ANNOUNCER: This is a special edition of LOU DOBBS TONIGHT: "Independents Day - Awakening the American Spirit."
Here now, Lou Dobbs.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Good evening, everybody.

Voters tonight extremely concerned about our slowing economy and desperate for political leadership. Our economy facing a recession after three decades of economic mismanagement by both Republican and Democratic administrations and congresses. Independent voters are simply seething these days.

The Federal Reserve this week responding to this crisis by cutting interest rates by three-quarters of a percentage point, that the biggest cut in interest rates by the Fed in nearly a quarter- century. And the Bush administration and Democratically-led Congress agreeing on an economic stimulus package worth about $150 billion.

We will have extensive coverage tonight of the war on our middle class and the response of our political leadership.

We begin with Ed Henry at the White House.

(BEGIN VIDEOTAPE)

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Lou, leaders in both parties have been under great pressure to do something to boost the economy. And, this week, they delivered.

(voice-over): The president was quick to declare victory on the stimulus package that will pump $150 billion into the sagging economy.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This package has the right set of policies and is the right size. The incentives in this package will lead to higher consumer spending and increased business investment this year.

HENRY: The deal came after round-the-clock negotiations, Congress moving at record speed.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: I think this is a remarkable package because it is about putting money in the hands of America's working families.

HENRY: It gives $600 rebate checks to individuals making under $75,000, $1,200 for couples who earn less than $150,000 a year. Couples with kids get an extra $300 per child.

In a concession to Democrats, workers who make at least $3,000 but don't pay taxes will still get $300 checks. In return, Democrats dropped calls for increase in food stamps and extension of unemployment benefits. Republicans also secured tax breaks for small businesses, who can write off 50 percent of purchases of plants and other capital equipment.

REP. JOHN BOEHNER (R), MINORITY LEADER: The speaker gave some, as she said. And Republicans gave some. But I think it's a good compromise that will benefit the American people.

HENRY: There's one reason for the bipartisanship -- it's an election year. And both parties are desperate to show they're doing something about the sliding economy.

BUSH: This agreement was the result of intensive discussions and...

HENRY: While the president does not have to face the voters in November, he has a legacy to fret about. That's why White House officials say the economy will be a major focus Monday when he delivers his final State of the Union Address.

BUSH: I know Americans are concerned about our economic future. Our economy is structurally sound, but it is dealing with short-term disruptions in the housing market and the impact of higher energy prices.

HENRY (on camera): But this is not a done deal yet. Some senators are talking about adding money for food stamps and other priorities. That might slow this bill down. And the U.S. Treasury Department is saying that, even if Congress finishes it by mid- February, it still might not be until late spring or summer until all of the checks have reached all of the mailboxes, raising questions about just how quickly this will boost the economy -- Lou.

(END VIDEOTAPE)

DOBBS: Presidential candidates of both parties quick to present their own ideas to solve this nation's worsening economic problems and to avoid a possible recession. But none of the candidates is offering a solution to the long-term structural problems that face this economy.

And, as Casey Wian now reports, that could be one more reason for an independent presidential candidate to join in this campaign.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Democratic presidential candidates wasted no time blaming President Bush for the nation's economic turmoil.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We have not made the kind of progress that we need in having a balanced economy. And George Bush has made it worse.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: We're in danger of seeing millions of Americans become basically homeless and losing the American dream.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: The rich are getting richer and we have added five million people to the poverty rolls in just over the course of the last seven years.

WIAN: Republicans, however, are sparing the president and trumpeting their own credentials.

RUDOLPH GIULIANI (R), PRESIDENTIAL CANDIDATE: Of all the people running for president of the United States, I have had the most experience in turning around a government and in turning around an economy.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We have got to restrain spending. Otherwise, we will continue to have to borrow money from the Chinese.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: When things like this occur, it points out just how important it is to have a president who actually has had a job in the private sector becoming our next president.

WIAN: That argument may work in the primaries, but it will be a tough sell in November's general election.

JOHN GEER, PROFESSOR, VANDERBILT UNIVERSITY: It will give a huge advantage to the Democrats if the economy continues to struggle. Just think back to 1980 and what Ronald Reagan was able to do against Jimmy Carter. It's a big plus for the out party if the economy is in trouble.

WIAN: A recent CNN/Opinion Research poll shows the economy is the most important issue in this year's election. Most candidates are proposing short-term economic stimulus plans, which is part of the problem, says New York City Mayor Michael Bloomberg, who is considering an independent presidential run.

MICHAEL BLOOMBERG (R), MAYOR OF NEW YORK: In politics, winning elections and protecting a party majority is more important than solving problems. And short-term pork invariably wins over long-term investing and special interests win over the rest of us.

WIAN: Come November, Bloomberg's independent message of job creation and economic growth through infrastructure investments could attract voters weary of traditional party politics.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

DOBBS: Joining me now, three of the country's best political analysts, CNN contributor radio talk show host Roland Martin, with me here in New York.

Roland, good to have you here.

ROLAND MARTIN, CNN CONTRIBUTOR: Glad to be here.

DOBBS: CNN contributor Democratic strategist Donna Brazile.

Donna, thank you for being with us.

And Gloria Borger, CNN political analyst.

Gloria, thank you.

Let's turn, if I may, first to you, Gloria.

The idea that this president and the leaders, the Democratic leaders of the House and Senate, sitting down to -- kind of shoulder to shoulder to say we're going to get comfortable and wrap our arms around an economic stimulus package, is this the kind of leadership that's playing into the hands of these presidential candidates?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, in fact, congressional leaders and the president are doing this in their own self-interests, Lou, of course, because they know that their approval ratings are way low. Congress' approval rating has been as low as 11 percent or 13 percent. And the president is somewhere in the 30 percent range.

It's in their interests to let the American public know that they can actually work together to get something done. But, if you're a Democratic presidential candidate, you may want to do more than comes out of any compromise with this president. And if you're a Republican presidential candidate, you may want to do less.

MARTIN: This is a perfect example of why you have no leadership. They wait for the last moment. There is no coincidence this is happening in election season. We know what the game is.

The bottom line is, the economy has been going towards this direction for quite some time. And they have all ignored it. They passed the buck. And, as usual, they will until the tail end and say, hey, let's try to do something right now, so we can look good.

BORGER: Can we just say that Washington is a lagging indicator? OK?

(LAUGHTER)

BORGER: That is true.

DOBBS: It's not only a lagging indicator. It's also a dragging indicator, in my experience. And the reality is that, at least in my judgment -- I better say this -- in my judgment, the fact is that these candidates, both parties, are not coming up with prescription, but in that, for long-term solutions to our economy. We're talking about trade. We're talking about faith-based trade policies. We're talking about a failure to regulate our markets and financial institutions. We're talking about a failure to invest in our public infrastructure, to invest in our children, in public education. And the fact of the matter is, these folks aren't talking about a plan to take care of it.

(CROSSTALK)

MARTIN: And, unfortunately, you get penalized when you're really too honest.

John McCain learned that in Michigan. He was honest when he said, these jobs are not coming back. Mitt Romney says, I am going to fight to bring those jobs back. And people said, that's what I want to hear.

McCain knew the truth. But we want that hopeful Wizard of Oz in that somehow is going to end up being perfect. And when you're so truthful, the voters tend to penalize you. So, they have to dance around the issues.

DONNA BRAZILE, CNN POLITICAL ANALYST: But let me also say that Senator Clinton has called for a moratorium on home foreclosures...

DOBBS: Right.

BRAZILE: ... a rate freeze on interest rates.

John McCain -- I mean, John Edwards is talking about investing in a green economy. And Obama is also talking about helping those on fixed incomes.

So, I think Democrats have been talking about this for a long time. Perhaps the country hasn't been paying attention. But they all have plans on trade. They all talk about moving away from the NAFTA- type trade deals of the past. So, I think the Democrats are really prepared to make this stimulus package work. But again it depends on the president working with Democratic leaders.

(CROSSTALK)

DOBBS: Gloria, I am going to have to interrupt you. We're going to come back to you first.

BORGER: OK.

DOBBS: And you can straighten all the rest of us out...

(LAUGHTER)

DOBBS: ... when we continue with our panel here next.

And elected officials in Washington rushing to help our beleaguered middle class? Oh, yeah? We will have that report and a great deal more. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: We're back with three of the country's best political analysts, CNN contributor radio talk show host Roland Martin, here with me in New York, CNN senior political analyst Gloria Borger, and CNN contributor Democratic strategist Donna Brazile.

Donna, let's talk about the issue of truth in advertising here. This president hasn't been truthful about the of this economy. This Federal Reserve hasn't been truthful about the state of this economy. Wall Street certainly hasn't been. And corporate America can't find its voice. It talks to the Chamber of Commerce and the Business Roundtable.

What in the world are the American people supposed to believe here? These candidates for president?

(CROSSTALK)

BRAZILE: Lou, we have been operating on borrowed money for a long, long time.

And now you see all these overseas investors coming here and just picking their way through the American economy because of the dollar value at this point.

DOBBS: Yes.

BRAZILE: Look, I think it takes real leadership.

And hopefully what we will see a year from today is another president taking the oath of office who will promise to help the middle class and the working poor in this country and put the American people first, not corporate interests, not special interests. But people are really tired of this back and forth, back and forth. And, meanwhile, they're at home suffering trying to figure out if they can pay their fuel bill and also if they can keep their homes.

MARTIN: I really laugh, Lou, when I watch Wall Street screw up, then ask for a handout.

DOBBS: Yes.

MARTIN: And the same people criticize those who accept welfare.

DOBBS: Right.

MARTIN: It's real interesting how we dog people on welfare, and you're getting a handout, but what did they demand? The Fed cut, cut, cut, because we screwed up.

DOBBS: And, also, they need a $100 billion superfund to get them through the subprime mortgage.

MARTIN: Right.

DOBBS: Gloria, you were trying to say something.

(CROSSTALK)

BORGER: Well, I was trying -- it's sort of interesting to me. I think, sometimes, in politics, we get the leaders we deserve, because we, as voters, don't want to hear that we have got to take some tough steps.

MARTIN: Right.

(CROSSTALK)

BORGER: I will say that George Bush did try to do something on Social Security. You may not have liked his proposal, but he did try to get something done. These are intractable issues that we seem unable to solve in this country.

MARTIN: Well...

BORGER: And that's because of our partisan politics.

DOBBS: Right. OK, Gloria, I think you're right. The president at least had the guts to bring it up.

BORGER: Yes.

DOBBS: He also was foolish enough to attach it to private accounts. Now, those accounts would be doing what in this market right now?

BORGER: Tanking, yes.

DOBBS: Second, we have unfunded liabilities that in far greater and more immediate and urgent need of resolution in both Medicare and Medicaid in this country. And what did he do there? He attached the biggest spending bill in terms of expanding entitlements since the Great Society 40 years ago.

(CROSSTALK)

BRAZILE: Let's not forget the war. Let's not forget what this war in Iraq is costing the American economy...

DOBBS: Right.

MARTIN: Very true.

BRAZILE: ... as well as our reputation in the world.

We're -- basically, we're digging ourselves deeper into debt right now. And I don't believe the stimulus package -- although it's very much needed to try to revive or jump-start the economy, I don't believe the stimulus package is going to do the trick, because this is structural problems now we're dealing with. MARTIN: And, Lou, here is one thing I would love to see.

I would love to see some folks in the congressional districts, thousands of people literally go to their member of Congress and say, give it back. If we really care about...

DOBBS: The earmarks.

MARTIN: Right, the earmarks.

DOBBS: Yes.

MARTIN: If we really care about our budget and they say let's re-look at what our district is getting; let's give it back, because again the people do have the power to do so.

But I wonder if the people are willing to actually say, give something back. I don't think they want to do that. I want to see somebody do it.

(CROSSTALK)

DOBBS: You want to watch everyone start squealing? Instead of just the earmarks, let's say the entitlements programs in this country are simply unsustainable.

MARTIN: Right. Right.

DOBBS: Folks, this is just the truth. You're going to hate me for saying this. They're not sustainable.

MARTIN: Right.

DOBBS: We are going to have to roll back Medicaid and Medicare and Social Security. Folks, that's just the fact. The truth is, you're not going to get elected speaking those words.

(CROSSTALK)

MARTIN: On my radio show, Lou, whenever we talk about tax cuts, or when people say, we're going to raise taxes, I tell my listeners, two things are going to happen, guys. Either you're going to raise taxes or you're going to have stop asking for more and more.

I'm sorry. You can't ask for more and then say, but don't raise my taxes. Somebody else will pay for it.

DOBBS: Well, you will see the Democratic candidates -- if history is any indicator, you will see the Democratic candidates offering everybody at least $5,000 in their pocket. And you will see the Republican candidates will offer every wealthy person and every corporation in the country $5 million in extra tax benefits.

(CROSSTALK)

MARTIN: Precisely. (CROSSTALK)

DOBBS: These are the cartoons that these partisan parties have become.

BORGER: Well, and I think you're 100 percent right about that, which is why, when you hear some candidates talk about a post-partisan environment, you know, John McCain is excoriated in the Republican Party, as you well know, Lou, because he works across the aisle.

And that's a problem, when, just because you work with Democrats sometimes, if you're a Republican, that you get in trouble. And it didn't always used to be that way. I'm old enough to remember the first fix on Social Security, when Tip O'Neill worked with Ronald Reagan to try and get it done. And guess what? They did. But it happened after an election. And I think that's the right time.

DOBBS: Yes. Well, it also happened with a fellow by the name of Alan Greenspan in 1983 with real, real, as you suggest, bipartisan direction and support.

(CROSSTALK)

BORGER: Exactly. Exactly.

DOBBS: But we saw them try to do this just a few years ago. And it caved in from the left and the right.

(CROSSTALK)

BRAZILE: Well, not to bring back the '90s -- I don't want to bring back the '90s, because I don't want to sound like I'm a mouthpiece for one of the candidates, but, look, you have got to admit, Lou, that the Democrats took this problem head on back in the 1990s, and wrestled this budget, got it in good shape, and we balanced the budget, and brought about fiscal prosperity for all Americans.

What we saw over the last seven years with the Bush administration, working with a Republican-controlled Congress, is that they gave away money to those who least needed it and then, of course, we began to borrow our way through the war and everything else. I think we need commonsense leaders back in office to help us, not just grow this economy, but fix some of the structural problems that exist now in our economy.

(CROSSTALK)

MARTIN: Where is Ross Perot when we need him?

(LAUGHTER)

DOBBS: Well, you know what?

(CROSSTALK)

DOBBS: You know, you say this about Ross Perot. But the reality is that Ross Perot challenging and destroying George H.W. Bush's reelection in 1992...

MARTIN: Right.

DOBBS: ... and focusing national attention on that budget deficit, by the way, spurred the Democratic Party and the Democratic Leadership Council to balance that budget in 1993.

(CROSSTALK)

DOBBS: Donna Brazile is exactly right. So, you know, everybody played a part there, partner.

(CROSSTALK)

(LAUGHTER)

BORGER: I agree.

MARTIN: Well, he is from Texas.

DOBBS: He is from Texas.

BRAZILE: That is what we need now, a year from now. We need a new president and a new spirit about taking care of our own here in this country.

BORGER: OK. I nominate Donna. OK.

BRAZILE: No, not me. I'm not qualified, remember?

(LAUGHTER)

DOBBS: Let me say that...

BRAZILE: I'm too young, Lou.

DOBBS: Well, I understand that. I know the feeling.

BRAZILE: I'm not tested.

(LAUGHTER)

(CROSSTALK)

MARTIN: You haven't been vetted.

BRAZILE: And, besides, I eat boudin for breakfast sometimes.

DOBBS: But, from day one, you will be ready. I know that, Donna Brazile.

(LAUGHTER)

(CROSSTALK) BRAZILE: And, Lou, you will be in my Cabinet, trust me.

DOBBS: Bless your heart. I appreciate it.

BRAZILE: Thank you.

DOBBS: And, Roland Martin, thank you. Appreciate it.

MARTIN: Appreciate it.

DOBBS: Coming up next: political leaders congratulating themselves on reaching a bipartisan agreement on that economic stimulus package. But will that package do anything to end what has been an outright war on our middle class? We will have a special report on its likely effect.

And Senator Jeff Sessions challenging the presidential candidates in both parties to declare they will end illegal immigration and border security lapses -- Senator Sessions among our guests here next.

(COMMERCIAL BREAK)

DOBBS: President Bush and Congressional leaders congratulating themselves on reaching a quick agreement on that economic stimulus package. But the temporary stimulus will do little to end the war on our middle class. Working men and women and their families will continue to suffer from stagnant or declining wages, rising health care costs and plummeting home values.

Christine Romans has our report.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT: It's been called an aspirin for the American economy. It will make us feel better now but the headache, in all likelihood, will return.

ROBERT REICH, FORMER LABOR SECRETARY: Energy prices going up and food prices going up, and housing values going down. For a lot of people, that was their piggy bank after all. It's really a drop in the bucket.

ROMANS: Indeed, many agree the $150 billion stimulus package won't rescue falling home prices or reverse the foreclosure crisis. Merrill Lynch forecasts home prices will tumble at least 25 percent over the next three years. Another study said homeowners will lose some $1.2 trillion in property value and at least another 1.4 million home foreclosures are expected this year.

A stimulus check from the treasury won't hold down health care premiums and 47 million Americans are still without health insurance.

Renowned economist Martin Feldstein prefers a stimulus plan that gets triggered, only if an economy downturn stretches three months in a row. MARTIN FELDSTEIN, NATIONAL BUREAU OF ECONOMIC RESEARCH: But if triggering is not in the cards, then I would say it would be better to have an immediate fiscal package than to wait and see whether in fact the economy is turning down.

ROMANS: Even supporters acknowledge it isn't the economy's cure- all.

REP. NANCY PELOSI (D), HOUSE SPEAKER: Let us praise it for what it does, not disrespect what it does not.

JASON FURMAN, BROOKINGS INSTITUTE: To get out of the problem now it's pretty simple. It's cutting interest rates and stimulating the economy through tax cuts or spending increases and it looks like both of those are in the process of happening.

ROMANS: Most agree doing something is better than nothing at all.

(on camera): Still, there are serious concerns that an ailing $13 trillion economy cannot be fixed quickly by lower interest rates and a $600 check alone.

Christine Romans, CNN, New York.

(END VIDEOTAPE)

DOBBS: Time now to look at some of your thoughts.

Catherine in North Carolina said: "I wish these candidates would stop promising change. They cannot change a thing. It takes Congress and the Senate and the president working together to change something. Damn it, the candidates from both parties can't even get along with each other. How in the Sam Hill are they going to get along with Congress and the Senate to change anything? Do they really think the American people are so stupid as to believe their hogwash?"

The short answer is, yes, they do.

Nat wrote in about the president's economic stimulus plan: "Dear Lou, it seems to me that handing out money is only temporary. But the problem won't go away. Stopping the outflow of jobs and industries and making free trade fair trade would have a long-term effect. Keep hammering away, and maybe Congress will listen, Lou."

We will keep trying.

And Bill in California: "Dear Lou, it is time to change from GNP, gross national product, to GIP, gross imported product. That would say it all."

You know what? That's a terrific idea. We thank you for it. And we're going to try to work that in here from time to time.

We love hearing from you. Send us your thoughts at loudobbs.com. Each of you whose e-mail is read here receives a copy of my new book, "Independents Day: Awakening the American Spirit."

Up next: the Federal Reserve cutting interest rates by the largest amount in a quarter-century. Will that interest rate cut help middle-class Americans? Will it turn this economy around? Will it stop recession? The answer is no, but no one in politics wants to be that adult about it. We will tell you what's going on.

And most American public schools, well, many of them have failed an entire generation of our students, but one school district has had stunning success. We are going to share that success story with you.

We will have all of that, much more, next. Stay with us. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: The Federal Reserve slashed interest rates this week by the largest amount in a quarter of a century, three-quarters of a percentage point.

But there are concerns that lower interest rates and the economic stimulus package won't be enough to help our financially strapped middle class and the working men and women in this country and their families, who are already suffering considerable pain. As Bill Tucker now reports, interest rate cuts can't make up for rising inflation and the worsening personal debt load that American consumers must bear.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Balanced against the good news that interest rates are falling is the sobering reality of $900 billion in credit card debt and $14 trillion in home mortgage debt. Buried in that debt, Americans are now having to face the fact that the equity and their primary asset, their homes being stripped away. And banks socked with losses of their own and real estate are looking to the middle class for profits.

ROBERT MANNING, ROCHESTER INST. OF TECHNOLOGY: The real problem for the most distressed households in America today is the banks have lost a fortune on their subprime mortgage or fixed equity divisions. They're not making money on repackaging these loans with their underwriting divisions, which means they're squeezing the credit card divisions for every dollar they can get out of them.

TUCKER: Meanwhile, the economy is applying its own squeeze. Inflation in 2007 edged 4.1 percent higher, the highest since 1990. In key categories, price increases outstripped the overall rate. According to the labor department, food costs rose 4.8 percent. The price of health care insurance rose 10.1 percent. Gasoline rose eight percent for the year, but by 30 percent in the last quarter. College tuition, up more than six percent.

And adding to the misery, wages have not kept pace. Rising less than a percent last year, a paycheck just doesn't go as far. Many economists believe cutting interest rates is a welcome action -- ROBERT KUTTNER, AUTHOR, "THE SQUANDERING OF AMERICA": But if you have this long-term problem of insecure employment, rising health costs, rising tuition costs, rising energy costs, people losing the equity in their home, it doesn't matter very much if you cut interest rates. It doesn't fix what's broken.

TUCKER: And rising job insecurity is only making a bad situation worse.

(END VIDEOTAPE)

TUCKER: In over the past decade as factories closed and jobs were shipped overseas, Americans coped with the prospect of having their jobs exported to cheap markets overseas. Now, there is the added uncertainty of what will happen if there is a recession. Will they lose their jobs, possibly their homes? And that concerns economists, Lou, who say, it means Americans are much more likely to be conservative, sharply curtail their spending and possibly exacerbate any potential slowdown, Lou.

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

Well, joining me now from Philadelphia is Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania, one of the country's leading authorities on financial markets. It's good to have you with us, Professor. Here in New York with we, Robert Kuttner, co-editor of "The American Prospect," the author of the book, the important book, "The Squandering of America." Robert, good to have you with us.

ROBERT KUTTNER, CO-EDITOR, "THE AMERICAN PROSPECT": Thank you.

DOBBS: Let's go to one issue first, and that is the three quarters of a point interest rate cut dramatically announced by the Fed. Could there be a clearer statement that these markets are in severe, severe trouble?

KUTTNER: Obviously not. I mean, the Fed doesn't have emergency meetings unless the Fed thinks things are dire.

DOBBS: Professor Siegel?

PROF. JEREMY SIEGEL, UNIVERSITY OF PENNSYLVANIA: Well, absolutely. I mean, the last one was 9/11. This is the biggest decline in interest rates in a quarter century. Not on the U.S. but the world economies are in danger, and Bernanke recognized it.

DOBBS: Bernanke recognized it, but we should also point out Bernanke last May also said that the subprime meltdown would not go much further, certainly would not expand to the economy at large. That turned out to be a rather optimistic and certainly incorrect assessment.

Professor Siegel, this market right now is rolling back and we're watching world markets fall precipitously. But many Americans are not aware that the Chinese market, the Shanghai market, has basically quadrupled in three years. The Bombay, the Mumbai market has tripled in three years. Hong Kong and South Korea have doubled in three years. This has been obscene what we've seen happen with emerging markets. This is a bubble on world equity markets, is it not?

SIEGEL: Well, I would agree with you on China, but there's been remarkable advances in those emerging markets. I don't know if you've been to China and India and seen some of the progress there. I have. And it's quite impressive. I mean, these economies are going from being the poorest on earth to a rising middle class that's actually outstripping the U.S. now.

DOBBS: Robert?

KUTTNER: Well, it's a rising middle class but the average Chinese worker still makes under a buck a day. And this is not exactly what you'd call fair competition. If they were buying more of our products, it wouldn't hurt so much that they were taking some of our jobs because we'd have jobs created to export to them. It's a totally imbalanced situation.

DOBBS: And Ben Bernanke, since we're dealing with the Fed right now, Ben Bernanke, Robert Kuttner said, you know, with this -- whatever the package is, he wants people to spend it on domestically produced goods, as he put it. Where in the heck is an American family going to find domestically produced goods to spend that money on?

KUTTNER: It's really startling. And Greenspan's memoir kind of back into the same ship (ph), I should mention. That he said one of the reasons that inflation has been held down is that all of these overseas jobs that pay workers a pittance have held down American wages, and that's why inflation was so well behaved. So even the big dogs are starting to admit what's really been going on.

DOBBS: And some of us, Robert, you and I can go shoulder to shoulder on this.

KUTTNER: Yes.

DOBBS: We've been talking about and warning about this very issue for years.

KUTTNER: Right.

DOBBS: Jeremy Siegel has not. He has been a cheerleader for this market and has made a lot of money doing so. But the reality is here, Professor, we're in a heck of a mess. We have not been regulating our markets. We have not been regulating the financial institutions that are lending. We have not been investing in public infrastructure. We've not been investing in public education. And we're about to get handed our heads, are we not?

SIEGEL: There are failures, certainly. But, you know, Lou, you have to remember -- you know, still over 80 percent of our spending is on domestic goods. And our net trade deficit is still only five percent of GDP. Now, you could argue we should get that lower. But I mean -- DOBBS: No, no, no, Professor. Our current account deficit right now is right at six percent of GDP.

SIEGEL: Right.

DOBBS: As you know, the Federal Reserve five years ago, the Dallas Federal Reserve did a study showing that we have to -- one of two things will happen when you reach the level of deficit that we've reached in this country. One is, we'll either have to adjust our economic policies in this financial system, or we will suffer a significant market adjustment, which may be what we're undergoing right now.

KUTTNER: You know, Lou, there's all this talk about the stimulus leaking out to buy imports. There's a very good way to prevent that from happening. Our infrastructure in this country is just a disgrace. If you put some public money into rebuilding infrastructure, whether it's schools or roads or rail or energy, developing energy independence, 100 cents on the dollar gets spent domestically.

DOBBS: Right. And I think that's a terrific idea. And the reality is that we have right now a corporate America, a Wall Street. Where are their voices, Professor Siegel? Robert Kuttner? Where are the heads of Bank of America, Citigroup, talking about these markets?

Instead, we've seen corporate America and Wall Street basically subordinate themselves to the U.S. Chamber of Commerce and the business roundtable and in a crisis like this, they hide like children.

KUTTNER: They want more deregulation, you know.

DOBBS: Professor, you get the last word.

SIEGEL: One thing I would say that what's different here is savings and loan, they handed the bill right to the U.S. taxpayer. At least Citigroup, Merrill and all those dumb companies that bought those loans, they're taking the hard knocks, which I think is some measure of justice there.

DOBBS: That's justice for them, but not for the two million people being foreclosed upon. And let's reserve a special place in hell for all of those geniuses on Wall Street who ran amuck with the opportunity that this administration, this Congress, the previous administrations and Congress provided them.

Robert Kuttner, thank you very much.

KUTTNER: Thank you.

DOBBS: Professor Jeremy Siegel, as always, good to have you with us.

Up next, we'll introduce you to a woman behind one of this country's most successful school systems. It's a great story. And later, what are these presidential candidates saying about fixing this economy? We'll take a look at some of the proposals with three of the best political analysts in the nation. Stay with us. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: This nation's public school systems are under fire for failing to educate our students. It could be argued successfully, I believe, that an entire generation of Americans has been failed by our public schools. Last week, we brought you good news about Cincinnati's school system, a school system that is now succeeding where others failed.

Principal Sharon Johnson of Withrow University High School is one of the driving forces behind that school system's remarkable, incredible turnaround, and she joins us tonight from Cincinnati. Great to have you with us.

SHARON JOHNSON, PRINCIPAL, WITHROW UNIVERSITY HIGH SCHOOL: Thank you, Lou.

DOBBS: Let's talk about what you have done. I mean, you've taken a system that less than 10 years ago was an abject failure and turned it into a remarkable success. How did you do it?

JOHNSON: Well, Lou, you know, when thinking about the success of schools and looking around the nation and realized there are great, successful schools, going into a school like Withrow that was once a failing school, the dreams that I had were that it could become an excellent school.

Now, what is excellent? Excellent is having people on board who have the same philosophy as believing that all children can succeed in spite of their economic background. We have a great team of teachers who came in the door, believing that concept.

DOBBS: Let me ask you this, Sharon. The idea, as I talked to educational experts around the country, one of the suggestions they make, one of the really screaming demands they want to see implemented, is that school classroom sizes be reduced significantly. Does that play an important part in what you've managed to do there?

JOHNSON: Lou, in urban education, having smaller class sizes is always helpful. But the key to a great education is having a highly qualified teacher who believes that all children can succeed.

DOBBS: Well, that -- you know, that makes all the sense in the world. And let me ask you, you know, I can't tell you how many people have talked to me about you and how you're a no nonsense, straight ahead person, idealistic as you can be, but if I can put it this way, hell bent on succeeding with those young minds and spirits. How do you do it?

DOBBS: Well, Lou, I believe that it begins with not accepting excuses. I believe that it takes teachers who understand, if a child says to you, I can't, and we will say, you can. If a child says to a teacher, I won't, and we say that you will. We believe that the teachers in our school at Withrow University High School believe that it doesn't matter when a child says they can't do something. We feel that it's the responsibility of the teacher and the whole staff to help make this child smart.

We believe in accountability at Withrow University High School, accountability for teachers, accountability for administration, accountability for the entire staff.

DOBBS: You know what -- you know what everybody is saying right now, Sharon? Where in the world are the teachers' unions, and how did they let you do that?

JOHNSON: Well, the teachers' union agreed for us to have -- to increase the number of schools to be achieving. It was wonderful to have the union to work with our district to say, we need to create better schools for our children.

DOBBS: Any reason that that can't be replicated all across the country?

JOHNSON: Oh, absolutely. This can be replicated across the country. All you need is collaboration, cooperation and hard work, commitment and dedication in turning this thing around.

DOBBS: Principal Sharon Johnson, it is a delight to have you here. I hope you will come back, and we can have some more discussions about not only your own success, but importantly about spreading that success around the country, giving some folks who really want to do the right thing by our young people some sense of how to get -- to further advance that educational opportunity.

JOHNSON: I would love to join you, Lou. And I appreciate you.

DOBBS: Thank you. And my congratulations to you and Cincinnati and your school system for getting it done.

JOHNSON: Thank you very much.

DOBBS: Up next here, all the presidential candidates planning to jump start this economy. We'll tell you what they're saying whether their plans can work. What in the world are the elected officials we have doing? I'll be joined by three of the best political analysts here, next. Stay with us. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: The economy, of course, isn't the only issue that voters are concerned about this election year. We're all deeply concerned about border security, illegal immigration, and Senator Jeff Sessions, one of the country's leading critics of illegal immigration and the failure to secure our borders and ports, challenged all of the presidential candidates of both parties to commit to fixing this nation's broken immigration system. Senator Sessions joins me now from Washington, D.C. Senator, good to have you with us.

SEN. JEFF SESSIONS (R), ALABAMA: Thank you, Lou, good to be back.

DOBBS: Senator, you're asking each of these candidates, Republicans and Democrats to say what?

SESSIONS: Well, to explain in more detail what they really intend to do. You know, we've had some general words from them that they want to do something to improve the illegality in our immigration system, but a committed president, I'm absolutely convinced, can completely reform immigration. I don't know why we couldn't have an 80 percent reduction in illegal immigration in the next three or four years, easily done if we have a committed president.

So they're not talking about it. I've been disappointed that there's been a lack of real discussion about the specific steps that need to be taken that will work to improve the problem we've got.

DOBBS: Senator, I have to smile as you speak because I happen, first of all, to think you're exactly right. But I keep thinking of the open borders amnesty agenda, the advocates, the social ethnocentric interests, corporate America, who are trying to push through the mainstream media the idea that the issue of illegal immigration is no longer of concern to Americans or either party. It's no longer --border security is no longer a priority, as if those polls were all wrong.

And yet, these candidates are so afraid of this issue on the Democratic side, they won't even take it up. Both Senator Obama and Senator Clinton have basically said to me and said of me, that you know, I'm completely wrong on this issue that we've got to have comprehensive immigration reform. They're not going to address this issue responsibly, and we know that.

SESSIONS: Well, I think we've got to push these candidates now because pretty soon, maybe in just a few weeks, it will be down to two. And we need to have at least some of those, one of those candidates and not both committed to doing some of the things, all of the things really necessary to be successful. If we don't, we're going to have a difficult time because without the support and leadership from the president, as we've seen from the last 30 years, nothing is going to happen.

DOBBS: Let me ask you, former Governor Mitt Romney, Senator John McCain, Rudy Giuliani, of those, who do you think on the Republican side is most committed to border security, port security and stopping illegal immigration?

SESSIONS: Well, just on their web sites, Senator Romney has the most detail. Governor Romney has the most detail and has some ideas that I think are effective. But really, I would like them to discuss these 15 points. Each of which I believe are critical to establishing a good system and let's see where we're heading from there.

DOBBS: Absolutely.

SESSIONS: Have a discussion. But don't you think before these guys ask to be president of the United States, we're entitled to at least know before we vote for them or against them how they stand on this issue?

DOBBS: Senator, I couldn't agree with you more. Frankly, all of them scare me to death on the issue because I think some folks -- Senator McCain says he's gotten the message, so I'm going to take the man and his word. But as reporting on it, and you participating in it there in Washington, D.C., the process on illegal immigration reform that we witnessed over the last three years in Washington, has been breathtaking in its deceit, its duplicity, its misrepresentation. It's breathtaking.

SESSIONS: It's really been that way for about 30 years. People have promised and promised with no real intention to follow through. That's why commitments to specific actions that can work need to be obtained from our candidates.

DOBBS: Well, I think it's a wonderful idea. We're going to direct folks to your Web site. We're going to put up your 15 points on ours, and we appreciate you doing it. Thank you very much, Senator Jeff Sessions, for being with us.

SESSIONS: Thank you.

DOBBS: I'll be right back with three of the nation's best political analysts. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Joining me now, three of the best and my favorite political analysts here in New York, Errol Louis, columnist for "New York Daily News", syndicated columnist Miguel Perez, Democratic Strategist Hank Sheinkopf. Thanks for being here, gentlemen.

Let me start, Miguel, with you. Is there sufficient maturity in this country for these candidates, for our elected officials, our president, the leaders, the Democratic leaders and the House and Senate to actually stand up before the American people and say, you know, this is very serious and it's very likely we're in recession? And let's all be adults and not sit here and be squeamish about the quote unquote "r" word, recession. It's cyclical. It's part of the nature of economies and certainly this one. What do you think, Miguel?

MIGUEL PEREZ, CNN CONTRIBUTOR: I agree. But what they should be saying is that look, you know, we have these plans that are, you know, two years away. What we should be dealing with is the urgency of the problem. And, you know, some of these guys are still in congress the last time I looked. A lot of these candidates are senators. What they should be encouraging is for the Congress to finally do something for the American people.

We have a stagnant legislature, and we have a stagnant executive branch and they really need to -- this is their last chance. This is Bush's last chance to do something for the American people.

DOBBS: I think this chance --

PEREZ: And so is this congress.

DOBBS: Yes.

PEREZ: If they really don't do something about this emergency that we have right now, I don't know when they will.

HANK SHEINKOPF, CNN CONTRIBUTOR: Bush is history. This emergency has been going on for some time. No one's going to like the truth, but it's time to tell the truth. And the truth will make the special interests that provide the money that runs the politics in this country very uncomfortable. So it will take a tremendous amount of courage, Lou, for someone to stand up and tell the truth.

DOBBS: Hank, are you suggesting that both political parties, the Democrats and Republicans and their candidates, are dominated by corporate America and special interests?

SHEINKOPF: Dwight Eisenhower was not the most exciting person in the history of the world, but he said something on the way out the door. He said beware of the military industrial complex. Beware of the financial industrial complex, which is what it has become. And, frankly, if you put in those words, he was exactly right more than 40 years ago, and he's right today.

DOBBS: The Republicans and the Democrats in the two previous -- in this administration and the previous, the Congresses, Republican and Democrat, over the course of the past almost two decades, handed over the keys to these markets, to the financial institutions, and pushed back against regulation, opened it up and they have literally raped and pillaged.

(CROSSTALK)

Hold down literally, but it figures --

ERROL LOUIS, CNN CONTRIBUTOR: I mean, it's -- well -- look, it's startling. This Bush administration stood in the way when something like 49 of the 50 attorneys general tried to get a hold legislatively and through lawsuits over local financial institutions to do something about predatory lending, to do something about payday lending. They very specifically out of Washington told the banking institutions not to cooperate, told them to switch to federal charters and helped create this mess in a really profound kind of a way.

DOBBS: Let's assume the worst here. That this economic, this financial crisis is as bad as is feared on both sides of the Atlantic and around the pacific rim and many of the markets. Any one of these candidates give you great confidence in terms of economic leadership, understanding of international markets, the capacity to come up with a vision to resolve what could be some very, some horrific days ahead?

LOUIS: The interesting thing and this is why I'm in the business. I think you, too, in a way, is that you don't know who's going to rise to the occasion. A year from now when the new president is sworn in, whoever he or she may be, they're going to have challenges that we have scarcely imagined at this point, I think, when it comes to management of the economy. And the question for them will be, for their career, for their administration, for their lives really is, will they rise to the occasion? Will they develop the courage and the creativity and the skills and the alliances that it will take to put together a system that is unraveling before our very eyes.

DOBBS: Hank?

SHEINKOPF: I'm an optimist sometimes and a pessimist other times. I can tell you I'm waiting for people to come up with a rhetoric that matters, a rhetoric that will tell people, that will tell the American public to believe in something very strongly again like recovery, and to be able to put this country together in a way that makes some sense. I haven't heard it yet.

DOBBS: Now, the leadership in this country right now, it's peculiar. As I was talking about Professor Siegel and Robert Kuttner, two very distinguished economic observers, the idea that we have not had direct discussion from our -- from Wall Street, from corporate America, for the leaders is troubling. And it's one of the changes in our society, in our economy that is, I think, extremely unfortunate, particularly faced with crisis as we are today.

Miguel Perez, thank you very much, sir. As always, good to have you here. Errol Louis, thank you, sir. Appreciate it. Hank Sheinkopf, thank you, sir.

Thank you for being with us. We'll see you later. For all of us, thank you for watching. Goodbye from New York.

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This story ran on CNN on January 25, 2008.