The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight: The news of this Wednesday, led once again by the hurricane story. We have the day's developments, the search and rescue effort in New Orleans, the health and disease threat all along the Gulf Coast, Mississippi's rebuilding problems, and the latest on what Katrina's done to the economy. Then, we'll get Paul Volcker's final conclusions on the U.N.'s Oil-for-Food scandal.

NEWS SUMMARY

JIM LEHRER: Authorities in New Orleans pressed holdouts to leave today or risk disease and death. Amid that effort, engineers labored to empty more water from the city and search teams continued the hunt for the dead. Betty Ann Bowser narrates our report.

BETTY ANN BOWSER: More than a week after Mayor Ray Nagin first imposed a mandatory evacuation order for New Orleans...

MAYOR RAY NAGIN: Every person is hereby ordered to immediately evacuate New Orleans.

BETTY ANN BOWSER: Reporter: ...as many as 10,000 residents remain in the largely destroyed city. But Nagin has now made it clear they will have to go, and he has authorized the use of force as a last resort to carry out his order. These NewOrleans police officers were told to remove people by any means necessary.

SPOKESMAN: If, for some reason, you don't get a response and you hear people on the inside and refusing to open the doors or what not, do what you have got to do.

BETTY ANN BOWSER: There is some disagreement among city, state and federal officials as to how or whether this order should be carried out.

ART JONES: There's no plan for us to force anyone out.

BETTY ANN BOWSER: Louisiana state officials were quick to say they would not force people from their homes. Art Jones is the head of the state's disaster recovery division.

ART JONES: That is a very tough decision to go force an American out of their home. But we're going to do the best that we can to convince them in a reasonable manner to get out while the getting out is still a matter of saving them

BETTY ANN BOWSER: Conditions grow ever more perilous in the flooded streets of New Orleans. But if residents still refuse to leave, they will not be denied assistance from authorities.

SGT. TIMOTHY PALMER, California National Guard: We're going through each of the residences, verifying if there's anybody in the actual residence, offering them any assistance we can offer them, from food to water, taking down notification.

BETTY ANN BOWSER: National Guardsmen have been told not to forcibly remove residents. .

SPOKESMAN: Army National Guard, do you need help?

BETTY ANN BOWSER: Regular military on the ground are prohibited by law from police functions. All told, there are now over 60,000 Guard and military personnel in the region. There is no drinkable water or electric service in New Orleans and won't be for months. The sewer system is now open-air, flowing by many front doors.

It's the befouled water that has officials most concerned because it provides a perfect breeding ground for pestilence. The public health threat from a raft of water- and animal-borne diseases is very real. According to the Centers for Disease Control, at least three people in the Gulf region have already died of an illness that resembles cholera.

DR. LOUIS MINSKY: It's a well known organism and it's highly fatal, particularly in patients who have weak immune systems who have exposed their wounds or cuts.

BETTY ANN BOWSER: The Environmental Protection Agency also said its tests showed elevated lead levels. There is growing concern of health crises in large evacuation centers. At least 200 people at Houston's Astrodome are suffering from an intestinal virus. In New Orleans, the security situation has stabilized.

EDDIE COMPASS: It is a very quiet night, a very peaceful night. With the military presence and police presence we have in the city of New Orleans, right now New Orleans may be one of the safest places in the United States.

BETTY ANN BOWSER: Efforts to drain the city continue. But only 23 of the 148 permanent pumping stations so essential to the task are online. Casualty recovery teams are also beginning their solemn work. There were reports today that 30 nursing home patients drowned southeast of New Orleans and 100 more people were said to have died in a warehouse where they had gathered along the river, waiting for help that never arrived.

JIM LEHRER: A major utility company said today it will shut off natural gas to much of New Orleans to repair broken lines. Gas has bubbled to the water's surface in many places and caught fire. And 850,000 electricity customers were still in the dark today in Louisiana and Mississippi. But Mississippi Governor Haley Barbour said crews are "getting over the hump" in restoring power.

Economic losses from the hurricane will be "significant, but not overwhelming." The Congressional Budget Office offered that assessment today. It warned the storm's effects may eliminate 400,000 jobs and cut economic growth by a full percentage point during the second half of the year. President Bush asked Congress for another $52 billion today for the recovery effort. That's on top of $10 billion already approved.

Senate Minority Leader Reid sharply questioned the president's response. In a letter to a Senate committee, he asked: "How much time did the president spend dealing wit h this emerging crisis while he was on vacation."

Also today, a leaked memo showed Federal Emergency Chief Michael Brown waited until after the storm hit to ask for more workers. He faced questions today about calls by top Democrats that he be fired.

REPORTER: Democratic leader Nancy Pelosi has called for your resignation and I'm wondering if you have a response to that.

MIKE BROWN: The president's in charge of that, not me.

REPORTER: Have you ever -

MIKE BROWN: Pardon.

REPORTER: Did you offer your resignation?

MIKE BROWN: I serve totally at the will of the president of the United States.

JIM LEHRER: Leading Republicans announced joint Senate hearings into federal failures. We'll have much more on the hurricane aftermath after this News Summary.

The Energy Department reported today the oil industry should get back to pre-hurricane levels by November. But it also forecast winter heating bills in the U.S. Could increase 70 percent. On the oil market, futures dropped another $1.60 in New York to settle at $64.37 a barrel.

Tropical Storm Ophelia grew in the Atlantic today. By late today it was 80 miles off Cape Canaveral and following an erratic course. It could become a hurricane tomorrow. Two our hurricanes in the Atlantic now, Nate and Maria, pose no threat to the mainland.

Chief Justice William Rehnquist was laid to rest today. His casket was carried from the U.S. Supreme Court to a private funeral service. The speakers included the president and Justice Sandra Day O'Connor, a long-time colleague of Rehnquist. The chief justice was buried later at Arlington National Cemetery. Television coverage was not permitted at the funeral or the burial.

In Iraq today, U.S. forces freed American hostage Roy Hallums at a farm outside Baghdad after getting a tip. Hallums was kidnapped last November. He worked for a Saudi company that supplies food to the Iraqi army.

In Basra today, a roadside bomb ripped through a U.S. convoy, killing four American civilians. They worked as security guards for the U.S. Mission there. Later, a car bomb in Basra killed at least ten more people and wounded 15.

Investigators of the U.N. Oil- For-Food program in Iraq issued a final, scathing report today. The report was commissioned by the U.N. It strongly criticized Secretary-General Annan, his staff and member states for failing to police the program, but it did not link Annan to anything illegal. The lead investigator, Paul Volcker, spoke at the U.N..

PAUL VOLCKER: We have found no corruption by the secretary-general. His behavior has not been exonerated by any stretch of the imagination. If you read the report, it is a... it places a litany of deficiencies.

JIM LEHRER: We'll talk to Paul Volcker later in the program tonight.

Egyptians voted today in their first presidential election with more than one candidate. Incumbent Hosni Mubarak was expected to win a fifth term. Opposition candidates and poll watching groups said the balloting was riddled with abuses and irregularities. Final results are not expected until Saturday.

California lawmakers are now the first in the nation to vote to allow same-sex marriage. The state assembly did so last night. The state Senate voted last week. It was unclear today if Gov. Schwarzenegger will veto the bill. The state Supreme Court in Massachusetts allowed gay marriage in 2003. But today, the state attorney general there agreed to let voters consider a ban, possibly in 2008.

Ford and Toyota announced major recalls today, involving pickups and sport-utility vehicles. Ford is recalling nearly four million vehicles. They could have a faulty cruise control switch suspected in engine fires. They are: The F-150 pickup, Expedition, Bronco and Lincoln Navigator, made between 1994 and 2002. Toyota said it's recalling nearly a million 4-runners, plus compact and T-100 pickups. They were built between 1989 and 1998 and could have power steering problems.

On Wall Street today, the Dow Jones industrial average gained 44 points to close at 10,633. The NASDAQ rose five points to close at 2,172. And that's it for the News Summary tonight. Now it's on to: The Katrina disaster, day 10-- search and rescue in New Orleans, the disease threat, Mississippi's problems, and the economic fallout; plus Paul Volcker on the U.N. oil scandal.

FOCUS - SEARCH AND RESCUE

JIM LEHRER: Still finding and removing the living from New Orleans. We begin with this report from Jeffrey Kaye of KCET-Los Angeles.

SPOKESMAN: We may not be back in this area, and they're talking 60 to 80 days before the water goes down.

RESIDENT: I understand.

RESIDENT: I understand.

SPOKESMAN: So, I strongly urge you to get out now.

JEFFREY KAYE: Coaxing residents to abandon their homes is not in the job description of Louisiana State Wildlife and Fisheries agents.

SPOKESMAN: I understand you are loyal to your animals, but you're going to run out of food and water, and you need to take care of yourselves right now.

JEFFREY KAYE: Normally, this time of the year, game wardens would be out in the countryside for the opening of the dove hunting season. But with some 60 percent of the city of New Orleans waterlogged, their department has dispersed a flotilla of flat-bottom boats for search and rescue missions.

SGT. RACHEL ZECHENELL: A lot of locals are used to flooding, and they still think this thing's going to go down in a couple days. So, we're having a hard time getting into their heads it could still be a few weeks before we get... even with them pumping out right now, getting all the water out.

RANDY TREADAWAY: Even if it's a real, serious medical issue, then we may force them to leave.

SGT. RACHEL ZECHENELL: Yes.

RANDY TREADAWAY: So, if you could tell our airboat operator he's number one, you're number two, and when we get to 27, we're going to start sending them out to the east.

JEFFREY KAYE: Teams from Louisiana and around the South have used hundred of boats. Armed personnel, including sheriffs, deputies from as far away as Albuquerque, provided escorts. Officials say the heavy weaponry and bulletproof vests were necessary protection. They worried about a repeat of earlier incidents in which snipers had fired at police and aid workers.

SGT. RACHEL ZECHENELL: In law enforcement, I never would have dreamed I'd have to wear body armor to come rescue people, unfortunately. But, you know, I think the last few days, they've gotten it under control. We really haven't had any incidents and...

JEFFREY KAYE: But you're wearing it?

SGT. RACHEL ZECHENELL: I am wearing it because you don't know. I mean, there's a lot of people that's been in here for a week, and I'm sure there might be a sense of cabin fever, and they don't know who to trust maybe at this point.

JEFFREY KAYE: This operation yesterday was in southwest New Orleans, close to the garden district. Throughout the city, the waters are gradually receding, but they're contaminated by toxics and waste, and the flooded neighborhoods lack basic services, including communication. Many stranded residents haven't heard about the extent of the damage and thousands have insisted on staying put.

KORACE HOFFMAN: Yeah, I saw the water. Well, it's going to rise up a little bit, but I didn't expect it to go this bad. So, by the time it got to this point, I was like, "well, I might as well just stay."

JEFFREY BROWN: Why?

KORACE HOFFMAN: It really ain't no bother to me.

JEFFREY BROWN: Do you have any power?

KORACE HOFFMAN: No, sir.

JEFFREY KAYE: Running water?

KORACE HOFFMAN: No, sir.

JEFFREY KAYE: Sewage?

KORACE HOFFMAN: No, sir. I'll make do somehow, some way.

JEFFREY KAYE: Independent of state agents, National Guards troops conducted their own search and rescue operations in heavy trucks, the U.S. Coast Guard patrolled from the air, and private boat owners came to offer aid. Shannon Gamewell brought his boat to New Orleans from Arkansas to be a nautical good Samaritan.

SHANNON GAMEWELL: I just talked to my wife, and I said, "Look, if you were here and Haley was here, I would want someone like me coming to get you," you know? And that's not... I mean, don't get me wrong. I'm just a redneck with a mud buddy, you know, but in this type of situation, that helps.

RESIDENT: We just had so much water going on.

JEFFREY KAYE: Gamewell came across Shirley Johnson and her family and loaned her his cell phone so she could call the daughter in Atlanta.

SHANNON GAMEWELL: Do you have a phone number.

SHIRLEY JOHNSON: Tiffany? This is Sherrie. Yes. We stayed home. We waiting for the water to go down. I'm so glad to hear from you all because we have been sick and worried. Yeah, I know. (crying)

SPOKESMAN: It's okay, Shirley, it's all right. It's okay.

JEFFREY KAYE: Later, as seen in video shot by a NewsHour producer, Gamewell encountered Warren Mahoney, a stroke patient.

WARREN MAHONEY: I need my medication. I got nothing to last but a couple days, I need that blood pressure medicine.

SHANNON GAMEWELL: You stay right there, put your cane down. Use a cane, lean on your cane because I'm coming, I've got to come up, okay.

JEFFREY KAYE: Gamewell helped Mahoney to his boat, flagged down a passing Air Force helicopter and helped carry the disabled man to the chopper so he could be evacuated.

SPOKESMAN: Anybody home?

JEFFREY KAYE: Game wardens hoping to find more residents like Mahoney yelled through open doors and windows. (Dog barking) The welfare of pets was a main reason many people chose not to evacuate. Carolyn Mitchell was worried about the fate of the animals in the house she shared with three other people.

JEFFREY KAYE: How long you figure you can stay here?

CAROLYN MITCHELL: Another couple of days. I mean we've been trying to get out and make plans. We just really want to make sure that our animals will be taken care of before we go.

MAN: I appreciate it, no problem.

JEFFREY KAYE: Eventually, the game wardens persuaded the residents to put their own safety before that of their animals. They quickly packed their belongings and were evacuated. In the next few days, officials may use more than persuasion. The New Orleans mayor has ordered all residents to leave the city.

JIM LEHRER: Margaret Warner has more on this story. She spoke with New Orleans Police Captain Marlon DeFillo a short time ago. He's the commander of the Public Affairs Department.

MARGARET WARNER: Captain DeFillo, welcome, thanks for joining us. Give us the latest on the evacuations. How many people were you able to evacuate today?

CAPTAIN MARLON DE FILLO: A couple of hundred, nearly one thousand individuals we evacuated today. We still have a lot more people who are willing to be evacuated. And that is where we stand right now.

MARGARET WARNER: Do have a good sense of how many people there are and say where they are so if you want to go in and get them, you can?

CAPTAIN MARLON DE FILLO: Many of the areas that we are focus on now are public housing developments where we have a number of people who remain in their homes on the second and third floors. Their first floor is underwater. But we are working to, mainly at this point, to relieve the city of those folks who are willing to leave the city who have been stranded for the last eight or nine day without food and water. Those are the people that we are concentrating on now.

MARGARET WARNER: And are you still, are you delivering food and water to anyone who is stranded whether voluntarily or whether they are refusing to leave?

CAPTAIN MARLON DE FILLO: Yes, we are. But that can only go for so long. We don't know if this is going to last a week, two weeks, a month, six months. So there is a mandatory evacuation because it is unsafe. It is unhealthy to be in the city at this time. We have not completed the recovery process. We are still recovering -- rescuing people. There is no running water. There is no electricity. So it is a hazardous situation at this time.

MARGARET WARNER: So when do you think you may have to resort to forceful measures?

CAPTAIN MARLON DE FILLO: Let me just say that New Orleanians are smart. And once we begin to tell them that there are no other options, that it is apparent that you have to leave your home -- and many folks will heed to that warning. Many folks, once you take those options away, they will comply and leave.

MARGARET WARNER: So in other words, you are saying that the mayor's new order last night, when you are able to tell folks that, that is having an effect, that some people who had refused to leave now are ready to?

CAPTAIN MARLON DE FILLO: There are some people who once they learned what the new message was, are leaving. Now there are some people who want to stay to protect their property, to protect their animals. We understand that. And they're good people. These are good, law-abiding citizens. What we have to do as a law enforcement entity is to it convey to them the importance of leaving, the importance of their personal safety and to let them know that there are no other options. And we believe that once we go back into those communities and express those concerns, then they will do that.

MARGARET WARNER: Now the chief of the Pentagon's joint task force, Gen. Honore, has said that the U.S. active military won't participate in any forced evacuations. And I gather that the question about the National Guard is up in the air. They said they haven't been asked. What is your understanding of what kind of help you all would get if you had to go to forced evacuations?

CAPTAIN MARLON DE FILLO: We have a tremendous amount of resources and help at this time to do what is necessary to keep the people of this city safe. We have a unified command. We have everyone on board that -- who are willing to support this organization and to support their city. So we don't think it's going to be a problem to try to get the resources, if needed, to have a forced evacuation.

MARGARET WARNER: Captain Marlon DeFillo, thanks for being with us. And good luck.

CAPTAIN MARLON DE FILLO: Thank you very much.

FOCUS - HEALTH CRISIS

JIM LEHRER: Getting people to leave New Orleans is related directly to the growing public health concerns there and elsewhere on the coast.

Gwen Ifill has the latest on that. She spoke this afternoon with the head of the Centers for Disease Control, Dr. Julie Gerberding.

GWEN IFILL: Dr. Gerberding, welcome. We have heard reports today that there are three dead in Mississippi from water-borne illness. We have heard other larger numbers but there is some confusion about how many people have actually been casualties so far, fatal casualties because of the diseases that came in the wake of Hurricane Katrina, can you clear that up for us?

DR. JULIE GERBERDING: I think we are in a situation right now where these cases are being investigated. There is a lot going on right now. We have to try to ascertain which cases are attributable to the hurricane, per se, what things might be coincidental -- a lot of work in progress. But we do know that there are some people who acquired an infection called Vibrio vulnificus and at least three of those people have died.

It makes it sense that this could be a consequence of the hurricane because this organism is in saltwater and people who have exposure to the saltwater as a consequence of the hurricane, especially if they're injured and have wounds on their arms or legs that allow the bacteria to get into their body, they could have acquired the infection as a result of this situation -- a lot more work to be done though before we will really understand the scope and magnitude of the problem.

GWEN IFILL: So only three that we know of right now but potentially more?

DR. JULIE GERBERDING: We have to keep an open mind. Again, it is very early in the process. And there are lots of parts of the country where we don't yet know all the information about who has sustained injuries and who is in the hospital and who is at risk and what they ultimately will be diagnosed with.

So we have to keep an open mind and be prepared that there will be additional cases of any of these problems that we're concerned about right now.

GWEN IFILL: We also, however, have all been looking at the water in New Orleans as it has grown, what appears to be more fetid day after day. Can you give us a sense of what kinds of diseases that you are testing in your on the ground experience have told you can be found in those waters that rescuers as well as residents should be guarding against.

DR. JULIE GERBERDING: Well, let's talk about the water situation in New Orleans, particularly because today the EPA did announce the first results from tests that are ongoing there. These very preliminary first test results did indicate that there was a very high degree of sewage contamination of that water.

So of course the infections that could be present in sewage are a hazard to the people who are in that water. That is why we are urging everyone to follow the mayor's orders about evacuation, to leave that area, to get out of the water. And for goodness sake, don't drink it. It is also why today CDC posted some specific recommendations about protecting the workers who are going in there to conduct the rescue and cleanup operations.

GWEN IFILL: Like what, for instance?

DR. JULIE GERBERDING: Well, for example, we want workers to wear the kinds of very heavy boots that protect them from injuries while they are walking with their feet underwater. We're also recommending that they wear heavy-duty gloves so they don't get cut or injured and create a place where these infections could gain entrance into their body, and of course the kind of face shield that would keep water from splashing up into their mouth or mucous membranes.

Most of the infections that could be present in sewage are transmitted by the oral route -- meaning you get them in your mouth and swallow them and they cause diarrhea or vomiting. And sometimes they can enter through the skin. So protecting your skin and keeping them out of your mouth and eyes are really important parts of safety precaution for these workers.

GWEN IFILL: You are recently returned from the region. As you toured there, what kinds of health conditions did you see or unhealthy, I guess I could say, conditions did you see on the ground?

DR. JULIE GERBERDING: Well, let me just first say that what I think was the overall impression of our visits to all of the shelters and the environment in the South was what an incredible amount of heroism is going on there.

I was also very impressed in the shelters, particularly the large shelters where we know there would be a risk for infection transmission from respiratory or possibly even hand to hand contact, the emphasis on hygiene and the emphasis on hand cleaning and prevention of transmission really started as soon as these refugees arrived.

The Astrodome in Texas where there are 24,000 people -- we've got the entire community of healthcare workers in the Texas area right in there with a row of sinks down the hall to really emphasize let's keep people safe while they're here.

GWEN IFILL: I have read that the population that you are serving, the people who are in so many of these shelters, are people who were vulnerable health-wise even before this happened. To what extent do you have to compensate for the fact that you are dealing with an underserved population when it came to healthcare?

DR. JULIE GERBERDING: Well, I think we are appreciating that many of the people who went to the Superdome in New Orleans as a shelter of last resort were the people who had the least means for leaving the city. And that means that they are at increased risk for many of the health disparities that plague our society in certain areas. So there are many special needs people there.

And that's really, I think, one of the miracles of the sheltering system that is going on, that not only are we worrying about the immediate problems of the hurricane and its -- the injuries that ensued from that, but already Secretary Leavitt and the whole department as well as the state and local health officials everywhere we traveled are concentrating on mental health services, on restoring people's benefits, on linking them back up to Medicaid, whatever state they end up in, and really recognizing that this isn't just about a temporary loss of home or the horror of a hurricane, this is about really helping people protect their health and move on to a state of hope so that we can get them to a home in the very near future.

GWEN IFILL: So you are confident, based on what you saw and what reports you've gotten back from your teams on the ground, that the potential for a widespread - a widely spreading disease in these shelters and in New Orleans because of the water because of the conditions, has been largely averted?

DR. JULIE GERBERDING: I'm not ready to say that. I think what we recognize is there is certainly a potential for a risk here. We've got a high degree of contamination in the water and a lot that we'll learn as we go forward with more testing and more evaluation of that water. So we're not out of the woods yet in the city of New Orleans. And certainly any time you put so many people together in a crowded place, there is very high potential for disease transmission.

What I am encouraged by is that people started out with the awareness. CDC has 24 disease detection teams around the country working with the shelter officials and the local health officials to detect cases as they emerge and to take the steps necessary to prevent transmission. This will go a long way to avoiding a large-scale event.

GWEN IFILL: Once the water is finally drained from New Orleans -- who knows how long that will take -- but once that happens is your job largely done?

DR. JULIE GERBERDING: I don't think any of us know when our work will be done. This is going to be an ongoing health issue for a long period of time. So we're just at the very early stages. And from a Health and Human Services perspective, we're concentrating first on helping those people who need it the most and then helping them on the way to a situation where they can really benefit from the governmental programs and sustain their dignity and get back to a home where they can look forward to their future.

GWEN IFILL: Dr. Julie Gerberding at the Centers of Disease Control, thank you very much for joining us.

DR. JULIE GERBERDING: Thank you.

FOCUS - STRICKEN STATE

JIM LEHRER: Now, the situation in Mississippi. Today, by way of videophone, Gov. Haley Barbour provided an update on conditions in his state to members of the House Energy and Commerce Committee meeting in Washington. Here are excerpts.

GOV. HALEY BARBOUR: There is tremendous damage way, way north of the coast, but the 80 miles across the Mississippi Gulf Coast is largely destroyed. A town like Waveland, Mississippi, has no inhabitable structures -- none. Our utility that serves the coast and the southeastern part of the state lost every transmission line, had two power plants put out of commission and virtually 100 percent of their customers lost power.

When you lose power, the telecommunications system falls down, because of the need for electricity, not to mention the fact that virtually all the towers were blown down. We lost water because the water systems run, and the sewer systems run, on electricity. Today we have about 288,000 customers who still don't have power. The peak was about one million.

The Mississippi Power Company reports that they will have power to every customer who can receive power by Saturday, which is incredibly remarkable that in less than two weeks, they can have restored power because every one of their customers, just about, has lost power, and their power plants were out.

We're kind of turning the corner to where we're starting recovery, we're starting cleanup in most of our towns, and all of the part of south Mississippi is going to be improved when we get finished, but we are going to need a lot of help and it is going to take a lot of time.

JIM LEHRER: Many people in Mississippi's hurricane zone are not waiting for government help to arrive. They're surviving on community help. Tom Bearden reports from Gulfport.

TOM BEARDEN: A tree fell on Becky Schroeder's house in Gulfport, Mississippi, when Hurricane Katrina passed over. That would be pretty severe damage in most hurricanes, but compared to what this hurricane did to the Gulf Coast, it almost seems minor. But there are tens of thousands of residences with this kind of damage, forcing hundreds of thousands of people to literally camp out in homes without windows, doors, with big holes in the roof.

Like many people here, the Schroeders haven't waited for outside assistance. They started cleaning up their property and making repairs. There is no electricity or running water, and probably won't be for a month or more. They can live with that; what they're having a hard time dealing with is the fear.

BECKY SCHROEDER: We've had looting in the neighborhood. My next door neighbors have had jewelry stolen while they went to pick up supplies and things like that. So we stay awake at night, we sleep in shifts, we've formed a neighborhood watch between the four houses here and we kind of stand guard, you know.

TOM BEARDEN: Schroeder says she wept for joy when the first military helicopters flew overhead days after the storm. They still fly over ever few minutes. But she hasn't actually seen any guardsmen actually in her neighborhood.

BECKY SCHROEDER: I feel like if we had more Guard presence at an earlier point where they could come into the neighborhoods, we'd all feel safer and be able to sleep at night, at least.

TOM BEARDEN: The Schroeders have plenty of food and a generator is keeping a freezer running, but thousands of others can't be as self-sufficient. At Gulfport's Bel-Aire Baptist Church, a mobile kitchen is now serving more than 4,000 meals every day. With most grocery stores still closed, food is hard to come by. The kitchen is operated by the Georgia chapter of the Woodmen of the World, a fraternal charity group. Their convoy set out shortly after the hurricane passed looking for the place they might do the most good. They heard about the church, and set up shop. There is no regular delivery schedule, people just show up with supplies, sometimes by the truckload. Later, they expect to get regular shipments from the Red Cross.

State manager Billy Groce says the politicians complaining about relief efforts being slow don't understand what groups like his have faced just getting here.

BILLY GROCE: They don't realize that, you know, you're traveling along and you have to stop because there's a tree across the road. Somebody's got to move that tree. You get the tree out of the way and you go another 30 feet and there's a power line.

TOM BEARDEN: The church parking lot is a 24-hour distribution center for donated supplies -- a steady stream of people browse the tables, taking what they need-- no paperwork to fill out, no questions asked. Sandra Clayton was having a hard time getting around because of an injury a couple of days ago.

SANDRA CLAYTON: The lights were out, had candle wax on my hand, I had some water I was trying to get in the freezer and dropped it. I broke my left two toes and the bones right across the top, and I'm supposed to see an orthopedic surgeon to get a pin put in, but the surgeon I was going to see was out of town.

TOM BEARDEN: Where are you getting most of the help you are getting?

SANDRA CLAYTON: Word of mouth and churches like this, that's it. I've tried Red Cross, so far haven't got any help.

TOM BEARDEN: How about FEMA or the feds?

SANDRA CLAYTON: FEMA, I finally got through last night, but they have... they're telling you that you have a wait. So, like I said, if it weren't for these churches, we'd be out.

TOM BEARDEN: Pastor Lowry Anderson says people outside this area can't even fathom the number of people who need help.

PASTOR LOWRY ANDERSON: Within three miles of this church there's 23,000 people. So they're coming from all around. The first day we fed 1,800, and it's escalated from there. So word of mouth, and then most of them are staying around here. Some of them have lost everything, most of them, I think I could safely say, have severe roof damage and things like that, and of course, the economy's going to take it on the chin for awhile and that's why we're doing what we're doing.

TOM BEARDEN: In the meantime, what had been the most valuable part of Gulfport, its beachfront property, remains deserted. The owners have not been allowed to return, and when they are, they won't find much that is even recognizable. By some estimates, everything on the Mississippi Gulf Coast within a quarter mile of the water has been utterly destroyed.

FOCUS - ECONOMIC RIPPLES

JIM LEHRER: And speaking of the economy, a look at a report today and other indications of what Katrina is doing to the U.S. economy. Jeffrey Brown has our story.

JEFFREY BROWN: New Orleans and the Gulf region will see a "prolonged and substantial disruption of economic activity." The hit on the overall U.S. economy will be "significant, but not overwhelming" -- that from the first snapshot of the economic impact of Katrina, released today by the non- partisan Congressional Budget Office. The director of the CBO, Douglas Holtz-Eakin, is with me now. And from Baton Rouge, we're joined by Jim Richardson, professor of economics and director of the Public Administration Institute at Louisiana State University.

And welcome to both of you.

Mr. Holtz-Eakin, starting with you, to use your phrase, significant but not overwhelming, start with the significant side what makes this a major economic event for the United States?

DOUGLAS HOLTZ-EAKIN: Prior to Katrina the U.S. economy was growing briskly. The unemployment rate had been falling steadily. The economy had added one hundred fifty-two hundred thousand jobs a month. With the effects of Katrina, concentrated in the second half of this year, we'll see noticeably slower growth; we'll noticeably slower improvement in the jobs and as a result it will significantly affect the growth path of the U.S. economy. More overwhelming, it is unlikely to cause a recession, but it will be noticeable.

JEFFREY BROWN: You used a number of up to 1 percent of GDP and 400,000 jobs. This is the forecasting business so this must be hard to do, but that sounds pretty solid to you in terms of the impact?

DOUGLAS HOLTZ-EAKIN: I would say to anyone who asked, those numbers will be wrong. It will turn out that the estimates are mistaken one way or another. But they seem to be good ballpark estimates given what we know. The uncertainty is enormous. And as time elapses and we see the nature of the damages, we'll have a much better idea.

JEFFREY BROWN: Professor Richardson, give us a snapshot of the key economic sectors down there that were impacted.

JIM RICHARDSON: Well, in the New Orleans metropolitan area there are a number of sectors -- one being the petrochemical sector, the oil industry, there is also the shipbuilding, Avondale shipbuilding grounds. And you have the Lockheed Martin space shuttle area. And then you have four private universities plus the public university. And then of course your tourist industry is a large part of the economy as well.

JEFFREY BROWN: Now you mentioned of course the oil production. And a lot of attention was focused on that right from the beginning. What is happening with that?

JIM RICHARDSON: That seems to be coming back. And that can come back without the city of New Orleans or that area being more inhabitable because you are dealing with pipelines. You are dealing with a small number of workers. So in that situation, the oil industry, unless there is structural damage to the pipelines or to some of the producing rigs, that will come back fairly fast. And that will also be true for the refineries and some of the other manufacturing facilities that will need only -- not a large number of people working at them. And assuming there is no structural damage, they will get back on-line fairly quickly.

JEFFREY BROWN: What about the flow of goods on the Mississippi and through the Port of New Orleans? Probably most of us don't even know how big -- how big all that is, how much economic activity flows through there. What has happened -- what kind of commodities are impacted and what is happening?

JIM RICHARDSON: Well, in terms of there are two ports really, the Port of New Orleans and the port of South Louisiana right together, very close together. You have a lot of agriculture products imported to other countries: Rice, chicken products, wheat and things of that nature. That will have an impact on farmers throughout the Midwest very easily. Coming into the country you have things like steel products, aluminum products, and products of that nature that will have an impact also because most of those products go up the Mississippi River, up to the Midwest and over to the East Coast.

JEFFREY BROWN: So Mr. Holtz-Eakin, is that how you measure the larger impact on the economy by things like the commodity prices?

DOUGLAS HOLTZ-EAKIN: I think the petrochemicals and the pace at which natural gas, oil production, the refining and distribution of gasoline, the pace at which that comes back will be the key to the national impacts. The second to look at is the degree to which shipping is restored along the Mississippi and that transportation link, a quarter of all agriculture exports going out that route. Those are things that can be monitored. If it passes relatively quickly, the impacts will be small as a result.

JEFFREY BROWN: Now, what most of us have seen immediately, of course, is the price at the pump.

DOUGLAS HOLTZ-EAKIN: The price at the pump went up -- hardly a surprise under the circumstances. It has come down from the post-Katrina peaks. The question is how quickly can, especially the refineries and pipelines get full electric power and get the distributions systems back to the point where we have, instead of a large and prolonged increase in energy prices but a short-lived spike from what were already fairly high levels, that is a key issue here.

JEFFREY BROWN: But to the extent that consumer spending has been something that has propped up the economy for so long, is there a risk to the spending that would be put forward on other items because of high gas prices? And is there a risk to consumer confidence?

DOUGLAS HOLTZ-EAKIN: There is a mechanical impact in the second half -- at the heart of the calculations we did was to look at the kind of spending that would be displaced in the household sector because they had to pay higher prices at the pump and for energy products. If there are further impacts in confidence, which would cause overall household spending to weaken, that then feeds back into the larger economy; that is worth keeping an eye on.

JEFFREY BROWN: Mr. Richardson, Professor Richardson, what factors will go in to determining how quickly some of these key sectors will be able to turn around down there?

JIM RICHARDSON: I think the factors first will bejust how much structural damage was done. And I think they are already investigating that very quickly. I know the Port of New Orleans, people were there several days ago looking at the port and seeing what was wrong. In fact, it is my understanding they now have electricity at the port. So I think it's not clear that the structural damage to those industries was great; it's just a matter of getting the people back so you can have workers.

The refineries, the chemical facilities, they I think will come back on fairly quickly because you only have to deal with a small number of people to work there. And you can accommodate those, probably. The port, you need people, you also need some transportation modes, trucks, trains and so on. So it is not quite just as simple for the port, probably. But I think they are working on that and they are certainly making a special effort to get those elements of the economy up and running very quickly.

JEFFREY BROWN: And, Mr. Holtz-Eakin, the other piece of the puzzle, of course, is the budgetary impact. Today the president asked Congress for $52 billion in emergency assistance. That is on top of $10 billion the other day. I saw some estimates today that could go from one hundred and fifty up to two hundred billion dollars. Does that have an impact on the budget deficit? Does it have an impact on spending and tax considerations?

DOUGLAS HOLTZ-EAKIN: The impact will largely happen in fiscal year 2006. We put out an estimate for this fiscal year of about $330 billion. Katrina happened late enough that it won't affect that number very much. Going forward, the ultimate budgetary impacts will largely be in the hands of the Congress and the president.

JEFFREY BROWN: What they decide -

DOUGLAS HOLTZ-EAKIN: What they choose to fund and the pace at which they fund it will determine the ultimate impacts. Most of this, it is important to recognize, is a one-time event. It's the recovery from the loss of, the tragic loss of life and the loss of property. It's the recovery and restoration of facilities. It happens once -- in a $13 trillion economy, it's not an overwhelming dollar figure.

JEFFREY BROWN: And Professor Richardson, finally, the budget impact on local and state governments must be great. We had a report on our program yesterday about the town -- the city are you in -- Baton Rouge and the influx of people.

JIM RICHARDSON: Well, it is going to have an impact on the state budget because suddenly you have 600,000 people who worked in the New Orleans area, and many of them are jobless, or they have moved to other states to take up their employment. So there will be an impact on the state revenues, for sure and also on the expenditure side in terms of things the state must fund to help that part of the state.

The other side is, cities like New Orleans, they've suddenly lost their whole tax base, or a good bit of it, and not only New Orleans but also surrounding areas, other parishes, so those local governments, that will be a special fiscal problem which the state must be able to help them deal with.

JEFFREY BROWN: All right. Jim Richardson and Douglas Holtz-Eakin, thank you both very much.

UPDATE - OIL FOR FOOD

JIM LEHRER: And finally tonight, a very different kind of storm, that over oil, food, corruption and mismanagement at the United Nations. Ray Suarez has our story.

RAY SUAREZ: Paul Volcker, the former Federal Reserve chairman, has spent the last year-and-a- half investigating the United Nations Oil-for-Food program, and allegations it was mired in corruption and allowed Saddam Hussein to siphon billions of dollars. The final report, delivered today, said the $64 billion program did help feed Iraqis from 1997 to 2003, but the report also concludes: " the United Nations organization needs thorough reform - and it needs it urgently."

Secretary-General Kofi Annan, himself under scrutiny for his son Kojo's involvement, told the Security Council today he would not resign despite the committee's strong criticism of top U.N. management.

KOFI ANNAN: The findings in today's report must be deeply embarrassing to all of us. The Inquiry Committee has ripped away the curtain, and shone a harsh light into the most unsightly corners of the organization. None of us-- member states, secretariat, agencies, funds and programs-- can be proud of what it has found.

RAY SUAREZ: Two U.N. officials running the program have resigned or been forced to leave their jobs and are the subjects of criminal investigations.

RAY SUAREZ: And joining us now is Paul Volcker, the chairman of the Inquiry Committee.

Chairman Volcker, the system was designed to sell Iraqi oil, take the money and buy supplies for the people of Iraq. Where did your commission conclude the system broke down?

PAUL VOLCKER: Well, the system broke down, I think in a variety of ways. The program was, of course, authorized by the Security Council. The Security Council had some differences of opinion. And the program was to the very tightly designed and implemented and there was some uncertainty as to who was really in charge.

The secretariat had responsibilities and I think they in some respects fell down on the job. And there were difficulties in Iraq. And principally Saddam Hussein was able to manipulate the program to his advantage.

RAY SUAREZ: Well, manipulate how? What were people involved with Oil-for-Food doing that caused you to say in the final conclusion that the system lacked competent, lacked honesty lacked accountability?

PAUL VOLCKER: Well, the manipulation, principally from Saddam Hussein side came in two directions. There was a lot of smuggling of oil. That was the principal source of elicit funds to Saddam Hussein. And the U.N. sat aside basically and didn't do anything about the smuggling although they increasingly new about it. The responsibility there lies principally, I think, with the members of the Security Council which, of course, includes the United States.

But then there were methods of manipulating the program by designating who could buy the oil at below market prices and profit from that. And people, politicians, officials, journalists, who the Iraqis thought could be influential benefited to some extent from those oil sales.

A similar process went on, on the buying side when Iraq was buying humanitarian goods from abroad, sometimes at too high prices and demanding kickbacks and other payments from the suppliers that went directly illicitly to the Iraqi government.

RAY SUAREZ: So Saddam Hussein and the middlemen were making money off of this.

PAUL VOLCKER: That's right.

RAY SUAREZ: Were the Iraqi people getting good and medicine as they were supposed to?

PAUL VOLCKER: Well, I think and we commissioned another study on that from some of the best-known experts on humanitarian assistance in the world. And they concluded certainly that a situation that was dire on the nutrition side threatening rather large spread starvation was definitely improved by the shipments of food.

Shipments of medicine and medical supplies helped stabilize that situation. So that in an immediate sense the program worked. But over time, more and more inefficiencies arose and as you indicated earlier, elements of corruption certainly both in Iraq but disturbingly within the United Nations itself.

RAY SUAREZ: Did you find that this corruption touched the secretary-general himself?

PAUL VOLCKER: No, not directly in terms of the secretary-general being paid off or anything like that. But there was this complication that his son was at least marginally involved in helping a quip employed him -- Cotecna -- to get a contract for inspection involving the program.

We did not conclude that the secretary-general knew about that situation. But his son was involved and later we did, have now criticized the secretary-general for not conducting anything like an adequate investigation when his son's involvement became known.

RAY SUAREZ: What about his general oversight of the United Nations as secretary-general, and his involvement in the Security Council as secretary-general in overseeing the operation of the program? You seem to be pretty tough on him in those regards.

PAUL VOLCKER: Yes, well, it fell short of the standards that I think we should expect from the United Nations. I think he should be tested against a high standard and he is the head of the secretariat. And the secretariat fell short of I think effective administration of the program, the kind of thing that should have been expected. Now that is partly the responsibility of how the Security Council defined the program and retained some administrative and operational controls themselves. But nonetheless, the administration secretariat and not just the secretary-general but others have to bear the responsibility.

RAY SUAREZ: What does the United Nations have to do in the view of yourself and the commission to fix the problems you found in this investigation?

PAUL VOLCKER: Well, precisely, I mean, that's the importance of this investigation. This program was large, it was complex, it was complicated, it was difficult to manage. But some of the things that we found I think are symptomatic of more systemic problems in the United Nations that just demand reform and change if the United Nations is going to have the credibility and the sense of competence that should be expected.

There are two key elements. It needs a stronger, more disciplined administration. And we think that requires attention to a chief operating officer, in effect, chief operational officer whose responsibility is to make the program run -- make the ship run efficiently, to diminish the political influences and maximize management efficiency. That's one point.

The other point is the United Nations has been very weak in auditing and control and proper investigatory apparatus for looking at itself. So we suggest that certainly needs more financing, it needs more attention and oversight should be focused on an independent board with authority to insist that it become adequately financed and that auditors and control officials have access to an independent body so they aren't dependent upon the line officials that they are themselves examining.

RAY SUAREZ: Well now, given what you know about the institution and how you have had this intimate look at it, briefly, do you think the United Nations is capable of making the kind of changes you brought forward?

PAUL VOLCKER: That is the acid test. There is a lot of lip service being paid now to the need for reform. You saw that in the Security Council meeting this morning. But whether all that pledge for reform is converted into reality is the acid test.

And we've suggested that the general assembly which in the end has the authority here should prepare benchmarks that should be met no later than, not in the current situation, the near term session of the general assembly but in the session in the fall of 2006, they should definitely set some objectives. And we'll see whether they should be met. And I think the two key items are the ones that I mentioned.

RAY SUAREZ: Chairman Paul Volcker, thanks for being with us.

PAUL VOLCKER: Thank you.

RECAP

JIM LEHRER: Again, the other major developments of this day: Authorities in New Orleans pressed holdouts to leave or risk disease and death. President Bush asked Congress for $52 billion for the recovery effort. And Chief Justice William Rehnquist was laid to rest. We'll see you on-line and again we'll see you online and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.