure we understand the nature of the people that we hold, whether or not there's possible intelligence we can gather from them that we could then use to protect us. And so we'll continue to work the issue hard.

QUESTION: I'd like to go back to Secretary Rumsfeld. You talked about the big-picture elements of the secretary's job, but did you find it offensive that he didn't take the time to personally sign condolence letters to the families of troops killed in Iraq? And if so, why is that an offense that you're willing to overlook?

BUSH: Listen, I know how -- I know Secretary Rumsfeld's heart. I know how much he cares for the troops. He and his wife go out to Walter Reed in Bethesda all the time to provide comfort and solace.

BUSH: I have heard the anguish in his voice and seen his eyes when we talk about the danger in Iraq and the fact that youngsters are over there in harm's way. And he's a good, decent man. He's a caring fellow.

You know, sometimes, perhaps, his demeanor is rough and gruff, but beneath that rough and gruff, no-nonsense demeanor is a good human being who cares deeply about the military and deeply about the grief that war causes.

QUESTION: Mr. President, I want to kick forward to the elections in Gaza in a few weeks, if I could, please.

As you know, presidents back to Carter have searched for a solution to the Palestinian/Israeli conflict. Your dad worked hard for it. Your predecessor said it was like going to the dentist without having your gums numbed.

I'm wondering what great...

BUSH: The guy had a way with words.


QUESTION: I'm wondering, sir, what lesson you draw, though, from their efforts -- how you think the war in Iraq may at this point have improved prospects for a Mideast peace and whether you think you might sit in that diplomatic dental chair yourself this year.

BUSH: I've been in the diplomatic dental chair for four years. This is an issue we talk about a lot.

But it became apparent to me that peace would never happen so long as the interlocutor in the peace process was not really dedicated to peace or dedicated to a state.

BUSH: You know, look, I gave the speech June 24, 2002, in the Rose Garden that laid out the vision about how to achieve -- at least from point of view, how to achieve a peaceful solution and something that I hope happens.

But I'm realistic about how to achieve peace. And it starts with my understanding that there will never be peace until a true democratic state emerges in the Palestinian territory. And I'm hopeful right now, because the Palestinians will begin to have elections -- will have elections, which is the beginning of the process toward the development of state.

It is not the sign that democracy has arrived. It is the beginning of a process.

And we look forward to working with Israel to upheld her obligations to enable a Palestinian state to emerge. But we got a good chance to get it done.

And I know the world wondering whether or not this is just empty rhetoric or do I really believe that now is the time to move the process forward. And the answer is, now is the time to move the process forward.

But we cannot shortcut the process by saying, you know, "Well, the Palestinians can't self-govern. You know, they're not suitable for a democracy."

BUSH: I subscribe to this theory that the only way to achieve peace is for there to be democracies living side by side. Democracies don't fight each other.

And the last system didn't work, which was the hope that a Palestinian Authority run by a singular head, who on some days would say, "We're for peace," and on some days would say, "Now is the time to attack," hoped that everything would be fine. It just didn't work.

So I look forward to working with the world, the new secretary of state, to work with the Palestinians to develop the structures necessary for a democracy to emerge.

And I appreciate the fact that Prime Minister Tony Blair is willing to help that process by holding a conference with Palestinians that will help develop the state. And if the free world focuses on helping the Palestinians develop a state and there's leadership willing to accept the help, it's possible to achieve peace.

And there are responsibilities for all parties. Palestinians have responsibilities, the Israelis have responsibilities, the Americans have responsibilities, the E.U. has responsibilities. But we've all got to keep the big vision in mind in order to achieve the objective.

Listen, thank you all very much. I wish everybody -- truly wish everybody a happy holidays.

BUSH: For those of you coming to Crawford, I look forward to not seeing you down there.


Thank you all.

QUESTION: Are you going to the Rose Bowl?

BUSH: No, I won't be going to the Rose Bowl. I'll be watching the Rose Bowl.

And by the way, in case you're not following high school football in Texas, the Crawford Pirates are the state 2A, Division II champs. And we look forward -- don't we? -- to wave the championship banner above the Crawford High School.

All right, happy holidays.

DARYN KAGAN, CNN ANCHOR: President Bush getting in one final comment there. High school football almost a religion in Texas. Other than that, you could say this was like his final exam before the holidays. College students relating to that.

Probably not a topic the president didn't touch upon. Iraq, Social Security, spending bills, immigration, war on terror, just to name a few.

TONY HARRIS, CNN ANCHOR: Homeland security, Donald Rumsfeld, you mentioned Iraq. Mixed results there. He talked about in terms of training the military and the police there, foreign fighters. He talked about Iran. He talked about North Korea.

You're right, comprehensive is what we had hoped for and, you know, I came away with a sense that this -- this -- this was good. It was good to see him in this form. It was good to see him this exhaustive.

It was good to see him taking so many questions. And it gave us an insight and a window into the way he thinks. It was great to see.

KAGAN: And plenty of tough questions. Up there was Bernard Kerik, the failed nomination for homeland defense secretary. He said he's disappointed that that didn't work out. The problems of Bernard Kerik seem to unfold every day in the papers.

Our John King is ready. Let's go ahead and bring in our senior White House correspondent.

John, let's talk about Donald Rumsfeld. And before we get to you, a sound bite. He had two questions, this president took, on Donald Rumsfeld. One, in one answer he strongly defended his secretary of defense, and the other was more specific, directed at the latest revelation that the defense secretary has not been personally signing letters of condolence.

Let's listen to that sound bite.


BUSH: Listen, I know how -- I know Secretary Rumsfeld's heart. I know how much he cares for the troops. He and his wife go out to Walter Reed and Bethesda all the time to provide comfort and solace.

I have seen the anguish in his -- or heard the anguish in his voice and seen his eyes when we talk about, you know, the danger in Iraq and the fact that youngsters are over there in harm's way. And he is -- he's a good, decent man. He's a caring fellow. You know, sometimes, perhaps, his demeanor is rough and gruff, but beneath that rough and gruff, no-nonsense demeanor is a good human being who cares deeply about the military and deeply about the grief that war causes.


KAGAN: So despite what some people are considering piling on, calling for Donald Rumsfeld's resignation, this president standing by his secretary of defense -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Standing by. And Daryn, I think by far that was the most interesting thing to come out of this news conference. The president did cover a lot of ground, a lot of policy at home and abroad.

Very little new ground trodden on, though, as the president discussed whether it be Iraq, Iran, Syria, Social Security reform here at home. When it comes to Secretary Rumsfeld, the president knows as this year comes to a close his defense secretary is in hot water in many ways with Republicans on Capitol Hill, Democrats as well. But he long has been with the Democrats.

And now this more personal controversy about why doesn't he take the time to personally sign a letter of condolences. Why use one of those machines they call an auto pen? The president closing this year by making clear that he has full confidence in his defense secretary, trying to add a much more personal note about the man behind that gruff demeanor, as the president put it.

Why is the president doing this? Number one, because he does stand by Donald Rumsfeld, his aides said. And number two, he knows in January when Congress comes back the Iraqi elections will be a subject.

The lack of armored vehicles in Iraq will be a subject. This auto pen controversy likely to be a subject.

The administration will be asking for billions of more dollars for another year for the troops on the ground in Iraq. The defense secretary will be in the hot seat on Capitol Hill. The president trying to help, if you will, build up some political support for him at the same time he's trying to build up political support for his own agenda.

KAGAN: Speaking of political support or lack of political support, Bernard Kerik, the subject of his nomination, came up, not too surprisingly. The president saying he's disappointed this one didn't work out, but didn't give a clue as to who might be next up as a nomination for Homeland Defense secretary.

KING: No, he did not. But we are told we might get that announcement as early as tomorrow. We should get an announcement.

There are two big jobs open right now. The Department of Homeland Security, who will be the cabinet secretary there? And who will get what some would say is an even more important job because it is a new job?

Much like Tom Ridge when he became the first secretary of Homeland Security, this country is about to have its first director of national intelligence as well, someone who has to referee a lot of turf battles between the Pentagon, the CIA and other intelligence agencies across Washington and assert control over what all involved say is an unwieldy and complicated and sometimes confusing intelligence apparatus.

The president, we are told, could have both of those appointments before heading home for Christmas. Some possibility that one might lay over. But stay tuned. Probably as early as tomorrow we'll get one of the nominees for those critical jobs.

KAGAN: Yes, and the president in his plain speak saying he will name a new intelligence director when "I find somebody who knows something about intelligence." President Bush just kind of saying like it is.

I'd like to get as we wrap this up a big-picture comment from you, John. This president in his first term did not give a lot of news conferences, and yet it seems like he's getting more comfortable in this free format.

KING: Well, he holds a news conference when he believes it suits his political interest. And the president is going home to celebrate the end of the year, if you will, as most Americans do, to wind down at the end of the year.

But he also knows, when he comes back, he has a very busy agenda, whether it is lawsuit reform, tort reform, as he calls it, whether it is Social Security and taxes, whether it is a budget that is going to make almost everyone, whether the interest group be conservative or liberal, this president's budget is going to make everyone mad, because it pulls in on spending.

So what the president is trying to do, is say, yes, I won 51 percent of the election in November, but that still means 48 percent voted against me. He needs to build up political support among Democrats and independents. He needs to solidify, if you will, the support of Republicans, and he needs to put the people on notice in Congress of what he wants to do when he comes back. Everything here between now and the inauguration, the State of the Union, the release of the budget, designed, if you will, to put the president on an upward path when it comes to political support.

So this is a traditional event, the end-of-the-year news conference, but for this president, even though he won re-election, still quite critical. He has a lot he wants to do in the second term, and he knows that history tells him he must get most of the big things done in the first two years, because then, guess what, another midterm election, and then on to the 2008 presidential election.

KAGAN: Seems like we're already talking about that. John King at the White House. John, thank you for that.

We continue looking at the president's news conference with Tony.

HARRIS: Yes, Daryn, we want to bring in Chris Lawrence, who is in Baghdad for us.

And, Chris, before we talk about a number of issues that were touched on with the subject of Iraq by the president in this news conference, a very exhaustive news conference, just about an hour of time with the president, I want to play the soundbite for you and get you to respond to it. It is the president. If we titled it, it would be "hard work ahead, we must stay the course."

Take a listen to this and then let me get your response to it.


BUSH: Must meet the objective, which is to help the Iraqis defend themselves, and at the same time have a political process to go forward. It's in our long-term interest that we succeed. And I'm confident we will.


HARRIS: And, Chris, I guess here's the question -- is the job of meeting the objective, the big objective, the big 'O,' is it getting more difficult as you see it on the grounded there in Baghdad?

CHRIS LAWRENCE, CNN CORRESPONDENT: Well, it seems to be as difficult as it's been for the past few months, just an incredible amount of violence here in Iraq.

And I think what these attacks prove is that although there were concerns that they may not be able to hold fair elections in areas dominated by the Sunni Muslims, this proves, this happening in Shiite Muslim areas, that anywhere in Iraq can be an extremely dangerous place.

Now, also today, Iraqi officials also sounded a lot like President Bush did, saying they're hopeful about next month's elections, saying these attacks over the weekend, these car bombs that killed nearly 70 people, would not disrupt the elections, and they actually took a significant step today in developing the actual ballot that the Iraqis are going to vote on.

Let's get you caught up on to what happened over the last day here. Down in Najaf, south of here in Baghdad, all the survivors have now been accounted for. Police have arrested 50 suspects in that area, and they have also sealed off the city after a car bomb exploded outside a crowded square while many people were watching a funeral procession go by.

Just 50 miles away from Najaf, in Karbala, another bomb exploded, this one at a bus depot, killing 16 people there, and digging an enormous crater in the ground.

Now, what those two have in common, is they both occurred in areas dominated by the Shiite Muslim community. Iraqi officials saying today that terrorists are trying to drive a wedge between the two main religious sects here in Iraq. They say it will not work. They say they are going ahead with the elections. They say that they will be depending heavily on American troops to secure the polls when voters get there.

And today, they instituted a lottery system of sorts, where a United Nations official literally drew names out of a bin to establish the exact order in which the candidates will appear on next month's ballot -- Tony.

HARRIS: OK, Chris Lawrence, reporting to us live from Baghdad. Chris, Thank you.

KAGAN: We are going to get to the story that shocked a lot of people over the weekend. A mother slain, her baby ripped from her womb. The woman who was accused of that crime to appear in maybe one, perhaps two different courtrooms today. We'll get to that story after this break. (COMMERCIAL BREAK)

KAGAN: Let's look at what's happening now in the news. President Bush holding a wide-ranging end-of-year press conference, and you saw it live right here on CNN. Among other things, the president defended Secretary of Defense Donald Rumsfeld who has come under recent criticism. Mr. Bush says Rumsfeld has done a fine job, and he looks forward to working with him in the future.

Police rounded up dozens of suspects in Iraq today. Two car bombs killed 68 people on Sunday. The attacks were aimed at crowds in the holy cities of Karbala and Najaf.

A truck driver will be cited in Pennsylvania after his tractor- trailer jackknifed. It led to an 80-car pileup. Police say the trucker was doing 55 in white-out conditions.

And speaking of the weather, a blizzard at the post office. The Postal Service says today is likely to be the busiest day of the year for shipping. A live picture there for you. Officials say mail it today if you want it there by Christmas.

Officials in Williamsport -- actually in South Williamsport, Pennsylvania, are holding out hope of finding a missing child. The 9- year-old boy is autistic and unable to speak. He's been missing since Saturday. Officials are urging people to check inside sheds or garages where he might have gone to keep warm.

HARRIS: The woman accused of killing an expectant mother and stealing the baby from her womb makes an initial court appearance today. CNN's Jonathan Freed is following the story. He's in Kansas City Missouri with the latest.

Jonathan, good morning.


That's right, Lisa Montgomery is indeed expected to appear at the federal courthouse here in Kansas City, Missouri sometime today. She's going to appear before a U.S. magistrate judge, where a public defender is going to be appointed for her and it will be the first time that the charges will be read out in court, charges of kidnapping resulting in death.


FREED (voice-over): The gruesome kidnapping and murder case has stunned even veteran members of law enforcement.

SHERIFF BEN ESPEY, NODAWAY COUNTY, MISSOURI: Nobody here could ever perceive this ever taking place, to have a fetus taken out of someone's womb, and then doing an Amber Alert and trying to find a child that -- it's inconceivable.

FREED: According to the FBI, Lisa Montgomery contacted the victim, 23-year-old Bobby Joe Stinnett, through an Internet chat room, pretending to be interested in the dog she bred. The two arranged to meet last Thursday at Stinnett's home in Skidmore, Missouri. Montgomery is accused of strangling Stinnett, who was eight months pregnant, and cutting the fetus out of her womb. Police issued an Amber Alert for a car a neighbor had seen outside the murdered woman's home.

ESPEY: We may not have ever recovered this little baby if the Amber Alert system was not put into place.

FREED: The 36-year-old Montgomery was arrested on Friday, and allegedly confessed to the crime. Neighbors in Melbourne (ph), Kansas say Montgomery and her husband were showing off the baby as their own.

After surviving the tragic ordeal, the infant has been united with her real father. Zeb Stinnett has named her Victoria Joe, in memory of her mother, and says she's truly a little miracle.


FREED: Now, Tony, the U.S. attorney told CNN earlier today that they have not yet decided whether or not to seek the death penalty in this case. A little bit early for that -- Tony.

HARRIS: Jonathan Freed for us. Jonathan, thank you.

Now we turn to the Michael Jackson child molestation case. The lawyers are due back in court next hour. Our Miguel Marquez is covering that story. He is in Santa Maria, California this morning.

Miguel, good morning.


One person not going to be here, at least expected not to be here, is Michael Jackson himself. One thing seems clear, the fact that we are all here and the court has such a heavy calendar, the week before Christmas, seems like this thing is on a fasttrack for trial.


MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): For Michael Jackson, this Christmas week, a pretrial hearing with a long legal list.

ROBERT PUGSLEY, SOUTHWEST LAW SCHOOL: It suggests that this judge really is anxious to get this case going.

MARQUEZ: Among other things, the judge will hear two defense motions to dismiss the case. Jackson's lawyers will argue Santa Barbara District Attorney Tom Sneddon has carried out a prosecution based on revenge and that he's abused his power in obtaining search warrants. Over 100 warrants have been executed against Jackson. The latest was in early December, when his Neverland Ranch was raided for a second and third time in this case. Authorities also obtained a DNA sample from Jackson. Last April, a grand jury indicated the pop star, for, among other things, conspiracy and lewd acts against a child. Jackson has denied all charges.

PUGSLEY: I think that the independence of the grand jury is going to stand fast against any motions to dismiss.

MARQUEZ: If the judge won't dismiss the case, Jackson's defense will argue that evidence recently gathered at Neverland should not be allowed at trial and the trial date should be put off by six weeks.

The hearing comes days after Jackson greeted children and the media at his Neverland Ranch, a move his spokeswoman said had nothing to do with Jackson's case.

PUGSLEY: On Mr. Jackson's side, a demonstration that there's nothing to hide. Bring the public on.


MARQUEZ: Another motion we're liking to hear today is one from the prosecution, that would limit the amount of personal records that Jackson's defense can get of the accuser and accuser's family. One thing that we were expecting to hear today that's already been put off to January is a prosecution motion that would allow prior sexual offenses accused against Mr. Jackson to be allowed in this proceeding. That will be put off until January -- Daryn.

KAGAN: Miguel Marquez, from Santa Maria, California.

Our viewers can follow developments in the Jackson case. Any time you're away from your television, just go to your computer. is available 24/7.

HARRIS: Well, we told you Friday the sobering news about Celebrex. Today, the makers of the drug are making changes. Details on that.

KAGAN: And whomever you are shopping for, it's likely at least one person on your list is asking for video games. Daniel Sieberg looks at how the video games have taken the spotlight in American entertainment. You're watching CNN LIVE TODAY.


KAGAN: All right. Let's talk about something you are not going to see on television anymore. That would be ads for the popular painkiller Celebrex. They're being taken off the air. The drug, though, is still on the market. A study linked with high doses of Celebrex to an increased risk of heart attacks in some patients.

Our medical correspondent Elizabeth Cohen is here with our latest dose of health news.

Good morning.


You know, Pfizer, which makes Celebrex, says that at the suggestion of the FDA, they are taking those ads off the market, so you won't be seeing ads like this one. And goodness knows you have probably seen them in the past. They were all over the airwaves. In fact, Pfizer in the first nine months of this year, spent $71 million on advertising this popular painkiller. Now the Food and Drug Administration has not explained why they want the ads off the air, but they still want the drug on the market. All they say is that they're still taking data in and they are studying that data.

Now some critics have said that because of the ads, or largely because of these ads, that Celebrex was widely overprescribed, that simply too many people were taking it. If that is true, that's not good news. Because what this study found was that it increased risk of heart attacks by 2 1/2 times. That means the more people taking it, and 26 million Americans have taken, the more people taking it, the more heart attacks.

KAGAN: But it also means, there's a lot of people who don't have heart problems, who are saying, wait, I love that drug. So what are people supposed to do if they don't have heart problems?

COHEN: Right, there certainly are a lot of people who found a lot of relief, a lot of arthritis sufferers and others, who found a lot of relief, from Celebrex. And we asked some experts what do you do if you have a patient like that? And what these experts at the Food and Drug Administration said, go to your doctor and see if there are alternatives, which would include over-the-counter pain relievers.

For many people who love Celebrex, you know what, Ibuprofen, or Acetaminophen, which is Tylenol, those are going to work just as well. Not true for everyone, but some it is. Exercise will help arthritis sufferers, so will weight loss, and certain dietary supplements will help as well.

And the Food and Drug Administration is very clear in telling doctors, starting this past Friday, if you do insist on keeping your patient on Celebrex, you need to give them the lowest effective dose. What they found, Daryn, was the higher the dose, the more likely of heart attacks.

KAGAN: Very interesting. Elizabeth, thank you.

And to get your "Daily Dose" of health news online, log on to our Web site. You'll find the latest medical news, a health library, and information on diet and fitness. The address is

HARRIS: And when we come back, technology correspondent Daniel Sieberg will be here to help me, give me the knowledge to beat my kid at his new video games this Christmas. We'll be right back.


HARRIS: All right, look here, forget about "Pong" and "Pac-man," these are not your father's video games, but dad and mom might just be playing right along with the kids. Video games have gone from arcade attractions to booming business.

Technology correspondent Daniel Sieberg is taking a weeklong look at the gaming craze.


DANIEL SIEBERG, CNN CORRESPONDENT (voice-over): Video games may have started out as a distraction for kids, costing just a quarter at the neighborhood arcade. But electronic entertainment has now become the $8 billion gorilla in America's living room.

DOUG LOWENSTEIN, ELECTRONIC SOFTWARE ASSOCIATION: Video games have emerged as an equal partner in shaping the culture and the entertainment that people around the world consume.

SIEBERG: No fewer than 145 million Americans say they play video games. That's just more than 50 percent of the total population.

UNIDENTIFIED MALE: It's grown to be something phenomenal.

SIEBERG: Including both hardware and software sales, the industry made about $11 billion in 2003. Compare that to only $9 billion in box office receipts for that year. The November release of Halo 2 saw sales of $125 million in its first day.

UNIDENTIFIED MALE: We sell tens of thousands of games a week here.

SIEBERG: Part of the reason? Those kids who started out playing Atari 20 years ago, well, they're still playing, and so are their kids.

UNIDENTIFIED MALE: Usually a lot of sports games. Sometimes we'll play a couple of adventure games, but...


UNIDENTIFIED MALE: Yes, and Halo, too. As many hours as we put behind a game console, yes, it's a great way to spend some father-son time.

SIEBERG: While demand has grown, so has the competition. The amount of money invested in a top name video game is on the level with a blockbuster movie.

UNIDENTIFIED MALE: You're talking about $10 million, $20 million to make some of these games. You know, you're asking consumers to pay $50, $40 or $50 to buy one of these games.

DAN "SHOE" HSU, "ELECTRONIC GAMING MONTHLY": Yes, there's a lot at stake, and that's why you really have to do things very carefully, really plan out what you're going to do and execute well.

SIEBERG: Hundreds of titles this year didn't even break even. And at these budgets, it only takes one bomb to break a company. But for the top titles, Americans don't hesitate to shell out. But could the popularity of these games just be a passing fad?

HSU: If you asked me this maybe 10 years ago, maybe. But now, you know, mom and dads are playing video games. Adults, business owners. You know, the average age of a gamer in the United States is 29 years old. So I think it's definitely here to stay.

SIEBERG: And with the backing of Santa Claus, at least for now, analysts predict the holiday season of 2004 will set a new record when the numbers come in.


SIEBERG: You know, a big part of the reason that 2004 is expected to be so lucrative is because several highly anticipated sequels were released in the past few months. Those include "Halo 2," "Doom III," "Half Life II," and the newest game in the rather controversial "Grand Theft Auto" series. Basically, if the summer is when movie studios release their blockbuster titles, the holiday season is (INAUDIBLE) for video games. It's also the time when parents save up the money to buy what they're kids are asking, as you might well know.

HARRIS: Yes, I do. But, Daniel, how come I love "Pong" and "Pac-man," but I can't play these games today, and my son beats me every time.

SIEBERG: They are from the thumb generation. They grow up with their hands kinds of in this position with their thumbs moving fast all the time, typing on the keyboard. It's something that is just part of that generation.

HARRIS: All right.

SIEBERG: As much as a gamer I am, I wish I had that in me.

HARRIS: I don't have it. Daryn, I don't have it.

SIEBERG: Didn't grow up with it.

HARRIS: Thank you.

KAGAN: Keep practicing. There's still hope.

There's also hope for a white Christmas. Are you looking for one? We'll be back in a moment with a wintry forecast.



KAGAN: That's going to do it for us. You're coming back tomorrow to fill in for Rick.

HARRIS: I'll be here with you. I'll be here with you.

KAGAN: OK, we'll see you.

And right now, Wolf Blitzer takes over from Washington D.C.


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