[Lou Dobbs, Cnn Anchor:] Good evening. A top U.S. commander today said the coalition is tightening the noose around Saddam Hussein. Colonel James Hickey said members of the former regime are running out of places to hide in Iraq. The chairman of the joint chiefs, General Richard Myers, was equally optimistic during his visit to Iraq. Senior Pentagon correspondent Jamie McIntyre reports.
[Jamie Mcintyre, Cnn Military Affairs Correspondent:] General Richard Myers says he was optimistic about the future of Iraq even before his one-day inspection tour. And after briefings by top commanders and firsthand talks with soldiers of the 4th Infantry Division, Myers says he's more confident than ever.
[Gen. Richard Myers, Joint Chiefs Chairman:] It is really hard work. We're still at war. We still have the remnants of the regime to deal with, perhaps some foreign fighters. What you find our soldiers doing is across the gamut excuse me not only the security piece, but they're also working the political piece by establishing town councils. They're working the economic piece by providing money for small contracts.
[Mcintyre:] The 4th I.D. has set up headquarters in what was once an opulent palace in Tikrit, the heart of Saddam country, where resistance to the U.S. occupation is the heaviest, on the wall, a large poster showing which members of the regime are still at large and which have been captured by the 4th I.D. Now that U.S. troops have been told they will serve a maximum of a year in Iraq, Myers insists, morale is up. And he says the killings of Uday and Qusay have opened a floodgate of useful intelligence.
[Myers:] That is happening more and more every day. More and more Iraqis are coming forward, saying: Look over here. The guys you want are over here. That's going to happen.
[Mcintyre:] Still, the attacks continue to inflict a daily toll of dead and wounded U.S. troops. The U.S. military estimates there are between 4,000 and 5,000 mid-level Baathist opposition fighters. The U.S. strategy to deal with them, put succinctly by one top commander, is to kill them. And if he doesn't surrender, that applies as well to Saddam Hussein, who the U.S. believes is being penned in by a tightening dragnet.
[Myers:] He was sweating it early on. If he's alive, we think he left the fight early on to save his skin. But he's done this before. In his history, he's had to do this before.
[Mcintyre:] U.S. military sources here at the 4th Infantry Division main headquarters tell CNN, the latest intelligence indicates Saddam Hussein is still in the Tikrit area, but that he's on the run, changing his location every two to four hours. Jamie McIntyre, CNN, Tikrit.
[Dobbs:] As Jamie just reported, the hunt for Saddam Hussein is now concentrated in Tikrit. And while searching for Saddam Hussein, U.S. troops there today found a large supply of weapons and ammunition. Harris Whitbeck reports from Tikrit on the hunt for Saddam.
[Harris Whitbeck, Cnn Correspondent:] The predawn hours in dangerous Tikrit, the homeland of Saddam Hussein. Two platoons from the U.S. Army's 4th Infantry Division race up Route 2, one of the principal and deadliest highways in the region. Their mission: to raid homes believed to house Saddam's loyalists. Waking a sleeping family, they hustled them all into a walled courtyard. An old man tries to escape.
[Unidentified Male:] Where are you going to go? You're 80 years old!
[Whitbeck:] A young woman was bound and gagged after she screams pro-Saddam chants. This family belongs to Saddam's tribe. Their loyalty runs deep, deep enough that the soldiers find a large cache of hidden weapons in their house, stacks of pictures showing Saddam bestowing medals on a uniformed family member. As dawn becomes morning, the soldiers fan out into the house's orchard, finding more hidden guns and ammunition. Raids like this one are sources of valuable information in the effort to find Iraq's deposed leader and to cut off his network of support.
[Unidentified Male:] It just gives us a common picture. You know, we put it on a big map and look at everything that we've found. And usually, if you're finding significant caches, certain types of weapons, you know, we can use that to track movement.
[Whitbeck:] The regional U.S. commander says this type of operation will eventually lead to the most-wanted man in Iraq.
[Unidentified Male:] We've been given estimates about the location of Saddam Hussein. We have targeted certain areas in the past as a part of our raiding regime. How long will it take? Time will tell, but I think it's going to be sooner than later.
[Whitbeck:] More raids, more weapons, more information. [on camera]: Raids like this one take place any day at any time. Soldiers say each one means progress, one step closer to the man they're looking for. Harris Whitbeck, CNN, on the outskirts of Tikrit in Iraq.
[Dobbs:] In Baghdad, an American soldier was killed today when a supporter of the former regime dropped a grenade onto a Humvee that was in a military convoy. Three other soldiers were wounded in the attack. They were all members of the 1st Armored division. Also today, Saddam Hussein loyalists blew up a pontoon bridge on the river Tigris. It was the first time supporters of the former regime have targeted a bridge.
[Lt. Col. Bill Adamson, 4th Infantry Division:] We've been repairing it since the end of April. But now we've got people trying to blow it up. We constructed this military bridge just south of it back at the end of April and opened it to all civilian traffic. But now, because of this damage, we're going to have to shut the bridge down to all civilian traffic, effective today.
[Dobbs:] And what is the public view of the Bush administration's Iraq policies? Well, support for the president's strategy in Iraq went up last week in the latest CNN survey. The CNN"USA Today"Gallup poll showed 60 percent of Americans surveyed support the president on Iraq. That compares with 57 percent a week earlier. Pollsters also say most Americans continue to believe the war against Saddam Hussein was worth it. But the White House is concerned about the stability of that support should the number of American casualties rise sharply. Senior White House correspondent John King joins me now with the story John.
[John King, Cnn Sr. White House Correspondent:] And, Lou, the administration says it is confident this will be less and less of a political issue over time, because, the administration says, it is confident that the policy on the ground will ultimately bring more results. But this is one of the reasons we do see more aggressive military action, trying to root out those who are fighting and killing on too frequent a basis U.S. military troops on the ground in Iraq. The administration believes, though, Lou, if the policy succeeds and you see visible proof of a reconstruction in Iraq and these attacks go down, that this will be much less of a political issue for the president here at home. But there's no question, it is a growing political debate at the moment, just today, the House Democratic leader, Nancy Pelosi, and several of her Democratic colleagues, sending a note to the president questioning his policy in Iraq, questioning the planning for postwar Iraq, urging the president to get more troops in on the ground to improve security, but saying that it is critical that those troops come not from the U.S. military, but from other countries, that the president expand the alliance on the ground inside Iraq Lou.
[Dobbs:] John, Saudi Arabia, I understand, has just issued a statement on the congressional report on the September 11 attacks. What are the Saudis now saying?
[King:] Well, Lou, we have just learned in the last few minutes that the Saudi foreign minister, Prince Saud al-Faisal, has requested and has been granted time to see the president tomorrow afternoon here at the White House. He wants to come with complaints that his government believes it is being maligned. A number of pages were kept out of the report released last week. Some members of Congress have said that the administration is protecting the Saudi government from what these members have called incriminating evidence of Saudi involvement somehow in the September 11 attacks. The Saudi government says that is flatly not true, that there is no evidence at all that the Saudi government had anything to do or any knowledge of the attacks. We are told, Prince Faisal wants to come to the White House because he wants administration help in clearing the record, if you will, setting the public debate straight. One of the issues to be discussed, we are told by diplomatic sources, is the possibility of the Saudis asking the Bush administration to declassify the material that was kept out of that report. The Saudis say, these are reckless accusations. They want the administration's help. And, again, one option would be a Saudi request to declassify the material kept out of that report. All a White House official will tell us is, yes, that meeting will take place. They say they are not aware of any official request to declassify that material, and a senior official telling me just a few minutes ago that material was kept out of the report for legitimate national security and law enforcement reasons Lou.
[Dobbs:] So the effect of this, John, on the part of the Saudis could be simply public relations. Certainly, this White House, if it made the determination on the basis of national security to redact those 28 pages, wouldn't be moved by Prince Faisal's request.
[King:] An interesting question, because the president has said repeatedly that Saudi Arabia has fully cooperated and is fully cooperating and is a key ally in the war on terrorism. The Saudis, of course, have a domestic audience at home as well. And they feel badly maligned and have complained about that, because several members of Congress have said the administration is protecting them. So this is a very interesting debate. Many Democrats have said the president should declassify more of this. Some Republicans, including the former intelligence chairman, Senator Richard Shelby, have said more should be declassified. Now the Saudi government might ask that as well. So the debate over that report will continue here at the White House tomorrow.
[Dobbs:] And, John, I'll be talking in just a matter of minutes with the chairman of the Senate Intelligence Committee, Senator Pat Roberts. And we'll take up this issue as well. John King, thank you very much.
[King:] Thank you.
[Dobbs:] More violence in Saudi Arabia today, as police there stepped up their hunt for radical Islamist terrorists. Police shot and killed six men. They wounded a seventh when they raided a farm in Qassim province. Police launched a series of raids in May, after suicide bombers attacked a housing complex in Riyadh. Those bombers killed 25 people, nine Americans among them. More than 2,000 Marines are sailing towards Liberia. They're expected to arrive off the Liberian coast within five days. As they await the president's order on whether or not to land, the fighting in Liberia is intensifying. Rebels today captured Buchanan, Liberia's second largest city. The rebels' victory means the government has lost control of the last major port under its control. In Monrovia, government and rebel forces continued to battle for strategic bridges in the capital city. The fighting has killed hundreds of civilians. Still to comes: Senator Pat Roberts says a lack of organization and equipment contributed to a massive communication breakdown in the months leading up to September 11 and that many of the same problems still exist today. Senator Roberts, the chairman of the Senate Select Committee on Intelligence, will be our guest. And at this school, orientation takes on a whole new meaning. Peter Viles will report on this country's first high school specifically for gay students. And threats and intimidation in the Kobe Bryant case: The district attorney is forced to lock down his office. Our Deborah Feyerick will have that live report from Eagle, Colorado. Stay with us. Death row inmate Darnell Williams has been granted a stay of execution. Indiana Governor Frank O'Bannon delayed Williams' scheduled death for 60 days. The delay was ordered so that DNA tests could be conducted on the evidence that led to Williams' conviction. Williams was sentenced to death for killing his foster parents in 1986. Even as this nation's crime rate is falling, the prison population is rising. Nearly one of every 143 people in this country was in federal, state, or local custody last year. That's an increase of more than 2.5 percent from 2001. The cost of housing those inmates, by the way, now tops $40 billion a year. In Montana, firefighters are preparing to launch a counterattack against a massive wildfire. The firefighters are trying to stop the 9,300-acre blaze before it reaches homes and businesses near the entrance of Glacier National Park. That fire is one of three major blazes now burning in and around the park. And rising water is the problem in Canton, Ohio. Heavy rains over the weekend filled entire neighborhoods with water, sending 1,000 residents to higher ground. Damage estimates have already topped $1 million. In New York City today, controversy over the Department of Education's newest alternative high school. New York plans to open the first high school specifically for gay and lesbian students. News of the Harvey Milk High School is drawing a lot of attention. Peter Viles has the report.
[Peter Viles, Cnn Correspondent:] As the saying goes, only in New York. "The New York Post" calls it "Gay High." Harvey Milk High School, inside this nondescript office building, bills itself as the first public school in the nation catering to gay and lesbian students.
[Michael Bloomberg , Mayor Of New York:] I think everything feels that it's a good idea, because some of the kids who are gays and lesbians have been constantly harassed and beaten in other schools. And this way, it sort of solves that problem. It lets them get an education without having to worry.
[Viles:] But others are questioning the plan to expand a school that's based on sexual orientation.
[Mike Long, New York Conservative Party:] I think it's wrong in spending taxpayers' money. I think it's wrong in giving special privileges to a certain class of people. I think this is social engineering in the worst way. And it is my hope and my desire that the taxpayers of the city of New York, the state of New York, and the nation speak out against this before this spreads across the nation.
[Viles:] New York City's is already an odd school system full of special programs, the "Fame" high school for kids who want to be stars. Other schools prepare students for careers in fashion or law enforcement. There are special high schools for pregnant girls or new parents, for kids who are in prison, for those who recently arrived in America from non-English-speaking countries, and for kids who have substance abuse problems. Harvey Milk High, with about 100 students this fall, grows out of a program originally financed by the Hetrick-Martin Institute, which says it quote "believes all young people, regardless of sexual orientation or identity, deserve a safe and supportive environment." Supporters of the school include actress Susan Sarandon, who volunteered this spring as principal for a day. As New York City moves in one direction on this issue, the Catholic Church is moving in the other. The Vatican later this week will reportedly issue new instructions to Catholic politicians, reminding them of the church's strong opposition to the legalization of gay marriage Lou.
[Dobbs:] The idea of a high school specifically for gay and lesbian students, this is, to say the least, quite a departure, to focus high school on the basis of sexual orientation.
[Viles:] It's one thing to say, well, if the kid has fallen behind in reading, we have a special school for that kid, special needs kids, maybe a pregnant girl who needs when she has the baby day care. Those issues, a special school makes a certain amount of logical sense. This is very controversial, the idea that taking kids out of the mainstream will somehow help them in the long term.
[Dobbs:] Mayor Bloomberg talking about kids being teased or whatever by other students, the support for this to provide a safe environment for their education. Why shouldn't there be a safe environment for every child's education?
[Viles:] This is a logical question. It's been asked by some of the critics. You heard from one from the Conservative Party in New York. Another question is well, lots of kids are teased. Some kids are overweight. Some kids wear glasses. Where do you draw the line here? And the city has certainly opened up itself to these kind of questions.
[Dobbs:] But going ahead, they are, as they are wont to do in New York City.
[Viles:] They sure are.
[Dobbs:] Thank you very much, Peter Viles. Well, it's the subject of our poll question tonight. Do you believe taxpayers should be funding public schools specifically for gay students, yes or no? Cast your vote at CNN.comLou. We'll have the results for you later in the show. When we continue: "Selling America," a series of special reports this week. From billboards to the big screen and beyond, advertisers going to any lengths to reach their target audiences. Bill Tucker will have the report. And phony business between some of this country's largest phone companies a federal investigation under way. Lisa Sylvester will report from Washington. And your thoughts on our series of special reports on "American Classics" tonight. We'll share some of your e-mails coming up. Stay with us. The sexual assault case against basketball star Kobe Bryant has stirred up strong emotions among the public. The Eagle County district attorney's office in Colorado reported threats, and it was forced to lock down its offices. Deborah Feyerick is in Eagle, Colorado. She joins us with a live report now Deborah.
[Deborah Feyerick, Cnn Correspondent:] Hey there, Lou. Well, the FBI is investigating those threats. The DA's office was closed. Only those who worked there or had business there were allowed to enter, the Colorado Bureau of Investigation also looking into this. It is a felony. It amounts to intimidation of a public official. Now, all of this was happening as Kobe Bryant's defense team waits for a judge's ruling, the judge right now deciding whether or not to unseal some critical information in this case. This is information that would shed light on the evidence that the district attorney has. For example, it would include search warrants, the arrest warrant, also police records, any statements that Kobe Bryant may have made. One defense lawyer who is not directly tied to this case says it would be all the juicy stuff that the public wants to know. Kobe's team has actually joined with the district attorney to keep all of this information sealed. A former prosecutor tells me that that is highly unusual. Oral arguments are going to be heard in this case on Thursday. Also at issue, another judge deciding another matter, and that is the 911 tapes, the 911 tapes that were made by friends of the victim after she apparently suffered a drug overdose. This was because she had broken up with her boyfriend. This was earlier this year. So the judge is set to rule on that, perhaps as early as today, perhaps by the end of the week. The district attorney wanted more time to consider, but the judge said, no, he had all the material he needed Lou.
[Dobbs:] Deborah, the district attorney forced to close his offices because of threats against the DA?
[Feyerick:] This is a very passionate issue. As you mentioned, the district attorney has received threats. Now, this could be perhaps some crazed sports fan. This could also be somebody who has something against Kobe Bryant or somebody who has something against this woman. Don't forget, also, the woman was really a target of sort of a vicious smear campaign. Much personal information about her made it onto the Web. As a matter of fact, there was a site in which her picture was allegedly shown. It turned out to be the wrong person, but the venom surrounding this case very, very severe.
[Dobbs:] Deborah Feyerick, Eagle, Colorado, thank you very much. Let's take a look now at some of your thoughts. Peter Rindge of New Hampshire wrote to say: "When will it occur to the American public that this country is no longer a manufacturing power? Our government and big business has sold out our country since the 1950s. I'm surprised I haven't seen the USA listed on eBay to the highest bidder." John Steinbruck on Lewes, Delaware, wrote on our series of special reports "American Classics." He wrote about specifically Coke. "Shame on you," he said. "Coke and all other forms of liquid candy in soda machines in school cafeterias are ruining the health of the nation." Larry of Broken Arrow, Oklahoma, however, applauded the series, saying: "The classics are great. The Corvette and Coca-Cola are true American icons." And Paul Gygi of San Jose, California, wrote about the number of U.S. deaths in Iraq: "I don't care if Uday and Qusay are dead or alive, or Saddam, either, for that matter. I do care that American service men and women are in danger and being killed." We couldn't agree with you more. And we love hearing from you. Send us your thoughts at LouDobbs@CNN.com. Coming up next: communication breakdown, why American intelligence failed in the months before September 11. Senator Pat Roberts, the chairman of the Senate Select Committee on Intelligence, joins us to talk about the disturbing details of that new report. And phony business: a federal investigation of MCI's business practices, practices that some say put this nation's security at risk. Lisa Sylvester will report from Washington. Stay with us. Our next guest says the U.S. Intelligence Committee has failed to address some systematic weaknesses that were in place before the September 11 attacks. Senator Pat Roberts is the chairman of the Senate Select Committee on Intelligence. His committee just declassified much of its report on the intelligence failures leading up to September 11. And he joins us now from Capitol Hill. Senator Roberts, good to have you with us.
[Sen. Pat Roberts , Kansas:] Lou, nice to be with you.
[Dobbs:] The failure to communicate, so many opportunities lost that are catalogued in your report, you believe that many of the same problems that permitted those failures still exist today?
[Roberts:] Well, no, I think we've made a lot of progress. I think the FBI especially has turned from a law enforcement agency to a counterterrorism outfit. I think the agency, the CIA, is working much better with the DIA and the military. I think the biggest issue was, we didn't suffer from a lack of collection of assets or information. It was the lack of really trying to analyze and then fuse that what that analytical product and get that to the policy-makers, so we could make some action. Thank the lord we have not have had another 911. I think we are doing some things better. Are we there yet? No.
[Dobbs:] And you have also suggested that the CIA, the entire intelligence community, would be far better bolstered had we not cut so much money from the respective budgets of the agencies. Do you expect to see those agencies beefed up in the next budget?
[Roberts:] Well, we've already done that in the budget that was just passed in the defense appropriation bill. Largely 60 percent, 70 percent of that comes from the defense budget. And in our intelligence mark that's a fancy word in Washington for meaning our authorization bill, the bill for the intelligence community we have tried to do that. But, having said that, we're still underfunded. We're underfunded in counterterrorism. We're basically underfunded in regards to analysts. We're underfunded in regards to efforts for better human intelligence. And what happens to us is, we have to come back every time and ask for a supplemental bill, an emergency bill, rather than really putting it in the budget. You can't get intelligence on the cheap. And I'm afraid that's what we've been doing.
[Dobbs:] George Tenet under considerable fire for all that is revealed in this report and in the 16 words in the president's State of the Union message.
[Roberts:] Right.
[Dobbs:] George Tenet, should he remain the head of the CIA?
[Roberts:] That's really not my call, Lou. I'm not trying to dodge the issue. He has the ear and the support of the president of the United States. I'll say this for George. He was contrite. He was forthright. He took full responsibility. He's done some things right, the problem being, when you're the DCI, when you're the head of the intelligence community, like George is, you don't get any real kudos or pats on the back on what you've done right. You do get a lot of criticism on what you've done wrong. But then you really can't answer it. So, in some ways, he's taken the heat. But, basically, he has said, "It's my responsibility," and he's taken that responsibility.
[Dobbs:] He's taking the heat, but the national security adviser effectively put the blame on the CIA, his agency, when it turns out that the CIA had in fact redlined those words, or at least the conclusion of those words, earlier. How much accountability should there be for Condoleezza Rice?
[Roberts:] Well, there should be full accountability. We're working with the National Security Council right now to get the personnel involved, the staff involved, that made those decisions to meet with our staff in regards to the inquiry we're conducting in the Senate. We will take this where it leads us, albeit, I'm sure that Condi Rice will accept the full responsibility for those errors, if in fact they have been made.
[Dobbs:] And the Saudis today, as John King just reported from the White House, requesting a very quick meeting with the president, very troubled by the 28 pages that were redacted in the report. To what degree do you think that the U.S. government should be listening to the Saudis on that score?
[Roberts:] Well, we should always listen to the Saudis. They have been allies on some very important subjects. But they've got a decision to make. I hope they've made it. The attack in regards to Riyadh was their 911. And they finally have to realize they are the targets of terrorism. And they can't look the other way when there are terrorist groups being funded in part by the Saudi Arabians. So instead of being bankrolling terrorism and simply looking the other way, they've got to join the fight. Hopefully, they've done that.
[Dobbs:] And Senator, the 28 pages, any likelihood that we, the American public, will see what was contained in those in any way soon?
[Roberts:] Probably not probably not very soon. And I'm, like Senator Shelby, a little unhappy with the amount of the pages that were redacted. That's the fancy word for blacking them out. I really think that if some of those pages were not redacted it would put the intelligence community in a far better light, especially in regard to the authority that was not granted or was granted when we could have taken care of Osama bin Laden some years ago.
[Dobbs:] Senator Pat Roberts, as always, thank you for being here.
[Roberts:] Thank you, Lou.
[Dobbs:] Tonight's quote comes from Washington where fire and rescue officials from 40 states gathered to learn how officials handled the September 11 attacks. One administration official had this to say: "Today our freedom is more secure than 21 months ago. We have unlearned the natural tendency of a free people to take freedom for granted." That from U.S. Attorney General John Ashcroft. Turning now to a corporate crime investigation that could have national security implications. Federal prosecutors are investigating whether MCI dodged millions of dollars in fees by disguising some of its long-distance calls as local calls. MCI rivals raised the accusations first, and they say the company's tactics, in fact, jeopardized national security. Lisa Sylvester reports.
[Correspondent:] MCI, one of the country's largest long-distance carriers, allegedly artificially avoided millions upon millions of dollars in terminating access costs that were instead paid by AT&T.; That accusation comes from AT&T; in papers filed with the U.S. bankruptcy court.
[Jim Cicconi, At&t; General Counsel:] It may be business as usual for MCI. It's certainly not business as usual for the rest of the industry. This is not an area of legitimate dispute. This is outright fraud.
[Sylvester:] Let's say an MCI customer in Washington, D.C. calls a relative in Maine. MCI is supposed to pay a termination access fee to the local phone company. But according to court papers, the call would have been rerouted to Canada, lumped into AT&T; traffic, and then sent back to Maine so it would look like an AT&T; call from Canada to Maine. A lot of money is at stake. Every year the big local phone companies charge more than $16 billion in access fees.
[Scott Cleland, Precursor Group:] The system is so serpentine, so labyrinthian and so technical, that there are always, at any given time, dozens upon dozens of disputes among carriers.
[Sylvester:] AT&T; sampled calls from Canada during the last year 730 million minutes' worth of phone calls. Only half of them were calls that clearly originated from Canada. Thirty-three percent of them, almost a full third, actually appear to be from the U.S.Not only did AT&T; lose access fee revenue for these calls, but the company claims it paid extra fees that MCI should have paid. These latest allegations could jeopardize $800 million worth of contracts MCI has with the federal government. This afternoon, Verizon formally asked the government's General Services Administration to investigate MCI's actions. MCI, formerly WorldCom, is already under investigation in connection with an $11 billion accounting scandal.
[Sen. Susan Collins , Governmental Affairs Chair:] MCI has admitted to conducting the largest financial fraud in our nation's history. That fact alone should trigger the kind of review that is now under way.
[Sylvester:] MCI declined to go on camera. But a company spokesperson says it has done nothing wrong. "For years we have had in place monthly access charge resolution meetings with the local phone monopolies. You can't help but to question our competitors' motives." MCI is scheduled to engineer from Chapter 11 bankruptcy this fall, and MCI's competitors have been fighting hard to keep that from happening. They don't want the company just to be reorganized. They want it dismantled Lou.
[Dobbs:] Lisa, thank you very much. Lisa Sylvester reporting from Washington. Coming up next, "Selling America." This week, our special report on advertising. From television to magazines to movies and the Internet, you're the target of advertisers wherever you go, whatever you do. Bill Tucker will have the report. And this country's top business magazine editors join us for our "Editors' Circle." From a settlement that could mean millions for Enron shareholders to the latest chapter of corporate crime, all of that and a great deal more. And oh, yes, tax cuts and tax hikes. We are in the political season. Stay with us. At the box office over the weekend, "Spy Kids 3-
[D:] Game Over" took the top spot. The third movie in the "Spy Kids" franchise took in $33 million. The three films have grossed $230 million so far for Dimension Films. That's a division of Miramax. "Pirates of the Caribbean" held on to second place. "Bad Boys II" third. "Lara Croft Tomb Raider: The Cradle of Life" debuted at No. 4. And "Seabiscuit" coming in fifth with a $20 million opening. Tonight, our series of special reports on advertising in this country. Every day, we're bombarded with ads on television, radio, billboards, the Internet $237 billion spent on advertising last year. It is a very big business and a very big part of our lives. Bill Tucker reports on "Selling America."
[Correspondent:] Advertising surrounds us. It's everywhere. We literally can't get away from it.
[Burtch Drake, Pres. & Ceo, Aaaa:] Americans are definitely bombarded by advertising wherever you turn. And I'm constantly amazed at where people can find places to put advertisements, including the back of, you know, a toilet.
[Tucker:] Quite a change from the beginning of the 20th Century, when if you wanted to advertise you bought an ad in a newspaper or magazine and you were done. There was no radio, no TV, no movies for product placements, certainly no Internet. As a matter of fact, there weren't even billboards. But more than just the number of venues has changed.
[Donny Deutsch, Deutsch Inc:] I think if you go back 30, 40 years, advertising was kind of a necessary evil. It sold stuff, and people, you know, kind of took it for what it was. Now it's just like movies and television, it's omnipresent, it's part of who we are.
[Scott Donaton, Editor, "advertising Age":] Advertising is a mirror on pop culture, and more and more frequently it's actually beginning not just to reflect what's happening in the popular culture but even to influence it.
[Unidentified Male:] So darn many frozen dinners. Trust Swanson. That's what most folks do.
[Tucker:] While true or not, advertising has gone from this
[Unidentified Male:] So I took Swanson.
[Unidentified Female:] So from now on we'll always take Swanson.
[Tucker:] To this
[Unidentified Female:] Why don't you get us something to cool this fire down?
[Tucker:] And as advertisers compete for our attention, the use of sex and humor is on the rise.
[Unidentified Male:] You know you need a cover sheet on your TPS reports, Richard! That ain't new, baby!
[Unidentified Female:] Hey, Jerry.
[Unidentified Male:] Hey, Janice.
[Tucker:] And in an effort to combat technology, which makes it easier to eliminate the ads, the ads are getting more subtle as well.
[Jim Speros, Chmn., Association Of Natl. Advertisers:] Product placement really has become a very big part of how companies choose to promote their products and services. There are subtle ways that advertisers are finding to place their products where the products become integral to the programming, and I think you'll see more and more of that occurring as we go forward.
[Tucker:] And after suffering its worst year ever in 2001, ad spending is back on the rise. With the Olympics and the elections all falling in the same year, next year is expected to be a record breaker in terms of spending, Lou.
[Dobbs:] Bill, thank you very much. Bill Tucker. Tonight's thought on the power of advertising: "The deeper problems connected with advertising come less from the unscrupulousness of our deceivers than from the pleasure of being deceived, less from the desire to seduce than to be seduced." That from American historian and author Daniel J. Boorstin. And we will continue this week our focus on "Selling America," examining all aspects of the advertising and its effect on our society. A reminder now to vote in tonight's poll. The question: "Do you think taxpayers should be funding a public school specifically for gay students?" Cast your vote at cnn.comlou. We'll have the results for you in the show later. When we continue, the editors of the nation's leading business magazines join me for our weekly "Editors' Circle." And a century of Hope from Hollywood, the USO, 100 years of memories. We'll be back with a look at the life and times of Bob Hope. Well, let's take a quick look at the top stories featured by "Forbes" and "BusinessWeek." "Forbes" featuring Hewlett Packard CEO Carly Fiorina as she's successfully engineering, of course, the merger of HP and Compaq. Now she has designs on fixing your company. "BusinessWeek" taking a look at Verizon's gutsy bet on reinventing telecom and also 100 top brands. And I need to talk to Mark Morrison about that because, well, a very prestigious brand was not included in there. Mark Morrison, the managing editor of "BusinessWeek" is with us. Steve Forbes, the guy who runs "Forbes" magazine and has his name on the door. Good to have you gentlemen.
[Mark Morrison, "businessweek":] Good evening, Lou.
[Dobbs:] Well, let's start out with the settlement with Enron, with J.P. Morgan and Citigroup. Two hundred what is it? 200 and...
[Steve Forbes, "forbes":] Fifty million.
[Dobbs:] Boy, that settles it. They hit a billion dollars in debt and settle up for a quarter. Is that a fair deal, Steve?
[Forbes:] Well, under the circumstances any money you can get is money found. And I think three or four years ago Morgan effectively two years ago didn't think they'd have to pay up at all. So it's money found, and take it and run.
[Morrison:] It's small change for Chase and for Citi and small change, I'm sure, in the minds of the many investors who lost billions of dollars on Enron.
[Dobbs:] Without their support, their help, their engineering, and their capital would those special purpose entities, the partnerships have been possible, which...
[Morrison:] Very difficult. They basically helped Enron cook the books. That's what the SEC concluded. And that's pretty bad. It's pretty bad stuff.
[Dobbs:] What do you think, Steve?
[Forbes:] It is bad. And you can do off balance sheet financing. Some of it's very legitimate. But this was taken to an extreme. And to pretend we didn't know what they were doing is a little disingenuous.
[Dobbs:] Disingenuousness seems to attend corporate America on occasion, but overall we're watching a corporate America that's on the rebound. Profits seem to be, as we're wrapping up the earnings season here for the second quarter, seem to be positive. Are you feeling better, Mark?
[Morrison:] You feel some more momentum coming into the economy. You mentioned the covers of our two magazines. You've got high-tech executives in both cases who have been in a retrenchment mode, but now they're stepping out, starting to make some commitment. Animal spirits are coming back. And this is very good news for the economy and for investors. Eventually some jobs.
[Forbes:] Yes, I think not only the profits second quarter were a little bit better than expected, but the economy, I think, is showing great strength. I wouldn't be surprised if the second half of this year we didn't see real growth rates of 4 percent. Next year I think we're going to touch 5 percent. There's a lot of momentum starting to build up.
[Morrison:] And already we've had five quarters now of higher profits reported by corporate America. So if you do get a little inch up in the growth rate, as Steve suggests, that's going to be terrific news for earnings and shareholders and eventually for employment.
[Forbes:] So my seemingly rash prediction at the beginning of the year on the stock market being up 40, 50 percent may not look so rash, I hope.
[Morrison:] A few points left to go. We're only up 13 points at the moment.
[Dobbs:] It still looks ebullient. We will find out soon whether or not it is irrational or not. Let's turn to the Democrats, who have discovered tax policy suddenly. They're talking these nine candidates, nearly all of them, are talking about rolling back the Bush tax cuts. Mark, you've got to be...
[Morrison:] They be dancing in the aisles at the White House over this news because to run on the idea of increased taxes in a time when the economy is just getting back on its feet, I don't think the average American or even the average economist computes that.
[Dobbs:] Except for that fellow right there, Senator Joe Lieberman. He has managed, to this point at least, to stay away from the tax issue. What do you think?
[Forbes:] Well, he's the only smart one out there. I think the rest of the Democrats remind you of Lenin's phrase, useful idiots. I think the Republicans are absolutely delighted there are so many useful idiots out there. Mondale did it in '84. He lost 49 out of 50 states. Looks like the Democrats are looking to repeat that feat.
[Morrison:] The Democrats are in a difficult position basically because the economy needs to grow and their philosophy is if you get the deficit down that will eventually lead to lower interest rates and to growth. But the problem is in the short term you really need the stimulation that's in the system and I don't think the longer-term aspects of the deficit resonate that much with the population.
[Forbes:] It's hard to run against prosperity, and that's what the Democrats are going to be facing next year.
[Dobbs:] Prosperity but still jobless prosperity, as we look at this recovery, as you say, improving profits over five quarters. We have seen the end of the recession officially declared by the National Economic Research Bureau. Jobs just aren't being created. When is it going to kick in?
[Forbes:] I think early next year as people realize this recovery is for real, that business investment's starting to go up and not just consumer spending. And it will be in time for the election. People will feel that the thing is moving in the right direction.
[Morrison:] I think that may be optimistic. I think may be well into next year before you see that happen. The spike in interest rates that we've had in the last month are a little scary in terms of what they portend for the recovery and the ability of people to create jobs again.
[Dobbs:] Mark Morrison, Steve Forbes, gentlemen, good to have you with us.
[Forbes:] Good to be with you.
[Morrison:] Good to be with you, Lou.
[Dobbs:] Well, next we'll share some of your thoughts, taking a look at the preliminary results of tonight's poll, and saying good-bye to a legend. The life and career of Bob Hope when we continue. Stay with us. Senator Hillary Clinton is hawking her memoir, "Living History" on her re-election campaign Web site launched today. Donors to Friends of Hillary receive gifts ranging from a bookmark to a personally inscribed limited edition of the book. And as of June 30, Senator Clinton's re-election campaign had raised $386,000. Clinton spent more than $41 million in her 2000 race. There's a bit to go yet. Telemarketers are desperately trying to strike back against the government's do-not-call list. They're suing a second federal agency. More than 28 million Americans have already registered to block those annoying telemarketer phone calls just over the past month. A telemarketing industry group has asked the U.S. court of appeals to reject new regulations set by the Federal Communications Commission. That is the same group that sued the Federal Trade Commission earlier in the year. The telemarketing industry estimates the do-not-call list will eliminate more than two million jobs, cost up to $50 billion each year. And the preliminary results of tonight's poll question do you think taxpayers should be funding public schools specifically for gay students? Thirty-four percent of you said yes, 66 percent say no. The results in the stock market today less pronounced. The major averages finished little change, following the release of several corporate earnings reports. The Dow down 18. The Nasdaq up 5. The S&P; down 2. Christine Romans is always up and has the market for us, even though it's mixed Christine.
[Christine Romans, Cnn Financial News Correspondent:] It is mixed. I mean, the Dow was lower, Lou, but it only took back 18 points of that 170-point rally from Friday, and that was a five-week high. So holding in there. And the Nasdaq closed higher. It's up almost 30 percent for the year now. Now, the earnings picture mixed overall. Profits fell for some of the chemical companies, Tyson Foods and Xerox. But look at Northrop Grumman, Humana and Kellogg. They reported earnings growth and raised targets for the year. Humana helped by government dollars for health insurance coverage for U.S. troops. And that stock rose to a four-year high at one point today, Lou. American Express shares fell, even though profit there rose 11 percent in the quarter. And AmEx raised its profit targets for the year as well. Those shares are up 40 percent this year. That might be why the stock was down a little bit today. There were big gains for AT&T; and Disney after analyst upgrades. And the phone stocks overall helped by MCI's woes. And Lou, this is where the real excitement was today. The bond yields, they soared. Everything from mortgage-related selling to bullish comments on the economy from a Fed governor, all feeding into that frenzy that we saw last week. Now, the yield on the 10-year note was 3.11 percent, just a month ago. It's back above 4 percent now. Just a month that's had that move.
[Dobbs:] There goes the rally, at least for a month.
[Romans:] At least for a month.
[Dobbs:] Christine, thank you. Christine Romans. Finally tonight, the passing of an entertainment legend. Bob Hope died last night at the age of 100. The comedian spent his life trying to make people happy. Tonight we look back at the Bob Hope we all remember and the memories he gave us.
[Unidentified Male:] From the Hollywood canteen, the Pepsodent show starring Bob Hope!
[Bob Hope, Actor:] This is dangerous. If this audience sees steak, they'll come right up here after it.
[Unidentified Female:] I don't know. They've seen ham all evening, and you're still here.
[Hope:] Senator McCarthy, he didn't see much of the game. He spent seven innings chasing the vendor who was yelling, "here you are, get your red hots here." You heard about President Kennedy saying we should all drink milk. Milk. Maybe he's younger than we think, huh? Over in China they're all wearing the Nixon look. That's a suit that's so tight your arms pop up and go like this. I played golf with President Ford many times. I'm not only a friend, but I'm one of the survivors. Who can blame Russia for wanting to be friends with Carter? They have all our bread, but what good is it without peanut butter? Now, just getting a bunch of votes doesn't prove you're an actor. Look at Ronald Reagan. They wanted to know where George was. Now we know where he was. Out hunting quail, huh? Hi. This is Bob Hope saying
[Unidentified Male:] All right. Let's hear it for him. Bob Hope!
[Hope:] Thanks to the USO I have some wonderful memories. Box lunches, yellow fever shots. And I've learned to say kaopectate in seven languages. You know, two years ago I visited Berlin. You know what a mess that is. Last year I visited Cuba, and you know what a disaster that became. This year they sent me here. Good luck, men! Here we are in West Berlin, ladies and gentlemen. West Berlin. That's a PX surrounded by Russians. Very happy to be back here. At Chukuchi. Kuchi, that's Vietnamese for you want it, you can have it. Yes, sir. Guantanamo's a Navy term meaning "I hear you knocking but you can't come in." I'm thrilled to be here at Osan Air base. Osan, that's Korean for "take it and stuff it." Great to be here in this beautiful Nam Phong, Thailand. Nam Phong, that's a Thai expression meaning you only have one, so keep it close to the ground. Nice to be here
[Dobbs:] Bob Hope. That's our show tonight. Thanks for being with us. For all of us here, good night from New York. "LIVE FROM THE HEADLINES" with Anderson Cooper is up next. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com