The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight: The news of this Thursday; then full coverage of the political quake in the Middle East, with a Simon Marks report on the Hamas victory in the Palestinian elections, Margaret Warner in Jerusalem, Ray Suarez at the Davos summit in Switzerland on what worldleaders are saying; plus, President Bush's statement here in Washington, and further American analysis; then, on another subject in the news, a Paul Solman report on autoworkers in Flint, Michigan.

NEWS SUMMARY

JIM LEHRER: The Palestinian elections had a stunning outcome: A landslide victory for Hamas. Official results today showed the Islamic militant group swept the long-ruling Fatah Party out of power. With nearly all the vote counted, Hamas won a clear majority of the 132 seats in parliament. The Fatah Party won about a third of the seats, and the rest went to small parties and independents. Hamas has called for Israel's destruction, but it offered today to continue a year-old truce. The Israeli government answered that it will not deal with a Palestinian government that includes Hamas.

But Palestinian President Abbas, a Fatah leader, suggested the Palestine Liberation Organization might handle peace talks. Abbas also leads that group.

In Washington, President Bush insisted "peace is never dead." But he said a Palestinian government cannot talk peace if it advocates violence and refuses to recognize Israel.

PRESIDENT GEORGE W. BUSH: We don't have a government yet so you are asking me to speculate on what the government will look like, I have made it very clear, however, that a political party that articulates the destruction of Israel's platform is a party with which we will not deal.

JIM LEHRER: In Europe, British Prime Minister Blair agreed. He said, "We can only do business with people who renounce terrorism." And Italian Prime Minister Berlusconi called the Hamas win "a very, very, very bad result." But the head of the Arab League, Amr Moussa, urged the world to accept the election results. We'll have much more on the Hamas victory right after this News Summary.

President Bush also said today he's concerned about any congressional attempt to change his domestic surveillance program. He said it might reveal too much to al-Qaida. And he warned, "If the attempt to write law is likely to expose the nature of the program, I'll resist it." He also said he has no doubts the surveillance without warrants is legal.

The U.S. military released another group of Iraqi prisoners today. It was the latest in a series of releases. This group included five women. But U.S. Officials denied they were let go because of kidnapper demands. A group holding American Jill Carroll insisted all female prisoners be freed a week ago. At least four women are still in jail, and Carroll's fate remains unknown.

The U.S. military also reported two more American soldiers were killed on wednesday. And the top U.S. Commander in Iraq, Army General George Casey, acknowledged U.S. Forces are under strain. He said, "Folks are stretched here, but they certainly accomplish their mission." On Tuesday, Defense Secretary Rumsfeld disputed reports the army is overextended. He said, "the force is not broken."

U.S. Senators debated Supreme Court nominee Samuel Alito again today. They also set a date for the confirmation vote. Late in the day, Majority Leader Frist announced a schedule allowing for several more days of debate.

SEN. BILL FRIST: We will be available as long as -- and as I said before, if Saturday is necessary, we would provide that time as well. The cloture vote will be 4:30 on Monday, and once that cloture is invoked we would have a vote 11:00 A.M. on Tuesday, Jan. 31.

JIM LEHRER: The Senate has split mostly down party lines on Alito. But Robert Byrd of West Virginia, the Senate's senior Democrat, said today he would vote "yes." Another Democrat, Tim Johnson of South Dakota, said he would vote to confirm as well.

The Congressional Budget Office today projected this year's federal deficit at $337 billion, up slightly from last year. That's lower than a White House estimate of $400 billion. The congressional report said future deficits will rise because of hurricane recovery, tax cuts, and Iraq.

General Motors today announced it lost $8.6 billion last year, the most since 1992. The heaviest losses came in North America. GM has said it does not want federal help. And in today's Wall Street Journal, President Bush cast doubt on any bailout.

He said U.S. automakers have to make "a product that's relevant." We'll have the story of some auto workers in Michigan later in the program tonight.

Choicepoint will pay $15 million for a major breach of its consumer data, the Federal Trade Commission announced today. The total includes a $10 million fine, the largest ever by the FTC.

Choicepoint acknowledged last year that thieves breached its security. They may have accessed credit histories and other information on 163,000 Americans.

On Wall Street today, the Dow Jones Industrial Average gained more than 99 points to close at 10,809. The NASDAQ rose 22 points to close at 2283.

And that's it for the News Summary tonight. Now it's on to: The Hamas storm in the Middle East, and auto workers in Flint, Michigan.

FOCUS - POLITICAL EARTHQUAKE

JIM LEHRER: We begin our Palestinian coverage with this report from the scene, by special correspondent Simon Marks. He and Margaret Warner have been covering the elections story for us all week.

SIMON MARKS: Fatah supporters took to the streets of Ramallah last night to celebrate a victory that was not theirs. The exit polls got it wrong. The faction founded by the late Yasser Arafat had not, in fact, won a narrow victory. Instead, it was roundly defeated by the radical Islamic organization Hamas.

And by day, it was Hamas supporters who were jamming the streets. Running in their first national electoral outing, Hamas candidates won a huge victory, securing 76 seats to Fatah's 43 in the Palestinian Legislative Council.

Hamas voters descended on the council building, tore down the Palestinian flag and flew their own Islamic banner underscoring the end to Fatah's ten-year dominance of government here.

Bowing to the inevitable, Prime Minister Ahmed Qureia resigned and urged President Mahmoud Abbas, himself a member of Fatah, to invite Hamas to form a government. Hamas leaders declared themselves ready.

ISMAIL HANIYEH, Hamas Leader (Translated): Hamas movement thanks the president and his interest in implementing these elections and his desire for these elections to be the gate to strengthen the national unity and to strengthen the political system based on political pluralism.

SIMON MARKS: Hamas leaders said today they are interested in what they called a political partnership with Fatah. But it's unclear whether that will extend to offering cabinet seats to Fatah members. Some Fatah officials said they now want their party to go into opposition and heal the internal divisions that may have cost it this election.

The Hamas victory is a seismic shift in the politics of the Palestinian Authority, its relationship with Israel and the broader Middle East. Branded a terrorist organization for leading an armed struggle aimed at destroying the fate of Israel, it has now scored an upset victory that puts its hands firmly on the levers of power. The consequences of that were being hotly debated in Jerusalem today.

HIRSH GOODMAN, Jaffee Center for Strategic Studies: I don't think anything that happens in the Palestinian territories could shock Israelis; we're beyond shock.

SIMON MARKS: Liberal Israeli intellectual Hirsh Goodman told the NewsHour's Margaret Warner that the election results could present his country with an opportunity.

HIRSH GOODMAN: Israel is going to be watching the music very carefully. And one thing about Hamas, first of all it has had a cease-fire with Israel for the last year and a half. The suicide bombers have not come from Hamas. The second thing is that they've always been a pragmatic party with a social agenda. And because of its pragmatism, there is a window of opportunity here. But it's going to take a lot of people climbing down from a lot of trees and a bit of time.

SIMON MARKS: Conservatives here disagree with Israel due to hold an election of its own in two month's time, they say the Hamas victory should mark a formal end to a period in which Israel tried to engage with the Palestinian Authority.

A spokesman for the conservative Likud Party said Israel's withdrawal from settlements on the Gaza Strip pushed through by Prime Minister Ariel Sharon, who later left the party before the stroke that left him in a coma, was the cause of the Hamas victory. When Israel flees, said a Likud spokesman, Hamas rises.

YOSSI KLEIN HALEVI, The Shalem Center: Let's stop excusing them and let's start treating them as responsible adults.

SIMON MARKS: Analyst Yossi Klein Halevi of The Shalem Center, a Jerusalem think thank, says Israel should take a tough stand.

YOSSI KLEIN HALEVI: The Hamas government -- even if it's democratically elected -- is a government that represents the random murder of over 1,000 Israelis. We will treat the democratically-elected government of Palestine as a terrorist genocidally-minded organization.

SIMON MARKS: Hard-liners say the Hamas victory makes them even more determined to push for an expansion of the wall that Israel has constructed separating Palestinian villages on the West Bank from Israeli settlements.

Only yesterday, Hamas leaders said they would never negotiate a way the clause in their covenant that demands the effective destruction of Israel.

Tonight acting Prime Minister Ehud Olmert convened a meeting of his top security officials to discuss the Hamas victory. And back in the Palestinian territories, intellectuals opposed to Hamas started agonizing about whether it will seek to Islamize a traditionally secular culture, reshaping not only Palestinian politics but society as well.

JIM LEHRER: More now from Margaret Warner in Jerusalem. I spoke with her earlier this evening.

JIM LEHRER: And hello, Margaret.

MARGARET WARNER: Hi, Jim.

JIM LEHRER: Have you talked to anybody today who really expected this to happen?

MARGARET WARNER: No, no. I mean Hamas expected to do well. Fatah by the end of the campaign knew that they were in trouble. But nobody expected Hamas to win outright or the size of this win.

JIM LEHRER: Now the Israeli reaction, what can you tell us about that? There is some official word late today; what is it?

MARGARET WARNER: The official word late today came when the prime minister held about a three-hour meeting with what they call the inner cabinet of defense and foreign ministry. And I'm told that the whole bureaucracy had worked up all these big decisions they have to make. It's not just do we talk to the Palestinians or not but I mean there are several decisions.

Do they go ahead and start dismantling the settlements as promised? Do they start withholding the tax money from the Palestinians? I mean these two societies are really very intermingled. Do they let elected members from Gaza travel to the legislature to meet, or do they have them arrested as terrorists?

So very little of that was decided at least, I don't know if it was decided. All they came out and said was, we will not negotiate with a government that has Hamas members in it who deny Israel's right to exist and are terrorists.

Now I'm told that that leaves a tiny window open. I mean, if the Palestinians wanted to form a government of all technocrats that is in the cabinet with no Hamas members, i mean this may be very unlikely, or, of course, if Hamas were to be willing to come out and renounce its long stated positions.

The other thing is I'm told is what Israel wanted to is not completely close the door and put the ball back in the Palestinians' court.

JIM LEHRER: All right. Now back in that court, what has -- what has Hamas said today about these very issues, about its position on Israel, its willingness to negotiate and whatever?

MARGARET WARNER: Well, the interesting thing is, Jim, that they don't have a unified command or power structure yet. And that's been part of their strength in Gaza and in the West Bank. But they had always planned afterwards, after the election to get together and hold a big confab and have a big discussion about what to do. But they never thought they would be dealing with this.

So you had conflicting statements, but the most interesting one in the inner Palestinian debate was the public comment from some Hamas leaders that they wanted a national unity government; they wanted a Palestinian people unified.

The people in Fatah and the Palestinian Authority say, at least the younger guards say look, they just won this as a figure leaf. One person said, they just want us to do the dirty work like continue to, as they put it, try to negotiate with the Israelis where we would have no standing.

And a lot of the younger members are saying let's not do it; let's go into opposition. If we stay -- if we join this government, we'll have no credibility, we'll look totally opportunistic and we'll give them a figure leaf, we'll give them cover.

And in fact, one of them said to me much what Yossi Halevi said when i interviewed him this afternoon in Simon's - in the piece Simon just did - which is, is let the Palestinian people say if Hamas can govern and let them see what they voted for.

So nothing has been decided yet. Mahmoud Abbas had a big meeting late tonight, with all - I don't know if it was all but a lot of the Fatah members who won. All they did was come out and essentially give the speech you and I talked about last night about, I expect the new prime minister to form this government according to my principles. I was elected president. But that leaves a lot open to question. I mean, he's not in much position. He doesn't have a lot of leverage at this point.

JIM LEHRER: And he also suggested that the Palestine Liberation Organization might be reactivated to negotiate with Israel rather than the new Hamas-led government. What's that about?

MARGARET WARNER: I know, and frankly i found that totally puzzling, and I was not able to get through to anyone. And it has been just about an hour since he said that. I thought the PLO, where did the PLO come back into this?

One of the things that's happened here, Jim, is that, i mean, both sides are reeling that the Palestinians talked about a sense of panic. The Israelis talked about disequilibrium and how jolted they were. The leading Israeli defense correspondent tonight said it was shock and awe. And one of the signs of that is that even the vaunted cell phone systems here are sort of melting down, I mean not completely, but it's just hard to get through to people. So I frankly just can't explain to you what that meant.

JIM LEHRER: But back to your other point about Hamas, there is no one person or one small group of people even speaking for them now at this point, correct?

MARGARET WARNER: I'm told that Mahmoud al Zahar who is becoming familiar, he is one of the three or four Gaza leaders that you often see quoted, he did call Mahmoud Abbas today but basically just to kind of open a channel of communication, and at least the two or three people I talked to did not feel he had made any kind of offers.

Basically each side within the Palestinian stand-off now is trying to decide what their position is before they can talk to one another.

JIM LEHRER: Sure. And this is going to probably take awhile to sort through, correct?

MARGARET WARNER: Oh, absolutely, absolutely because as I said, nobody -- I think that the Israelis now feel and they've been in, by the way, I'm sure you're going to report the cells were in constant communication with, you know, Washington, London, Paris.

I mean, one of the decisions they have to make is do they call on the international community to cut off funds for the Palestinian Authority. If that happens, the PA could collapse. They are already in deep money troubles.

So I mean, each side has all kinds of -- it like three-dimensional chess -- they have all kinds of things to decide before I think they can really negotiate with one another, even Hamas and the Palestinian Authority or Fatah.

JIM LEHRER: Finally, Margaret, because we spent so much time on it last night, why were the exit polls so wrong?

MARGARET WARNER: Jim, I was very glad that I said to you, remember exit polls in the U.S., and -

JIM LEHRER: Right.

MARGARET WARNER: -- let's look the turnout.

Put briefly and not too complicated, they had this strange voting system where you go in and vote for the nationalist; that is easy for the pollsters to figure out.

But then you vote for local candidates. So last night I talked, for instance, yesterday at the polling, I talked to one woman, a professor who said well I voted for Fatah on the national list because I don't want Hamas -- and she had her son with her, you know, ramming - they're ramming Islam down my son's note, that is my job. But then she said, but for the local candidate i voted for -- and if it was a PFLP, now that is a radical terrorist group, remember the Achille Laurel -

JIM LEHRER: Right.

MARGARET WARNER: -- That's the PFLP - so she totally cancelled her vote out. That happened in a lot of places.

And if you look at why Hamas did so well, they only had a three-seat margin on the national list -- I mean they still won 30-27. But they had a huge margin on the local list. And that's because they always fielded one candidate and Fatah -- because they were disciplined -- and Fatah was completely undisciplined and they sometimes have four and five candidates in a district.

So I don't see how any pollster could possibly track all that unless they had people in all, whatever it was, 66 districts. And that is why I think they were so badly off. They still missed who won, even just the national list Hamas won. But if the national list were the only thing, they wouldn't have had enough seats to be totally in charge.

JIM LEHRER: Okay. Margaret, thank you very much again.

MARGARET WARNER: Thanks, Jim.

FOCUS - WORLD VIEWS

JIM LEHRER: Reverberations from Hamas' victory were felt throughout the world. None were more closely watched than those of the United States. Kwame Holman reports.

KWAME HOLMAN: The first question posed to President Bush at a news conference this morning was whether Hamas' victory had crushed hopes for Middle East peace.

PRESIDENT GEORGE W. BUSH: Peace is never dead, because people want peace. I believe -- and that's why i articulated a two-state solution early in my administration so that -- as a vision for people to work toward, a solution that recognized that democracy yields peace and the best hope for peace in the Middle East is two democracies living side by side.

So the Palestinians had an election yesterday, and the results of which remind me about the power of democracy.

You see, when you give people the vote, you give people a chance to express themselves at the polls, they -- and if they're unhappy with the status quo, they'll let you know. That's the great thing about democracy. It provides a look into society.

And yesterday, the turnout was significant, as I understand it. And there was a peaceful process as people went to the polls. And that's positive. But what was also positive is that it's a wakeup call to the leadership.

Obviously, people were not happy with the status quo. The people are demanding honest government. The people want services. They want to be able to raise their children in an environment in which they can get a decent education and they can find health care. And so the elections should open the eyes of the old guard there in the Palestinian territories.

I like the competition of ideas. I like people that have to go out and say, "Vote for me and here's what I'm going to do." There's something healthy about a system that does that.

KWAME HOLMAN: But Mr. Bush made it clear that peace in the region was in jeopardy with the militant Hamas in power.

PRESIDENT GEORGE W. BUSH: I don't see how you can be a partner in peace if you advocate the destruction of a country as part of your platform. And I know you can't be a partner in peace if you have a -- if your party has got an armed wing. And so the elections just took place.

We will watch very carefully about the formation of the government. But I will continue to remind people about what I just said: That if your platform is the destruction of Israel, it means you're not a partner in peace. And we're interested in peace.

KWAME HOLMAN: He urged Palestinian Authority President Mahmoud Abbas to stay in power.

PRESIDENT GEORGE W. BUSH: We'd like him to stay in power. I mean, we'd like to stay in office. He is in power; we'd like him to stay in office.

REPORTER: Will this affect aid to the Palestinians? And will you be able to work with Hamas, assuming they take on a large share of the government?

PRESIDENT GEORGE W. BUSH: Well, I made it very clear that the United States does not support political parties that want to destroy our ally, Israel, and that people must renounce that part of their platform.

But the government hadn't formed yet. They're beginning to talk about how to form the government. And your question on Abbas was a good one. And our message to him was, we would hope he would stay in office and work to move the process forward.

Again, I remind people, the elections -- democracy can open up the world's eyes to reality by listening to people. And the election process is healthy for society, in my judgment.

In other words, one way to figure out how to address the needs of the people is to let them express themselves at the ballot box. And that's exactly what happened yesterday. And you'll hear a lot of people say, "Well, aren't we surprised at the outcome?" or this, that or the other. If there is corruption, I'm not surprised that people say, "Let's get rid of corruption." If government hadn't been responsive, I'm not the least bit surprised if people say, "i want government to be responsive."

And so it was an interesting day yesterday in the -- as we're watching liberty begin to spread across the Middle East.

JIM LEHRER: And what of reaction in the rest of the world? Well, Ray Suarez was in a particularly opportune place to sample that today: The World Economic Forum at Davos, Switzerland. I spoke with him a short while ago.

JIM LEHRER: Ray, hello.

RAY SUAREZ: Hi.

JIM LEHRER: All right, first of all, set the scene there: tell us about this summit, what its purpose is and who was actually there.

RAY SUAREZ: It was begun decades ago by a Swiss academic, an economist, a business professor who thought that many of the world's problems could be solved if only you could get the world's problem solvers to hang around together for a week.

So he convinced a critical mass of them to come to a small alpine village in southern Switzerland and talk about the problems of the world. And when you get a couple of big names, they bring more big names and then you get the incredible five days, which is now the World Economic Forum in Davos.

JIM LEHRER: Who is there now? What kind of people are there now?

RAY SUAREZ: Well, you've got the secretary-general of the United Nations Kofi Annan, the president of Nigeria, Olusegun Obasanjo. I ran into the prime minister of Turkey as he and his delegation arrived this afternoon to start talks; Pervez Musharraf, the president of Pakistan, various members of the United States Senate and House of Representatives, professors, heads of business schools, even heads of whole worldwide churches.

Today one of my lunch companions was Bartholomew, the ecumenical patriarch, the leader of the world's Orthodox Christians.

JIM LEHRER: All right. Before today had there been much buzz among all these folks about the possibility that Hamas might win the election, the Palestinian elections?

RAY SUAREZ: When the Palestinian elections came up in conversation, which they did frequently, Hamas's chances were not really given a lot of hope.

People assumed that they would do very well -- that Fatah would hang on either by honest means or just out of habit. And no one -- and I'm talking about a lot of Middle East experts, people who live in the region -- gave Hamas a shot at winning a majority of the seats.

JIM LEHRER: Now what has been the reaction now to the fact that they did so?

RAY SUAREZ: Well, it's almost been wonderment. People are talking to each other and saying, more or less, can you believe it, they really did it? This evening an international affairs professor was telling me that people he has spoken to from Hamas said that they didn't even expect to win the election. And some of them didn't even want to win the election figuring a spell in government as a minority party, perhaps with a few cabinet ministries, some actual government responsibilities would prepare them to take power down the road.

JIM LEHRER: Now you've got -- what about some people from the Middle East that you've talked to or have heard from, what has been their reaction to this in the Arab and Muslim world?

RAY SUAREZ: Well, from the Arab and Muslim world the reaction has been cautious but very interesting. Everybody has said, these are heads of state for the most, part look, they won, and we have to respect that. But they also expressed a real desire for the killing to end in that part of the world. And that necessitated both Hamas, which not only is opposed to the existence of the state of Israel but is opposed to the existence of the Palestinian territories and a two-state solution, is opposed to the Palestinian Authority's way of running government and dealing with the Israelis over the years.

Now that they are in charge, the opinion was generally expressed by people like Pervez Musharraf, the president of the Iraqi National Assembly, and the queen of Jordan -- that Hamas would have to deal with Israel just as Israel would have to deal with the reality of Hamas in power.

JIM LEHRER: President Karzai of Afghanistan is there. What has he said about it?

RAY SUAREZ: Well, he said interesting things. He said first that the will of the people must be respected. But now that Hamas was voted into office, they should have the courage to treat Israel as a nation that has the right to exist just as the Palestinians have the right to exist as a nation.

President Karzai said we should wish that the people of Israel would recognize the needs of the Palestinians, that that need is understood by everyone inside and outside the region, and that there's way too much emphasis on the politicians.

Toward the end of his answer he started to get almost poetic about how the future of the region was not in the hands of politicians but of mothers and fathers, children, family members, people who get up and do their jobs every day for a living. We should look at people on both sides that way, not on the basis of liking or not liking this or that government.

JIM LEHRER: Finally Kofi Annan, secretary-general of the U.N., what has been heard from him?

RAY SUAREZ: Well, he has to be very cautious because he plays, obviously, as the world's super diplomat a kind of middle role here. He can't be expressing too much jubilation for one side or the other.

One of the first things he did after the results were confirmed was to call the leaders of Hamas and congratulate them on their victory, also express a hope for peace in the region. The so-called "quartet" that includes the United States, the European Union and Russia, will be meeting next week to talk about the future of Israel and a future Palestinian state, and of course Hamas will be the lead of their discussion.

JIM LEHRER: Okay. Well, Ray, thank you very much.

RAY SUAREZ: Good to talk to you.

FOCUS - WHAT'S NEXT?

JIM LEHRER: Now, some analytical connecting of the possible dots from the Hamas victory, and to Jeffrey Brown.

JEFFREY BROWN: And for that we get two views: Martin Indyk served as assistant secretary of state for near eastern affairs and twice as U.S. Ambassador to Israel during the Clinton administration -- he's now director of the Saban Center for Middle Eastern Policy at the Brookings Institution in Washington; and Khalil Jahshan, former president of the National Association of Arab Americans -- he now lectures in international affairs at Pepperdine University and is a private consultant on Middle East issues. And welcome to both of you.

Let me get something quickly out on the table because every report we just heard, Margaret, Ray, everyone, referred to what a shock this was. Martin Indyk, here in Washington, was it a shock? Do you think the administration was ready for these results?

MARTIN INDYK: No, I don't think so I think everybody was shocked. I was certainly shocked too. There was an expectation as Ray said that Hamas would do well, perhaps would beat Fatah, but not that it would get such a strong majority and therefore it would have to form a government. Even Hamas, itself, I don't think expected to be in that position.

JEFFREY BROWN: What do you think?

KHALIL JAHSHAN: Same thing. I think we were all shocked. No one anticipated these results, particularly the margin of victory that Hamas achieved. And I think this is a major political earthquake that registered at least 9.5 on the political Richter Scale here in Washington.

JEFFREY BROWN: All right, the president says we just saw him say a political party that articulates the destruction of Israel as part of its platform is a party with which we will not deal. Now is he right to say that given that this is now a party that has been elected to power, Mr. Indyk?

MARTIN INDYK: Yes, he has not a choice but to say that. On the one hand he has -- we have to result respect the results of a democratic election that the president pushed for very hard. And, by the way, one should say in this regard, that there was an opportunity to postpone the election. Mahmoud Abbas, the president of the PA wanted to do so. But this administration insisted that it go ahead.

So, on the one hand, we have to respect the results. On the other hand, as a sovereign government, we have no obligation to deal with a government that's committed to -- not to peace with Israel but to the destruction of the state of Israel, a government that will be headed by an organization that is on our own terrorism list because of its terrorism and pioneering of suicide bombing.

JEFFREY BROWN: Mr. Jahshan, is the president right?

KHALIL JAHSHAN: I think the president is right in the sense that all parties right now are jockeying for position and trying to pressure each other to take the right path.

The fear that I have is that we do not put ourselves in the same predicament that we did in the '70s and '80s, that we become victims to our own pronouncements and we lose political maneuverability in trying to talk to people who are in charge and whose role is vital in continuing some form of peaceful negotiations in the future.

So I don't take these pronouncements seriously. Unfortunately, though, I feel that the way the president dealt with the issue today was not kind of well-received, I think in the region and was not articulated well.

I prefer, for example, the statement by the secretary of state that she sent via video conference to Davos, where she kind of left more political maneuverability or some space to people who are listening in the region.

The president kind of made it sound like we're not going to talk to anybody.

JEFFREY BROWN: Well, what kind of contact or cooperation and with whom would you see for the U.S. right now?

KHALIL JAHSHAN: Well, the U.S., of course, can continue to talk to all kinds of parties in the region. We do not suffer from lack of allies. The problem is we have taken a policy that started as benign neglect and became purposeful neglect for the past several years with regards specifically to this issue.

And in a way, we have contributed directly to these results or to this political business disaster. But we can talk to many people. We have been talking indirectly. There are all kinds of dialogues with so-called democratic Islamists taking place through many NGO's here in Europe and the Middle East. And these are basically leaders of Islamist movements like Hamas but those who have committed in public basically to respect the democratic process.

So we can continue to talk to many of these parties, particularly those alluded to as possible players and third parties in dealing with Hamas.

JEFFREY BROWN: Do you have a problem with those kinds of contacts?

MARTIN INDYK: Look, Hamas now is on the horns of its own dilemma, now that it will lead the government. It will have to decide how it's going to deal with the issue of the desire of the Palestinian people, the needs that they have for calm and order and economic reconstruction.

At the same time, as it's going to want to continue with its policy of militant resistance, what we call terrorism, towards Israel and with the objective of destroying the neighboring state. That, we have no interest as an administration in easing that dilemma, so I think it's very important for the United States and the European governments, for that matter, are very clear at this stage that they are not going to deal with a government that is committed to an anti-peace process because then Hamas is going to have to over time make a decision.

I think Khalil is right in one respect, the Egyptians and Jordanians in particular, as neighbors of the West Bank in Gaza do not want to see a terrorist failed state on their borders. And therefore they are going to be working to try to moderate Hamas's position as well.

JEFFREY BROWN: What about the question, you raised it earlier, and we saw the president talk about the democratic process. He was very praiseworthy of that, while having problems with the result. Does that lead to -- put him in a bind in terms of how he can respond?

MARTIN INDYK: Yes, and I think that there is a big question mark tonight about the whole effort to promote democracy in the Middle East. The president is still clearly as we saw in that press conference very committed to it.

But its consequences are quite dire tonight for the peace process as we've known it in the past. I would go as far as to say that the peace process is over, that Hamas will not deal with Israel and Israel will not deal with Hamas; and we are not going to have a negotiating process.

So the whole question of what it is that we're achieving here by pushing democracy has a big question mark over it tonight. I think that it's a real gamble to believe that somehow Hamas's victory will lead to the moderation of Hamas and that everything will be fine in terms of the president's vision of a two-state solution. What we're headed towards now is a two-state outcome.

But on the one side is an Israel that will be behind a high wall and fence and on the other side is a Hamas-ruled Palestinian terrorist state and perhaps a failed state.

JEFFREY BROWN: What do you think about the democratic process and following it and following by its results?

KHALIL JAHSHAN: I think the program that the president has been advocating has definitely suffered as a consequence of these elections. There is a big question mark right now on a program that was hastily put together post 9/11 without thinking of the consequences of this type of advocacy of democracy without tilling the ground, if you will, or tilling the soil to allow that type of democracy to grow and to be able to nurture it from a distance. These results, I think, made that criticism a lot more credible and more forceful today than yesterday.

With regards to Hamas, definitely, I mean Hamas cannot have its cake and eat it too. It cannot claim to be a responsible party to govern the state of Palestine in the state that's in the making, at the same time continue to describe Palestine and its political platform or in its charter as an Islamic waf but Hamas, again, is a lot more pragmatic than many people think, you know, in a way. particularly the inside Hamas, those who have been involved in the elections.

And given their way, chances are they will look at other options. And my information is they are actually talking to several independent Palestinian personalities as we speak tonight to see if they can pass the buck and allow somebody neutral to run the cabinet rather than a Hamas personality to run the cabinet, of course, with influence by Hamas, but to have an independent personality, academic, respected, recently elected also in the elections yesterday, to be the next prime minister of Palestine.

JEFFREY BROWN: What about Mr. Indyk's point that the peace process as we know it is essentially over?

KHALIL JAHSHAN: I have declared that long before.

JEFFREY BROWN: You are not surprised?

KHALIL JAHSHAN: Long before Martin -- that the peace process has been dead since 2000, it has just been too expensive politically to pay for the funeral.

MARTIN INDYK: But I must say that the peace process may be dead but another process will emerge. And I think on the Israeli side we already saw the beginnings of that with the unilateral disengagement from Gaza.

And I think that the government of Ehud Olmert - assuming that he leads the government after the Israeli elections at the end of March -- is likely to say well, we don't have a partner now with Hamas running the government and we need to take another unilateral step, this time in the West Bank, determine our own borders, and for the interim at least, and let's get out of there.

And Hamas which will not want to deal with Israel will not mind inheriting 70 percent of the West Bank without having to make any compromises with Israel.

So something else is going to happen here. But it's essentially that the Israelis and Palestinians are going to go their own way. They're going to separate. And then Hamas is going to have to decide.

I agree with Khalil that they are pragmatic, that they understand that they have to meet the needs of the Palestinian people. That's why they haven't actually conducted terrorist attacks for the last year. And I think that there is a good prospect that because the Palestinians people are exhausted, because they don't want to see a return to the violence and terror of the Intifada, that Hamas in government will actually maintain the calm and then we will have the ultimate irony, that while they don't want to make peace with Israel, they may actually have an interest in maintaining the calm and maintaining the peace.

JEFFREY BROWN: And we just have a minute left.

MARTIN INDYK: Basically, look, I agree that recently we've heard the last few days some interesting statements from Olmert at the Herzliya Conference, some of the Hamas leaders during the election showing some hope that one could build on. But frankly this is deja vu in the sense that these results I think have set us back probably 20 if not 30 years.

We're going to go back to again negotiating over charters and negotiating over removing the destruction of this party by the other party. And so there is -- the chances of two parties who have conducted ten years of negotiations coming back to the table and restarting their negotiations from where things stopped right now are much dimmer. These chances are much dimmer and much slimmer than anticipated.

JEFFREY BROWN: All right, Khalil Jahshan, Martin Indyk, thank you both very much.

FOCUS - STATE OF THE UNION

JIM LEHRER: Finally tonight, the financial losses announced today by General Motors bring more focus on the autoworkers, the people who make the cars and parts.

Our economics correspondent, Paul Solman, of WGBH-Boston, reports on a group of those workers in Flint, Michigan.

SPOKESMAN: It'd like to welcome you --

PAUL SOLMAN: A makeshift union hall at the Ramada Inn in Flint, Michigan.

SPOKESMAN: One person here, all of us together, we have power.

PAUL SOLMAN: Striving for militancy here in Flint, birthplace of the United Auto Workers, a splinter group of the UAW is trying to invoke the spirit of 1937.

GREGG SHOTWELL, Delphi Worker: Walter Reuther said, "If you close one plant, we will close all the plants." (Applause)

PAUL SOLMAN: This was the sit-down strike of '37 that launched a previous generation of blue-collar Americans on the road to the middle class. Now, however --

GREGG SHOTWELL: They want to steal our pensions. They want to deprive us of health care. They want to cut our wages. But over and above that, they want to strip us of dignity on the job.

PAUL SOLMAN: Gregg Shotwell, like many here, has long worked at Delphi, Flint's beleaguered parts supplier, which used to be owned by GM, but was spun off back in 1999 to sink or swim on its own.

This fall, Delphi's so-called turn-around-artist CEO, Steve Miller, took the firm into bankruptcy.

Miller wants a judge to void the health care and pension promises of Delphi's UAW contract, slash the $27-an-hour wages of these workers to less than half that.

Delphi declined our request for an interview. Its workers, however, were more than willing to talk.

WORKER: We wouldn't be able to support our family, to take care of our families. It's not fair.

WORKER: We'd be going through bankruptcy ourselves if we had to take that big of a pay cut, you know?

WORKER: It's a bunch of crap. (Laughs) You want to know the truth? That's crap. I mean, we got them where they are today.

PAUL SOLMAN: Unfortunately, where they are today is on the rocks. Delphi does turn out technology intensive products. But it also still relies on simple parts, like sparkplugs, that can be made a whole lot cheaper abroad.

TODD SEIBT: Right behind us is the factory that makes millions of sparkplugs for General Motors today.

PAUL SOLMAN: Todd Seibt has done research on sparkplug economics for the local newspaper.

TODD SEIBT: The average cost of all the plugs built in this plant is about $2.00. They sell that to GM, Delphi's former parent company, for about $1.50. But GM can buy that same plug on the global market for about $1.00.

PAUL SOLMAN: So wait. So it costs them $2.00 to make it?

TODD SEIBT: Approximately.

PAUL SOLMAN: GM pays them $1.50.

TODD SEIBT: Correct. Delphi is losing 50 cents, and GM is getting a 50-cent deal, but still losing 50 cents over the global price.

PAUL SOLMAN: GM propping up its supplier, Delphi, still losing money. Dead-end economics, says the company, so it's targeted the usual suspects, the workers. It's a situation all too familiar in GM'S once-hopping hometown.

FOOTAGE: Teamwork, teamwork --

PAUL SOLMAN: During the first half of the 20th Century, Flint's fortunes rose as General Motors grew into the largest and most profitable corporation in the United States.

Back in 1955, GM employed over 80,000 people in Flint alone, including those who made sparkplugs in-house. But it's been pretty much downhill for decades, as GM has shed market share and lost tens of thousands of jobs.

ROGER SMITH (1986): Today we are announcing the closing of 11 of our older plants.

SPOKESMAN: The effect on Flint is absolutely devastating.

PAUL SOLMAN: By 1989, when Michael Moore declared a state of emergency in "Roger & Me," his anti-GM diatribe, Flint's GM job count was down to 30,000.

Today it's below 16,000 as things have just kept getting worse. The famed Chevrolet complex, called "Chevy in the Hole" for the valley it filled as recently as two years ago, is now just the hole.

The epitaph for the once-massive Buick City complex, "Demolition means progress," and the $80- million Six Flags Auto World, which raised Flint's reverie of revival in the '80s, was itself razed a decade later.

Flint's former glory, meanwhile, as the cradle of union militancy is preserved at the local museum. Professor Neil Leighton turns back the clock for us to the mythic winter of 1936-1937. The auto industry is rolling in money; the lower-class auto workers, an exploited afterthought.

NEIL LEIGHTON: Labor conditions are horrible. People are working long hours under terrible conditions and their pay is not going up. There's no such thing as benefits or retirement or anything like that.

PAUL SOLMAN: So, in December, the workers sit down on the job at Flint's Fisher body plant and occupy it. When the police come to evict them 00

NEIL LEIGHTON: The workers are up on the roof of the plant. And it's 16 degrees out and they open the fire hoses and coat the police with a nice coating of ice.

And in addition to that, they drop fire extinguishers on them, coping tiles, and ultimately, they take car hinges, which are great ammunition, especially when they're fired from an inner tube.

SPOKESMAN: Rioting and violence flare in the tense atmosphere of the nation's greatest auto strike.

PAUL SOLMAN: The strike paralyzed GM, at its peak of profitability, for more than 40 days. Its resolution ushered in a shared prosperity for more than 40 years, narrowing the income gap between labor and management in ways unimaginable back then. Meanwhile, confounding union critics, the economy grew as never before.

So it's the spirit of '37 that today's dissidents invoke, believing that as the Fisher body sit-down shuttered all of GM, so would a Delphi strike paralyze it today.

GREGG SHOTWELL: We can bring General Motors to its knees. The sit-downers won because they seized control of the shop floor. They won because they shut down General Motors.

PAUL SOLMAN: So why not shut down Delphi today and force GM to preserve the hard-won gains of the past?

The UAW leadership isn't talking strike, however, but legal action to enforce the contract. Thus the militants are organizing on their own.

GREGG SHOTWELL: The international has their place at the bargaining table. We have our place at the shop floor at the point of production. We can directly impact production, directly impact profit.

PAUL SOLMAN: Led by Gregg Shotwell, the dissidents have begun with a tactic called "work to rule," a slowdown in which you do everything strictly by the book.

GREGG SHOTWELL: My machine stops. What's wrong? I don't know. They bring the job setter over. "Gosh, I don't know." They bring a skilled tradesperson over. "I don't know." Now the boss is really sweating because he really doesn't know, and it's time for him to make a decision to tell us what to do. He's the knowledge worker.

That's the only thing that's going to affect them; that's the only thing that's going to bring General Motors to the bargaining table, and the effect of that is going to reduce the inventories so that when we go on strike, they're in a more vulnerable position.

PAUL SOLMAN: But aren't you worried that you're biting the hand that feeds you?

GREGG SHOTWELL: Biting the hand that's stopped feeding us. Why should we be slashed to poverty wages and then try to save General Motors? I'm sorry -- we have no reason in the world to want to save that company. Either they come to the bargaining table and treat us respectfully, or we will bring them down.

PAUL SOLMAN: You certainly feel for the workers when you look at drab Flint today, its stores boarded up, the parades of yesteryear conspicuous by their absence. And on top of that, this GM engine plant may soon be boarded up, Delphi East closed, costing another 6,000 jobs.

GM Worker Claire McClinton also works in the community.

CLAIRE McCLINTON: You know, an emergency used to be some catastrophic event in people's lives and now people are seeking help just to live. You know, their life is in an emergency.

PAUL SOLMAN: A local church, serving lunch to members of the community, many of them from auto worker families. Any more shutdowns, and the only assembly lines left in town could be those at the soup kitchens. And presumably, things will just get worse if Delphi, and then GM itself are shut down.

CLAIRE McCLINTON: We're just going to be like Hurricane Delphi; that's what people are calling it. It's going to be a devastating, catastrophic event. But on the other hand, the people from Flint, and with our history and the things that we're hearing is that people are not going down without a fight.

PAUL SOLMAN: Industry analyst David Cole agrees with the natural disaster analogy.

DAVID COLE: We could look at a cascading effect that would be a horrifying kind of thing. It would be Katrina Detroit, literally, or Tsunami Detroit.

PAUL SOLMAN: But, Cole insists, a fight would be futile. This is 2006, not 1937.

DAVID COLE: The company today is not a given. It's a very fragile position that it sits in. If the dissidents really gain tremendous power, they could kill everything.

PAUL SOLMAN: On the other hand --

DUANE ZUCKSCHWERDT: If someone come up to you and said, "Okay, you've got 30 years with this company"-- and people plan their lives around thinking I've got some sort of guarantee here-- and all of a sudden say, "it's gone," wouldn't you be concerned or upset? We understand where our members are at with that.

PAUL SOLMAN: Duane Zuckschwerdt is vice president of the UAW's regional office in Flint. His backdrop: A monument to the great sit-down strike of 1937.

But while the union honors its militant past, it has long staked its future on peaceful partnership with the likes of GM.

Given the double whammy of automation and globalization, David Cole says the UAW has no choice.

DAVID COLE: The union as a traditional adversarial or confrontational party to management is gone; it's dead. The union in the collective bargaining negotiations has no ability to define wages and benefits anymore. The market is defining those. And the only hope for the union is as a collaborative partner with management.

PAUL SOLMAN: The dissidents at Delphi, by contrast, denounce the UAW

SUE ATKINSON: They are spineless.

PAUL SOLMAN: Former GM worker Sue Atkinson thinks the union's partnership strategy is a loser.

SUE ATKINSON: And the international should have stepped up to the plate a long time ago. For the last 20 years, they've done nothing, and rank and file is tired of it.

PAUL SOLMAN: The UAW is diplomatic in response.

DUANE ZUCKSCHWERDT: It's a democratic organization and members have a right to, you know, their opinion.

GREGG SHOTWELL: Take control of production!

PAUL SOLMAN: But even if the UAW thinks a strike would be self-defeating, the dissidents are forcing it to bow, or at least give lip service, to the spirit of '37.

Is there going to be a strike?

DUANE ZUCKSCHWERDT: That's -- that's a strong possibility.

PAUL SOLMAN: So -- and if you strike Delphi, what happens to General Motors?

DUANE ZUCKSCHWERDT: General Motors could probably be shut down.

PAUL SOLMAN: General Motors shut down at huge cost to everyone.

On the other hand, if you were one of these people and had just been offered a pay cut of 50 percent, no more pension, no more health care, what would you do?

RECAP

JIM LEHRER: Again, the major developments of this day: The Palestinian election results showed the Islamic militant group Hamas won a landslide victory. President Bush said the United States will not deal with a Palestinian government that refuses to recognize Israel, and the president also warned he might oppose congressional attempts to change his domestic surveillance program. We'll see you online and again here tomorrow evening with Mark Shields and David Brooks, among others. I'm Jim Lehrer. Thank you and good night.