CNN — LOU DOBBS TONIGHT — Aired January 2, 2008 - 19:00 ET

LOU DOBBS, CNN ANCHOR: Today another setback for our middle class as the price of a barrel of crude oil hit $100 for the first time ever. Supply concerns driving the increase, communist China, other nations dramatically increasing their demand for oil as global competition for commodities increases.

The high cost of crude oil of course is not the only threat to this nation's working men and women and their families. American workers continue to lose ground, real wages are dropping, factory production is down. As Bill Tucker now reports, there are new concerns, and rising concerns tonight on whether American manufacturing can ever, ever recover.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): U.S. manufacturing appears to be in trouble. There was a sudden unexpected downturn in production last month. The news comes only two weeks after President Bush warned of some economic trouble on the horizon.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I fully understand the pinch some of your folks are going feel. And having said that, this economy is pretty good, definitely some storm clouds and concerns. But the underpinning is good.

TUCKER: But from 1997 through 2006, manufacturing output in this country fell. At the same time, imports from foreign manufacturers rose more than 58 percent and factory employment declined, falling from January of 1997 to 14 million in December of 2006. Sectors that lost ground included telecom hardware, aircraft engines, semiconductors, medical equipment and pharmaceuticals.

ALAN TONELSON, U.S. BUSINESS & INDUSTRY COUNCIL: The question of whether we can pull out of this nosedive is really the $64,000 question because the faster our manufacturing base shrinks the less capacity we have to generate the output.

TUCKER: Dave Frengel represents a broad alliance of companies lobbying for reforms in trade policy.

DAVE FRENGEL, PENN. UNITED TECHNOLOGIES: They're losing, not because they're not doing the micro economics right, not because they're doing innovation and you know lean manufacturing, but because they've been cheated, because they're competing against subsidized imports.

TUCKER: Workers feel the pinch too, not only in a lack of job security but in their paychecks, a fact that even ardent free trade economist Paul Krugman recently conceded in "The New York Times".

Quote, "It's hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. Those who are worried about trade have a point."

(END VIDEOTAPE)

TUCKER: And those in the manufacturing sector worry that as output declines and the shift to foreign manufacturers continues, America will lose its next edge, which is the innovative edge because as one manufacturer put it, Lou, you can't innovate if you don't have something to innovate.

DOBBS: Yeah and Paul Krugman, a well respected economist ideology, a liberal, but acknowledging that you know the reflexive nonsense of a free trade at any price, those days are over. It's to me stunning to see those numbers, the reaction on the part of the Commerce Department, this administration, to continue, do they simply say — I mean to hear George Bush say the underpinnings of the economy are great. There are storm clouds on the horizon. And I understand the pinch that some people are in, but everything is fine. I mean what in the world are people to make of a statement like that by the president of the United States?

TUCKER: Well you know, Lou, you coined the phrase faith-based trade policies. That's a lot of what this is. People believe free trade is good. They ignore the evidence. They ignore empirical facts that are put in front of them and say no, no, no, it's OK because it has to be OK.

DOBBS: The fact is today we're looking gold at a 28-year high. We're looking at a new record for the euro against the dollar at an all-time low against the euro, falling against most other major currencies, nearly all of them.

We're looking at crude oil. It — sitting right at $100 a barrel. This — and we've got candidates in Iowa, presidential candidates seeking their party's nomination talking about nonsense and blathering instead of dealing with the real issues that are going to shape this country for decades to come. I can't for the life of me figure out what is taking people so long to come to terms with the reality that is literally crushing the prospects for prosperity, and for the middle class dream in this country.

TUCKER: Middle class — medium-sized manufacturers will tell you they've known this reality all along. Dave Frengel says we know this is a fact. Coalition for Prosper America says it's a fact. It's bad out there. But, you have the international manufacturers who are saying, no, everything is fine. It's OK.

(CROSSTALK)

DOBBS: Oh believe me, I know that. The National Association of Manufacturing absolutely concentrating a Web site to me because they don't like my criticism of their — of what I consider to be absolutely Neolithic policies. It's their way or it is anything but the American way. And it's a tragedy that we've reached this state. And these candidates have got to begin to deal with that reality. But that means of course upsetting a lot of their contributors, those who donate to them, of course the orthodox is they've signed onto. Bill Tucker, thank you very much.

Lou Dobb's favourite expression?

"What in the world...............

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