[Wolf Blitzer, Cnn Anchor:] Now on WOLF BLITZER REPORTS, a star- spangled budget. The president asks Congress for a big boost to fight terrorism.
[George W. Bush, President Of The United States:] We need to be able to send our troops on the battlefields in places that many of us thought there'd never be a battlefield.
[Blitzer:] After the company's own investigation finds that executives got rich amid accounting violations, Enron's chairman pulls an end run around Congress.
[Sen. Byron Dorgan , North Dakota:] There are a lot of tough questions to be asked and to be answered.
[Blitzer:] Will Kenneth Lay be ordered to appear? Is Congress out to get him? Should gay couples adopt children? A group of children's doctors think so. We'll have a debate. Against all odds, the Patriots win the Super Bowl.
[Tom Brady, Patriots Quarterback:] When people say, "Well, you can't do this. You can't do this," that makes for a pretty dangerous team.
[Blitzer:] Not everyone said they couldn't do it. Hello. I'm Wolf Blitzer in Washington where President Bush today divided up our money. Billions more for defense, both for military might as well as for protecting the homeland. Also ahead, an FBI memo that gives us a new signal as to who might be responsible for the anthrax attacks. First, this news alert. President Bush calls on Congress to approve billions of additional dollars for fighting the war on terror and for homeland security. Speaking at Eglin Air Force Base in Florida, the president unveiled his $2.13-trillion budget today. The budget also calls for steep cuts for a number of government programs. We'll have much more on this in just a moment. Angry senators say they'll subpoena the former Enron chief Kenneth Lay to testify before congressional committees. This after Lay abruptly decided not to testify on Capitol Hill earlier today about the collapse of the energy company. Lay says he thinks lawmakers have already decided on his guilt. Pakistani and U.S. officials say they're still acting on the assumption that kidnapped journalist Daniel Pearl is still alive. Officials say they're checking out several leads. "The Wall Street Journal" reporter disappeared in Karachi, Pakistan, on January 23rd. The flights of Afghan war detainees to the U.S. naval base in Cuba are expected to resume in the next few days. Sources say the decision was made in part because more cells have been built and the security force at Guantanamo Bay has been beefed up. And now back to our top story, President Bush's $2.1-trillion budget. A big chunk of that goes for the military for its war against terrorism and for protecting the homeland. On domestic matters, some parents will get education breaks. Older people are to get help paying for those high prices for drugs. But other areas will get squeezed. The president defends it all, reminding Congress that the September attack, like Pearl Harbor, is a call for action. Our Senior White House Correspondent John King now with the nuts and bolts.
[John King, Cnn Senior White House Correspondent:] The president opened the budget battle focusing on what he calls priority one: paying for and winning the war on terrorism.
[George W. Bush:] It's proved that in this first phase that expensive precision weapons not only defeat the enemy but spare innocent lives, and the budget I submit makes it clear we need more of them.
[King:] The new Bush budget proposes spending $2.1 trillion in the fiscal year that begins in October. The Pentagon would get the largest one-year increase in two decades, $48 billion to $379 billion in all. And spending on homeland security would nearly double to $38 billion with an emphasis on airport and border security and fighting bioterrorism. Other key Bush priorities include $591 billion in new tax cuts and credits. One with a price tag of $32 billion would allow taxpayers who do not itemize deductions to get credit for charitable contributions. Another costing $4.2 billion would help parents pay for private education if their children leave failing public schools. But some domestic spending would be cut and, overall, funding for programs other than the military and homeland defense would grow at just 2 percent on average. The White House says the squeeze is necessary, that supporting the troops and winning the war requires tough decisions elsewhere in the budget. But Democrats say key domestic priorities, like health care and job training, suffer under the president's plan. Democrats also say Mr. Bush is dipping into Social Security money, that he wouldn't have to were it not for last year's big tax cut.
[Sen. Kent Conrad , Budget Chairman:] The hard reality is his long-term fiscal plan did not add up before September 11th. It's been made worse by the events of September 11th.
[King:] Democrats also note the bottom line: After four years of budget surpluses, the Bush budget projects a deficit of $106 billion this year and $80 billion in red ink next year. The White House notes past wartime presidents also have been forced into deficit spending. [voice-over]: Presidential travel is one element of the early Bush strategy, as the president tries to rally the American people to see things his way in a wartime budget battle all the more complicated by this fall's congressional elections. John King, CNN, Eglin Air Force Base, Florida.
[Blitzer:] And joining us now with more on the president's budget and his big-stick approach to defense spending, our Military Affairs Correspondent Jamie McIntyre. He's live at the Pentagon. Jamie, give us the details over there.
[Jamie Mcintyre, Cnn Military Affairs Correspondent:] Well, Wolf, this is the biggest increase or proposed increase in defense spending in nearly two decades, since the early years of the Reagan administration, and as you heard John King say, the Bush administration is defending this big increase as justified by the war on terrorism.
[Mcintyre:] The Pentagon says its record-high spending plan is needed to make up for years of neglect and to transform the U.S. military into a high-tech force capable of defeating terrorists wherever they hide. The Bush administration is asking Congress to approve $379 billion for defense, an increase of $48 billion. The Pentagon argues it needs every penny.
[Donald Rumsfeld, Secretary Of Defense:] If one thinks about the economic loss that took place on September 11th in this country and elsewhere in the world, in billions and billions of dollars, it is very clear that the defense budget is cheap when one compares it to putting our security at risk, our lives at risk, our country at risk, our freedoms at risk.
[Mcintyre:] While the budget is being sold as funding for the war on terrorism, the bulk of the money goes for traditional weapons and forces. But some programs are being touted as transformational, such as $1.1 billion for more unmanned spy planes, $1.3 billion more for more precision-guided bombs, and another billion to arm four older ballistic missile submarines with cruise missiles. Controversial programs, like the Air Force's F-22 Stealth Fighter, the Marine Corps' V-22 Tilt-Rotor Aircraft, and the Army's Crusader Howitzer all survived. But the Navy's next-generation Destroyer was scrapped as was one of its ship-launched missile-defense programs. Some Democrats in Congress say Defense Secretary Donald Rumsfeld is avoiding the tough decisions he promised to make when he came to the Pentagon last year. Some of those Democrats I've talked to say that they're concerned the Pentagon is simply adding new spending to many of the old programs without making some of the hard decisions that they expected Secretary Rumsfeld to make. That will be a subject, obviously, of some debate when the secretary goes up to Capitol Hill to defend his budget. Meanwhile, Rumsfeld himself declared war on the Pentagon bureaucracy the day before the September 11th attacks, and he says that it's not the case that the Pentagon is inflexible and incapable of change, and he cites the way the U.S. military quickly adapted new tactics and techniques to fight the war on terrorism in Afghanistan. Wolf.
[Blitzer:] Jamie, on a different subject, what's the latest on that internal investigation the military is now undergoing as far as that Afghan strike that may have hit the wrong target?
[Mcintyre:] Well, it's increasingly beginning to look, Wolf, although this investigation is not over, that the U.S. may have killed some forces there that were friendly to the United States. But the U.S. is insisting that, at this point, it believes that the shoot-out started because people from inside this compound fired first at U.S. forces. But Defense Secretary Rumsfeld today, in acknowledging that some innocents may have been killed, said it's possible that everybody's telling the truth here, that the U.S. troops were fired on first but that some friendly forces were also in with some unfriendly forces. He says it's a very confused situation, and they are hoping the investigation will sort it out. Wolf.
[Blitzer:] Jamie McIntyre at the Pentagon. Thanks very much. And let's turn now to the anthrax investigation. The FBI is now asking the country's 30,000 microbiologists to help them in finding out who sent letters laced with the deadly bacterium last year. Our National Correspondent Susan Candiotti joins us now with these fresh details. Susan.
[Susan Candiotti, Cnn National Correspondent:] Yes, Wolf. It's a massive new nationwide call for help to what a government official calls a unique population with specific information. But will it lead to the anthrax killer?
[Candiotti:] Nearly four months after the first anthrax death and with no killer in custody, the FBI is making another plea for help. In a letter to the 30,000-member American Society for Microbiology, the FBI puts it bluntly. "It is very likely that one or more of you know this individual." It's one more indication of what investigative sources have been saying privately: The four known anthrax letters came from a single U.S. source. The FBI's letter, obtained by CNN, recaps the latest FBI anthrax profile: someone who's experienced working in a laboratory, with access to select biological agents, with the knowledge or expertise to produce a deadly product, someone who's standoffish and works in isolation, a killer who may have used off hours in a laboratory to produce the anthrax. Work at this private laboratory is isolating the anthrax spores' genetic sequencing, which could further narrow the list of suspect labs and scientists. So far, not even a $2-12-million reward has helped.
[Fbi Spokesperson:] I don't think it's that we don't have any leads. We're looking out for that one person who may be able to give us specific information to help us utilize the investigation that's already being conducted.
[Candiotti:] The FBI won't say the case is stalled, but is it closed to being solved? Well, the Bureau won't say that either. And, Wolf, it's not as though the FBI has not been talking to some of these microbiologists already, but, quite frankly, as you heard the FBI say, it's very likely that some of them might know the person who's behind the anthrax attacks. And we also understand the Society is not very thrilled that their names have been given out to the FBI, 30,000 members.
[Blitzer:] So is it the bottom line: Are we any closer to finding out the culprit or culprits of who sent out these letters?
[Candiotti:] All the FBI Director Robert Mueller will say is that the case is not stalled and that there are promising new leads and that they hope to learn more information when they're through analyzing the anthrax found in that letter to Senator Leahy.
[Blitzer:] Susan Candiotti, thanks very much. And how safe are the nation's nuclear power plants from a terrorist attack? The Nevada Senator Harry Reid who oversees nuclear safety issues in the Senate will join us in the next half-hour with his assessment. But now to the Enron investigations. Electricity is in the air here on Capitol Hill because of the expected appearance of the Enron former chief executive, but Ken Lay abruptly bowed out, much to the dismay of several lawmakers. Right now, the SEC Chairman Harvey Pitt is testifying. Covering all these developments for us now is our Congressional Correspondent Kate Snow. We're taking a look at the live picture of the testimony that's underway right now on the Hill, but let's get this report from Kate Snow.
[Kate Snow, Cnn Congressional Correspondent:] Former Enron CEO Kenneth Lay snubbed a Senate subcommittee, angering lawmakers and prompting new criticism not only of Enron but the Bush White House.
[Sen. Fritz Hollings , South Carolina:] I've never seen a better example of cash-and-carry government than this Bush administration and Enron.
[Snow:] Citing Enron's ties to a host of administration officials, Hollings called for a special prosecutor to look into Enron and a subpoena to force Lay to appear on Capitol Hill next week. The White House dismissed the comments as a partisan attack, calling it disappointing that some are more interested in reading off partisan Democrat attack memos and repeating unfounded and unsubstantiated allegations. Lay's decision to avoid Congress came Sunday after his lawyer said lawmakers made inflammatory statements on the talk shows.
[Sen. Byron Dorgan , North Dakota:] He should not have expected it would ever be a walk in the park to appear before a congressional committee.
[Snow:] Dorgan said Lay was scared off by the Powers Report. Commissioned by Enron's board and released Saturday, it paints a scathing portrait, stating Enron management spent considerable time and effort working to say as little as possible about controversial outside partnerships.
[Sen. Peter Fitzgerald , Illinois:] Enron Corporation went way beyond all hat and no cattle. It was pure bull. In my judgment, in my opinion, Enron was running a gigantic Ponzi operation.
[Snow:] Now the author of the Powers Report, William Powers, who was asked by the Enron's board of directors to put this report together, is up next on this subcommittee this House hearing that is already underway, which you showed just a moment ago, Wolf. We do expect him to give some interesting testimony. He, the author of this report, will say that what he found was appalling. He will say they found that Enron employees involved in these partnerships outside of Enron enriched themselves in the aggregate, he says, quote, "by tens of millions of dollars." Wolf.
[Blitzer:] And, Kate, who else will be testifying on this issue of the Enron scandal in the days and, indeed, weeks ahead?
[Snow:] Yeah. It's Enron week here on Capitol Hill. We have a number of more hearings coming up in the days ahead, about seven of them. Tomorrow, we expect to hear from the top person at Andersen. The CEO of that company, Joseph Berardino, expected to be here. And then on Thursday, we expect to hear from Jeffrey Skilling who is the former CEO of Enron. We do expect to hear from him we expect we're told right now that he will testify. Two of his colleagues, Andy Fastow, the former CFO, chief financial officer, of Enron, and Michael Kopper, his associate, we're told, are going to be pleading the Fifth. That from Representative Billy Tauzin. Back to you, Wolf.
[Blitzer:] Kate Snow on Capitol Hill. Thanks for that report. And joining us now to talk about Ken Lay's sudden decision not to testify on Capitol Hill and other legal reasons that might be involved, the Harvard Law School Professor Alan Dershowitz. His new book is entitled "Shouting Fire: Civil Liberties in a Turbulent Age." Professor Dershowitz, thanks again for joining us. Let me read from the letter that Earl Silbert, Ken Lay's attorney, wrote to the Senate yesterday explaining the sudden about reversal in not wanting to testify. "In the midst of our preparation, particularly disturbing statements have been made by members of Congress. He," referring to Ken Lay, "cannot be expected to participate in a proceeding in which conclusions have been reached before Mr. Lay has been given the opportunity to be heard." Does that make sense to you legally speaking?
[Prof. Alan Dershowitz, Harvard Law School:] Well, it's a lawyer's letter, obviously, trying to justify his decision. I think he would have been crazy to appear without immunity in front of a belligerent congressional committee. There's, obviously, the possibility of criminal prosecution. You'd think everybody would have learned the Clinton lesson when his lawyer, Robert Bennett, allowed him to be deposed, and that led, as we all know, to impeachment and disbarment and all the rest of that. There's no legal obligation for him to appear. There's been so subpoena. Now there will be a subpoena. He then has to make a very tough decision. Does he invoke the Fifth Amendment or does he testify? Once there's a subpoena, those are the only two options available.
[Blitzer:] Well, isn't there's a third option that he would granted immunity in exchange for his testimony, right?
[Dershowitz:] Well, he has to first be subpoenaed and invoke the Fifth Amendment or indicate a willingness to invoke the Fifth, and then he'd be granted what's called use immunity, which is that anything he says to Congress in response to questions can't be used against him, nor can it be used as a source of other evidence. You'll remember from the Oliver North case that can create enormous problems for the prosecutor. North testified in front of Congress. Then he was prosecuted, and then the court reversed his conviction, saying it was very difficult to disentangle what he had said in front of Congress from what the prosecution may have used to prepare witnesses.
[Blitzer:] You heard his wife say last week in a televised interview that he really has nothing to hide, that he wants to fight this battle before court of public opinion. Presumably, that's why he had been willing, at least until yesterday, to testify. Were you surprised by those comments and his apparent willingness to testify?
[Dershowitz:] Well, no. I mean, the any good criminal-defense lawyer knows you put the wife on for the spin. She'll get the softball questions, and if she gets a hard question, she can always say, "Well, I'm just the wife. I didn't know." What she may have done, though she may have waived some of her own spousal privileges in relation to her husband. So it's possible now for Congress to subpoena her and to ask her questions about what he may have told her, if they're within the scope essentially of what she said on television. You can't just turn on and off the spigot and say, "Well, I'm prepared to talk to one television station or another, but I'm not prepared to talk to Congress." So she may have opened up some doors.
[Blitzer:] That would be playing pretty much hard ball, the U.S. Congress. Do you have any recollection of when they've ever done such a thing, bring in a spouse because the spouse appeared on television and gave up his or her privilege?
[Dershowitz:] Well, you remember in the Lewinsky case, they, in fact, called Lewinsky's mother to testify in front of the grand jury. So hard ball is not so unusual when politics is the name of the game. And the other thing that we're going to see, too, is calling people like Lay Ken Lay in front of the committee to see him invoke the Fifth on television I have to tell you that is really dirty pool. We didn't like it when Senator McCarthy used to do that, and I don't like it now. Even as a Democrat, I don't like Congress calling people in front of a congressional committee just to show that they're raising their hands and taking the Fifth Amendment. That's just not right.
[Blitzer:] But why can't they do that in terms of hard ball they want him to testify and make him take that Fifth if he's not going to testify?
[Dershowitz:] Well, the courts and some bar associations have said that it's an improper use of the subpoena power to call somebody knowing that that person is going to invoke a privilege simply to put them under public apogram for invoking a privilege. Now, you know, there's so much partisan politics. My friend, Senator Hatch, today is justifying Mr. Lay, saying, "Well, I don't blame him for not doing this." I myself don't blame him either, looking at from the point of view of a criminal-defense attorney. But you'll remember that the same Senator Hatch has frequently condemned people for hiding behind the Fifth Amendment and for not cooperating with Congress. So it really depends on whose ox is being gored here.
[Blitzer:] All right. Bottom line, Alan Dershowitz, if you were representing Ken Lay, what would you tell him to do?
[Dershowitz:] Well, it depends on whether he was innocent or guilty or whether I thought he was innocent or guilty. If I thought there was any reasonable prospect of guilt and a criminal prosecution, I'd have him play hard ball at this point. He's not going to win in the court of public opinion with a belligerent Congress or least senatorial majority. Better less said. Let his lawyer speak for him. Let other people speak for him. He's better off at this point not exposing himself to very difficult questions under oath.
[Blitzer:] The Harvard Law Professor Alan Dershowitz, the author of the new book, "Shouting Fire: Civil Liberties in a Turbulent Age." Thanks, once again, for joining us. And the SEC Chairman Harvey Pitt and Senator Byron Dorgan will be among the guests on LOU DOBBS MONEYLINE. That's less than an hour from now, 6:00 Eastern, 3:00 Pacific. Pediatricians weigh in on the controversial issue of gay adoption. We'll hear from both sides at the half-hour. Also, has the trail gone cold in the search for the kidnapped reporter Daniel Pearl? We'll have the latest from Karachi. And football's world champions are back home. We'll follow the Patriots' convoy to fans waiting at the stadium. And we'll be live there for the big welcome. Also, find out who among us picked the Super Bowl winner and the exact margin of victory. Stay with us.