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LOU DOBBS TONIGHT

Decision Day in Iowa

Aired January 3, 2008 - 19:00   ET

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


LOU DOBBS, CNN ANCHOR: Tonight, decision day in Iowa, voters will begin caucusing within the hour. It is the most closely fought presidential contest in eight decades. We'll have complete coverage of all of that, all the day's news, and much more straight ahead here tonight.
ANNOUNCER: This is a special edition of LOU DOBBS TONIGHT: news, debate, and opinion for Thursday, January 3rd. Live from New York, here now, Lou Dobbs.

DOBBS: Good evening, everybody. Voters in Iowa tonight preparing to vote in the first electoral battle of this presidential campaign. Opinion polls indicate this will be an extremely close race with the outcome of the Republican and the Democratic contest simply too close to call tonight.

The candidates believe victory could give them unstoppable momentum in the primary election season. The candidates spent this day making last minute appeals to supporters of undecided voters. We'll have extensive coverage of course throughout this broadcast and we begin tonight with Candy Crowley who is at the Clinton campaign headquarters in Des Moines.

Candy, what is the mood in the Clinton camp tonight?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well let me tell you I talked to three Clinton advisers and here are the answers I got when I asked them about the mood. They said confident, another one said attentive and the third one said OK. I think you can add that all up, and what you have is a campaign that isn't really sure what's going to happen. It's no different frankly than Barack Obama or John Edwards or any of those down the line.

This has to do, as we have said all day, with who can get those voters who have promised to stand up for them actually to those caucuses, Clinton is looking to make real inroads into sort of senior women, mature women, many of whom have never voted before. Are they actually going to come?

In the Barack Obama campaign, what they're looking for is (INAUDIBLE) slightly younger, 45 and younger. They'd like to see even the 29 down to 18 set turn out for them in droves that they haven't turned out for before in these caucuses. Obama also looking to those independents. There are more independents in Iowa than either party.

And will they come into those caucuses, change their voter registration to Democratic as they would have to do and vote for Barack Obama. John Edwards, he is looking for the tried and true. Those caucus goers who have always been there, who go to caucuses no matter what the weather is, he's looking for them to turn out.

Now they're down the tier, as you know, with Biden, with Dodd, with Richardson. Also keep an eye on them because as we all know in these Iowa caucuses, doing better than expected can often be almost as good as a win. The other mystery -- and I know this is a mystery because every campaign has asked me about this today -- what do you hear about the other lower tier candidates, because deals can be made.

If, in a Democratic caucus, you don't get 15 percent support within that caucus, you're considered not viable. What do you do? You either join another campaign or you ask people to come to you. Now, deals can be made. We've heard that Dennis Kucinich has told his supporters go ahead and support Barack Obama if I'm not viable.

There are other rumors out there of other lower tier candidates doing that. But the fact of the matter is they all deny it, so but it can play a very, very important part when it comes to that second choice, which is really key here, at least on the Democratic side, Lou.

DOBBS: Candy, I know you're excited. I'm excited about what we're about to witness in these caucuses. I have to ask you this, as you're there in the Clinton headquarters, it seems so quiet around you, so what's going on?

CROWLEY: Well they're all making phone calls. They're trying to make sure people are going to caucuses. I mean we're half an hour shy of when they've got to start driving them to those caucus places, so basically it's all hands on deck for the Clinton campaign, for the Obama campaign, Edwards and on down the line.

They have tot people still on the phones and they've got their precinct campaigns out there making sure the people who have committed to their candidates are actually going to come, so the action is other than here right now.

DOBBS: All right. Candy, thank you very much. Candy Crowley will be keeping us up to date on those developments from the epicenter of the Clinton campaign headquarters.

Opinion polls show Mike Huckabee and Mitt Romney are clear front- runners in the Republican part of this contest. Both Huckabee and Romney trying to mobilize their supporters in Iowa, working up until the very last minute and we're nearing that last minute. Dana Bash reports now from Huckabee headquarters in Des Moines -- Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, Lou, here at Huckabee headquarters and over at the Romney campaign, everybody says they are feeling very good about tonight, but nobody will guess who is going to win. It's just that type. But the real test tonight is for the surprise candidate in the Republican race. And that's Mike Huckabee.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Nice to have you here.

UNIDENTIFIED MALE: Thank you.

BASH (voice-over): The former pastor, former Arkansas governor is hoping his unusual part God, part pocketbook on one of you message carries the day.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: Because people had rather elect a president who reminds them of the guy they work with, not the guy that laid them off. I think they get it.

(APPLAUSE)

BASH: Huckabee is trying to rally voters to an insurgent cause, citing this, back of the pack to top contender in a matter of months, but a barrage of ads hitting Huckabee's record on taxes, illegal immigration and spending have hurt. And misstatements on national security left questions about his readiness.

UNIDENTIFIED FEMALE: I was a big Huckabee supporter until the Pakistan incident, and I got a little bit worried about the foreign policy.

BASH: In the end Huckabee knows he was a surprise candidate for dissatisfied evangelicals looking for a social conservative to trust. Here, one last appeal.

HUCKABEE: But it comes from one's soul and one's gut. You know something; I didn't get into being pro life because of politics. I became a political person because I am pro life and believe that one of the most important things we have to do in this country is protect each other.

(END VIDEOTAPE)

BASH: And the key thing to watch tonight is whether the passion behind Mike Huckabee can stand up to the deep and methodical campaign that is being run by his chief rival here, Mitt Romney. Mitt Romney of course is making the case that he is just as conservative as Mike Huckabee, and he's also banking on his business success, and telling voters that with that and the fact that he was a Republican governor in a Democratic state that they should really look to him as somebody who can end what frustrates voters the most. And that is the grid lock in Washington -- Lou.

DOBBS: Dana, thank you very much; Dana Bash.

Joining me now three of the sharpest political minds, analysts and commentators anywhere, conservative talk show host Bill Bennett -- good to have you with us, Bill -- and Democratic strategist Donna Brazile, Donna, great to see you, and our senior political analyst here at CNN, Gloria Borger. Thank you very much for being with us.

Let's start -- Gloria, your response. I thought it was interesting to start with a line that Huckabee uttered because it had a populous dream to it, not unlike Senator Edwards...

UNIDENTIFIED FEMALE: You could have written it, Lou.

DOBBS: I could have.

(CROSSTALK)

DOBBS: I could have, but I didn't.

UNIDENTIFIED FEMALE: You could have written that line.

DOBBS: But I didn't. The idea that Huckabee looks more like somebody you work with rather than somebody who would lay you off. What do you think of the line? What do you think of the message?

GLORIA BORGER, CNN SR. POLITICAL ANALYST: If you look at this Republican race in Iowa, as you see it between Huckabee and Mitt Romney. Think of Mitt Romney as the establishment Republican, with the support of the establishment, with the support of business, showing his business credentials, showing his government credentials. And think of Mike Huckabee as new kind of Republican, a populous Republican, a social conservative and evangelical conservative, but as somebody who says that he is with workers, he's a populous, doesn't want to cross picket lines, et cetera, et cetera. And that has a lot of appeal in the state of Iowa...

DOBBS: The last time, Donna, you heard a Republican say that he didn't want to cross a picket line.

DONNA BRAZILE, CNN POLITICAL ANALYST: I don't recall ever hearing that from a Republican. You know, Mike Huckabee is folksy. He connects with people at a very emotional level. At a time when the Republicans are talking about terrorism, he's talking about bread and butter issues, so I think Huckabee is a strong candidate but at the end of the day it's about organization in these closing hours of the campaign.

DOBBS: So you're going to be the pragmatist, the realist here tonight and suggest to us this is about organization, machined politics, forces on the ground and so much for populism...

BRAZILE: It's worth three to five points on a night like tonight where it's too close to call. It's a nail-biter. Mitt Romney has been on the ground. He has experienced people. He knows how to bring them out. He brought them out for the straw poll. He will bring out his supporters tonight.

DOBBS: Bill, as we look at this contest. We're starting to hear populism -- to go back to that issue -- emerge here. Perhaps not independents, but populism, whether it be Huckabee on the Republican side with some surprise, whether it be Senator Edwards with less surprise on the Democratic side, even Barack Obama is now starting to sound certain populous tones. What do you make of it?

BILL BENNETT, CNN CONTRIBUTOR: Well I think it's there. There is certainly something there. You're right, I'll be the realist pragmatist, he didn't cross picket lines. He went in the back door at the Jay Leno show because there was a picket line out front, so there's a problem there. I don't think he would have been quite so pleased to hear if we played some of his about immigration because that's another whole kettle of fish, but there's a populous sentiment...

DOBBS: Let me be clear. I'm not pleased with his selection...

(CROSSTALK)

BENNETT: Well that's why we're waiting for your declaration. You know the whole country is waiting (INAUDIBLE). But look...

UNIDENTIFIED FEMALE: (INAUDIBLE)

BENNETT: That's right. There is something very appealing about Huckabee. If I can just, for a moment, put it in perspective. We have this thing in Kenya where this election is disputed. People are killing each other...

DOBBS: Correct.

BENNETT: They blow up Benazir Bhutto in Pakistan. We all have our criticisms on what's going on, but this is how we do it you know and it's a salute to democracy. It's a tribute to democracy. Even a really rich guy with 500 million bucks like Romney goes out and goes to 400 places because he has to go before the people.

(CROSSTALK)

DOBBS: Michael Bloomberg with billions of dollars here...

(CROSSTALK)

BENNETT: But Huckabee is holding right up to Romney with very little money. That's something on his behalf, too.

DOBBS: Gloria, real quickly.

BORGER: Well I think Bloomberg will run if -- unless it's McCain running and Obama running. In that case, he won't. I think he will if it's anyone else.

(CROSSTALK)

DOBBS: We've got something of a long-range forecast. We're going to be back with our panel to get somewhat a more narrow near- term forecast. Stay with us folks. We'll be right back.

Now tonight's poll question; do you believe tonight's Democratic and Republican caucus winners will emerge as their parties' presidential nominees at the end of this process? Yes or no. Please cast your vote at loudobbs.com. We'll have the results here later in the broadcast.

Much more on the final countdown of the caucuses in Iowa ahead; also corporate elite trying to frustrate the will of the majority in one state that's fighting against the harsh impact of illegal immigration. We'll have a special report and one about success in that fight.

Troubling new evidence tonight that communist China has launched a dangerous new challenge to American military dominance in space. We'll have that special report and one of the world's leading authorities on communist China's military buildup will be joining us, Gordon Chang. All of that, a great deal more straight ahead.

We'll be right back. Stay with us.

(COMMERCIAL BREAK)

DOBBS: We are quickly approaching the beginning of the Iowa caucuses; we're minutes now away from the beginning of those caucuses. The voters you see there in these live pictures are making their way into the meeting halls across the state in public schools, libraries where they will begin the first electoral test of 2008 for both political parties.

Among the top issues for voters in Iowa tonight is our illegal immigration crisis. But many states far from tonight's caucuses have already taken steps on their own as the federal government has failed to take action to stem our border security and illegal immigration crisis. This New Year ushered in a tough new set of laws in Arizona that are directly aimed at stopping the employers of illegal aliens. The laws are on the books now but enforcement has yet to begin in earnest. Bill Tucker has the report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The nation's toughest new laws and employers who knowingly hire illegal aliens went into effect on January 1 in Arizona. Part of that law requires all employers in the state making new hires to use the federally run E- Verify program, an electronic verification database that checks Social Security numbers.

But so far, according to a spokesman for the company that runs the program, only 7 percent of employers in the state have signed up. The primary author of the law thinks it is because employers might be getting bad advice from their lawyers.

RUSSELL PEARCE (R), ARIZONA STATE HOUSE: They're putting these employers at risk. It's the law. It says they shall sign up. They shall use -- and again it's free, it's easy, it's for their benefit. It's simply -- again, this is malfeasance virtually on the part of an attorney as far as I'm concerned.

TUCKER: Perhaps employers who choose to ignore the new law are putting their faith in a challenge put forth by a coalition of open borders advocates and employers, which will be heard in court on January 16. Some think the advocates are putting too much faith in the law not being stringently enforced. SHERIFF JOE ARPAIO, MARICOPA COUNTY, ARIZONA: I get a feeling they don't want to lock them up. They just don't want to put illegals in jail. That's my opinion. And I think -- now that's not the public's opinion. I'm talking about the bureaucrats and the politicians. And that's what the bottom line is.

TUCKER: But a spokesman in the Arizona attorney general's office said there should be no mistaking the fact that the law is now the law.

(END VIDEOTAPE)

TUCKER: And under that law, civilians are allowed to file official complaints about employers they believe are knowingly hiring illegal aliens. The attorney general's office told me today they've received about a half dozen complaints on Wednesday, that those complaints will be investigated, Lou, and they will be turned over to the county prosecutors for prosecution.

DOBBS: Now this is an amazing law. It's already survived two court tests...

TUCKER: Right.

DOBBS: ... and meanwhile, we have all sorts of, frankly what I consider to be complete fools running around this country saying we can't do something in this country about this issue. They're going after the real problem and that is illegal employers...

TUCKER: Exactly.

DOBBS: ... and these arrogant and indifferent business leaders, both large and small, have got to be dealt with and severely. Sheriff, Joe Arpaio of Maricopa County where Phoenix is located, he wants to go after those illegal employers and right now.

TUCKER: Well he doesn't just want to go after them, Lou, he already he going after them.

DOBBS: Yes.

TUCKER: He is the can-do guy out there.

DOBBS: Well and setting a nice standard for the rest of the country to take a look at. And it does put the focus where it belongs on the illegal employers. Without them there wouldn't be a problem.

TUCKER: Exactly.

DOBBS: All right, Bill Tucker, thank you very much.

TUCKER: You're welcome.

DOBBS: And I think we ought to say once again our hats off to the people of Arizona who are showing that democracy works and the will of the majority can be represented especially when they demand it be represented.

Let's take a look now at some of your thoughts. Vanese in Georgia said, "Lou Dobbs, keep up the good work! I am an African American female in my twenties and I think God for your show." We thank you for the kind words.

And Marisol in New Jersey, "I've been listening to your program on satellite radio for the past year. You are the only person that is making any sense. I'm of Hispanic descent. I'm proud of my heritage. However, I understand that in Rome do as Romans do."

And Muhammad in Virginia, "Lou, I follow your show religiously and greatly appreciate that you consistently base your show on many important issues that affect all Americans."

We'll have a lot more of your thoughts here later in the broadcast. Each of whose e-mail is read here receives a copy of my new book, "Independents Day" Awakening the American Spirit", the book that corporate America, the Democratic and Republican Parties and a bunch of other elites don't want you to read.

Still ahead here, communist China escalating its aggressive military buildup; we'll have a special report for you tonight on rising concerns about a new Chinese space weapon.

And in a few minutes the first Iowa caucuses will be called to order; much more on the first presidential contest of this 2008 campaign year.

Stay with us. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: The presidential candidates of both political parties have all but ignored communist China's rising military and economic challenge to the United States. Communist China has now launched an aggressive military buildup, a buildup that in part is designed to challenge U.S. military dominance in space. Christine Romans has our report.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): This picture surfacing on the Internet last month may be of a new Chinese space plane. In an op-ed in "The Wall Street Journal" Asia edition, defense expert Richard Fisher says if legitimate it is evidence that Chinese engineers may be much farther along the previously thought in developing a military space plane. China has already put a man in space but he says the Chinese have long aspired to a space plane for many reasons.

RICHARD FISHER, INTL ASSESSMENT AND STRATEGY CTR.: For the conduct of active military missions such as attacking targets on earth or in space and for the conduct of passive missions such as launching small satellites or even launching missiles that would attack enemy satellites. ROMANS: Chinese military ambitions in space have become clear over the past year and a half. China has blinded a U.S. reconnaissance satellite with a ground based laser. It destroyed one of its own weather satellites with an anti-satellite missile, a critical milestone, experts say, since most American military communications rely on satellites. The bipartisan U.S./China Economic and Security Review Commission recently warned of these ominous projections of power.

CAROLYN BARTHOLOMEW, U.S. CHINA COMMISSION: If they can wipe out one of our satellites which they have demonstrated that they could do, they could take down the communications that are essential to our ability to fight a war.

ROMANS: But the view in Washington is that trade with China is a force for democracy in the world's largest and richest communist nation. Chinese officials have consistently said they favor peace and stability.

(END VIDEOTAPE)

ROMANS: Chinese officials have not publicly commented on the country's space ambitions and U.S. defense officials have urged the Chinese to be more transparent about their military spending and their plan, most recently complaining about China's refusal to allow the USS Kitty Hawk to visit Hong Kong.

DOBBS: Total of nine ships not permitted to go into port in China and this administration completing in its final year in office, the absurdity that's been its foreign policy in the case of China, actually funding that military buildup with just -- it's a mounting trade deficit with China. I love the fact (INAUDIBLE) is appreciating the Chinese are allowing it to appreciate and under the heading, be careful what you ask for, Treasury Secretary Paulson, we're going to see more expensive Chinese imports into this country. So they're doing just about everything wrong one could possibly imagine.

ROMANS: Richard Fisher says the fact that our trade deficits have fueled so much of this military build-up and there's so much money to spend shows that there is a lot of consistent hard work being put to its military use with American dollars.

DOBBS: I don't know which is worse in the greatest measure in this administration, its arrogance, its ignorance or its indifference to the welfare of the American people. But in any case, it's a close race across all three failings. Thank you very much, Christine Romans.

One of the world's leading authorities on communist China's aggressive military build up is Gordon Chang. He will be joining us here later in the broadcast.

The reeling American automobile industry today suffered another blow. Toyota outselling Ford to become the number two car seller in the United States last year. Ford had held the number two slot behind General Motors since 1931. That's over. Also today, Chrysler saying about a thousand of its workers will be losing their jobs next month. They're the first of 12,000 people to be laid off. And those layoffs announced back in November.

Ford naming India's Tata Motors by the way the likely buyer for Jaguar and Land Rover. The sale of those traditional British luxury brands are owned by Ford Motor Company, could bring Ford about $2 billion and is a clear statement to the aspiring and successful growth of Indian influence in this country.

Coming up next, the very latest from Iowa, just minutes now from the beginning of those caucuses in Iowa; we'll have live coverage and analysis from the best political team on television and presidential candidates paying less attention to the war in Iraq these days. Are those candidates ignoring evidence of success in Iraq? We'll be talking about that and a great deal more with General David Grange here next.

Stay with us. We'll be right back.

(COMMERCIAL BREAK)

DOBBS: We're now just about a half hour away from the beginning of the caucuses in Iowa. Republican and Democratic presidential candidates have been shifting their focus away over the last few days from the war in Iowa. Now you're looking at scenes, I should say here, of Merril Middle School in Des Moines where these are Democratic caucus goers where they will within just about a half hour be convened into their caucus and begin the process of determining the votes for each of these candidates. And about a half hour later, we'll begin the Republican process. It's going to be quite a night.

Obviously, these candidates have a great deal riding on it. That's one of the reasons that they've been ignoring the war in Iraq in recent days. That shift apparently came as the number of our troops being killed in Iraq declined. Twenty-three of our troops were killed in Iraq last month. That is the second lowest monthly total of this war.

General David Grange joins me now to assess as one of this country's most decorated and respected former military commanders whether or not this surge is working and doing so emphatically -- General, your thoughts?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, I think it is working and it's working not only because of the surge, but the cooperation between the military and the other government agencies involved in this effort, focused on the grass roots level which is starting to take effect in the different areas in Iraq.

DOBBS: Now the Pentagon recently announced violence in Iraq has fallen by 60 percent. the commanders on the ground, including commander General David Petraeus say those security improvements are, as they put it, tenuous. Your thoughts?

GRANGE: Absolutely. There's a good opportunity ahead, especially in an election year, that our adversaries are planning some kind of offensive or trying to rally to get more attention, the flash and burn to change opinions. Right now things going well, there's not a lot of talk about Iraq. In fact adversaries are losing traction.

DOBBS: There's one candidate who has been steadfast in his support of the president, the surge strategy and that, of course, is Senator John McCain. Let me ask you, as one who is still, although retired from the military, still well connected, and, of course, involved with the military, our military in Iraq as well. Is it sort of frustrating to you to see that the national media and the political candidates, frankly in both political parties have not made as much as what one might have assumed of what has been a period of success over the last 90 to 120 days in Iraq?

GRANGE: It does. The reason being is that there are several factors here. One is that many of the American people are not focused on the war either, because they are not involved with any feelings for the war. In other words, there's no sacrifices being done, except for a few.

The other is that those that ride a platform that says that we're failing in Iraq, the strategy is not working, why would you say anything right now anyway, because the strategy is in fact working? The good news, Lou, is that the GI because he supports the constitution, has an oath to the constitution, a democratic process, can live with that, because that's their mission.

DOBBS: And putting up with politics is something that all of us have come to learn to endure and we will have many more months of it. General Dave Grange, thanks for being with us.

The democratic caucuses will be called to order in just about half an hour. Joining me now, one of the best political analysts in the country, New York Daily News columnist, Errol Louis, also a member of the editorial board at the New York Daily News. Errol, good to see you there in Des Moines. Give us your impressions of what you're seeing there.

ERROL LOUIS, NEW YORK DAILY NEWS: Well, the town puts on a great show. They've really spiffed up the downtown. You can see the beautiful capital in the background. There's a lot of excitement, because in a half hour, it's all over. They have a very short window in which to get all of these people into the 1700 odd sites all over the state. This is what it's all about. They spent tens of millions of dollars just for this little three-hour window that we'll see in the next couple of hours.

DOBBS: And we got a window on our screen, now, Errol, as you're speaking of caucus-goers getting ready to go into session there.

Errol, the fact is, the Des Moines Register and other news organizations in Iowa are suggesting that as many as a third of the likely caucus-goers are undecided. We know but not many of news organizations have reported, in my judgment, at least, sufficiently that Iowa's leading political party is not a party at all. It's independent registrants who outnumber both the democratic and republican registered voters. How big of a part do you expect the independent to play here and the undecided voter?

LOUIS: Really, that's the whole question. On the undecideds, historically Lou, Iowa voters or caucus-goers tend to make up their mind in the last three days. So it's very hard to poll them right up until the last minute. Three days ago it was New Year's Day. It's kind of hard to be sure when it comes to that.

You're right about the independents. It's the biggest story here. When you look at the polls that put Obama up by seven points, what's key about those polls is that there is an overwhelming amount of independents who are supplying that. I've gone to a couple of his rallies. I've talked with some people. It's true, they're first-time caucus-goers, they're independents. What they will do is tell the story on the democratic side.

DOBBS: Errol, thank you very much. Errol Louis tonight giving us a sense what's going on in Des Moines and what will be happening over the course of the next few hours. Errol, thank you very much; Errol Louis from Des Moines.

And a reminder to you to please vote in our poll tonight. The question is do you believe tonight's democratic and republican caucus winners will emerge as their party's presidential nominees? Yes or No? Cast your vote at LouDobbs.com. We'll have those results in a matter of moments.

Still ahead, red storm rising, is communist China buying sensitive military secrets and selling those secrets to Iran and Syria? One of the foremost authorities to China joins me.

And the countdown is on. Just a few hours from now, we'll know who the winners and losers are in Iowa. Three of the brightest political minds in the country join me here next.

Stay with us, we're coming right back.

(COMMERCIAL BREAK)

DOBBS: There's compelling new evidence tonight that communist China is developing what is called a space bomber as part of its massive military buildup. It's the latest indication of China's rising threat and challenge to the United States. According to Gordon Chang, a leading authority on China, President Hu Jintao is shifting China in a new direction against U.S. interests globally. Gordon Chang is also the author of "The Coming Collapse of China." Joining us here now, Gordon, you also wrote a piece in the Wall Street Journal this week challenging the orthodoxy of many on the commercial side. Are commercial interests simply on the part of this nation overwhelming foreign policy and national security considerations?

GORDON CHANG, AUTHOR, "COMING COLLAPSE OF CHINA": You have to believe that's the case. You see all of these attempts to pre-approve Chinese companies. Import U.S. technology without approvals. This is just incredible because these Chinese companies take the technology and transfer it to the Chinese military. The Chinese military turns around and sends it to places in North Korea, Iran and Syria. This is terrible policy on our part.

DOBBS: It's a terrible policy but a continuation and an acceleration of what the Bush administration has put in place. And before it, the Clinton administration in point of fact. The idea that six months ago further controls are removed, allowing duel use technology to be moved from the United States to communist China. What in the world is going on?

CHANG: This is ludicrous. We can't prevent the Chinese from stealing U.S. technology in the U.S. You know, how are we going to prevent the Chinese when our technology is already in Chinese hands in China? You know the Bush administration is not protecting the United States because it's failing to exercise common sense.

DOBBS: In my judgment its constitutional responsibility which is to protect the national interest and provide for the safety of the American people. But this administration is in disregard of another of tenants of responsibility in the part of leadership. What in the world should we see this administration do? What is -- is there an answer that is straightforward that could be effective in terms of U.S./China policy?

CHANG: I think the first thing we have to do is hold China to account. Everyone says we need to integrate China into the international community. As we do that, China is permitted to do all sorts of bad things. Washington doesn't say anything, from trade, defense to every relationship.

DOBBS: In neither house of congress nor the part of the white house. Why, in your judgment are none of the political presidential candidates seeking their parties' nomination, democratic or republican, addressing these issues?

CHANG: You're right. This has been a bipartisan failure, Bush administration, Clinton administration and administrations before that. And I think largely because they see sort of this economic relationship with China as preempting everything else including the security concerns of out country.

DOBBS: Gordon Chang, thank you very much.

CHANG: Thank you.

DOBBS: Up next here, the democratic caucuses will begin shortly. Three of the best political analysts are joining me to assess what we should expect in Iowa, what is likely to occur and what awaits us in this political season as the campaign goes on.

And soaring crude oil prices, rising food costs, the assault on the middle class is under way in earnest. We'll have a special report on the war in the middle class. Next, stay with us.

(COMMERCIAL BREAK)

DOBBS: We are now minutes from the beginning of the Iowa caucuses. This is going to be an exciting evening. CNN will be covering it as we are there. You see the caucuses beginning to go to order and the process beginning. We're going to be covering this throughout the evening. Iowa decides indeed setting off this political campaign, both parties embarking on the choice for a nominee to run for president, and this live picture, as republican voters now, we're told they are making their way, taking their places in Des Moines. They look pretty settled in to me. And they need to get to work out there, which they'll be doing here shortly.

For more on tonight's Iowa caucuses, I'm joined by three of the best political analysts in this country. Here in New York, I'm joined by Pulitzer Prize winning columnist for the New York Daily News, Michael Goodwin. Michael, good to see you. This will be an interesting, interesting day. And Hank Sheinkopf, democratic strategist and great guy; Hank, good to see you. And in Des Moines, Iowa, senior political reporter, Jonathan Martin of Politico.com and he's the bravest and the toughest of us all, there, taking on the combat in the field. Jonathan, good to have you with us. Thanks for joining us.

Let me ask you. I've talked to Candy Crowley, a number of our people there, we've looked in on those caucuses, we are frankly -- I'll speak only for myself. I'm so excited to see who emerges as the front-runners in these Iowa caucuses. Who is the mood there? Assess for us the tone and the mood.

JONATHAN MARTIN, POLITICO.COM: We are jubilant to finally be upon the caucuses, Lou. Both reporters and campaigns are glad that real votes are finally going to be cast. Toss away those polls. We have real live Iowans tonight showing up in church basements, in schools across this state and casting their vote on a democratic and republican side. I think that on both sides a lot of these campaigns are very, very nervous. They don't know what is going to happen. They have a sense. Until this thing is done, no one really knows.

On the democratic side a lot of folks think Obama right now is the man to beat. On the republican side, still too close to call. The major question there Lou, do those evangelicals come out for Huckabee in droves? If they do, it could be a big night for him. If this more of a contest that is you know compromised of GOP regulars, the folks from the county committees, Romney probably will pull it out.

DOBBS: Hank, the word is right now with I guess people are taking a look at the polls pretty strongly saying that the seven point lead for Obama, they're taking seriously.

HANK SHEINKOPF, DEMOCRATIC STRATEGIST: Anything can happen here. We don't know how really to judge a caucus. We can poll as best as we can but frankly, if it is the case, it tells you that Hillary Clinton will have a lot of work to do in New Hampshire. If she doesn't score there, it could be, as they used to say in the movies, curtains.

DOBBS: And Michael, Jonathan Martin talked about jubilation there. And this is -- this is the main event. Give us your assessment of what we should expect, and what we might not expect. MICHAEL GOODWIN, NEW YORK DAILY NEWS: Well, turnout will give us a lot of information, just the raw numbers of how many people come out to caucus. On the democratic side, the general thinking is the more people who come, the better for Obama, that the younger people a lot of them away at college. If they turn out over 170,000, which will be a whooping turnout. Last time it was 125,000. That will favor Obama. On the republican side, it's much, smaller, maybe half of that, which is probably a lot of that's going to go for Huckabee. But in the general election, Iowa is a swing state. So the democrats have a much better turnout here tonight.

DOBBS: Jonathan Martin at Politico.com out there in Iowa, what are the issues as best as you can assess it? We're going to be looking at a lot of polling information that's going to come in as people enter these caucuses. That process is already under way. Give us your best assessment, if you will, your best judgment as to which issues are moving these caucus-goers, first on the democratic side, what you expect to be the result.

MARTIN: On the democratic side, certainly issues like healthcare, like education, certainly the war in Iraq, basic bread and butter issues that motivate the democratic base; also competing to see who can be, obviously the most outspoken against president Bush plays well.

Lou, on the republican side, this will bring a smile to your face. Immigration, no question, the top issue here in Iowa among conservative activists. It's brought up at nearly every town hall meeting that you go to on the republican side and even at democratic town haul meetings also. It's ever present. That's what is driving these folks tonight.

Also on the republican side, keep in mind about 40% of caucus- goers tend to come out of a church. Heavily Christian conservative base here, you're also talking about issues of faith, not just matters of policy.

DOBBS: That's an interesting point. Let's explore that for a minute because what we've also watched emerge here, to add a little bit to that smile on my face, if the issues are illegal immigration. The issues are public education. Free trade policies costing working men and women in this country and their families their jobs, their livelihoods and their quality of life that's when I'll get a smile on my face when we see one of these parties, one candidate, whether announced or not, betting to deal with these issues. You brought up an issue of religion. It's an issue for the Obama campaign. It is an issue for the Romney campaign, certainly the Huckabee campaign. I cannot believe that we're watching religion take on the import that it has in this campaign.

SHEINKOPF: Lou, in our money and on our money it says "In God We Trust." What is new here? When you have this kind of economic crisis that people feel and we've said on this program for months that Iraq will be supplanted by the economy as the issue. Immigration is the economy. Education is the economy. Healthcare is the economy. People in the heartland are in pain. They may do something unusual tonight, vote for religious feeling and populous at the same time. Not an unusual event in American political when people are in crisis.

GOODWIN: But I don't think it will be that way in every state and that's one of the oddities of this kind of state by state caravan that we go through. Iowa, as Jonathan said, has a very conservative Christian base particularly among the Democratic Party.

DOBBS: You're not saying democrats are humans here.

GOODWIN: No. It's interesting that most people who go to church regularly vote republican. Other states do not have such a preponderance of voters who can sway an election. So I think for example in New York, religion is not likely a big issue.

DOBBS: I take your point but these candidates are bringing this issue with them. There's a certain mobility to the issue, because these candidates have expressed how important it is to them. I personally have no problem with god in the public square as a matter of philosophy or in any way.

SHEINKOPF: God is being used as a way to make people pay attention to those arguments.

DOBBS: Who will be the beneficiaries, as we wrap up here, Jonathan Martin, of the emphasis on religion, how will we see it tonight on these caucuses?

MARTIN: On the republican side, there's no question. If it's an issue that drives a lot of Huckabee supporters out on this cold night to the caucuses, it's going to benefit him and him alone.

On the democratic side, I don't think it has quite the same impact inside their primary right now. But Mike Huckabee, if he does win here tonight, there's no question about it, it's no small part because of the fact he enjoyed wide support from fellow Christian conservatives in Iowa.

DOBBS: Hank, quickly.

SHEINKOPF: Anything can happen here. God is both democrat and republican. People are worried about the economy. Put that together and you have a populous explosion across the country.

DOBBS: Fascinating. All right. Michael?

GOODWIN: Just watch the turnout. I think turnout will give us an early indication where it's going now and also in the fall.

DOBBS: Watch those independents. I love the fact that so many people are overlooking the fact that there are more independents than democrats or republicans. It will be interesting to see their role as well. Jonathan Martin, Politico.com out in Des Moines, thank you very much for being with us. Hank Sheinkopf, Michael Goodwin, gentlemen thank you as well. We appreciate it.

We're now minutes away from the beginning of those caucuses. Still ahead here, a major new challenge to what is left of our middle class already reeling from the mortgage crisis, stagnant wage, healthcare costs, the list goes on. We'll be talking about that and bringing some perspective to the issue I hope. Next, stay with us.

(COMMERCIAL BREAK)

DOBBS: The latest poll show rising concern among Iowa's voters about the state of our economy. That's no surprise for the rest of America's beleaguered middle class. At every turn prices are rising and the value of wages and homes are dropping. Louis Schiavone has the report.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRESPONDENT: Just in time for winter and just ahead of the traditional gasoline price hikes, energy prices have hit a punishing new threshold, surging to $100 a barrel this week and settling just under that in the New York Mercantile Exchange. It's making everything more expensive.

UNIDENTIFIED MALE: It creates a hardship. You get gas prices like they are, they affect you in so many ways they don't realize it like taking your family out to dinner is less than that.

SCHIAVONE: Says one analysts, blame the speculators, players like investment banks and hedge funds who are still reeling from the mortgage meltdown.

TYSON SLOCUM, PUBLIC CITIZEN: They were fleeing from that, looking for ways to try to make up for lost ground and to put their money in a place where they could recover some of their losses effectively.

SCHIAVONE: From wheat to gold and silver, to copper, tin and zinc to oil and gas, world demand is high and price to the U.S. is higher than most.

SCOTT SEGAL, ENERGY ANALYST: The U.S. dollar doesn't buy as much crude petroleum on the international marketplace as it used to because of the declining value of the dollar and that also contributes to the price of not only gasoline but the price crude petroleum.

SCHIAVONE: For the average consumers we spoke to, paying the bills has been more of a stretch.

UNIDENTIFIED MALE: People used to get a full tank now get $3, $4 at a time.

SCHIAVONE: As President Bush signals, he was considering an economic stimulus plan, one thing did decline, U.S. currency values with the euro now nearly equals to $1.48 in U.S. dollars. Louis Schiavone for CNN, Washington.

(END VIDEOTAPE)

DOBBS: Tonight's poll results. 85% said you doubt that tonight's caucus winners will ultimately emerge as their party's presidential nominees.

We thank you for being with us tonight. CNN's Iowa caucus coverage continues right now with Wolf Blitzer.

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