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CNN LIVE EVENT/SPECIAL

Michael Chertoff Appears Before Senate Committee Looking Into Katrina Failures; President Bush Speaks at Wendy's Headquarters in Ohio

Aired February 15, 2006 - 11:00   ET

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


DARYN KAGAN, CNN ANCHOR: Let's take a look at what's happening right "Now in the News."
Michael Chertoff is on the hot seat on Capitol Hill. The Homeland Security secretary testifies this hour before a Senate committee looking into the government's response to Hurricane Katrina. A new House report out today is already blasting the Bush administration, as well as local and state officials, on the response to the storm.

A live report is straight ahead.

The lawyer who was accidentally shot by Vice President Dick Cheney is expected to stay in a Texas hospital for about a week. Harry Whittington is now recovering from what doctors describe as a minor heart attack that was triggered by a birdshot pellet lodged in or near his heart. The vice president has not commented publicly about the hunting accident.

More on that story coming up.

Plus, live coverage of a news conference updating Whittington's condition is scheduled for a couple hours from now. You'll see that live here on CNN.

In Alexandria, Virginia, confessed al Qaeda conspirator Zacarias Moussaoui is scheduled back in a federal courtroom during jury selection for his sentencing trial. The judge's decision comes one day after she barred Moussaoui for his outburst. The jury will decide whether Moussaoui will be executed or receive a life sentence.

From Britain, word that murder suspect Neil Entwistle is on his way back to the United States. Entwistle is British. He is accused of killing his wife and daughter in Massachusetts. He was turned over to U.S. marshals earlier today at London's Gatwick airport.

President Bush is talking health care today as he takes a quick trip away from Washington. Mr. Bush will push his plan to expand health savings accounts in a speech in Dublin, Ohio, about an hour from now. The plan is drawing heavy criticism from Democrats.

We'll have a preview and a live report just ahead.

Good morning. And welcome to the second hour of CNN LIVE TODAY. Let's check some of the time around the world. Just after 11:00 in Dublin, Ohio; just after 10:00 in New Orleans.

From CNN Center in Atlanta, I'm Daryn Kagan.

First up this hour, failure. It is a word that comes up a lot in a House committee's review of the government's response to Katrina.

Other descriptive words are used as well, words like "dismal," "dysfunctional," "ill-prepared" and "overwhelmed." The House report was released this morning, and it spreads blame from President Bush all the way down to local officials along the Gulf Coast. But the review from Michael Chertoff is especially scathing.

The Homeland Security secretary appears before Katrina investigators in the Senate this hour. You will see portions of that live here on CNN.

First, Homeland Security Correspondent Jeanne Meserve sets the scene.

Jeanne, good morning.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Good morning, Daryn.

The juxtaposition is interesting. The same day Chertoff goes before investigators, the House committee releases its scorching report on the Katrina response.

(BEGIN VIDEO CLIP)

REP. CHRISTOPHER SHAYS (R), CONNECTICUT: As we did our investigation, we realized that the White House was basically in a fog, the Department of Homeland Security was totally disengaged, particularly the secretary, Mr. Chertoff, and with FEMA and the director of FEMA, Mr. Brown, he was negligent.

(END VIDEO CLIP)

MESERVE: The House report obtained by CNN finds leader failed to lead throughout government. For example, "Delays in the response effort might have been avoided if President Bush had gotten involved earlier. Homeland Security Secretary Michael Chertoff should have shifted the federal posture from reactive to proactive mode to save lives and speed relief."

"Department of Defense coordination with DHS was not effective. Despite warnings 56 hours before landfall, Louisiana governor Kathleen Blanco and New Orleans mayor Ray Nagin delayed mandatory evacuation until 19 hours before landfall."

"New Orleans police were ill-prepared and completely overwhelmed and lost almost all effectiveness."

The bottom line, the committee says, better preparedness and response could have saved lives.

One focus of the Senate committee before which Chertoff appears today is a timeline. Michael Brown, the former head of FEMA, told the committee last week that Chertoff's assertion that he didn't know about extensive flooding in New Orleans until a day after the storm was "just baloney."

You can bet that the senators will want to know about that and much, much more -- Daryn.

KAGAN: And what's interesting, because so much of this has been so political, Jeanne. But this House panel, this report, it's made up of all Republicans because the Democrats didn't want to participate.

MESERVE: Yes. The Democrats said they thought it was going to be a whitewash. It clearly hasn't been there.

A couple of Democrats did sit in on the -- on the -- on the sessions with this committee. They did issue a minority report. It is even harsher and it, amongst other things, calls for Michael Chertoff to be replaced -- Daryn.

KAGAN: Jeanne Meserve live in Washington, D.C.

Thank you.

We are awaiting Homeland Security Secretary Michael Chertoff's testimony at the hearing on Hurricane Katrina, and we'll bring that live to you when it happens.

And continuing live coverage of the hearing is available on CNN Pipeline. It's a new service available from CNN.com.

At five minutes past the hour, we move on to these new -- Abu Ghraib prison scandal. It has been revisited.

Australian television has aired pictures that until now haven't been viewed in public. By all accounts, many of the images appear even more graphic than the ones that we have seen previously.

For more on that, let's go to the Pentagon and correspondent Barbara Starr.

Barbara, hello.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Good morning to you, Daryn.

Well, military officials now confirming that these images that appeared on Australian television, indeed, they can confirm that they are part of the official log of photographs of alleged abuse at Abu Ghraib prison taken back, by all accounts, in the 2003-2004 time frame.

We're going to show you a couple of the pictures. They are disturbing, but they underscore why the photos were considered to be abuse.

U.S. military personnel are only allowed to take prison photos, if you will, for documentation purposes. These photos that we are showing, of course, are photos that appear to have no reason, of course, to be taken.

Now, the Pentagon certainly is not happy that these photos have now, all this time later, of course, still come to light. There is a pending lawsuit in the United States by some public interest groups that wanted all of the Abu Ghraib photos released.

There are hundreds that have not been seen by the public. But the Pentagon had tried to stop any publication, at least in the United States, saying that any publication could incite violence in the Arab world and, therefore, put U.S. troops at risk. That lawsuit still pending, but now many of these photos emerging in the Australian news media -- Daryn.

KAGAN: Barbara Starr live at the Pentagon.

Barbara, thank you.

Right now I want to bring in former Army interrogator Mike Ritz, who is now in Boston.

Mike, hello.

MIKE RITZ, FMR. ARMY INTERROGATOR: Hi.

KAGAN: So you have seen these photos, this new round of photos?

RITZ: Yes, I saw them this morning, and...

KAGAN: And what do they -- I'm sorry. We have a little delay. But in terms of -- besides the fact that they should never have been taken, that they shouldn't be photographing prisoners, where do they cross the line for you?

RITZ: Well, all of the new pictures, of course, are crossing the line. I mean, what we're seeing now is -- I don't think it's really a surprise.

If you look at the pictures that we had already previously seen, you could imagine what happened when the pictures weren't being shot, or the pictures that weren't shown to us. I mean, what we're seeing now, though, are a lot more graphic representations of what went down at Abu Ghraib. And, you know, it's despicable, it horrendous. It's the same act; we should keep that in mind.

And hopefully the Arab world will understand that this is the same exact circumstances that we had already seen. This isn't something new.

KAGAN: And from having worked in that type of environment, where do you think the system broke down? RITZ: There was clearly no system of checks and balances whatsoever. There was no sort of supervision going on. And, you know, oftentimes the Abu Ghraib situation gets misconstrued as if it were part of the interrogation process, but that's never been proven to be the case.

This has actually been a situation where you have a lot of guards within a prison that started mishandling prisoners that started to lose their sensitivity, and that's a very slippery slope. I mean, we can look at the Stanford prison experiments, for example, which I know have been referred to time and time again of the ability and sort of the human nature for people to become very sadistic when they're in such a powerful, authoritarian position.

KAGAN: So what is the proper role of interrogation?

RITZ: The proper role of interrogation is to extract the most pertinent information in the least amount of time. But never, never, never is part of interrogation to abuse those people that we need to get this information from.

It's not the effective measure. And certainly, it has huge repercussions down the line, which we've been seeing.

KAGAN: Mike Ritz, thank you for your input this morning.

RITZ: Thanks for having me on.

KAGAN: Some background -- yes, absolutely.

Some background for you now. Nine U.S. soldiers have been punished for their roles in the Abu Ghraib abuse scandal. Eight went to prison.

Perhaps the most recognizable face from the scandal is former private Lynndie England. She is currently serving a three-year sentence and received a dishonorable discharge.

The man considered the Abu Ghraib ring leader, former corporal Charles Graner, is serving 10 years. That is the longest sentence. Graner is said to be the father of England's 16-month-old baby Carter.

Senators are questioning Secretary of State Condoleezza Rice about the Iraq, Iran and the Bush administration's foreign policy as we look at live pictures from Capitol Hill. Rice is testifying before the Senate Foreign Relations Committee. She says Iran is in open defiance of the international community by resuming uranium enrichment, but she declined to detail what sanctions the U.S. is pursuing.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: Well, Senator, we are -- we have heavily sanctioned Iran, obviously, after 1979, but the -- there are still some measures that we might even be able to take on our own, and we're looking at those. Obviously, anything that we can do multilaterally will be much more effective. And I think now with the Security Council resolution -- or Security Council venue for Iran, we will be able to begin those discussions.

As I said to Senator Lugar, it is not easy. There is not -- there is not common view on when or how sanctions ought to be...

(END VIDEO CLIP)

KAGAN: Ought to be taken was going to be her final words there. Secretary Rice says the Bush administration is requesting $75 million to build democracy in Iran. She says the money would support Iranians seeking freedom under what she calls a radical regime.

It is a secret military unit that claims to have uncovered information about the September 11 hijackers more than a year before the attacks. Later today, a House committee holds a hearing on the unit that is code named Able Danger.

Representative Curt Weldon says the unit identified terrorist ringleader Mohammed Atta 13 different times. Weldon has been pushing Congress to investigate the workings of Able Danger since August.

(BEGIN VIDEO CLIP)

REP. CURT WELDON (R), PENNSYLVANIA: No one's happy with this hearing. I've made a lot of enemies, I'm sure, in the White House, in the agency network. And I know the Clinton people are not happy. But in the end, I'm here to do a job. And I'm here with my colleagues who support this effort on both sides of the aisle.

(END VIDEO CLIP)

KAGAN: Former members of the September 11 Commission have downplayed the findings and the claims that are made by Able Danger.

A list of international terror suspects and people with suspected terror ties has grown to 325,000 names. That's according to today's "Washington Post." The paper says much of the information comes from the National Security Agency, but officials won't say how many names are linked to the NSA's controversial wiretap program. Civil liberties groups are concerned many innocent people's names may also be on that list.

We'll go back to the hearings on the Hill, where Michael Chertoff is scheduled to be grilled this hour. Is the Homeland Security head in deep water over the Katrina catastrophe?

We'll go live to Ohio, where the president is set to talk about one of the biggest items on his domestic agenda: health care.

And that's new video of President Bush just arriving in Dublin, Ohio. He is visiting a fast-food chain's headquarters for the speech.

Plus, a trip to Torino for a shot at gold. From the gridiron to the slopes, this athlete has come along way and has a little bit further to go. (COMMERCIAL BREAK)

(STOCK MARKET REPORT)

(COMMERCIAL BREAK)

KAGAN: We're standing by. The Homeland Security secretary will be testifying before a panel investigating the government's slow response to Hurricane Katrina. Michael Chertoff gets grilled by members of a Senate committee this hour.

Joining us to talk about Katrina and the investigation and Chertoff's testimony and this House report that's just out this morning, our security analyst, Clark Kent Ervin. He is a former inspector general for the Department of Homeland Security.

Clark, good morning.

CLARK KENT ERVIN, FMR. INSPECTOR GEN. FOR DEPT. OF HOMELAND SECURITY: Good morning, Daryn.

KAGAN: So you have seen the report?

ERVIN: I have.

KAGAN: Do you think "scathing" is a fair word?

Scathing may be an understatement. It is a scorching report. And I think, frankly, that the House Republicans are to be commended.

This was not the political whitewash that the Democrats feared. They took the department and the secretary on for what was, I think, as they said, an inexcusable failure of leadership here.

KAGAN: A couple of the highlights from the report in terms of Michael Chertoff. We're about to hear from him in front of this Senate committee. Two days late, they said, in implementing the national response plan, and bad choice in putting Michael Brown, the then head of FEMA, in charge of that plan because he didn't even have training to run that kind of a program.

ERVIN: That's exactly right. You know, one of the things the secretary said, quite rightly so, when he became the secretary was that we need to concentrate our limited resources on only the things that are likeliest to happen, and those things, if they were to happen, would do the most damage.

That makes perfect sense. It's just that Katrina fit that template perfectly. And yet, not only was it predicted -- predictable, but it was predict and, yet, the department was unprepared for it.

KAGAN: And yet, went ahead. Now, when Michael Brown testified in front of the Senate committee earlier -- actually, last week, he said that natural disasters within the Department of Homeland Security are actually -- he used the word "stepchild." They don't get the same respect as a terrorist attack would get.

ERVIN: Right. That is not the impression that I got, I must say, when I was in the Department of Homeland Security.

I think the secretary is right to say that, really, there's very little difference between how you would respond to a terrorist attack or a catastrophic -- not a garden variety, but a catastrophic natural disaster. In both instances, you'd need essentially the same things in terms of response: an evacuation plan, shelters, prepositioned food, supplies. You would need a clear chain of command, inoperable communications.

But the problem is that since we weren't prepared for a predictable natural disaster, it calls into question, obviously, whether we would be prepared when we wouldn't have any warning at all in the event of a terrorist attack.

KAGAN: And getting back to the Monday morning quarterbacking of Katrina, there's been no shortage of finger pointing and blaming, and this report goes all the way down to the parish level in pointing fingers. But also, I think one of the most concerning things says -- when it goes back and talks to these government officials, it says they find a resistance to change the game plan that they still have.

So, if we're going through this again this year, the same thing would happen.

ERVIN: Well, that's exactly right. And of course the hurricane season is only months away, June 1. So there's very, very little time to put in place the things that should be put in place.

You know, the secretary's remarks yesterday were right on. We need to have a logistic system so that we can keep track of supplies. We need to have a cadre of experienced professionals who can be deployed in the event of these disasters.

It makes sense. But this should have been in place long ago, and long before Katrina struck. And we only have just a few months to put it in place before potentially another disaster of like dimension strikes.

KAGAN: Also, under the miscellaneous, when it was pointing blame, it pointed blame at celebrities like Oprah and Sean Penn, saying they didn't help when they showed up at the time that they did because it distracted from what needed to be done.

ERVIN: Right. Well, I'm sure that their coming was motivated by the best of intentions, but I think the larger point here is that the House Republicans were right to say that there's a lot of blame to go around. It wasn't just a federal response that was disastrous. The response at the state and local level was disastrous, too.

But at the end of the day, when you have a catastrophe of this dimension, that's why we have a federal government. It necessarily has more resources, and it should have more experience and expertise in these kinds of circumstances. We depend on the federal government to respond in times like this.

So, I'm hopeful that now that we've had two wakeup calls, 9/11 and Hurricane Katrina, we'll move at warp speed to do what needs to be done.

KAGAN: Hopefully it won't take the third one to be the charm there.

ERVIN: Exactly.

KAGAN: Clark Kent Ervin.

Clark, good to have your expertise, as always.

ERVIN: Thank you, Daryn.

KAGAN: Thank you.

Once again, that report coming from a House panel. What we're waiting for is a Senate committee. And we're going to be listening to Michael Chertoff as he testifies. And that should happen any minute.

Coming up, the secrets surrounding the vice president. The silence after his weekend hunting accident is only the beginning. We're going to look at other chapters in Vice President Dick Cheney's quiet career.

(COMMERCIAL BREAK)

KAGAN: We're getting word from the White House about Vice President Dick Cheney. There has been much criticism of how the flow of information has happened and a lack of a public response from Vice President Dick Cheney since the hunting accident over the weekend. Well, now we're getting word that vice president will be speaking later today and giving an interview.

More details on that later in a little bit.

Right now, let's check in on weather. Jacqui Jeras has that for us.

Hi, Jacqui.

JACQUI JERAS, CNN METEOROLOGIST: Hey, Daryn.

(WEATHER REPORT)

KAGAN: All right, Jacqui. Thank you very much.

Want to look at live pictures now from Capitol Hill. Homeland Security Secretary Michael Chertoff just entering the room. He will be testifying about his experience and his performance in the wake of Hurricane Katrina.

You see him talking with Senator Lieberman and Senator Susan Collins of Maine. When he begins to make his opening statement, we will go live there.

Meanwhile, you hear it ever year, the Olympics are a once-in-a- lifetime experience for some athletes to live out their dream. So imagine how exciting is for this young Olympian. A skier on the slopes, also a college football standout. He has NFL dreams.

How does he handle his duel dreams? Jeremy Bloom's story is coming up.

(COMMERCIAL BREAK)

KAGAN: And we go live back now to Capitol Hill. There is Homeland Security Secretary Michael Chertoff. This is the Homeland Security and Governmental Affairs Committee in the Senate.

Let's go ahead and listen in.

(JOINED IN PROGRESS)

U.S. SENATOR SUSAN M. COLLINS (R-ME), CHAIRMAN: ... one of the fundamental responsibilities of the Department of Homeland Security is, quote, "preparing for natural disasters and terrorist attacks through planning, technology, and coordinated efforts. In the event of a natural or man-made disaster, DHS will be the first federal department to utilize a full range of state, local and private partnerships to alleviate the effects of a potential disaster," end quote.

Clearly that mission was not accomplished. The federal department that was supposed to lead, direct and coordinate the federal response to Katrina was time and again late, uncertain and ineffective.

A central purpose of this hearing is to learn why in a crisis that called for decisive and speedy action, DHS was plagued by indecision and delay.

If our government failed so utterly in preparing for and responding to a disaster that had been long predicted and was imminent for days, we must wonder how much more profound the failure would be if a disaster were to take us by complete surprise, such as a terrorist attack.

The delays in DHS's response are both alarming and unacceptable. The chasm that Katrina exposed between DHS and FEMA, one of its most important components, presented a significant impediment to a coordinated, swift federal response.

Concerns about this disconnect were expressed long before Katrina, and our investigation has revealed disturbing conflicts about roles, resources and responsibilities.

But the problem within DHS goes beyond its relationship with FEMA. The department's overall lack of preparedness for this catastrophe prevented both decisive action before the storm hit and an effective response in its immediate aftermath. After landfall, the department far too often appeared to be frozen with indecision and nearly paralyzed by ineffective communications. Key decisions were either delayed or based on faulty information.

As a result, the suffering of Katrina's victims was worsened and prolonged.

This lack of preparedness is evident throughout the response to Katrina. On August 30th, the day after Katrina made landfall, Secretary Chertoff named then FEMA Director Michael Brown as the principal federal official for the response effort. He did so despite Mr. Brown's hostility to the very concept of a principal federal official and his disdain for the national response plan.

In addition to questioning the appointment of Mr. Brown, I wonder why a PFO was not designated before Katrina made landfall when it was already evident that we were facing a looming disaster that would require a direct link between federal operations on the ground and DHS headquarters.

The effect of this delay was much like having the general show up after the battle had already begun.

From that evident lack of readiness come a great many issues that we will explore today. Among them are, why was situational awareness at DHS so severely lacking throughout the Katrina response?

While people throughout the nation merely had to turn on their television sets to learn of the levee failures and the dire need for food and water at the Superdome and the convention center, DHS was consistently behind the curve.

The delays in response to these crises were the direct result of poor communications.

Why weren't the tremendous resources of the Department of Defense deployed sooner? The delay in bringing these assets to bear not only prolonged the suffering of the victims, but also made the work of first responders even more difficult and more dangerous.

The failure to resolve obvious issues beforehand led to numerous other problems, from the poor information flow between DHS and the White House, to the difficulties DHS encountered in assigning missions to other federal agencies to the unnecessary disputes with overwhelmed state and local officials.

The examples are legion. The failure to promptly order the buses Michael Brown promised. The failure to deliver essential commodities for victims at the convention center until two days after Mr. Brown apparently became aware of their plight. The failure to quickly process requests for vital commodities throughout Louisiana and Mississippi and to track their delivery. The failure to field more search and rescue and emergency medical teams at the onset of the flooding. The failure to respond rapidly to a devastated telecommunications system. The failure to appoint a single senior law enforcement officer as soon as the need became apparent. The failure to invoke the catastrophic incident annex to the National Response Plan, which would have permitted the department to be more proactive.

The list of critical tasks done either late or not at all is staggering.

And perhaps most crucial to understanding the failures of Katrina is the fundamental question of whether FEMA had adequate leadership and resources to respond to a disaster of this magnitude.

As I said at our hearing last Friday, FEMA's response to Katrina has to be judged a failure, and as a consequence, the response of DHS must be judged a failure as well, despite the outstanding performance of the Coast Guard and of individual DHS employees.

As the third anniversary of the Department of Homeland Security approaches, it is past time for the department to carry out its vital mission and meet its responsibilities to the American people.

Senator Lieberman?

U.S. SENATOR JOSEPH I. LIEBERMAN (D-CT), RANKING MEMBER: Thank you, Madam Chairman.

Good morning, Mr. Secretary.

The many hearings that we have held, the witnesses that we have interviewed, and the documents that we have reviewed have brought us to today's important hearing with our sole witness, the secretary of the Department of Homeland Security, Michael Chertoff.

This committee's Katrina investigation is moving now toward conclusion, reckoning and, I hope, reform.

According to the law, it is the responsibility of the secretary of homeland security to lead the government's preparations for and response to disaster, natural or terrorist. The secretary is the national official most directly responsible for protecting the safety of the American people here at home in times of danger.

That is what the law creating the Department of Homeland Security says, what Homeland Security Presidential Directive number 5 mandates, and what the National Response Plan requires.

And that is why today it is our responsibility to ask Secretary Chertoff some tough, direct and critical questions based on the jarring lack of preparation for Katrina that our investigation has found.

Among the most important of these questions are: Mr. Secretary, why did you do so little in the months after you became secretary to make sure that the agencies of our government, particularly your own, were ready to carry out their responsibilities to protect the American people under the National Response Plan and President Bush's Homeland Security Directive Number 5?

How could you have left us with so many of those agencies so unprepared that when Katrina struck, too many of them ran around like Keystone Kops, uncertain about what they were supposed to do or unable to do it?

Why in the days immediately before Katrina made landfall, as the National Hurricane Service and agencies within your own department warned over and over that this was the long-feared hurricane that would break the levees and drown the city of New Orleans, did you not mobilize more of the resources of the federal government to protect this great American city and its people?

With all the information coming into your department's operations center on the day that Katrina struck New Orleans that the city was flooding and people were trapped or drowning, how could you, as secretary of homeland security, go to bed that night not knowing what was happening in New Orleans and get up the next morning and proceed not to New Orleans to oversee the response, but to Atlanta for a conference?

Respectfully, those are some of the hard and perplexing questions that have emerged from this committee's investigation, that you, Mr. Secretary, and we have a responsibility to answer so that the next time disaster strikes, as it surely will, the federal government is totally ready to protect our country and our people.

Thank you.

COLLINS: Thank you, Senator Lieberman.

Our sole witness today is the secretary of homeland security, Michael Chertoff. He was confirmed unanimously by the United States Senate exactly one year ago. I thank him for appearing here today.

Secretary Chertoff, we are swearing in all witnesses for this investigation, so I would ask that you stand.

Do you swear that the testimony you are about to give is the truth, the whole truth and nothing but the truth, so help you, God?

MICHAEL CHERTOFF, U.S. SECRETARY OF HOMELAND SECURITY: I do.

COLLINS: Thank you.

Please proceed with your statement.

CHERTOFF: Thank you, Chairman Collins.

And thank you, Senator Lieberman.

I ask before I give a shortened version of what I submitted for the record that the full statement I prepared be accepted for the record.

COLLINS: Without objection. CHERTOFF: I appreciate the opportunity to be here. I've followed the hearings to a reasonable degree of detail and am very interested in the perspective this committee on one of the most difficult and traumatic experiences of my life, which was the process of anticipating and managing and dealing with the consequences of Katrina, consequences which still continue to this day.

You can't escape the fact when you talk about Katrina that this was a storm of unprecedented magnitude. Not because it was a surprise, because I don't think it was a surprise that a storm like this could happen. But because in terms of prior experience, at least as far as I know, nobody in living memory recalls a set of challenges as difficult as those presented by this hurricane.

And without dwelling on it, just a few things that bear keeping in mind: 90,000 square miles were impacted. That's an area larger than Great Britain and three and a half times the area inundated by the great Mississippi flood of 1927.

FEMA estimates that 300,000 homes were destroyed, six times as many as the Midwest flood of 1933 and 11 times as many as Hurricane Andrew. One hundred and eighteen million cubic yards of debris was produced, more than double the amount produced by four Florida hurricanes of last year -- or two years ago and six times what was produced by Andrew.

So this was an unprecedented disaster. While I'm here, I suspect, mainly to talk about things that failed, I do think we have to acknowledge things that succeeded. The United States Coast Guard rescued 33,000 people, six times the number rescued nationwide in all of 2004. FEMA rescued more than 6,500 and deployed all 28 urban search and rescue teams for the first time. Forty thousand rescued by two agencies, which is seven times the number of people rescued in the four hurricanes in Florida in 2004.

In the first six days, the federal government distributed 28 million pounds of ice, 8.5 million meals, 4 million gallons of water, which exceeds the combined total for the entire rescue operation in Hurricane Andrew.

Now, as you pointed out, Chairman Collins, I am responsible for the Department of Homeland Security. I'm accountable and accept responsibility for the performance of the entire department, the bad and the good. I also have the responsibility to fix what's wrong.

If I can digress and step out of my official role for a minute, I can tell you on a personal basis, probably the worst element of this catastrophe personally is not criticism I've received or criticism the department has received by committees and commentators, but the vision of people who did have their suffering unnecessarily prolonged because this department did not perform as well as the vision of its performance suggested it should have been able to do.

I say that without suggesting I was naive about the challenges I assumed when I was confirmed a year ago. In the six months that I was in office before Katrina hit, I knew and I said to this committee there were many, many things to be done.

But I do want to talk about a couple of general observations before I answer the specific questions about what happened in Katrina and about what we want to do going forward.

First of all, I have to say that the idea that this department and this administration and the president were somehow detached from Katrina is simply not correct, in my view and in my recollection of what happened.

We were acutely aware of Katrina and the risk it posed.

We followed this hurricane from the time it started to meander up toward the coast of Florida, as it crossed over the southern tip of Florida and got into the Gulf.

We knew, and certainly FEMA most of all -- because if there's anything that FEMA is expert in, it is hurricanes -- knew there was at least a potential, as the week before hurricane landfall, came that this would hit New Orleans with potentially catastrophic consequences.

On the weekend before Katrina made landfall, that's the 27th and 28th of August, the president took an unprecedented step, something that's only been done, to my knowledge, once before, which is to declare an emergency for Louisiana and for Mississippi in advance of hurricane landfall.

And I want to emphasize that that is an extraordinary event, because the Stafford Act, which is the federal law which authorizes the federal government to come in to act at time of disaster, that is what I would say is the kind of ultimate tool, the ultimate source of authority for the federal government, and for the second time in memory the president took the step of invoking it before a hurricane.

This also, by the way, according to the literal text of the National Response Plan, automatically designated this and created this as an incident of national significance.

So on the weekend before hurricane landfall, as I recollect it -- and I'm going to try very hard to separate what I know now from what I knew then, because I certainly know a lot more now than I knew back then -- but on that weekend, I had the assurance that we had opened the legal and strategic floodgates to allow as much resource and as many assets to be pushed into the theater of engagement as possible.

There was a second major question I confronted in that weekend: Were our incident commanders exercising their authority properly? Were they using the tools? Were they adequately considering the things they had to consider as the operational commanders?

And I want to make it clear that although Michael Brown has got a lot of attention, Michael Brown did not function alone at FEMA. In that weekend, federal coordinating officers, who are statutorily designated officers as part of the Staff Act, were sent down to Mississippi and Louisiana, and other places as well, to be on-the- ground incident managers for FEMA and for the Department of Homeland Security. You saw Bill Lokey here. I think he was a witness. I don't know if Bill Carlisle testified. These are two very experienced men. They were supported by the very experienced men and women who are in the regional headquarters that support these states.

And they were supported by the very, very experienced men and women who sat around the table at the National Response Coordinating Center at FEMA in Washington who are the principal backstop, the principal pool of talent that supports operational activity in the field in the time of a hurricane.

And I venture to say there were dozens, maybe over 100 years of experience fully engaged that weekend.

I came in on Sunday and I sat in a teleconference. And that conference has about at least 50 people who are either sitting in that room at FEMA or were sitting at DHS or were sitting in the regional centers or were sitting on the ground in the emergency operation centers in the states.

And the purpose of that video conference is to go around and make sure everybody has considered and talked about all of the measures that must be in place to anticipate what is going to happen when this hurricane hits.

If there's nothing else that FEMA is an expert in, it is hurricanes. This is the challenge, although not on this scale, but this is the challenge they have worked at, they have planned for and they have considered the core of their mission since they were created.

And as I sat there, I heard a round-robin go-around, hearing from, first of all, each of the emergency managers for the states, the National Guard representative from the state, talking very specifically about their assessment of what need to be prepositioned, what was on the way, and expressing very clearly their satisfaction with the state of affairs, and their belief they had prepositioned or en route what they needed to respond.

I then heard the regional officers go through the same litany and again say they felt that everything was enroute and positioned the way it needed to be.

I then heard the people sitting around the table in headquarters talk about things like transportation, urban search and rescue, logistics, medical teams.

At the end of that VTC -- and I also heard Michael Brown say -- and I think he was quite accurate about this: "We need to push everything we can, jam the system, push the envelope, get everything down there that you need to get."

And then at the end of that, and I was conscious of the fact that although I'm the secretary, I'm not a hurricane operator. I do not have 30 years of experience managing hurricanes, and I do not see myself in a position to contradict or second guess operational decisions by hundreds of years of expertise.

But I did want to get to the core issue. So I asked two questions. And these are in the transcript that's contained of that Sunday VTC which I know you have. First, I said, is there anything in this department that is not fully available to you, that you need, that you don't have, that I need to get to you -- I'm paraphrasing -- because it's all available.

And Michael brown said I'm in touch with the components, the Coast Guard. I specifically mentioned the Coast Guard. Everybody has been through this drill before. We are all engaged and working.

And then, because I knew that the Department of Defense had unique resources and talents, I asked the second question. I asked the question, have you reached out to DOD, the Department of Defense? Are their assets ready? Do you have what you need from them? Are you ready to go with them?

And in the presence of the Defense Department representatives sitting around the table, and who I could see on the screen, Michael Brown said, yes. We are here with the Defense Department. We are engaged. And we are working, getting all of the things that we need.

That was what I needed to know, to believe that we were, that the experts saw us as ready to move and be pre-positioned.

Now, there are many lapses that occurred, and I've certainly spent a lot of time personally, probably since last fall, thinking about things that might have been done differently.

But I do want to talk about things that can be done differently in the future, very, very briefly. First, I want to make it clear, for the public at least, that in the first few months I arrived, after February, I knew that there were a lot of challenges of this department.

In fact, I'm sure in my confirmation hearing I heard predictions that I was getting into a department that was brand-new. Senator Bennett I think pointed out that at the Department of Transportation it took them five years to get ready. And by the way, this is no criticism of Governor Ridge who with some very able assistants had to stand up a department from scratch.

But I think it was a candid recognition that a new department, barely two years old, had a lot of work to do in terms of integration, in terms of building capabilities and in terms of building a common culture.

After I did a review, I came back and I believe I testified in this committee, I certainly testified elsewhere, and I said publicly in July, scarcely a month before Katrina, I said that we were not where we needed to be in terms of preparedness. And I said that because having gone through the exercise of TOPOFF, and having looked and sat with the people in the department, I knew we had a lot of work to do. And I started to propose some specific things to get ourselves turned around, including getting FEMA to focus on its core mission and making sure we unified all of our preparedness and our planning and our grants and our training in a single focal point.

In accordance with the law and of course the appropriations process, we targeted October 1 to reorganize and get ourselves better situated and then, of course, move forward to start what is not a brief and in fact is a very substantial process of getting ourselves prepared to the level we need to be. Unfortunately, Katrina didn't wait until October 1.

So we come here now with a major set of challenges. And I know this committee is looking very carefully at the issue of reform. I know that the committee, quite rightly, wants us to withhold making significant decisions about major reforms until the committee has had an opportunity to put its findings out. I agree that that's appropriate.

And as a consequence, when I spoke on Monday about some of the things we're doing, I deliberately said I'm not going to talk about more systemic reforms which the president also is going to hear some recommendations about.

But I do know there's some things we have to get done by June 1st, because hurricane season not going to wait again.

First of all, we have to have a unified incident command. Putting aside issues of personality which at least emerged for me last Friday when another witness testified, it is clear that the whole idea we need to pass information from a FEMA operations center to a DHS operations center as if across a gulf or a chasm, makes no sense at all. We have to complete the process of building out our operations capability. We've got to have real-time, simultaneous visibility into operations in both places.

Second, it is completely correct to say that our logistics capability in Katrina was woefully inadequate. I was astonished to see we didn't have the capability most 21st century corporations have to track the flow of goods and services.

I was more surprised to learn the reason for that is because we don't contract for that directly. We do it through another agency, and that other agency apparently didn't insert a requirement for such visibility in the contract. We're going to correct that.

Our claims management was also something that fell short. Again, to put it in context, we've never had the volume of people whose claims needed to be dealt with. I think 770,000 people were displaced, approximately, many more than FEMA had ever dealt with before.

And I think, frankly, FEMA was strained in past emergencies.

So we are talking now about expanded capability to deal with telephone registration, expanded technological capacities, and a dedicated corps of people who are specialists -- to go out into the field to reach people when they're widely dispersed, as opposed to making them touch us.

Financial management: We're already implementing a plan to bring better financial management tools into the department.

Debris removal: I'm aware of the fact that we still have a lot of debris on the ground. It's not moving quickly enough.

I've gotten a lot of complaints in the last few months about the Army Corps of Engineers, in terms of being expensive and in terms of being not necessarily inefficient.

And, of course, all they do is turn around and subcontract out to others.

That didn't make a lot of sense to me. We have already taken the position that we're going to try to equalize the incentive structure to encourage local mayors and local officials to hire their own local debris removers, as opposed to going through the Army Corps.

We're going to work, again, this year going forward to try to identify some contractors who can available.

And finally, communications: We had not just a problem of interoperability, we had a problem with operability.

We are already building teams in FEMA and DHS to get into the field with better communications equipment and ability to stream back directly to where we are in Washington.

We are acquiring more satellite equipment and more communications equipment to be able to deploy to our state and local emergency operators so they can communicate with us.

One thing is clearly true: The foundation of any ability to make significant and intelligent decisions in a crisis is communication. And we have to get the equipment, and then the second thing is we have to have the culture -- a culture where people view themselves as part of an integrated team.

So with that, I want to thank the committee for the opportunity to testify. I anticipate and I welcome tough questions. I'm going to take responsibility for what the department did, but I'm also going to take responsibility for identifying solutions for the problems that we saw in Katrina.

COLLINS: Thank you for your statement.

PROTESTER: But, Senators, but mothers and children are being thrown in the streets. Mothers and children are being thrown in the streets while trailers sit in the ground.

COLLINS: Sir? Sir, this is not a public hearing today.

PROTESTER: This is not American. They're being evicted. Why are they being thrown in the ground? It is hard. It's just hard.

COLLINS: I understand that. And the committee is working on that issue. We've been to the area twice. I invite you to sit quietly and allow us to proceed with the hearing.

Thank you.

I would also invite you to talk further with our staffs if you would like to, sir, and see if we can help any specific concern.

LIEBERMAN: I want to repeat that the chairman has invited you to sit at the hearing if you'd like, sir, so long as you remain quiet.

COLLINS: Thank you.

Secretary Chertoff, I remain perplexed by your decision to appoint Michael Brown as the principal contact for the department when he had such poor relationships with you and with the other senior officials.

Assistant Secretary Stephan has told us that Michael Brown did not fully understand a lot of the responsibilities assigned under the National Response Plan, that he opposed the entire concept of having a principal federal official, a PFO.

I'm trying to understand why, in view of Mr. Brown's open disdain for the department, his disagreement with the concept of the PFO, and his criticisms of the National Response Plan, why you would want to have that person as the principal federal official and how you would think that it would improve the ability of the department to respond to Katrina to have an individual who was disdainful of the whole process.

CHERTOFF: Chairman Collins, when I answer that question, I have to put out of my mind the events of last Friday, because I have to tell you, it was astonishing to me to hear the testimony of Mr. Brown concerning his decision, apparently, by his own admission, as the PFO on the ground, to deliberately bypass the department and not to deal with us.

I had attributed the problems I had sometimes engaging with Mr. Brown to just the overwhelming pressures of the situation itself.

I have to put myself back in the frame of mind of what I knew at the time in August.

Doesn't surprise me to learn that Michael Brown opposed the NRP. I think that there were many people who were not necessarily satisfied with Congress's -- or happy with Congress's decision to create this department. And my experience in government, I have spent well over a decade in government, is, and I saw it when we tried to fuse intelligence and you tried to get the CIA and the FBI to talk together, there was a lot of grumbling and there were a lot of people who bitterly opposed those things.

But one thing I saw, at least until this hurricane, was the fact these people put their policy differences aside and acted professionally when matters of life and death were at stake.

I met with Michael Brown. I heard his vision of what he wanted to do with FEMA. I heard him discuss the issue of preparedness and the lack of preparedness. I actually agreed with some of his suggestions. I agreed we ought to align training and grants and preparedness in one place.

I did disagree with him in one respect. I did not believe that the solution was to put all of the grants and all of the grant-making and training under his authority as the head of the FEMA and as the undersecretary in charge. I wasn't going to give him more authority.

And after I decided that I was going to propose the structure that I ultimately recommended to Congress in July, the deputy secretary and I talked to Mr. Brown and we said to him, "Look, we know you are disappointed with the result of this. If you're going to have a problem functioning as the head of FEMA with this, let us know. It's perfectly creditable to say, 'I can't go along with this and I want to leave.' If you're going to stay, though, we need to have your full commitment."

He told us he felt he had gotten a fair hearing, he would give us his full commitment.

I remember in August, before Katrina, for the first time ever, we brought emergency managers and homeland security advisers into the same room in a summit here in Washington precisely to talk about the needs, to be sure we were an all-hazards agency. And we talked about the need to be integrated and partnered on natural hazards as well as other hazards. And Michael Brown was there and he endorsed it.

So, yes, if I had known then what I know now about Mr. Brown's agenda, I would have done something differently.

COLLINS: I guess, as I look back at all the decisions that you had to make, I can't help but conclude that that was one of your biggest mistakes.

I mean, I have an e-mail in which your staff is complaining to Michael Brown's staff that you've lost all contact with Michael Brown for two days. And this is a critical two days. It's the two days after landfall.

Michael Brown testified before this committee that he found your phone calls to be annoying, disruptive. It's just astonishing to me that a person who seemed to not believe in the cause and a person on whom you were relying for active, complete and prompt communication, which you didn't get, was placed in charged.

But I want to go on to another issue. I know from talking with you during the week of August 28th that, later in the week, you were in Louisiana, you were working night and day, around the clock, to try to remedy the problems and improve the response.

But earlier in the week, your actions are puzzling to me because, despite what you said in your opening statement, earlier in week -- in contrast to later, when you were clearly fully engaged -- you did seem curiously disengaged to me.

And the best example of that is on Tuesday morning, the day after landfall, when you're aware of the significant failures in the levees and you're aware that the city of New Orleans is flooding rapidly -- and yet you make the decision to continue with your schedule and to fly to Atlanta with Secretary Leavitt to attend a conference on avian flu.

Now avian flu is an important potential threat, but Katrina was an immediate crisis. I just don't understand why you didn't cancel those plans, return immediately to the emergency operations center and take control.

CHERTOFF: I think I can address both of the questions or the comments by talking a little bit about Monday and Tuesday.

Let me begin by saying, again -- and I encourage you to look again at the Sunday video teleconference.

Going into the hurricane, both in the words and in the demeanor, Michael Brown gave me no reason to doubt his commitment to work and use all of the assets available to make this response as capable as possible.

So I had no sense going in that, whatever his personal feelings were, there was going to be a problem.

On Monday -- and I'm sure we'll get into this later -- I was concerned about the levees. The original projection, I think, in Hurricane Pam, which actually projected I think 60,000 deaths, was for an overtopping, a single surge that would overtake and flood the city -- whereas levee breaching which, in some ways, presents a much more difficult set of challenges, was not actually what was anticipated.

My focus in that on Monday was -- once the storm had passed sufficiently to start getting reports from the ground -- was to tap into the Homeland Security Operations Center, either by going back and forth or having people come up or by getting on the phone to see: What was the ground truth, what was the real situation on the ground?

And I remember specifically asking about, "What are the conditions of levees," and hearing at some point early in the afternoon, an initial report that said there may be some overtopping, there may be some loss of the I guess they call it "rickrack" (ph) or something on top of the levees -- but no substantial levee breach.

I knew I was going get a situational report at 6:00 P.M., which would give me a complete laydown of all of the assets and all of the conditions on the ground.

And I think situation report is part of what's been submitted. And it probably actually got a little bit closer to 7:00.

And I remember, quite specifically, that report said: "There are some reports of breaching, but nothing has been confirmed. We're looking into it." So I was mindful of the issue of breaching, because I knew that if we had a substantial breach -- I don't mean a small breach -- that would pose a second set of problems.

I'm sure we'll get into the question of why I didn't hear about e-mails that came later that night. But I will tell you, at least when I went to bed, it was my belief -- and it was somewhat fortified by things I saw on TV -- that, actually, the storm had not done the worse that had been imagined.

I think it actually moved a little bit to the east at the last minute.

On Monday, I thought about whether I should go down to the hurricane area. And we actually had a discussion about that in my office, about whether I ought to go down to Baton Rouge where the emergency operations center and Mike Brown was.

And I determined not to do it, because I was concerned about coming in and actually interfering with the operators in the first 24 hours of the post-hurricane operation.

I will tell you that I have a respect for the difference between the operator and the person who's leading the organization. The operator's very much involved in immediate decisions of what goes on. I have been an operator. I was an operator on 9/11. And I know the way I dealt with the attorney general on 9/11.

So I tried to be sensitive to not getting in his hair, but also be supportive. The decision I made was not to go to an avian flu conference, but to do two things on Tuesday. Go down to a meeting at the CDC about avian flu with Secretary Leavitt.

And I want to make it clear, this is not like a conference, like you go to in a hotel. This was a meeting among the top leaders of the department to kick-start our preparedness for avian bird flu.

But secondly, to go to the emergency operations center in Atlanta, which is where Region 4 is located. Region 4 had half the responsibility for coordinating the response for Katrina. My thought was that that would be a way of my getting another perspective and visibility on what was going on on the ground, talking to operational people, without getting into a situation where Mike Brown felt someone was coming and now actually creating a question about who's running the immediate incident management in the field.

On Tuesday morning, at around 7:00 a.m., I got the spot report that indicated there had been a substantial levee breach. I made a determination, since I was going to go to the operations center, I ought to continue with the trip.

And I need to make clear that the federal government spends a considerable amount of effort providing me with 24-hour communications. There is never a moment that I am not within a hand's reach of a secure telephone, a secure fax, and literally what I have in my office. So my the hardware and the ability to communicate is that full capability was with me at every moment that I went down. And I frankly spent a lot of time on the phone and in communication back with headquarters during Tuesday.

So, with that capability in mind, I did take the trip. I did ask the question immediately, is this irreparable breach? What's the area that's going to be flooded? And as reports came in, as information came in, I became the aware of the fact that this was almost the worst possible levee breach because it would submerge the large center part of the city.

I don't want to give a long answer, but I want to give you a complete answer.

I knew at that point that there were three immediate things that had to be done. Search and rescue had to be accelerated, because you were dealing with potentially hours where people's lives were in the balance. Second, we had to make sure there was food and water for people who were stranded. And third, we had to think about a second evacuation.

Those needed to be done in that order because saving lives in search and rescue is a matter of hours. Food and water is a matter of hours. Evacuation is a matter of a day or two.

And really from that point on, I continued either by telephone or in person to repeatedly pulse back at headquarters and in the field, frankly, to see how we were doing on those things.

The last thing I want to add is the e-mail you read about my conversation with Michael Brown occurred on Tuesday night. And as part of my effort to get the truth on Tuesday about now what was the plan for this second evacuation -- because, by the way, Coast Guard, I got very good reporting from throughout the thing.

I was not -- I heard there were approximately 450 buses lined up to come. I didn't have a confidence that there was really a plan that was visible to me. I wanted to get the incident manager on the phone. I had difficulty getting it. I heard that he was flying around with governors and other people, that he was thinking about a T.V. appearance. And I gave him a very clear message: Job one, is to get this thing down. Sit in the operations center. Get with the relevant managers. Make sure you're taking care of all of these issues. That's the Tuesday call.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY Job one is to get this thing down, sit in the operation center, get with the relevant managers, make sure you are taking care of all of these issues. And that's the Tuesday call.

DARYN KAGAN, CNN ANCHOR: We have been listening in to the Homeland Security and Governmental Affairs Committee. Governor -- governor -- Senator Susan Collins of Maine calling Homeland Security Secretary Michael Chertoff curiously disengaged in the days after Hurricane Katrina made landfall along the Gulf Coast.

We're going continue to listen in, right now fit in a quick break, and we'll be back after this.

(COMMERCIAL BREAK)

KAGAN: We are watching two live events. In the top right part of your screen, President Bush is in Dublin, Ohio, at the headquarters of Wendy's International. He's expected to make a speech on health care. And we're also listening in to Michael Chertoff, the Homeland Security secretary, as he testifies before the Homeland Security and Governmental Affairs Committee.

We're going to listen in to President Bush and we'll monitor the hearing on Capitol Hill.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... place to come and visit. So I get on Air Force One this morning, I said, "Take me to Dublin." The guy heads east.

(LAUGHTER)

I said, no. Dublin, Ohio.

Proud to be here. Thanks for letting me come and visit with you. It's neat to be in the house that Dave built.

(APPLAUSE)

He was a great American. George Voinovich and I were sharing Dave Thomas stories, particularly when he came and helped educate and lead the governors -- that's when we were governors -- about adoption. And one of his great legacies is inspiring people to show the ultimate act of love, which is to adopt a child.

Another great legacy he leaves behind, a great company that is providing thousands with good jobs. Another great legacy is to leave behind consumer choice. You can either get your three-quarter pound triple cheeseburger or your salad.

(LAUGHTER)

I appreciate the fact that Wendy's understands that choice for the consumers is important. I also appreciate the fact that Wendy's understands that giving employees the opportunity to make rational choices in health care is an important part of having a workforce that is vigorous, active and enthused about their jobs. And so today I'm here to talk about innovation in the health place, how we can make sure the health care system in the United States of America remains the best in the world.

And so, Jack, thanks for letting me come. Thanks for being an innovator.

I love the entrepreneurial spirit of America. And the entrepreneurial spirit doesn't end if you happen to be a big company. As a matter of fact, it's important to remain entrepreneurial no matter what your size is. And to have a company like Wendy's introduce HSAs, which I'm about to talk about, reminds me that the entrepreneurial spirit is alive and well here.

I appreciate the team, the management team, and all the employees for giving me a chance to come and visit. I will keep my remarks relatively short so you can get back to work.

(LAUGHTER)

Governor, thank you for coming. I appreciate Governor Bob Taft joining us. Yesterday, I had the privilege of meeting with his wife Hope. We were talking about how to rally the great armies of compassion around the United States to help provide love and help and concern for those amongst us who need love and help and concern.

I want to thank my friend Senator George Voinovich. I've known him for a long time.

He's steady. He is capable. He is a great public servant.

Thank you for being here, George.

I want to thank the members of the United States Congress who managed to get a free flight on Air Force One to come and join us.

(LAUGHTER)

I'm better for the fact that you accompanied me. Thank you.

And that would be Pat Tiberi, the United States congressman from this district. Congressman David Hobson is with us as well, as well as Congresswoman Deborah Pryce.

Thank you all for coming today.

(APPLAUSE)

The speaker of the house is with us.

Mr. Speaker, thanks for joining us.

The president of the Ohio Senate is with us.

Glad you guys are here. Thanks for coming.

I also want to mention Senator Steve Stivers, United States senator, lieutenant colonel in the Ohio National Guard. He served a 12-month tour of duty in the Middle East and Africa.

I appreciate your service. God bless you and your family.

And god bless all our troops in harm's way.

(APPLAUSE)

I skipped the majority leader. I didn't mean to.

Mr. Majority Leader, it's an oversight, you know. Thank you for -- thank you for being here, Larry Flowers (ph).

I want to thank the mayor of the city of Dublin for joining us.

I appreciate you coming, Mayor. I'm honored you're here. Thanks for taking time out of your schedule.

I just met with some folks that work here at Wendy's. I'll talk about them later. But I also met with an owner of a restaurant here, Frank Ciatola (ph). I met Sean Kessinger (ph). He's the vice president of finance for the Ohio Credit League Union. I met with a farmer, Debbie Carr (ph).

We talked about health care from the perspective of small business owners, entrepreneurs. I listened to their concerns. I listened to their solutions. And as I begin to give this address on the health care system, I want you to know that many of their thoughts are incorporated in a -- in what the vision is for good health care.

So thanks for taking time to be here today.

Let me start by giving you kind of a state of the economy.

It's strong. I recognize there's parts of Ohio that aren't -- that aren't necessarily as strong as other parts of the country. But from an overall perspective, when you look at the nation's economy, it's strong and it's getting stronger.

And the reason I say that is because we're now in our fifth year of uninterrupted economic growth. Last year, this economy, in spite of high energy prices and in spite of natural disasters, grew at 3.5 percent.

We've -- after-tax income of our people -- and that matters a lot, you know, whether or not people got money in their pocket after paying their taxes -- is up 8 percent since 2001.

Productivity is high. It's important to have high productivity growth in an economy because that's how -- that's how economies improve their standard of living for their people. The more productive you are as a citizen, or the more productive you are as a company, the more likely it is you will generate higher revenues and higher quality of life. And so productivity is increasing, which is a measurement of not only this country's competitiveness, but it's a measure of whether or not life is improving for our citizens.

Small businesses are thriving. That's really good news. Most new jobs in America are created by small business. And when the small business sector is thriving, it means people are working.

We've added 4.7 million new jobs over the last two and a half years. The national unemployment rate is 4.7 percent. That's low.

(APPLAUSE)

Things are improving here in Ohio. The unemployment rate is still 5.9 percent, but nevertheless, the trends are in good shape. You've gone from 6.4 percent to 5.9 percent. Obviously there's still work to do.

George and member of the delegation are concerned about trade that is fair and free. He wants manufacturers here in Ohio to be treated fairly in places like China. I assured him I understand that's part of my job.

I'm going to India at the end of this month, and I'm going to make it clear to the Indians we look forward to trading with you, but just treat us the way we treat you. That's all we ask. And the reason I say that is because we can compete with anybody, any time, anywhere, so long as the rules are fair.

(APPLAUSE)

The fundamental question is how do we remain a leader in the world economy?

You know, there's uncertainty in this -- in this economy of ours. People are changing work a lot. That kind of creates a sense of uncertainty.

People see China and India out there looming as competitors. And the reaction with some is, you know, just don't compete, let's just kind of shudder down, let's get protectionists. Or why don't we isolate?

I have a different point of view. My attitude is we shouldn't fear the future, we ought to shape the future. My attitude is the United States of America must continue to be the leader in the world economy for the good of our people. And so here are some ways as to how to make sure this economy remains strong today and remains strong for years to come.

First, in order for us to be a leader in world, we've got to remain a leader when it comes to technological developments. So I'm proposing to the Congress the American competitiveness initiative, which will double the basic research in basic sciences over the next 10 years.

And secondly, I recognize most research is done in the private sector, and yet, the incentive for companies to invest in research which yields technologies, which increases standards of living and makes sure our economy is on the leading edge is through the research and development tax credit. It expires on an annual basis.

It is very difficult for a private sector to plan when a tax code is uncertain. And so Congress, in order to make sure that we invest in the future, should make the research and development tax credit a permanent part of our tax code.

Finally, in order to remain competitive, we've got to have kids who understand math and science. And so I laid out an initiate...

(APPLAUSE) I've spent some time talking about it last week. I'm going to continue talking about it. I'm looking forward to working with -- this is an issue, by the way, where we can put aside needless politics which tends to dominate Washington, D.C., and focus on the good for the future of this country.

I'm confident we can get something done on this very important education, as well as research and technology issue.

In order to make sure we're competitive, we've got to be wise about your money. The tax relief we passed is working. In order to make sure America is the most competitive nation in the world, we've got to keep your taxes low.

(APPLAUSE)

And be wise about how we spend your money. Which means we've got to learn to set priorities in Washington, D.C. We can't try to be all things to all people when it comes to spending your money.

We're on the way to cutting this deficit in half by 2009. And I intend to keep us on track to cut the deficit in half by 2009.

To be wise, to be competitive in the future, we've got to get off being hooked on Middle Eastern oil.

(APPLAUSE)

You know, in order for us to grow -- I said something in the State of the Union that probably surprised some of you. I said we have a serious problem. We're addicted to oil

But I meant what I said. I fully understand that in a economy that requires oil from parts of the world that -- where some countries may not like us, it puts our economic security at risk and puts our national security at risk. And I'm serious about working with members of both parties to advance technological research that will enable us to drive cars by switch -- or by using switchgrass as the base stock of ethanol, or wood chips, as well as the corn and soybeans we use today.

I mean, I can't wait for the day, and I know future presidents can't wait for the day, when somebody walks in with the farm report and says, " Mr. President, the crops are up and we're less dependent on Middle Eastern oil." And it's coming. It's coming.

(APPLAUSE)

To keep this country competitive, we need a health care system that provides Americans with high-quality care at good prices. And that's what I want to talk about today.

The health care costs are rising sharply in America. If they continue rising the way they are, it will make us less competitive.

Many Americans are worried that they're not going to get the treatments they need. Small businesses in particular are struggling to pay for health care for their employees.

If two-thirds of the new jobs in America are created by small businesses, and your small business owner is struggling to keep their employee base because of health care, then we've got to do something about it. Workers have lost good coverage because they're changing jobs.

I told you there's uncertainty in the marketplace because people are changing work. And if you fear about losing health care when you change work, it creates even more uncertainty.

More than 45 million Americans have no health insurance at all. And this is unacceptable for our country.

We've got the best health care system in the world, make no mistake about it. And the question, is, how do we keep it that way? And I've got some ideas for you.

First of all, we've got to choose between two competing philosophies when it comes to health care. Behind the rhetoric in Washington and all the proposals, there's really a philosophical debate.

Though on one hand there are Some folks who are goodhearted folks, good, decent folks who believe that government ought to be making the decisions for the health care industry, and there are some of us who believe that the health care industry ought to be centered on the consumer, I think as we kind of make our minds up about what philosophy works it's important to look at the world health care systems.

Other nations have adopted for government control of heath care for centralized decision-making when it comes to health care, which has created long waiting lines and quality of care not as good as the American system, and a significant lag in technological development.

We have done a different path up until now in our nation's history. We believe in private medicine that encourages innovation and change. It's been the cornerstone of American public health up until now. And we have a choice to make.

I have made my choice. I'm going to lead the Congress to make sure that our health care system preserves the American system of private medicine, that we strengthen the relationship between doctors and patients, that we make the benefits of private medicines more affordable and accessible for our citizens.

That's our strategy.

Obviously, government has a role to play. You know, we have made a commitment to the poor and the elderly in United States, and it's a commitment we're going to keep.

You know, when I got to Washington, I took a look at the Medicare system. It's a very important part of our nation's health care system, and that is Medicare, except it was old and tired and hadn't been changed. It was a centrally-controlled system.

I'll give you an example of what I meant by old and tired.

This is a system that paid $28,000 for ulcer surgery. If you've got an ulcer, you check in the hospital, Medicare will write you a $28,000 check. It wouldn't pay the $500 necessary to prevent the ulcer from happening in the first place.

In other words, medicine had began -- begun to change, and Medicare didn't change with it. One reason why is because it's centrally controlled. All decisions had to be made by people out of Washington, D.C.

And so I worked with members of the United States Congress to modernize the system. I said if we got a commitment to our elderly, let's make the commitment a good one. We're not going to make the commitment and have it be a mediocre commitment. It ought to be a good, sound commitment. And we did. We added a prescription drug benefit to Medicare that modernizes the system. And at the same time, we gave seniors more options from which to choose.

See,part of making sure a health care system works seems like to me the consumers ought to have more choice. In a centralized system, you know, the government make the choice. In a private system that focuses on the markets, people ought to have a choice. People ought to be able to be given different options from which to choose.

And so we did modernize the system. It's tough sledding up there in Washington to get things changed. People like the status quo at times.

Twenty-four million Americans have now signed up for the new Medicare plan since January 1st. That's a lot of folks, 24 millions. Hundreds of thousands are enrolling each week. Now, needless to say, when you have a change that size, there's going to be some things that needed to be adjusted in that system. And you probably read about the dual eligible problem. I don't know if you've had that problem here in Ohio, Governor. We're dealing with it.

Our job is to solve problems when arise. When you had that big of a shift, you can imagine there's going to be glitches. But by far the vast majority of people are signing up to a program that's making a big difference in their lives. Competition -- in other words, when you have a choices, it creates a sense of competition in the marketplace. It's lowering the costs of American seniors.

The average cost that seniors pay now for prescription drug benefit is a third less than what was expected. In other words, when we started rolling out the plan, it was expected that the prescription drug benefit would cost the senior $37 a month. The actual cost is $25 a month. It's an interesting lesson about what can happen when you give people different options from which to choose.

The other thing that's important for you all to know is that the typical senior will end up spending about half of what he or she used to spend on prescription drugs. And if you want the system to function well, it seemed like to me and others here that we ought to modernize the system to make it good for our seniors. It's working.

If you happen to have a mother or father who's a senior, I strongly urge you to get your loved one or your friend to call 1-800- Medicare, or to go on the Web at medicare.gov and help person realize the great new options available to him and her.

Medicaid, as well, is a program that we also take very seriously. It's a program aimed at helping the poor. It's administered in conjunction with states. It is health care with low-income families with children, for seniors and disabled Americans. It's a very important program.

It needed to be restructured, however, in order to make the program actually work in a cost-effective way. And so, we decided to work with the states to give governors and folks at the local level more flexibility in how to structure the program to meet the needs at the local level.

See, in past, if you had a good idea -- old Taft had a good idea. He had to come to Washington and beg permission for a waiver. I had a governor who was elected to do something good for the people. I'm worried about the -- those who are qualified for Medicaid.

Please give me permission to do what I think is right. The new bill I signed is one which will make states -- give states a lot more flexibility when it comes time to signing up people, to designing eligibility standards, to providing what the programs ought to look like. In other words, it's flexibility, all aiming to make sure the Medicaid system works well.

We take the program seriously, but we fully understand what happens when the bureaucracy becomes so encrusted that it's impossible to design programs that will actually meet state's budgetary needs, as well as the needs of the people. And we're remedying that fact.

The -- I mentioned to you, we have the goal of making sure that our budgets are responsible. You know, one of the budget I just signed -- the bill I just signed and the budget I proposed is finally beginning to do something about the growth in Medicare and Medicaid.

I want to describe to you a little bit about what we're doing. Let me give you this story, kind of an analogy. There is a difference between slowing your car down to the speed limit or putting your car into reverse. I want you to think about that, as I explain to that in working in Congress, we have slowed Medicare down from 1.8 percent a year to 7.7 percent a year. In other words, we found ways to reform the system so that we can slow the growth rate down to make it -- Medicare more affordable for future generations.

We're not putting the car in reverse, we're just finding the speed limit. Same thing with Medicaid. Its growth slowing down from 6.9 percent to 6.6 percent a year, which means by just by slowing the growth rate down on those two important programs, and at the same time, making them more efficient and delivering better services, we're saving the taxpayers $104 billion over five years. I want to thank the Congress for working on this. You hear rhetoric of course, that, you know, we're starving the poor. The car's going the speed limit, it's not going backwards.

Now, the long-term solution for Medicare requires -- and Social Security requires an understanding that we've got a lot of Baby Boomers ready to retire. The true strain on our budget is really going to be the unfunded deficits caused by a Baby Boom generation retiring with fewer workers to pay for guys like me.

I mean, lot of us are retiring. As a matter of fact, my retirement date is -- I turn 62 on 2008, which is a pretty convenient time to retire. There's a lot of us. There's a lot of us, a whole lot of us, and there are fewer people paying in the system per person retiring.

And what's interesting, and you got to know this, is that my generation has been promised greater benefits than a previous generation. So you can imagine, when you start to think about the strain. A lot of us have been promised greater benefits with fewer people paying for us, and it's not going to work. It's simply not going to work.

I was very serious in the State of Union -- I explained this to George and the congressmen -- that I understand a solution to Social Security and Medicare, in terms of dealing with bulge of retirees, is going to require a bipartisan solution. And I mean it to members of Congress. I expect there to be a bipartisan effort to come up with a solution. Nothing will pass the House or Senate unless there's agreement.

And now's the time to put aside the politics that has stopped rational people from coming up with a rational answer to a very serious problem, to set it aside, sit down at the table, and solve this problem once and all so we can travel the country looking at young workers and saying, you're going to pay payroll taxes into a bust system anymore. You're going to pay payroll taxes into a system which will around not only for Baby Boomers like me, but for a young generation of coming up. Now is the time for us to get something done.

KAGAN: We've listening into President Bush. He is in Dublin, Ohio, today. He is speaking at the world headquarters of Wendy's fast food restaurants, talking mainly about health care and changes he would like to make to the America's health care system.

On the other part of your screen, the smaller box you see, that is the Senate Homeland Security and Governmental Affairs Committee. They've been hearing a lot from Homeland Security Secretary Michael Chertoff today, in some scathing testimony.

And if you would like to listen more to President Bush, just go to CNN.com/pipeline and listen in there.

We're going to fit in a quick break. Much more after this.

(COMMERCIAL BREAK)

KAGAN: We're watching two live events as they unfold. On the left part of your screen, President Bush in Dublin, Ohio, at the headquarters of Wendy's International. He is talking about health care. If you'd like to listen in to more that, go to CNN.com/pipeline.

And then also, we are watching from Washington D.C. That is Homeland Security Michael Chertoff. He is testifying before the Homeland Security and Governmental Affairs Committee in the Senate. We will listen in to more of that in just a minute.

(NEWSBREAK)

KAGAN: And this hour, on Capitol Hill, Homeland Security Chief Michael Chertoff continues to face tough questions on the government's response on Hurricane Katrina.

Chertoff told the Senate committee he does not discount the failure to deliver swift and sufficient aid to those in decimated areas.

(BEGIN VIDEO CLIP)

CHERTOFF: I also have the responsibility to fix what's wrong. And if I can digress and step out of my official role for a minute, I can tell you on a personal basis, what was probably the worst element of this catastrophe personally, is not criticism I've received, or criticism the department has received by committees and commentators, but the vision of people who did their have suffering unnecessarily prolonged, because this department did not perform as well as the vision of its it performance suggested it should have been able to do.

(END VIDEO CLIP)

KAGAN: One of the most commonly cited examples of the failed response is the stalled delivery of FEMA's mobile homes. Eleven- thousand are stranded in Arkansas, 450 miles from the Gulf Coast, and the storm victims they were intended to house.

On Monday, a Homeland Security official told a Senate committee that many are falling apart and won't be usable. One FEMA official adamantly denied that on CNN's "ANDERSON COOPER 360."

(BEGIN VIDEO CLIP)

DAVID PAULISON, ACTING DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY: Well, first of all, I -- I sent staff out today to look at the mobile homes, after the reports last night on TV and listening to the inspector general.

They're -- the mobile homes are fine. There's not one mobile home that has been damaged. They're going to be usable. Mobile homes last a long time, 15, 20 years. So, we are going to use them. I don't know where the information came from that the inspector-general got, because -- but some -- because somebody gave him bad information. ANDERSON COOPER, CNN ANCHOR: Well, let me just read to -- to our audience what he said. It was Richard Skinner from Homeland Security.

He said -- and I quote -- "Since they were not properly stored, the homes are sinking in the mud, and their frames are bending from sitting on trailers with no support."

You say, that is absolutely not true?

PAULISON: That -- that is not accurate at all. The -- the wheels may be in some mud. We're in the process of actually bringing in gravel to -- to stabilize the soil.

But we have trucks that can move them around, if the water -- if they get standing water. And the only ones that are on jacks are the 80-foot mobile homes. And that's the way they are supposed to be stored. They are being stored properly. They're being taken care of. We will use all of these mobile homes sooner or later.

(END VIDEO CLIP)

COOPER: And that was from last night's "ANDERSON COOPER 360." You can see that show weeknights, 10:00 Eastern, 7:00 Pacific right here on CNN.

FEMA already has spent more than $300 million on the stranded mobile homes. That's an easy number to merely gloss over, until you put pencil to paper and realize just how many critical items that money could have brought.

With more on that, here's CNN Tom Foreman.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT, (voice over): A hospital reopens downtown. The cost, $92 million. But it's priceless in this city right now. So imagine what could have been done with the $300 million spent on the empty trailers sitting in Arkansas.

Realtors say for $300 million, almost 2,500 permanent homes could have been built and sold for $120,000 each to working class people. Then, the money could be turned around to build even more.

The New Orleans school board has spent $20 million from its operating budget to reopen 20 schools. Educators say with $300 million, every school in town might be back in session.

A new ten-acre roof for the Superdome, $33 million.

The Convention Center, before Katrina, it brought in almost $2.5 billion a year to the local economy. It's being refurbished now on insurance money. The cost, $100 million.

Debris removal, police supplies, levee repair, public transits, the needs in New Orleans are endless. And many locals will tell you, so is the frustration over every wasted cent. No one knows if all those tax dollars spent on that ghost town of trailers would have otherwise gone to needs on the Gulf. But, still, it is an awful lot of money that certainly could have been used elsewhere.

What could you do with $300 million? No kidding. You could lay a carpet of dollars more than five feet wide all the way from New Orleans to Washington. Or maybe you could buy trailers in the right place, for the right folks, just trying to rebuild.

Tom Foreman, CNN, Washington.

(END VIDEOTAPE)

KAGAN: Throughout the storm-decimated Gulf Coast, there is one singular agreement: Money will pave the road to recovery. This morning New Orleans Mayor Ray Nagin looks aboard for international support to rebuild the city. He welcomes delegates from Shanghai, in hopes of recruiting major trade business.

For an advance look at the congressional report on the Katrina response, log on to CNN.com/Katrina. You can also see images of Katrina's aftermath, view a timeline of Katrina and read witness of the devastating conditions. All that and more at CNN.com/Katrina.

New imagines of Abu Ghraib Prison abuse are out today. They are more graphic than previously seen pictures. The photographs and videos were first aired on Australian Television. We'll have more on that in just a moment. Also the latest on Vice President Dick Cheney and plans he might have to speak out.

We're back after this.

(COMMERCIAL BREAK)

KAGAN: We're watching two developments; two events as they develop. President Bush is in Dublin, Ohio, at the corporate headquarters of Wendy's International. He is talking about health care.

Also, on Capitol Hill, the Homeland Security and Governmental Affairs Committee continues their hearing, and Michael Chertoff, the homeland security secretary, on the hot seat today, answering questions of how he and his department handled the aftermath of Hurricane Katrina.

And you can follow either of these events on CNN.com/pipeline.

Meanwhile, we'll get to other news of the day.

New images of Abu Ghraib prison abuse are out today, and they more graphic than previously seen pictures. The photographs and videos were aired on the Australian television network SBF (ph). Network officials there say the pictures were taken back in 2003, the same time as the first prison abuse photos. A U.S. military spokesman in Iraq says showing the photos is -- and doing that now is provocative and irresponsible. Lieutenant Colonel Barry Johnson (ph) says the pictures don't reflect what's happening right now at the prison.

American commanders in Iraq are concerned that overcrowded Abu Ghraib Prison is becoming a breeding crowd for extremist leaders and terrorists. A report in "The New York Times" cites U.S. authorities as saying detainees are forging insurgent networks inside the prison and swapping terror tactics. The "Times" add that many non-hardened fighters, rounded up in raids, are released rather than sent to the overpopulated jail.

Doctors are keeping a close watch on the Texas lawyer who was shot by Vice President Dick Cheney during a weekend hunting accident. Harry Whittington is back in intensive care after suffering what doctors describe as a minor heart attack. Doctors say the heart attack was triggered by a piece of bird shot that has lodged in or near Mr. Whittington's heart. The vice president is expected to make his first public comments on the shooting later today. The delay in publicly addressing it and reporting it is keeping the story in the spotlight.

Today on CNN's AMERICAN MORNING, former Clinton White House Press Secretary Joe Lochkart said the issue is one of credibility.

(BEGIN VIDEO CLIP)

JOE LOCKHART, FMR. WHITE HOUSE PRESS SECRETARY: This one wasn't a hard one, and that's what's so curious. And I think -- I don't think most Americans are sitting around at their breakfast table saying I wonder if there's something more to this hunting story. I think they are sitting around saying, boy, if they won't tell us that, what else aren't they telling us? And that's a real problem of credibility.

(END VIDEO CLIP)

KAGAN: CNN will have a live coverage of a hospital news conference updating Harry Whittington's condition. That's supposed to take place in about five minutes.

The shooting and the Cheney's silence reopened a debate in Washington over whether the vice president is an asset or liability to this White House.

CNN's Brian Todd reports.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT (voice-over): Another political headache, another brushback with the media, and another round of a familiar question: Has Dick Cheney tipped the balance and become more trouble for this president than he's worth?

TOM DEFRANK, WASHINGTON BUREAU CHIEF, "NEW YORK DAILY NEWS": I think it's fair to say now that -- that the vice president has become a -- a political liability for the president. And the vice president knows that.

TODD: "New York Daily News" bureau chief Tom DeFrank has covered the vice president since 1974, when, he says, Dick Cheney was more accessible than his boss, a young White House chief of staff named Donald Rumsfeld.

DeFrank believes Cheney's influence with President Bush had eroded -- too much cumulative political backlash, he says, starting with Cheney's secret meetings with energy executives while forming the nation's energy policy, his history with Halliburton, the company accused of questionable government contracts in rebuilding Iraq, the CIA leak scandal, and one seminal moment.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: Simply stated, there's no doubt that Saddam Hussein now has weapons of mass destruction.

DEFRANK: I think that the change for Cheney started with Iraq. I mean, he was a such leading proponent of going into Iraq, deposing Saddam Hussein, that, a things didn't work out in Iraq, Cheney became more and more of a lightning rod for critics.

TODD: But Republican strategists say that lightning-rod quality makes Cheney more valuable in rallying the conservative base, and the president who campaigned as a Washington outsider still needs him.

CHARLIE BLACK, REPUBLICAN STRATEGIST: The vice president's greatest asset to the president is his Washington experience and the wisdom and insight that he brings to the president, because he spent all these years in Washington that George Bush didn't.

TODD (on camera): Those who know Dick Cheney, those who have covered him, say, in weighing all of those assets and liabilities, we should allow for one more consideration: that Dick Cheney does not care what the press and politicos think. He has no political ambition above January 2009.

Brian Todd, CNN, Washington.

(END VIDEOTAPE)

KAGAN: The vice president has made it plain he does care how Harry Whittington is doing. This is a live picture from Corpus Christi, Texas. Any minute now, doctors there are supposed to give an update on Harry Whittington's condition. You'll see that live right here on CNN.

But that's going to wrap up three hours for me. I'm Daryn Kagan. LIVE FROM with Kyra Phillips begins at the top of the hour. I'll see you tomorrow morning.

(COMMERCIAL BREAK)

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