The NewsHour with Jim Lehrer

RAY SUAREZ: Good evening. I`m Ray Suarez. Jim Lehrer is away.

On the NewsHour tonight: the news of this Thursday. Then, no letup in the Middle East war. We have reports from Lebanon and Israel.

Capitol Hill takes up the Middle East and the Iraq wars. We hear from Senators John Warner and Jack Reed. Analysis of America Online`s reinvention efforts; a NewsHour report on two major art museum re-openings here in Washington, D.C.; and measuring a child`s growth by summer`s yardstick, from guest essayist Nancy Gibbs of Time magazine.

(BREAK)

RAY SUAREZ: Hezbollah rockets took a heavy toll inside Israel today as Israeli troops pushed deeper into Lebanon. The intense fighting came on day 23 of the war along the Lebanese-Israeli border.

More than 130 rockets were fired into northern Israel, striking mainly at two towns. At least eight people were killed. It was the worst civilian loss in Israel since July 16th.

The leader of Hezbollah, Sheik Hassan Nasrallah, offered to call off the assault if Israel does the same. Hezbollah TV carried his taped remarks.

SHEIK HASSAN NASRALLAH, Hezbollah Leader (through translator): We have a formula for the time being, that we will hit Haifa and further than Haifa. But any time you decide to stop your campaign against our cities, villages, civilians and infrastructure, we will not fire rockets on any Israeli settlement or city.

RAY SUAREZ: At the same time, Nasrallah warned, if Israel bombs central Beirut, Hezbollah will fire missiles at Tel Aviv.

Israeli planes did attack the southern suburbs of Beirut today for the first time in nearly a week. And they dropped leaflets, warning residents to flee the area.

In south Lebanon, Israeli tanks and some 10,000 troops fought Hezbollah in a series of towns. Four Israeli soldiers and at least three Lebanese civilians were killed.

Israeli commanders said they`ve carved out a security zone five miles deep. The defense minister said the army will go to the Litani River, 18 miles inside Lebanon, if Israeli leaders approve it.

The Lebanese prime minister said today more than 900 people have been killed in his country; the confirmed death count had been 520.

And Human Rights Watch reported the Israeli air strike in Qana last weekend killed 28 civilians. Lebanese officials have said 56 were killed. The Israeli military formally acknowledged today the attack was a mistake, but it said Hezbollah was partially to blame because it fired rockets from inside Qana.

Prospects for a diplomatic solution to the crisis remained murky today. A Hezbollah spokesman insisted there can be no overall peace "as long as there is one Israeli soldier on Lebanese soil." But Israeli Prime Minister Ehud Olmert said Israel is "very close" to the goal of ending the Hezbollah threat.

In Washington, State Department Spokesman Sean McCormack said French and U.S. diplomats could agree on a truce resolution within 24 hours.

SEAN MCCORMACK, State Department Spokesman: We certainly would hope that we could achieve something by Friday. But if not, we are prepared, and Secretary Rice has instructed our people both here in Washington and up in New York, that we`re going to work all throughout the weekend if necessary to get something done, because we are working on an urgent basis to bring about an end to the fighting in such a way that is lasting and durable.

RAY SUAREZ: But Muslim nations meeting in Malaysia condemned the U.S. and the U.N. for not doing enough. Iranian President Ahmadinejad told the gathering the main solution is to eliminate Israel.

There was heavy new fighting in southern Gaza today. Dozens of Israeli tanks advanced, and planes attacked Palestinian gunmen. We have a report by Lindsey Hilsum of Independent Television News.

LINDSEY HILSUM, ITV News Correspondent: Almost unnoticed by the outside world, eight dead in Gaza today, among them a small boy. Since Palestinian militants kidnapped an Israeli soldier in June, about 120 Gaza residents, armed men and civilians, have died in Israeli attacks.

Today, the Israeli Defense Force released video of soldiers detonating explosives found in a deserted house in Gaza.

Israel`s reoccupying the land it left just a year ago. Fifty tanks rolled into Gaza today and took up positions near the destroyed airport.

RAY SUAREZ: Hospital officials said four of those killed today were Palestinian gunmen, but a U.N. statement criticized Israel for the repeated killing of civilians in Gaza. We`ll have more on the overall crisis in the Middle East right after this news summary.

In Iraq today, at least 25 more people were killed in new attacks or found dead in the streets. The worst attack came when a bomb on a motorcycle exploded in Baghdad. A dozen Iraqis died, and dozens more were wounded.

Also today, Iraq`s government confirmed a heavy loss of civilian life last month. It said more than 1,000 Iraqis were killed nationwide in July; in addition, 1,800 civilians were injured in the violence.

And the U.S. military announced two more U.S. Marines were killed today in western Iraq.

The top U.S. commander in the Middle East conceded today Iraq could be facing civil war. Army General John Abizaid testified at a Senate hearing. He voiced hope that adding U.S. troops will help secure Baghdad. He said it`s vital to stop the surge of killings between Sunnis and Shiites.

GEN. JOHN ABIZAID, U.S. Army: I believe that the sectarian violence is probably as bad as I`ve seen it, in Baghdad in particular and that, if not stopped, it is possible that Iraq could move towards civil war.

RAY SUAREZ: But later, Abizaid said he`s optimistic Iraqi forces can prevent any civil war.

There was also word today the outgoing British ambassador to Iraq, William Patey, has warned of civil war. The BBC quoted his final cable to London as saying, "The prospect of a low-intensity civil war is probably more likely at this stage than a successful and substantial transition to a stable democracy."

Four Canadian soldiers were killed in Afghanistan today. They died in separate attacks by Taliban fighters in Kandahar Province. The Canadians were part of a NATO force. Seven NATO troops have been killed since they took over security in southern Afghanistan Monday.

Elsewhere in Kandahar, at least 21 Afghan civilians were killed when a market was bombed.

There was no letup today in the scorching heat across the Midwest and northeast U.S. Officials reported at least 14 deaths so far. In New Jersey, the governor waived admission fees at state swimming areas as temperatures neared 100 degrees again.

AOL announced today it will cut as many as 5,000 jobs, about a quarter of its workforce. The layoffs are expected within the next six months. They`re part of a restructuring plan that makes e-mail and other services free. The plan also includes selling AOL`s Internet access business in Europe. We`ll have more on this story later in the program tonight.

On Wall Street today, the Dow Jones Industrial Average gained more than 42 points to close at 11,242. The Nasdaq rose 13 points to close at 2,092.

That`s it for the news summary tonight. Now, reports from Israel and Lebanon; Senators Warner and Reed on the Middle East and Iraq wars; AOL`s reinvention efforts; two new museums; and an essay on summer freedom.

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RAY SUAREZ: We have two reports tonight from the Middle East, beginning with Martin Geissler of Independent Television News, reporting from Kiryat Shmona in northern Israel.

MARTIN GEISSLER, ITV News Correspondent: Northern Israel in flames. On the day this country`s prime minister told his people the goal is nearly achieved, Hezbollah launched its most deadly cross-border strike of this war.

More than 160 Katyusha rockets fired from southern Lebanon in just half an hour. The towns of Acre and Ma`alot bore the brunt of the assault. For the past three weeks, they`d been lucky; the missiles had passed them by. Today, Hezbollah proved they can and will find their targets.

In the small town of Kiryat Shmona, a rocket embedded itself in the middle of the main street, one of 39 fired into this community in those same 30 minutes.

Warnings like this are being sounded across northern Israel every single day. Hezbollah`s Katyusha rockets might not have the accuracy or the range of the Israeli missiles, but today have served as a reminder to the people here that they`re deadly enough.

There are now 10,000 Israeli troops across the border in Lebanon. It`s proving a long, slow job pushing these missiles out of range.

RAY SUAREZ: Tens of thousands of Lebanese have been forced from their homes. ITN`s Kylie Morris reports from the city of Tyre on the efforts to bring them aid.

KYLIE MORRIS, ITV News Correspondent: Precious cargo in Tyre. Boxes of basic necessities gingerly carted along the back roads of the city to a school where more than 300 people have taken shelter. Most here have fled their villages with only what they could carry.

ASSAD IEL DOUR, U.N. Development Program: The situation is very bad, OK? The number of displacements have been increasing day by day. The reason is all these surrounding villages, especially after Qana massacre, they`ve fled away from their villages and they came over here, hoping to find safe shelters.

KYLIE MORRIS: The Lebanese government say a million people have now been displaced by the fighting. That`s a quarter of the country`s population. The challenge for aid agencies now is to ensure those who fled are given the assistance they need wherever they are.

Hassan Maz (ph) is six years old. He and his family fled their village 19 days ago. For now, this is the only classroom he knows. He`s living here with eight others, among them his 18-year-old sister, Manera (ph).

Manera tells me the family was separated as they fled their village and that she`s anxious for news of them. She says she doesn`t want to go further north from Tyre, no matter how close the fighting comes, but what she wants most is for the war to end so they can all go home.

(BREAK)

RAY SUAREZ: The wars in Iraq and Lebanon converge on Capitol Hill. Margaret Warner has that story.

MARGARET WARNER: Defense Secretary Rumsfeld came to the Senate Armed Services Committee this morning flanked by Joint Chiefs Chairman Peter Pace and Army General John Abizaid, commander of U.S. forces in the Middle East.

At issue: the spiraling sectarian violence in Iraq and the conflict in Lebanon between Israel and Hezbollah.

For the first time, these two top military commanders publicly acknowledged that there`s a real risk of civil war in Iraq. Ranking Democrat Carl Levin first raised the subject.

SEN. CARL LEVIN (D), Michigan: The British ambassador to Iraq has warned that Iraq is descending towards civil war. And he said it`s likely to split along ethnic lines, and he`s reported as predicting that Iraq`s security situation could remain volatile for the next 10 years. Do you agree, General, with the ambassador from Britain to Iraq that Iraq is sliding towards civil war?

GEN. JOHN ABIZAID, U.S. Army: I believe that the sectarian violence is probably as bad as I`ve seen it in Baghdad in particular and that, if not stopped, it is possible that Iraq could move towards civil war.

SEN. CARL LEVIN: General Abizaid, when General Casey was asked at a press conference recently whether he still believed what he said last year, that he predicted that there would be troop reductions over the course of this year, he said that he still believes there will be such reductions this year. Do you personally share that view?

GEN. JOHN ABIZAID: Senator, since the time that General Casey made that statement, it`s clear that the operational and the tactical situation in Baghdad is such that it requires additional security forces, both U.S. and Iraqi. I think the most important thing ahead of us, throughout the remainder of this year, is ensuring that the Baghdad security situation be brought under control.

It`s possible to imagine some reductions in forces, but I think the most important thing to imagine is Baghdad coming under the control of the Iraqi government.

MARGARET WARNER: Chairman John Warner expressed concern about the role of U.S. troops if full-blown civil war erupts.

SEN. JOHN WARNER (R), Virginia: We need only look at the Baghdad situation. Baghdad could literally tilt this thing if it fails to be brought about a measure of security for those people, tilt it in a way that we could slide towards a civil war that General Abizaid recalled. What is the mission of the United States today under this resolution if that situation erupts into a civil war? What are the missions of our forces?

PETER PACE, Chairman of the Joint Chiefs: Sir, I believe that we do have the possibility of that devolving to a civil war, but that does not have to be a fact. I believe that U.S. Armed Forces today can continue to do what we`re doing, which is to help provide enough security inside of Iraq for the Iraqi government to provide governance and economic opportunity for their citizens.

The weight of that opportunity rests with the Iraqi people. We can provide support. We can help provide security. But they must now decide about their sectarian violence. Shia and Sunni are going to have to love their children more than they hate each other.

MARGARET WARNER: Republican Senator John McCain and Democratic Senator Hillary Clinton both questioned the Pentagon`s judgments, past and present.

SEN. JOHN MCCAIN (R), Arizona: General Pace, you said there`s a possibility of the situation in Iraq devolving into civil war. Is that correct?

PETER PACE: I did say that, yes, sir.

SEN. JOHN MCCAIN: Did you anticipate this situation a year ago?

PETER PACE: No, sir.

SEN. JOHN MCCAIN: Did you, General Abizaid?

GEN. JOHN ABIZAID: I believe that a year ago it was clear to see that sectarian tensions were increasing. That they would be this high, no.

SEN. HILLARY CLINTON (D), New York: You are presiding over a failed policy. Given your track record, Secretary Rumsfeld, why should we believe your assurances now?

DONALD RUMSFELD, U.S. Secretary of Defense: Senator, I don`t think that`s true. I have never painted a rosy picture. I`ve been very measured in my words. And you`d have a dickens of a time trying to find instances where I`ve been excessively optimistic.

MARGARET WARNER: The other issue that was clearly on everyone`s mind was the crisis between Israel and Hezbollah and the possibly negative consequences for Iraq.

SEN. JOHN WARNER: As the current conflict in Lebanon and north Israel proceeds, there is obvious concern that the crisis could spark a wider war. The firebrand Iraqi cleric, Muqtada al-Sadr, said, quote, "We, the unified Iraqi people, will stand with the Lebanese people to end the ominous trio of the United States, Israel and Britain, which is terrorizing Iraq, Lebanon, Afghanistan and other occupied nations." He also said that he was ready to go to Lebanon to defend it.

MARGARET WARNER: General Abizaid agreed there was a connection between the two conflicts.

GEN. JOHN ABIZAID: A couple of days ago, I returned from the Middle East. I`ve rarely seen it so unsettled or so volatile. There`s an obvious struggle in the region between moderates and extremists that touches every aspect of life. Such extremism, whether state-sponsored by Iran or ideologically motivated by al-Qaida and its associated movements, remains a serious danger to global peace and stability.

The arming of independent militias and the subsequent undermining of state institutions by these militias is the curse of the region. If this century is to be dominated by non-state actors with no responsibility to the international community, we are in for even greater dangers.

It should not be lost on us, for example, that Hezbollah fields greater and longer range weapons than most regional armed forces. If left unchecked, it is possible to imagine chemical, biological or even nuclear weapons being transferred to militias or terrorist organizations by a state actor.

There is no doubt that these are dangerous times for the world, but there should also be no doubt that, with concerted international action and the application of our own substantial power, these dangers can be overcome.

Iraq sits at the center of the broader regional problem. Al-Qaida and Shia extremists form terrorist groups and death squads to challenge the new government and undermine confidence and a better future.

Iran talks about stabilizing Iraq, but just as in Lebanon, it arms, trains and equips local extremist Shia militias to do Iran`s bidding. As the primary security problem in Iraq has shifted from a Sunni insurgency to sectarian violence...

MARGARET WARNER: The conversation continued behind closed doors this afternoon.

Now, some reaction from two committee members who attended today`s hearing. Republican Chairman John Warner of Virginia, who we just saw, he last visited Iraq in April. And Democratic Senator Jack Reed of Rhode island, he was in Iraq last month.

Welcome, Senators.

Senator Warner, this was the first time that we`ve heard General Abizaid and General Pace be so frank in acknowledging the possibility that Iraq could slide into civil war. How significant did you find that?

SEN. JOHN WARNER: Well, that`s a very significant statement that was made today, and it`s important that the American people and, indeed, the world hear that.

All along, I feel as senators -- I mean, excuse me, Chairman Pace and Abizaid in appearing before the committee throughout this year have given us strong, professional judgments with regard to that situation. And today perhaps was the most somber as it relates to the civil war.

But they pointed out, in their professional judgment, that civil war is not around the corner yet. You see a strong military growing in Iraq. The first signs of a civil war would be the fracturing of that military. You see a government trying to proceed with its responsibilities of sovereignty. And you see a commitment by the prime minister, who just visited here a week or so ago, that he`s going to try and disband the militias, and therein would be the seeds of the commencement of a civil war in those militias.

MARGARET WARNER: Senator Reed, did you see a significant shift in what the two commanders said?

SEN. JACK REED (D), Rhode Island: Yes, I did, I think in several different dimensions.

First, General Abizaid pointed out this is becoming more of a sectarian fight than an insurgency motivated by former Baathist regime elements, and that sectarian fight has dire and ominous consequences, particularly in Baghdad as Shia and Sunni fight each other.

In addition, I think they were much more candid with respect to the deteriorating situation because of the violence and the fact that time is of the essence to deal with it, and principally it has to be dealt with by the Iraqi government.

The prime minister has to not only talk about disarming the militias, he has to do it. And the complicating factor is that these militia elements are also, in some respects, part of his own government. So he has some very difficult political challenges, and only time will tell if he can prevail.

MARGARET WARNER: So, Senator Warner, the consequences of what you heard, what we heard today, General Abizaid was saying that Baghdad is actually key and that forces, U.S. forces cannot be reduced until Baghdad is secure. Can you extrapolate from that, should we extrapolate from that that the chances at this point are fairly remote of a significant drawdown of U.S. troops in this calendar year?

SEN. JOHN WARNER: I think he was, again, very candid with us, although we did not specifically talk about any drawdown, such as General Casey spoke to around six or eight weeks ago. Clearly, the complications in Baghdad, the need for additional U.S. troops there, the need also for additional Iraqi troops there indicates the seriousness of the deteriorating situation in Baghdad.

And consequently, I think it was correct to draw the assumption from the testimony of all three witnesses today that we should not look to any significant drawdown of forces in the foreseeable future.

We go back to the president`s basic formula: the ground consideration and factors control any redeployment or withdrawal of those forces. And that change has not taken place for the best, by any means, given the seriousness of the situation in Baghdad.

MARGARET WARNER: Senator Reed, do you share that assessment? One, is that what you heard today? And, two, do you agree? You were just in Iraq last month.

SEN. JACK REED: Well, as Chairman Warner pointed out, General Casey was talking optimistically just a few weeks ago. Now the situation has deteriorated, I think, significantly.

There are still roughly five months left in this year, and I think we all have to ask ourselves that, if the situation is still as desperate as it seems to be today after five months and after introducing more American forces into the country, what do we do next?

We`re limited generally by limits on our overall force structure about putting even more troops in. So this is a very difficult, challenging moment.

I think honestly that we have to be hopeful that we can start some type of deployment, because an open-ended commitment over many, many months and years is expensive and, ultimately, I think it`s difficult to sustain, given our force structure.

MARGARET WARNER: Senator Warner, you said something to General Abizaid, which we did quote in our piece or show in our piece, but you said -- and let me see if I can read this -- that, basically if we see a civil war really erupt, that the administration may have to come back to Congress for a new authorization to maintain troops there. What were you -- is that what you mean? Do you think that`s the case, that basically you all didn`t sign up for staying on in a civil war?

SEN. JOHN WARNER: I was one of the co-authors of that resolution, and I went back here recently and re-examined it very carefully. And you go back to the Constitution. Our president has the authority as commander in chief of the Armed Forces to deploy them to the far-flung places in the world to protect our freedom here at home. That he has done.

And now the question is to Congress, only the Congress can declare war. Well, factually we haven`t declared any situation to be war since World War II. So what we do from time to time is pass the resolutions.

So to an extent, Congress plays a role in supporting the president`s authority in the Constitution to employ our forces. Now, the resolution in my judgment was drawn up at a time when none of us, from the president on down, could ever envision the seriousness of this situation now, in terms of sectarian violence, and -- and I underline -- just the possibility of a civil war.

Now, if that were to come about, I think the American people would ask, "Well, which side are we going to fight on? Or do we fight both? And did we send our troops there to do that? We thought we sent them there to liberate the Iraqis, which we have done at a great sacrifice, 2,500-plus."

And therefore it seems to me Congress should focus on a dramatic change if our troops are to be employed in that type of combat. We would have to go back and focus on what we have done and determine whether or not we have to do anything further to support the president.

MARGARET WARNER: Senator Reed, do you think there would be congressional support for maintaining troops in Iraq if it descended into civil war, however that is defined?

SEN. JACK REED: Well, if there`s a civil war in Iraq, then our first obligation is to protect our troops. We can`t expose them to a crossfire of various sectarian groups challenging for the legitimacy of leading Iraq.

And after that, I think you come to the issues that Senator Warner suggested, some type of legal justification.

But long before we would be voting about this, we would be forced to confront a very stark reality: Our presence in the country is dangerous to our forces and not helpful to the Iraqis. And I think, long before we took votes, the president would have to act.

I should also suggest I don`t think anyone foresaw the kind of detailed violence that`s going on today, but many of us did see an occupation that would be long, costly, and involving sectarian differences that are essential and part of Iraq.

MARGARET WARNER: Senator Warner, actually let me...

SEN. JOHN WARNER: Can I just add a word on this...

MARGARET WARNER: Well, Senator Warner, actually, I`m dying to move on to another topic you raised today.

SEN. JOHN WARNER: All right, now I really got to say that I strongly support the president, and he has the authority to deploy our forces as he sees it`s in our best interest.

And in my judgment, it is absolutely essential that we continue to support this Iraqi government and to try and enable the Iraqi people to accomplish their desire to have a freedom, a stabilized country, and to exercise sovereignty.

So I`m not suggesting in my warning that Congress may have to go back and debate -- we do that, we owe that obligation to the American people. But this senator wants to support, hopefully, the continuation of this mission to succeed.

MARGARET WARNER: Now, let me ask you about something else you did say today, which was that you were concerned about the Lebanon, Israel, Hezbollah crisis and that it could spill over and hurt the situation in Iraq. And specifically you said you were concerned that the decisions and rhetoric coming out of Washington not adversely affect American troops in Iraq. What did you mean by that?

SEN. JOHN WARNER: Let me say very carefully the following: Israel was attacked wrongfully. Its sovereignty was challenged by Hezbollah. Israel has a right to defend itself, and it has done that.

Now, the question is the role of the United States. We traditionally have tried to give support to the Israeli people to maintain their independence and their sovereignty. In the resolution that we passed here in this Senate, that was set forth ever so clearly.

The point I make, as we try to do our role traditionally as an honest broker, to help Israel, to help stop this conflict, then we must do it in a way that we do not engender any greater risk to our forces fighting in Iraq.

As I say, we`ve already lost 2,500-plus, 20,000-some-odd wounded, in three years. We`ve got an enormous investment to see that situation succeeds, and I would hope that what we do -- and we were reassured by the secretary of defense today -- that, as we proceed to try and work out the resolution of the problem between Israel, Hezbollah, Lebanon and Palestine, then we do it in such a way as not to incite further harm to our troops who are bravely fighting in Iraq.

MARGARET WARNER: So, Senator Reed, do you think that the actions of the administration or the Congress and the words coming out of Washington so far in support of Israel have endangered American interests or American troops elsewhere in the region?

SEN. JACK REED: I don`t think the words and the actions so far have. I think what is problematic though is that Hezbollah, because of its resistance so far -- and I think it`s creating a mythic quality disproportionate to its actual effectiveness on the battlefield -- but it is creating on the Arab and Islamic street this sense that they might be emulated in Iraq and elsewhere.

And also, I think you`re seeing some of these militias in Iraq, principally the Mahdi Army and their leader, being very supportive of Hezbollah, saying that this is the example that others should follow, others in the Islamic world. I think that perception is perhaps endangering our troops, but I don`t think it`s a direct function of what is being said here or what`s being done by the administration.

MARGARET WARNER: Let me just get Senator Reed to follow up on that. Do you agree with General Abizaid, Senator Reed, that there is a parallelism between Hezbollah being this armed state within a state within Lebanon and the growth and increasing violence on the part of Shiite militias in Iraq?

SEN. JACK REED: Well, I probed General Abizaid on that. And I do think there is a parallelism. But one of the complicating factors in Iraq is that the Mahdi Army and its leader, Sadr, they`re not only a militia, but they also have a presence in the Iraqi government. They control...

MARGARET WARNER: Just as Hezbollah does in Lebanon.

SEN. JACK REED: Just as Hezbollah does in Lebanon. And this Maliki government is one we support, and that`s what makes this situation in Baghdad and Iraq infinitely complicated.

It`s not a fight just by some outlaw bands; you have people that are involved in the government. And it makes it very difficult for the prime minister to move effectively against these forces. And my sense is, if we don`t move effectively, or the Iraqi government doesn`t move effectively against particularly the Mahdi Army, that this situation will continue to deteriorate.

MARGARET WARNER: And do you think we`re headed that way, Senator Warner, in which the Mahdi Army essentially becomes almost like Hezbollah, but within Iraq?

SEN. JOHN WARNER: Well, I think, as my colleague said, they`re much like the Hezbollah now, in terms of their actions. And they are getting a certain amount of support from Iran which, indeed, is the principal supporter of arms and supplies, together with Syria to Hezbollah.

So when I made that connection earlier, I`m just concerned that, as we fulfill the role which we must as honest broker in trying to bring back a resolution of the fighting in the Israeli-Lebanon theater, that we do so in a way not to engender any greater risk to our forces.

Now, you`ll notice of recent the Grand Ayatollah Khamenei and other members of the religious organization in Iraq have been speaking out and speaking out against actions of the United States as if we were giving unqualified support to Israel. And, of course, I don`t think we are.

We`re giving a very judicious, honest-broker advice and support to try and resolve the suffering on both sides of that conflict in the Israeli- Lebanon theater.

MARGARET WARNER: All right. Senator John Warner, Senator Jack Reed, thank you both.

(BREAK)

RAY SUAREZ: Still to come on the NewsHour: two museums re-open; and an essay on summer freedoms. But first, AOL`s trying to reinvent itself again.

America Online became synonymous with the Internet in the 1990s with this ubiquitous greeting...

AOL VOICE: You`ve got mail!

RAY SUAREZ: ... but AOL has fallen on hard and uncertain times since its merger with Time Warner in 2000, as the Internet business has evolved and companies like Google and Yahoo have prospered.

Long a subscriber-based service, AOL announced yesterday that it will almost completely shift its business model to a free service, supported largely by advertising revenue. AOL expects to lose many of its subscribers in the process; it lost nearly one million in the last quarter alone.

And here to bring us up to date on this latest version of AOL is Kara Swisher, technology writer for the Wall Street Journal and author of two books about AOL.

Kara, welcome. For millions in the late 1990s who were getting their first taste of the World Wide Web, AOL was literally their gateway, their portal. What happened in the meanwhile?

KARA SWISHER, Technology Writer, Wall Street Journal: Well, you know, I think their slogan was, "So easy to use, no wonder it`s number one," and that was the whole thing. The Internet was really complicated and hard to use, and AOL brought it to them in a very easy and friendly fashion in a way that wasn`t technological, but was consumer-oriented about communications, about community, and they did a great job at that. Unfortunately, that was their greatest time.

RAY SUAREZ: Well, since then, search engines have gotten a lot better and people now have ways to get on the Web where they don`t need somebody to sort of take them by the hand.

KARA SWISHER: Right.

RAY SUAREZ: Was it just sort of consumer experience and people learning their own way that made AOL less necessary?

KARA SWISHER: No, I mean, there`s -- gosh, watching AOL is like watching someone fall down a very long flight of stairs that they keep falling down and almost push themselves down. AOL has made so many errors over the past recent years especially.

But I think, yes, it was Internet on training wheels. That was what it was called by a lot of people and disdained by a lot of geeks. But in fact, you know, they really didn`t keep up with what was happening on the Web. And companies like Google and Yahoo and many others, even today like Flickr, and YouTube, and MySpace, just surpassed them easily because there was no innovation going on, on the AOL service.

RAY SUAREZ: Well, in 2002...

KARA SWISHER: And that`s what it`s all about. I mean, it`s all about innovation right now.

RAY SUAREZ: In 2002, the company hit its high watermark. It had 35 million subscribers.

KARA SWISHER: Right.

RAY SUAREZ: It`s got a lot less now. Where did they go?

KARA SWISHER: Well, they left, because no one is doing dial-up phone service. I mean, nobody does that. It`s not convenient. Broadband is finally proliferating in this country.

Our country is way behind other countries, but finally a lot of people are using broadband. And the whole idea of a dial-up service is very antiquated. It`s sort of like having a horse and buggy to get around the Internet when there`s all these speedy cars going on.

And so AOL was continuing to market to that group and hoping to transition them over to broadband, but other companies, like Yahoo, with SBC, satellite companies, all sorts of companies were, you know, in the space. And AOL just couldn`t keep up.

Now, they had the chance, because they were merged with Time Warner, which is the biggest cable system. And they have a huge high-speed cable business, but they never merged the two because of the acrimony of the merger. Things got very personal, and, of course, it took it out on the business.

RAY SUAREZ: Well, as more people got at-home Web access, did AOL have opportunities to shift that it simply didn`t take? Were there sort of roads not taken that ended up really hurting them?

KARA SWISHER: Well, for both Time Warner and AOL, yes. I mean, Time Warner years ago had Pathfinder, which was one of the biggest disasters, Internet debacles in the short history of the Internet.

But AOL had the chance to merge, for example, with the cable system. And there were a lot of fighting between the AOL people and the Time Warner people. And, you know, while they fought, everything burned down around them.

I mean, it was kind of a classic merger story where they aren`t thinking about the customer and what`s next. They`re thinking about, you know, their status and place within the organization. And they never made that one key part of the merger which would have been to merge AOL with its high-speed cable service. And I think they might have been dominant today had they done that.

RAY SUAREZ: Well, everybody in the early days of the merger talked about what a great idea it was, since Time Warner was such a huge content producer. And everybody says, "Well, AOL is a content aggregator. Time Warner is a content producer. Now, all you have to do is hook up those two pipelines and, boy, oh, boy, it`s going to start flooding into people`s houses."

KARA SWISHER: Right, right.

RAY SUAREZ: Why didn`t that happen?

KARA SWISHER: Well, again, fighting between the top executives. I mean, there was so much -- you know, it was like a Shakespearian play up there up at Time Warner Center. Steve Case, Gerald Levin, even Dick Parsons, they all just didn`t get along, and therefore nothing happened and nothing gelled.

Now, you know, a lot of people thought the content would easily go over these content distribution channels. Meanwhile, companies that actually aren`t in the content business, like Google, just rose up because of advertising. And other companies, like MySpace, which is now the biggest site on the Internet, which was not around just a few years ago, benefited because of user-generated content, which was AOL`s real calling card in its early days.

I mean, AOL invented MySpace. MySpace would not be around without the influence of AOL, and yet AOL is dwindling and MySpace is growing.

RAY SUAREZ: Well, you`ve talked about MySpace, about YouTube, about a lack of innovation. Yet if you weren`t paying attention, it seemed like every five minutes on television there was another AOL ad telling you about new features, and new access, and new, new, new. Was there, in fact, really not that much new going on at the AOL site?

KARA SWISHER: Well, they had really good ads. I mean, it`s just like Hewlett-Packard. Really nice ads, I really like them. But I think a lot of people, you know, were moving to these services, like Flickr and YouTube, because they`re very user-friendly.

And I think a lot of what AOL was doing was keeping people within. They wouldn`t share instant messaging. They wouldn`t allow you to move your e-mail around. You know, consumers after a while don`t like to be kept and sort of being told what to do. And right now on the Internet, the biggest trend again is, you know, social networking which where the user is in charge and the user is even creating content.

And I think the companies of the futures are the ones that are most open, at least in the Internet space, the ones that allow openness, sharing, that allow an ecosystem of sorts where they don`t have to like capture customers and hold onto them for dear life.

RAY SUAREZ: Well, let`s talk about what AOL does from now on. It still has a base of millions of fee-paying subscribers. As it shifts to this new free service, what happens to them?

KARA SWISHER: You know, free was something that was a good idea five years ago. I don`t know why it`s going to work today. I mean, they should have done it when they had the chance many years ago. They should have spun the thing off, really, because it had no ability to buy really interesting new companies.

I don`t know what it`s going to do, because it can`t -- you know, it doesn`t want to spend money on marketing. Now they`re laying off all these marketing people, you know, the people on the phones that drive you nuts at AOL.

And I don`t know quite how they`re going to hold onto people, because they lost I think a million people in the last quarter which is astonishing. At the same time, they grew so quickly. I don`t know how you hold onto customers when there are so many free alternatives, like Google Mail, Yahoo Mail. You don`t really need a service.

And now that AOL is free, you might stay there, but if it doesn`t have the features that the others have, people move away, especially young people. And it is all about the young people. They move away very quickly to things they like.

And even MySpace is threatened if they don`t continue to innovate and not sort of fill the service with commercial, you know, come-ons and sort of all this flash and to much, because the kids will move right off of it if they perceive something that isn`t useful to them.

RAY SUAREZ: Well, briefly, Kara, before we go, it was just the blink of an eye ago when this was a killer brand. It was the most well-known brand in that space. Is there still value embedded in that brand that gives you a pedestal from which to start something new?

KARA SWISHER: You know, years ago, Barry Diller wanted to buy. He`s another one who`s been another mogul that`s been in the Internet and wanted to buy AOL. And the AOL people, the Time Warner people, wanted to charge too much for it.

I mean, anybody could take a base of 17 million consumers and do something with them. It`s just whether they have the commitment at the top of Time Warner to do so. And I just get the feeling, when you visit companies like Yahoo, and Google, and Flickr, and YouTube, that this is where things are happening and the real excitement is there.

And I don`t know how you bottle that and bring it within AOL any more. And it may be just one of those -- you know, I always say that planes are covered with the bodies of pioneers, and AOL might be one of those pioneers.

RAY SUAREZ: Kara Swisher from the Wall Street Journal, thanks for being with us.

KARA SWISHER: Thanks a lot.

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RAY SUAREZ: Now, a fresh portrait of the nation and its art. Jeffrey Brown has that story.

JEFFREY BROWN: After six years with doors shuttered and a $300 million renovation, the National Portrait Gallery and Smithsonian American Art Museum have once again opened in Washington.

Housed in one of the great architectural gems of the capital, the original Patent Office Building that dates from 1842, the two museums have reoccupied a spectacular space, with plenty of natural light once again allowed to shine in and offices removed to create more exhibition halls.

The museums have always told stories of America, and their iconic images are still given pride of place, including Gilbert Stuart`s Lansdowne portrait of George Washington and Albert Bierstadt`s classic view of the Sierra Nevada.

But along with the renovation has come a chance for redefinition, of portraiture, its styles and subjects of the breadth of American art, and, through both, how best to tell the nation`s story.

Mark Pachter is director of the National Portrait Gallery. His counterpart at the Smithsonian American Art Museum is Elizabeth Broun.

ELIZABETH BROUN, Director, Smithsonian American Art Gallery: We like to be a traditional museum in presenting the very finest artworks made by Americans over more than 300 years. However, we have a very special role also: We try to connect those artworks to the larger story of the country and how we became the society we are today.

I think what Mark and I appreciate the most is that the artworks tell the story in a way that is very approachable and very powerful. It has an emotional component to it.

JEFFREY BROWN: Mark Pachter, what`s your mission?

MARK PACHTER, Director, National Portrait Gallery: For the National Portrait Gallery, I could give you the legal language and the enacting legislation, but it`s basically: Meet amazing Americans.

JEFFREY BROWN: Meet amazing Americans?

MARK PACHTER: Yes.

JEFFREY BROWN: And how do you define "amazing"?

MARK PACHTER: Well, that process is really at the heart of the National Portrait Gallery. The notion was, who do Americans remember? Whom do they notice? And how do we tell our national story in terms of individuals?

That`s really at the core of what we do. So we have a process whereby we look and we make sure that it`s not just white men on horses, which is probably close to the original conception.

JEFFREY BROWN: White men on horses, that`s the old idea of who`s amazing?

MARK PACHTER: You know, the National Portrait Gallery, whom you remember, only presidents, only generals and so forth. And of course, we remember presidents and generals. But we expanded the whole idea to understand that there are many fields of achievement.

JEFFREY BROWN: And so, yes, the presidents are all here; the founders; Lincoln in a famous photograph taken shortly before his assassination; the men who`ve occupied the White House in our own time. And important figures from the past in many fields still hang on the Portrait Gallery`s walls.

But portraits come in all sizes and shapes now, some, well, off the wall. And the definition of who`s amazing includes Americans now, those very much still with us.

And here`s Tony Morrison.

MARK PACHTER: Yes.

JEFFREY BROWN: You used to have -- didn`t you use to have a 10-year rule?

MARK PACHTER: Ten-year dead rule, we used to say...

JEFFREY BROWN: Ten-year dead rule.

MARK PACHTER: ... "Is somebody dead enough for the National Portrait Gallery?" That was an in-joke, but it was close to the truth.

JEFFREY BROWN: You had to be dead for at least 10 years.

MARK PACHTER: Ten years. And you understand why, because there`s a historical perspective and you didn`t want people to influence you and so forth. But then we decided that was crazy, that people, for them to understand the great figures of the past, they have to understand how they connect to the figures of today. And now people can be very much alive, breathing, filled with possibilities, filled with controversy.

JEFFREY BROWN: Elsewhere you have Shaquille O`Neal, Mia Hamm...

MARK PACHTER: Right.

JEFFREY BROWN: ... people who are sort of in the papers every day.

MARK PACHTER: Yes. We say, is Shaquille O`Neal a basketball player or is he one of the most extraordinary basketball players of all time? If the answer is yes, he belongs here. Mia Hamm, again, her...

JEFFREY BROWN: You actually sit around and you say...

MARK PACHTER: We do.

JEFFREY BROWN: ... you guys, you`re curators, you`re the head of a museum, and you say, "Is Shaquille O`Neal one of the greatest basketball players of all time?"

MARK PACHTER: We absolutely do. And we read, and we...

JEFFREY BROWN: That sounds like fun.

MARK PACHTER: Well, when it`s Shaquille O`Neal, it is. But we read things. We call people in the know about sports. And the thing is we`re also doing that with scientists, too. So the idea that we`re only looking at sports people now, whereas before it is only politicians, is not true; we`re just widening the range of whom we pay attention to.

JEFFREY BROWN: The Smithsonian American Art Museum has also expanded its range. Here one can take a chronological tour and see the development of the nation`s art, American artists looking to Europe`s great masters, then trying to bring forth something new.

ELIZABETH BROUN: I love this, because it is a contemporary take on the pluralism of America, and it shows that it`s alive and well.

JEFFREY BROWN: The renovation has allowed the museum to show off a unique image of America. A 33-foot-wide installation by the pioneering Korean-born video artist Nam June Paik, who chose different images, many from popular culture, to represent each state in TV monitors.

JEFFREY BROWN: So Kansas, your home state, gets "The Wizard of Oz"?

ELIZABETH BROUN: That`s right.

JEFFREY BROWN: Kentucky, I see the Kentucky Derby.

ELIZABETH BROUN: We have the Kentucky Derby. That`s exactly right.

JEFFREY BROWN: He tried to find something representative?

ELIZABETH BROUN: If you look at Iowa, you`ve got morphing political candidates.

JEFFREY BROWN: So this idea of defining American art, which is part of your business...

ELIZABETH BROUN: Yes.

JEFFREY BROWN: ... did you get a chance to rethink it during these years, as the museum was renovated?

ELIZABETH BROUN: Absolutely. And I think what we have come to understand is it`s not one story, it`s many stories, many stories across the country, many stories for each one of us. It`s whatever our own experience tells us America is about. And...

JEFFREY BROWN: That you can see in this one.

ELIZABETH BROUN: Absolutely, the experiences have been so different. For an artist like Paik, who came in 1954, he was a citizen of the world, he was originally from Korea, and then came here really seeking the avant- garde art world. He wanted to be on the cutting edge of technology.

We think he`s the first person ever to use the phrase "electronic superhighway" in print. And he was always the person who best captured how media and how television have transformed our lives. So the deeper story here is about that.

JEFFREY BROWN: These are museums that are determinately populous and welcoming. Visitors can watch as art restorers do their work, and special exhibitions show contemporary artists capturing aspects of American life.

To what extent does a person come here and discover an American identity?

ELIZABETH BROUN: We hope you come and think about what the American identity is, but we would be the last to say what that identity is in a definitive sense.

The culture was constantly trying to define something distinctively American. But in fact, the people were always thoroughly international, very pluralistic. And I think one of the great gifts of this country is that we`ve allowed a kind of grassroots populism and a kind of local culture to thrive throughout the decades and centuries.

MARK PACHTER: I call the National Portrait Gallery a conversation about America. We might call both that, both museums.

ELIZABETH BROUN: Right.

MARK PACHTER: It`s the conversation. It`s the ongoing question of who we are. So asking the question as you did is very American. Having only one answer has become, I think, less so.

JEFFREY BROWN: Six years later then, this conversation of American images has started anew.

(BREAK)

RAY SUAREZ: Now some closing thoughts on summer. We get them from guest essayist Nancy Gibbs of Time magazine.

NANCY GIBBS, Time Magazine: What is it about summer that makes children grow? We feed and water them more. They do get more sun, but that probably doesn`t matter as much as the book they read or the rule they broke that taught them something they couldn`t have learned any other way.

The school year channels them so efficiently through their lessons, their practices, their many pools of obligation. Summer is not obligatory. We can start an infernally hard jigsaw puzzle in June with the knowledge that, if there are enough rainy days, we may just finish it by Labor Day, but if not, there`s no harm, no penalty. We may have better things to do.

Pour a liquid out of its container and it changes shape, fills the space you give it. If you give children a lot of space, it may surprise you where they`ll go and the shape they`ll take.

Our family goes back to the same place every summer, a little town on a lake, and the place itself is as precise a measuring stick as the pencil marks on the kitchen doorway.

YOUNG GIRL: Right there. Look. That`s you.

NANCY GIBBS: The basement is a warehouse of outgrown skates and half- finished lanyards. Last summer, little sister`s feet could barely reach the pedals; this summer, she`s racing down hills, while big sister is taller than some of my friends. Her ears are pierced. Her shoes have heels when she`s not barefoot.

Some things get smaller, like the print in their summer reading books and the time we get to have them to ourselves. As they get older, we have to share them more, both with their friends and with their need for solitude.

They prize these brief but recurring alliances with their summer friends. They never see each other in school clothes, don`t know who threw up in math class, don`t know who sits where in the cafeteria. They do remember when they capsized a boat together, and got their first dogs, and sneaked into the woods to break some rule for the first time.

They separate for 10 months at a time and then meet again, and so they have stories to tell. They become natural narrators, sitting together under a tree, smelling of dirt and sunscreen, comparing what being 12 means in Canton, or Fox Chapel, or Bronxville.

As parents, we pay so much attention to their schools, their scores, their teachers. How is it that two months of play seems to shape their character and reflexes more than a whole winter`s worth of lessons?

When they are melted in the high heat of summer freedom, they find out just how flexible they can be, how bold, how resourceful, so that, when the air cools and school resumes, they swagger back into their orderly lines with a secret and another mark on the wall.

I`m Nancy Gibbs.

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RAY SUAREZ: Again, the major developments of this day. Hezbollah rockets killed eight Israeli civilians as Israeli troops pushed deeper into Lebanon. The leader of Hezbollah, Sheik Hassan Nasrallah, offered to call off the rocket assault if Israel ends its attacks on Lebanese towns.

The top U.S. commander in the Middle East conceded sectarian violence in Iraq could push the country toward civil war. And AOL announced it will cut as many as 5,000 jobs, almost a quarter of its workforce.

We`ll see you online and again here tomorrow evening, with Mark Shields and David Brooks, among others. I`m Ray Suarez. Thanks for watching. Good night.