The NewsHour with Jim Lehrer

GWEN IFILL: Good evening. I`m Gwen Ifill. Jim Lehrer is away.

On the NewsHour tonight: the news of this Wednesday; then, congressional questions and scolding on Iraq for General John Abizaid, the U.S. commander for the Middle East; a NewsHour report about the cost and the difficulty of rebuilding in Iraq; fallout from U.S. Airways` proposal to merge with Delta Airlines; and a conversation with five new members of the 110th Congress before it convenes in January.

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GWEN IFILL: The top U.S. commander in the Middle East warned today against setting timetables to leave Iraq. Army General John Abizaid testified at congressional hearings. He said timetables limit flexibility. And he said, "It seems to me that the prudent course ahead is to keep the troop levels about where they are."

A growing number of Democrats are pressing to start pulling troops out in four to six months. Abizaid said that would lead to even more sectarian violence. We`ll have more from today`s hearings right after this news summary.

Six more Americans were killed in Iraq on Tuesday. The U.S. military said today four died in combat in the west, and two more died in a roadside bombing in Baghdad. So far this month, 41 U.S. troops have been killed. Since the war began in 2003, 2,859 Americans have died.

Iraqi officials said today about 70 people have been freed after a mass kidnapping in Baghdad yesterday. Gunmen in police uniforms abducted them from an education ministry office. It is unclear how many are still being held.

Today, Prime Minister al-Maliki visited Baghdad University. He told educators and students he`s trying to improve security,

NOURI AL-MALIKI, Prime Minister, Iraq (through translator): I regret what has happened yesterday when a group of gangsters carried out a criminal act, but the government`s response was very strong and, despite the release of most of the kidnapped, we shall keep on chasing those criminals. Such acts cannot be done by a man loving his people and homeland, so those people are aiming to sabotage the country.

GWEN IFILL: In the latest violence, at least 40 Iraqis were killed and dozens wounded in a series of attacks today. The worst took place near a gas station in central Baghdad. A car bomb there killed at least 11 people and wounded more than 30.

A U.S. soldier pleaded guilty today to raping an Iraqi girl and murdering the girl and her family. Army Specialist James Barker entered the plea at Fort Campbell, Kentucky. The crimes took place last March in Mahmoudiya, a village just south of Baghdad.

Three other Americans are also accused in the rape and murders. Barker agreed to testify against them in a deal to avoid the death penalty.

Republicans in the Senate picked their leaders today. In the process, they resurrected the career of a former majority leader. NewsHour congressional correspondent Kwame Holman has our story.

KWAME HOLMAN: At the center of attention today in the Capitol was the three-term Republican senator from Mississippi, Trent Lott.

SEN. MITCH MCCONNELL (R-KY), Majority Whip: Our newly elected assistant majority leader, Trent Lott.

SEN. TRENT LOTT (R), Mississippi: Thank you, leader, and congratulations to you.

KWAME HOLMAN: Lott was elected minority whip, the number-two post in the GOP leadership, after pulling off a one-vote victory over Tennessee`s Lamar Alexander, who claimed a majority of support just yesterday.

SEN. TRENT LOTT: I`m honored to be a part of this leadership team, to support Mitch McConnell and all of my colleagues, to do a job that I`ve always really loved the most: count the votes.

KWAME HOLMAN: Lott returns to power just four years after he resigned as majority leader following remarks he admitted were racially insensitive. They came in 2002, in praise of former South Carolina Senator Strom Thurmond, who ran for president in 1948 as a segregationist.

SEN. TRENT LOTT: When Strom Thurmond ran for president, we voted for him. We`re proud of it. And if the rest of the country had followed our lead, we wouldn`t have had all these problems over all these years, either.

KWAME HOLMAN: But Lott did not disappear. He maintained his chairmanship of the Rules Committee and also openly criticized outgoing Majority Leader Bill Frist`s legislative tactics, signaling he would have done things differently and perhaps more successfully.

SEN. TRENT LOTT: If it were my call, I wouldn`t set this week up the way it is.

KWAME HOLMAN: This week, Lott, a seasoned vote-counter, lobbied his colleagues heavily, casting himself as a shrewder deal-maker than the freshman Alexander.

SEN. TRENT LOTT: The spotlight belongs on him.

KWAME HOLMAN: Lott declined to answer questions about his comeback today, deferring to Kentucky`s Mitch McConnell, the current majority whip, who will assume the minority leader post in January.

House Republicans hold leadership elections on Friday. House Democrats are expected to name Nancy Pelosi speaker tomorrow. The fight for majority leader pits Maryland`s Steny Hoyer, the current whip, against Pennsylvania`s John Murtha, an outspoken Iraq war critic, endorsed by Pelosi.

GWEN IFILL: A handful of House races have yet to be decided, but three more were called today. In Georgia, two Democratic congressmen, John Barrow and Jim Marshall, were certified winners by a total of about 2,600 votes. And in Wyoming, Republican Congresswoman Barbara Cubin won a seventh term. She beat her Democratic challenger by just over 1,000 votes.

Former Washington lobbyist Jack Abramoff entered federal prison today in Maryland. He`s to serve nearly six years for fraud in a business deal in Florida.

Today, in an e-mail to friends, he wrote, "This nightmare has gone on for almost three years so far, and I expect we are not even halfway through." Abramoff has also pleaded guilty to influence-peddling in Congress. He`s cooperating with prosecutors in that continuing investigation.

The former chairwoman of Hewlett-Packard, Patricia Dunn, pleaded not guilty today in a boardroom scandal. She`s charged with fraud and identity theft in San Jose, California. Prosecutors say Dunn approved illegal spying on contacts between board members and reporters. Dunn has said company lawyers assured her, her actions were legal.

President Bush met with Russian President Putin today, beginning an eight-day trip through Asia. Mr. Bush left Washington last night and stopped in Moscow for refueling. It was the halfway point on a flight to the city-state of Singapore. From there, the president will travel to Vietnam for the summit of Pacific Rim leaders.

In Moscow, a Kremlin spokesman said the two presidents discussed nuclear disputes with Iran and North Korea and the situation in the Middle East.

The president is making the journey without a new law to normalize trade with Vietnam. The House failed to approve it on Monday, and Republican leaders pulled it until December.

In Hanoi today, trade ministers tried to resurrect world trade talks that began in Doha, Qatar. U.S. Trade Representative Susan Schwab said it won`t be easy.

SUSAN SCHWAB, U.S. Trade Representative: Artificial deadlines will not do the trick. High-profile ministerials will not do the trick. The only thing that will get the Doha round back on track is if all of the key players -- and these are developed and developing countries alike -- are willing to stretch beyond where they were in July.

GWEN IFILL: The talks collapsed over disputes about subsidies and tariffs for farm products.

U.S. Airways offered today to buy its larger rival, Delta, for more than $8 billion. The deal would create one of the world`s largest airlines. Delta is currently operating under federal bankruptcy protection. It said it wants to stay independent but plans to review the offer. We`ll have more on this story later in the program tonight.

Severe storms swept across the South today. At least one man was killed in Louisiana, and several others were injured in Mississippi and Arkansas. Officials reported possible tornadoes in Alabama and other states. Scores of buildings and homes were damaged, and heavy rain caused flooding.

A new enrollment period began today for millions of Americans in the Medicare drug benefit plan. Recipients may change plans between now and the end of the year. More than 50 plans are available in most states.

The Bush administration says the program has won general acceptance, but some Democrats are pushing to have the government negotiate prices.

The federal agency that insures pensions reported today its deficit is shrinking. The Pension Benefit Guaranty Corporation said the red ink was just over $18 billion for the fiscal year that ended September 30th. That`s down more than $5 billion from a record shortfall two years ago.

On Wall Street today, the Dow Jones Industrial Average gained more than 33 points to close above 12,251. The Nasdaq rose 12 points to close above 2,442.

That`s it for the news summary tonight. Now: tough questions for a top military commander; big problems for Iraq contractors; the U.S. Airways bid for Delta; and the views of five newly elected members of Congress.

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GWEN IFILL: Today`s Senate hearings on the state of affairs in Iraq. NewsHour congressional correspondent Kwame Holman has that story.

KWAME HOLMAN: The number-one question before the Senate Armed Services Committee today was: What will it take to get the chaos in Iraq under control?

Addressing that issue were Army General John Abizaid, commander of U.S. troops in the Middle East, and Ambassador David Satterfield, the State Department`s senior adviser on Iraq. General Abizaid shocked this same panel three months ago when he said Iraq could slide toward civil war. Today, he offered a reassessment.

GEN. JOHN ABIZAID, Top U.S. Commander in the Middle East: I`m very encouraged by my most recent trip. And that, while sectarian violence remains high and worrisome, it`s certainly not as bad as the situation appeared back in August.

It`s still at unacceptably high levels. I wouldn`t say that we have turned the corner in this regard, but it`s not nearly as bad as it was back in August, and I am encouraged by that.

KWAME HOLMAN: The question of troop levels then became the focus of this Armed Services hearing, the first since the midterm elections. There are nearly 150,000 Americans currently serving in Iraq. Several committee Democrats advocated setting a timetable to draw down U.S. forces, but Republicans resisted that approach.

SEN. LINDSEY GRAHAM (R), South Carolina: Do we need more American troops at the moment to quell the violence?

GEN. JOHN ABIZAID: No, I do not believe that more American troops right now is the solution to the problem.

SEN. LINDSEY GRAHAM: Do we need less American troops?

GEN. JOHN ABIZAID: I believe that the troop levels need to stay where they are. We need to put more American capacity into Iraqi units to make them more capable in their ability to confront the sectarian problem.

SEN. LINDSEY GRAHAM: So it`s your testimony that we don`t need any change in troop levels to get this right?

GEN. JOHN ABIZAID: It is possible that we might have to go up in troop levels in order to increase the number of forces that go into the Iraqi security forces.

KWAME HOLMAN: Citing the chaos that has engulfed parts of the country, Arizona Republican John McCain questioned the general`s logic about troop levels.

SEN. JOHN MCCAIN (R), Arizona: General Abizaid, is al-Anbar Province under control?

GEN. JOHN ABIZAID: Al-Anbar Province is not under control, Senator.

SEN. JOHN MCCAIN: Yet we have enough troops to take care of the problem, which you say Baghdad is the primary area. Wouldn`t it make sense to say it might be well to get both Baghdad and al-Anbar Province under control before we have another battle of Fallujah and lose many more lives, because the insurgents have taken control of a good part of al-Anbar Province?

GEN. JOHN ABIZAID: It`s easy for the Iraqis to rely upon us to do this work. I believe that more American forces prevent the Iraqis from doing more, from taking more responsibility for their own future.

They will win the insurgency. They will solve the sectarian violence problem, and they`ll do it with our help. If more troops need to come in, they need to come in to make the Iraqi army stronger. That`s my professional opinion.

SEN. JOHN MCCAIN: So we have sufficient number of forces to clear insurgent sanctuaries, hold the territory with a combination of coalition and Iraqi forces, provide sufficient security in Iraq, so that economic reconstruction and political activity can take place, to arrest the momentum of sectarian death squads, disarm militias, to train the Iraqi army, and keep an American presence in Iraqi units, and place U.S. personnel in Iraqi police units? We have sufficient troops to carry out all those tasks?

GEN. JOHN ABIZAID: We have sufficient troop strength, Iraqi and American, to make those tasks become effective.

KWAME HOLMAN: Senators also wanted to know what role the Iraqi government is playing in stopping the sectarian violence carried out by armed militias.

SEN. CARL LEVIN (D), Michigan: Do you believe, General, that Prime Minister Maliki will move against the Sadr militia?

GEN. JOHN ABIZAID: I think he must move against the Sadr militia if Iraq is to become a free and sovereign and independent state.

SEN. CARL LEVIN: Do you believe he will?

GEN. JOHN ABIZAID: I believe he will. And he will use the Iraqi army to do so.

SEN. JACK REED (D), Rhode Island: General Abizaid, how much time do you think we have to bring down the level of violence in Baghdad before we reach some type of tipping point where it accelerates beyond the control of even the Iraqi government?

GEN. JOHN ABIZAID: I think it needs to be brought down within the next several months.

SEN. JACK REED: Ninety days, 60 days?

GEN. JOHN ABIZAID: Four to six months.

SEN. JACK REED: Four to six months. And you have said that your view is that the Iraqi government and Maliki is committed to do that. The $300 billion question is: When?

GEN. JOHN ABIZAID: I think he`s ready to do it now.

DAVID SATTERFIELD, Senior Iraq Adviser, State Department: We see the need for action, both on the political front and on the security front. The current levels of violence work against a political resolution, and the failure to move forward a political process, a reconciliation process, feed and sustain those levels of violence.

SEN. LINDSEY GRAHAM: Would you agree with this statement, that if the current level of violence is not contained or reduced dramatically, the chance of a political outcome being successful in Iraq is almost zero?

DAVID SATTERFIELD: There is no question that, if levels of sectarian violence, if the growth of militias are not addressed and brought down significantly, that the chances of a political resolution are significantly diminished.

KWAME HOLMAN: The State Department`s Satterfield also ruled out an idea that has surfaced in recent months: separating Iraq along ethnic and religious lines.

DAVID SATTERFIELD: The mixed communities of Iraq are found throughout the country. There is no easy map that can be drawn, no easy political decision that can be taken, that would not involve death and suffering to achieve partition. But, more importantly than my views, is that very, very few in Iraq wish to see partition as an outcome.

SEN. EVAN BAYH (D), Indiana: With all of our assistance, all of our blood and treasure and sacrifice there, at some point we have to ask ourselves the question: Do they have it in them to forge one country and a common destiny or is that beyond their capabilities?

GEN. JOHN ABIZAID: Yes, they have it in them. They can forge one country. They are fighting and dying for their country. They can overcome these problems, but it`s not an easy thing to do, just like it wasn`t an easy thing for us to forge our own destiny after the revolution.

KWAME HOLMAN: General Abizaid and Ambassador Satterfield both went on to testify before the House Armed Services Committee this afternoon. There, the general said the training of Iraqi military forces is accelerating and they could be ready to take on more of the fighting in less than a year.

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GWEN IFILL: Still to come: today`s proposed airline mega-merger; and five new faces in Washington. But first, the massive problems with the reconstruction program in Iraq. NewsHour correspondent Jeffrey Kaye of KCET-Los Angeles prepared this report.

JEFFREY KAYE, Reporter, KCET: Amid pomp and circumstance, hundreds of cadets graduated this summer from the newly rebuilt Baghdad Police Academy. The $73 million project was supposed to be a showpiece of America`s Iraq reconstruction program. But to critics, it`s an icon of incompetence; to others, it shows the challenge of rebuilding in a war zone.

Pictures taken by investigators two months after the graduation showed human waste dripping from ceilings in the eight dormitories. One leaky room was nicknamed the "rain forest." The photos and descriptions are contained in a report issues by the special inspector general for Iraq reconstruction, Stuart Bowen, Jr.

STUART BOWEN, JR., Special Inspector General for Iraq Reconstruction: Sewage just drains through the floors, through the light fixtures, through the ceiling, fundamentally compromising the structure of the buildings and creating really a disastrous situation, an unusable facility.

JEFFREY KAYE: Bowen calls the Baghdad Police Academy the worst project he`s seen since taking office in January 2004.

STUART BOWEN, JR.: We found that the plumbing was simply improperly installed in all eight barracks, so poorly that, when the facilities were used, that the plumbing burst.

JEFFREY KAYE: The company responsible for the Baghdad Police Academy is Parsons Corporation, the global engineering and construction giant headquartered in Pasadena, California.

JAMES MCNULTY, CEO, Parsons Corporation: The dormitories where the plumbing failures occurred is certainly regrettable, and it`s not up to our standards.

JEFFREY KAYE: James McNulty, Parsons` chairman and chief executive officer, blames Iraqi subcontractors for the problems at the police academy.

JAMES MCNULTY: When we found out about the difficulties, we sent in the Iraqi plumbing contractor who did the work, and they have repaired the facility under the warning terms of their contract (ph), at no cost to the government or to the Iraqis.

JEFFREY KAYE: But the inspector general`s office expects there will be additional costs to fix up the academy. That`s just one of the many controversies enveloping Bowen as chief watchdog of America`s $22 billion Iraq rebuilding program. Bowen is a former lawyer for George Bush in both Texas and Washington. His office has produced a stream of audits and reports highly critical of the Iraq reconstruction program.

SEN. SUSAN COLLINS (R), Maine: Welcome back home.

STUART BOWEN, JR.: Thank you.

JEFFREY KAYE: As inspector general, Bowen has spent a total of 15 months in Iraq. After a recent trip, Bowen briefed GOP Senator Susan Collins of Maine.

STUART BOWEN, JR.: It was very disappointing, most disappointing project I`ve visited.

SEN. SUSAN COLLINS: Was that in a Parsons project?

STUART BOWEN, JR.: Yes, it was.

JEFFREY KAYE: Bowen`s inspectors examined 14 of Parsons` Iraq projects, and Bowen says all but one were substandard.

STUART BOWEN, JR.: Thirteen of them did not meet contract expectations. And the one that did, a prison which I visited last spring, was ultimately canceled because it was over budget and significantly reduced in scope.

JEFFREY KAYE: In fact, the U.S. government canceled two Parsons prison contracts worth more than $100 million.

With hundreds of projects worth $1.7 billion, Parsons has assumed a lion-sized role in the Iraq rebuilding program. It`s worked on oil operations, schools, water systems, munitions disposal, and one of the most photographed buildings in recent Iraq history, the courthouse where Saddam Hussein has stood trial.

In other Parsons projects, health care facilities, border posts, and police stations, the inspector general cataloged contractor horror stories: posts that weren`t straight, walls with cracks and gaps, and poor concrete work that made structures unsafe.

Parsons was supposed to renovate 20 hospitals but completed just 12. Among them was the Diwaniya Maternity and Pediatric Hospital, 100 miles south of Baghdad. In January, Iraqi physician Ali Fadhil filmed at the hospital for a British documentary.

DR. ALI FADHIL, Iraqi Physician: Everywhere the standard of work is terrible. New light fittings have melted. Pipes have not been connected. In the operating theater changing room, you can smell raw sewage.

JEFFREY KAYE: Parsons received nearly $4.2 million to renovate this hospital, but instead of new equipment, Fadhil found old incubators held together with wires and tape, oxygen tubes that weren`t properly connected, and leaky plumbing. With the help of Fadhil, who now lives in New York City, we contacted the hospital administrator. He says the problems have worsened in the last 10 months.

DR. ALI FADHIL: Now we have the operation -- the cesarean operation room and the neonatal room, it`s closed right now because of sewage.

JAMES MCNULTY: Our contract was to renovate the hospital, which we did, and we turned over to our government, and the Iraqis accepted it. What happens after acceptance is beyond our control.

JEFFREY KAYE: Other Parsons work included the planned construction of clinics throughout Iraq, but that contract was scaled back from 141 to 20, and of that only seven have been completed.

STUART BOWEN, JR.: The program, which was the key to providing real health care in Iraq, simply fell off the rails. Parsons, the contractor, didn`t get the job done.

JEFFREY KAYE: McNulty says three factors are responsible for Parsons` difficulties: unreasonable U.S. government expectations; problems with Iraqi subcontractors; and, most of all, unexpected levels of chaos and violence.

JAMES MCNULTY: We had no idea going in that it would be this dangerous. All of the preliminary contractual discussions that we had during the bidding process, we were told to assume a, quote, "permissive environment," by that meaning that we would be able to freely travel around the country and be able to provide the necessary and appropriate oversight at all of the sites. And it certainly didn`t turn out that way at all.

JEFFREY KAYE: McNulty says the challenges in Iraq construction are like nothing Parsons has experienced in its 62-year history.

JAMES MCNULTY: We have had senior Iraqi contractor representatives on site murdered. We`ve had our Iraqi employees pulled out of cars and shot point-blank. We`ve had Iraqis that worked for us kidnapped. We have had truck drivers blown up by explosive devices while they`ve been driving down roads.

JEFFREY KAYE: But the difficulties of building in a war zone did seem apparent from the beginning. By early 2004, when Parsons signed its first reconstruction agreements, more than two dozen civilians working for private contractors had already been killed in Iraq.

PARSONS MANAGER: Our project managers are prudent enough to know that, if the coalition forces say it`s not safe, it`s not safe.

JEFFREY KAYE: And by June 2004, when we first visited Parsons for a story about Iraq reconstruction, company executives assured themselves and us they could handle the dangers.

JAMES MCNULTY: We feel very comfortable doing this work, and we think we can manage the risks. I mean, if we didn`t think we could manage both the physical risks and the financial risks, we would have chosen not to bid.

JEFFREY KAYE: Looking back on that statement, were you being realistic?

JAMES MCNULTY: At the time, I was being realistic because I didn`t think that the security situation would deteriorate to the extent that it did.

JEFFREY KAYE: The war also affects the watchdogs. Concerned for their safety, analysts with the inspector general`s office often examined satellite images instead of visiting projects in person.

The violence has also made oversight work difficult for the U.S. Army Corps of Engineers, which manages the Iraq reconstruction work and inspects projects.

But, says Major General William McCoy, the former commander of the Corps in Iraq, the war is not the only reason for Parsons` difficulties. McCoy, who spent 15 months in Iraq, until mid-October, made the decisions to terminate Parsons` prisons and health facilities contracts.

MAJ. GEN. WILLIAM MCCOY, U.S. Army Corps of Engineers: Their ability to get out and go and see stuff and get to a place was severely limited, partially because of their belief in the security situation, and partially because they just didn`t have enough people to get to the right places at the right time.

JEFFREY KAYE: The Army Corps found that Parsons also lost control of projects because of its heavy use of subcontractors, Iraqi companies, which in turn farmed out work to other layers of subcontractors. McNulty says the U.S. government required Parsons to use Iraqi firms, but Parsons had difficulty finding companies with expertise.

JAMES MCNULTY: The Iraqi contractors had never built anything to U.S. standards before. In fact, many of the Iraqi contractors were never in business until after the war. And so we were supervising Iraqi contractors and trying to get them to build to U.S. standards when they had never done so before and had no experience doing that.

JEFFREY KAYE: McNulty complains the U.S. government didn`t pay what Parsons needed to hire enough supervisors. To make matters worse, he says, after Parsons agreed to build 141 clinics in two years, the Army Corps of Engineers decided Parsons should do the job in half the time.

JAMES MCNULTY: The government then told us that 24 months was unacceptable, we had to build them in 12 months, and that they wanted to start every one of the clinics simultaneously, 141 clinics all over Iraq at 141 different sites.

MAJ. GEN. WILLIAM MCCOY: There was clearly some issues with some of the decisions the government made. But at the end, they signed the contract to accomplish the tasks that we asked them to do.

JEFFREY KAYE: Democratic Congressman Henry Waxman agrees. He says Parsons promised more than they could deliver.

REP. HENRY WAXMAN (D), California: The contractors didn`t think there would be a problem when they were willing to sign the contracts. They even added money into the contracts to provide for security protections for their efforts and for their workers.

JEFFREY KAYE: Waxman, who is expected to chair the House Government Reform Committee next year when Democrats take control of Congress, promises to pursue allegations of war profiteering.

REP. HENRY WAXMAN: I don`t think anybody ought to get paid and be able to keep the money if they didn`t do what they were supposed to do. And then they found that Iraqi subcontractors didn`t do the work, but why should the U.S. taxpayers pay for that? We should get our money back.

JEFFREY KAYE: But Parsons` chief says the company made an honest profit of 2 percent to 3 percent and has no intention of repaying it.

JAMES MCNULTY: There is nothing wrong with our firm having made a profit on that work that we did over there in Iraq. It was legitimately earned; it was honestly earned. And none of our employees, nor our firm, should feel the least bit bad about that.

JEFFREY KAYE: Congress recently voted to disband the inspector general`s office next October, but that decision is expected to be reversed. And Stuart Bowen says he`ll expand his investigation of Parsons as part of a widening probe of how U.S. funds have been used in Iraq.

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GWEN IFILL: Now, U.S. Airways` hostile takeover bid. What that says about the airline industry. Jeffrey Brown has the story.

JEFFREY BROWN: U.S. Airways is the nation`s sixth-largest airline. It came out of bankruptcy only last year and merged with America West. Delta is the nation`s third-largest airline and still in the midst of bankruptcy.

Today, the smaller U.S. Airways made an $8 billion bid for the larger Delta. And if it`s successful, the new combined airline will be one of the largest carriers in the world, providing the most flights on the East Coast and in transatlantic travel.

Here to tell us what`s going on is Richard Gritta, professor of finance and transport in the Pamplin School of Business at the University of Portland.

Professor Gritta, let`s start with, why is U.S. Air making this bid? What does it want?

RICHARD GRITTA, University of Portland: Well, it wants to survive, just like everybody else. And to survive, the key thing now is to abandon the short-haul markets, where the lower cost carriers are basically bleeding the major or legacy carries dry. And so this makes sense. This makes sense to merge with a carrier that has a lot of international routes and go where you can make money.

JEFFREY BROWN: Now, remember, not that long ago there seemed to be obituaries in the works for U.S. Airways. How is it able now, so soon after coming out bankruptcy, to make an $8 billion bid?

RICHARD GRITTA: Well, they`ve got the backing of Citicorp, and that`s a big thing. They`ve got financial backing. And if you`ve got money, you can always do a deal. But I think they feel to survive the long run, they`ve got to do something, and the something is merge. And Delta makes sense for them.

JEFFREY BROWN: Now, what about Delta? Explain their situation. Here they are struggling still to get out of bankruptcy. Tell us what they`re going through.

RICHARD GRITTA: Well, basically, the entire airline industry has -- absent a couple of carriers, like Southwest -- been a mess because of operating strategies that were flawed -- hub and spoke -- and financial strategies that were too aggressively using debt.

So Delta for a while -- at least in the 1980s -- was a very healthy carrier. And then they loaded up with debt when they expanded in the late 1990s. And, of course, all the confluence of events have conspired to hurt all the airlines, including the run-up in fuel prices. So now they`re looking at the problems of the vast majority of the carriers being so illiquid that they can`t make their debt obligations, and so you seek bankruptcy.

JEFFREY BROWN: And Delta, of course, has all along said that it wants to come out of bankruptcy as an independent airline, but now it says it will review this offer. So does that mean there is still a possible fight to come? And could there also be some competing bids to come?

RICHARD GRITTA: Well, there could be a fight, but the thing you have to realize is, in bankruptcy, that it`s really the creditors that control the situation. Under the Bankruptcy Reform Act, it`s the creditors that will agree to any deal that`s done. So management may not have any choice in the matter.

JEFFREY BROWN: Now, you`ve said that, in the case of U.S. Airways, that a merger might make some sense. There`s always considerations when these things are proposed, there are pros and cons out there that analysts see. Lay that out for us a bit. What are the possible problems, for example, in trying to bring together two airlines like this?

RICHARD GRITTA: Well, as a simple economic principle, that if you allow mergers, what happens is there`s less competition. And when there`s less competition, prices can go up. Airfares have been relatively high in the international market for that very reason, because there`s less competition. So that`s a con.

On the pro side, the merger candidates will tell passengers that, "Look, you`ll have more seamless travel. You can travel around the world on our carrier, and you can, of course, merge your frequent flyer miles and get awards faster." So there`s two sides to the coin.

JEFFREY BROWN: Now, I was going to ask you next about the implications for consumers. You just said one possible implication is higher airfares. Tell us what else.

RICHARD GRITTA: Well, I think basically that`s the biggest one that I would be concerned with, or the Justice Department will be concerned with. What will the mergers do to service and to fares?

Right now service, especially domestically, has fallen apart because of the financial pressures on the airlines, and the only reason why airfares are low in the domestic market is because of the presence of low- cost carriers like AirTran, like JetBlue, and, of course, the original role model for the low-cost carrier, Southwest.

JEFFREY BROWN: You know, this industry, having watched it for a long time, seems to go through these cycles of "bigger is better" at one point and then, "No, the smaller low-cost approach is the way to go." Where are we now in that kind of thinking, especially in light of this new potential merger?

RICHARD GRITTA: Well, I think the thinking now revolves around the fact that you can`t make money locally if you`re a major or legacy carrier against the start-ups because they have very different cost structures. Some of them, like Southwest, fly point-to-point service, which is a key we found in studies to minimizing your costs per available seat mile. That`s the key unit in the industry.

So they feel like they have to go internationally where there`s less competition, and they can sustain enough of a yield to make money. So that`s new, I think, within the last five or six years, the realization that maybe they should abandon the short haul where they can`t win for the long haul where, at least under the current situation, they can.

JEFFREY BROWN: What does that suggest to you about the possibility of floodgates opening here and more consolidation to come?

RICHARD GRITTA: Well, I`ve always believed -- we design bankruptcy tracking models, mathematical models that look at this industry. And we`ve got data clear back to about 1970. The industry has been, continues to be, very, very fragile.

So I expected fully that we`d see another major carrier go down, one way or another, either liquidate or, more preferably, merge. And a statistic that to me is shocking is, if you look at the 16 carriers that did exist or exist now that are major carriers, more than 10 of them now have filed receivership one or more times, and some of the classic names in industry have gone away. I mean, Eastern Air Lines, the Wings of Man, Braniff, Pan Am, and, of course, TWA disappeared forever. That`s really sad.

JEFFREY BROWN: So more of the big names out there, we may be hearing more about them, either trying to consolidate or merge or are experiencing more problems?

RICHARD GRITTA: Well, you know, I fully suspect that Northwest may start looking to partner up in, and a possible merger candidate there would be Continental. And Continental has been doing better of late, relatively speaking.

So we could see the disappearances of another two major carriers, in my estimation. A lot depends, you understand, on what happens to the economy, what happens to the price of fuel, interest rates, and how the union problems get resolved in all of this. And then finally, and very importantly, what the Justice Department does.

JEFFREY BROWN: All right. We wait to see on the Justice Department. We wait to see, of course, on what Delta says in response to this bid. Richard Gritta of the University of Portland, thank you very much.

RICHARD GRITTA: You`re very much welcome.

(BREAK)

GWEN IFILL: Finally tonight, five freshly minted members of Congress`s incoming freshmen class, and to Margaret Warner.

MARGARET WARNER: While a few House races remain to be decided, it`s clear that there will be at least 42 freshmen when the new Congress takes office in January: 29 are Democrats; 13 Republicans; and five of those new members join us today.

Democrat Yvette Clarke will represent New York`s 11th District, comprising most of Brooklyn. She spent the last five years as a member of the New York City Council.

Democrat Tim Walz will represent Minnesota`s 1st District in the southern part of that state. Walz is a geography teacher and football coach who spent nearly 25 years in the Army National Guard.

Democrat Ed Perlmutter will represent Colorado`s 7th District in the suburbs west of Denver. A lawyer, he spent eight years in the Colorado State Senate.

Republican David Davis will represent Tennessee`s 1st District in the northeastern part of the state. He owns a health care company and spent eight years in the Tennessee House.

And Republican Kevin McCarthy will represent California`s 22nd District in the state`s agricultural Central Valley. He served two terms in the California House, the last as minority leader.

And welcome to you all. Welcome to Washington. Welcome to the NewsHour.

REP.-ELECT TIM WALZ (D), Minnesota: Thank you.

REP.-ELECT ED PERLMUTTER (D), Colorado: It`s great to be here.

MARGARET WARNER: Let`s start by having each of you tell us briefly why you came to Washington, beginning with you, Tim Walz.

TIM WALZ: Well, first of all, thanks for having me. I think the reason I`m here and what my constituents were sending me here to do was to have a vision for this country that would extend beyond politics, that would extend beyond the next election. And in southern Minnesota, where the Mayo Clinic is located, and where leaders in renewable energies, they want to see a vision on what we`re going to do in this country, in terms of health care, especially in terms of renewable energies.

And that`s what I would like to see done early in these coming years. They don`t want to see this incremental growth; they want to see massive growth when it comes to renewable energies.

MARGARET WARNER: Kevin McCarthy, what about you?

REP.-ELECT KEVIN MCCARTHY (R), California: Well, I think this global economy, I`m concerned about the United States being able to compete. I think we need a tax system that`s more fair, simpler, and allows us to compete with Europe, and China, and India. And I think that will enhance our ability to create more engineers and make us able to compete and continue.

MARGARET WARNER: Yvette Clarke?

REP.-ELECT YVETTE CLARKE (D), New York: Yes, I have a very diverse constituency. They have two really strong concerns right now, and that is how we`re going to remove our troops from Iraq, and immigration reform that`s very humane. And I`m going to be very focused on those issues.

MARGARET WARNER: Ed Perlmutter?

ED PERLMUTTER: I`m coming from a district that`s right down the middle politically, right down the middle financially. I think the economy is an issue, about the squeeze on the people in the middle.

But for me, one of my kids has epilepsy, and stem cell research holds out so much promise for people with epilepsy, and Parkinson`s, and Huntington`s, and diabetes. And, you know, I`d like to be here to see that we really do use the science that we have available so that that promise is fulfilled for people, you know, like my daughter.

MARGARET WARNER: And David Davis?

REP.-ELECT DAVID DAVIS (R), Tennessee: Thank you for having us today. I come from a very Republican district, a very conservative-leaning district, so they want to make sure that we have those same values and heritage that our country was founded on. That`s one of the things that brought me to Washington.

And then, being a health care business owner, I`m a respiratory therapist by training, so I`ve been taking care of patients for almost 30 years. And I`m a business owner, so economic development`s going to be very large in the things that we look at as we go into the future.

MARGARET WARNER: All but one of you has served either on a city council or a state senate or state house. How has that shaped your approach -- and why don`t you begin, Kevin McCarthy -- to how you think this divided Congress can work together?

KEVIN MCCARTHY: Well, I come from California, where I served in the minority. And it was a uniqueness, because we recalled our governor during my time -- never done that in 100 years -- and we elected Arnold Schwarzenegger, who came from the middle.

I found the ability that you can have bipartisanship, but it`s got to be willingness on both sides. It can`t be, "I want bipartisan. I just want the other side to vote with me." You`ve got to give give-and-take.

And if you come to that perspective that you can give and take and you`re willing to give a little to get where you want to go, it can happen. But it takes real force, and the top of the leadership has to push it.

ED PERLMUTTER: Well, I served in the minority for six years, and then I was in the majority for two years in the state senate. And there was one point where we had a Democratic governor and Republican houses, and then there was a point where it was a Republican governor, two Republican houses, and the people in Colorado like checks and balances. And that`s when we won the Senate for the first time since Kennedy was president.

And the people in Colorado -- really, it`s the unaffiliated voter that is swinging things to Democratic side this time, and they expect compromise. They expect you to move the ball forward. They expect you to work with the other side.

And, you know, just having been through the orientation with these gentlemen and many others, I mean, we all are here to make this country as great as possible. And, you know, we`re going to have some disagreements, and we`re going to have some times where we don`t, you know, like what the other one is saying, but we`re going to move the ball forward. I have no doubt about that.

MARGARET WARNER: David Davis?

DAVID DAVIS: I`ve been in the Tennessee legislature for eight years, and I`ve been in the minority. And as long as bipartisanship means that we really want to work together and it`s not just rhetoric, I think we all come out better. And as one of the colleagues that I`ve met here on the Hill this week, that`s exactly what we want to do.

It`ll be much better for us. There`s going to be some key issues that we`re going to be dealing with -- tax policy, family issues, the war -- there`s going to be a lot of things. And what I found in Tennessee was about 97 percent of the time the Republicans and the Democrats voted alike. It`s that 3 percent of the time where you have some real key issues, and that`s what sets the two parties apart.

YVETTE CLARKE: Well, the New York City Council was really a one-house legislature, predominated by Democrats. So we had to really negotiate with the Republican mayor. And I think that`s the essential element in dealing with a bipartisan legislature. It`s the art of negotiation, creating the win-win scenarios where we can.

And so I think we`re all open to that. That`s what the American people have said through the electoral mandate that we`ve received, and I think we`re heading in that direction.

MARGARET WARNER: And, Tim Walz, your background as both a veteran and as a teacher, how do you think that shaped your approach that you bring to this?

TIM WALZ: Yes, I do think it matters, because I think I represent the large number of people who never do serve in the legislatures, elective office, and I think that was one of the reasons they were looking at me.

People operate in a reality where they have to compromise, they have to get things done, where effectiveness trumps ideology. And they feel strongly about issues, but they understand the real pressing issues of the day are the ones that need to be taken care of.

So I`m very optimistic. And I agree with Dave on this. If this becomes just rhetoric, if the Democrats just give the rhetoric, it`s bad for the country, and we all know that. So I think it`s a golden opportunity for us, and I`m really encouraged by this freshmen class.

We do have a responsibility here, and the American people have given us that. I never said last Tuesday was a mandate for the Democrats. It was a mandate for America to fix the Congress, and that`s what we`re here to do.

MARGARET WARNER: Let`s talk about Iraq. And, Yvette Clarke, you brought it up first. What role do you think House Democrats should play in reshaping policy in Iraq?

YVETTE CLARKE: Well, you know, I think it`s very clear that there`s a need for a change of course. Certainly, our president has begun to recognize that, as well. And I know that right now there is a working group that are coming up with recommendations for him.

Americans want to see us disengage to the extent that we can to enable a democracy to rise. It`s evident that we`re not in a position to do that if we`re in the midst of a war. And so Democrats have a responsibility of coming up with some really responsible solutions and looking at a time table, quite frankly. They want to see us come home.

MARGARET WARNER: Are you on board for that, a time table?

ED PERLMUTTER: Yes. And when I was out on the stump, I talked about spring of `08 as a time by which we have transitioned security to the Iraqi police and the Iraqi military. We`ve started a multinational reconstruction effort that goes beyond just Halliburton, and we redeploy some of our troops to nearby bases in the event a quick strike is necessary.

And, you know, I talked about that for the last year, because it gives the administration time to really take care of what they think they need to take care of, but it also allows us to redeploy and the Iraqis to take control of their own destinies.

MARGARET WARNER: Where are you on this?

TIM WALZ: Well, I`m not necessarily for a time table, if it`s not based on milestones of success, more like Bosnia. What I feel was broken here -- and this comes from the Republican side, too -- people like Senator Hagel had their voices stifled.

The process in Congress is what was broken on this. We need to get back to finding a solution. We need to get a multinational force in there. We need to get the reconstruction done. It needs to be done with the idea, what is our long-range goal for the Middle East?

When we disentangle from this, we`re disentangling with the vision of where we`re going to be on this. And I think that`s going to come out of this. This Congress is going to discuss that. We haven`t discussed it on the floor of Congress, and now is time.

So I`m confident we can get there. But I would agree there`s a definite change of course. People say a time line; of course, there`s going to be a time line we need these types of things done. But they need to be successful crossing through those gateways of success.

MARGARET WARNER: David Davis, what role do you think House Republicans in the minority here should play and can play in shaping Iraq policy?

DAVID DAVIS: Well, I think, when we look at the war in Iraq, at least the people from the 1st Congressional District of Tennessee believe and understand that this is not just one front. We believe this is a war on terror. We feel like this is not a war we started. This is a war that was brought to us, and this war has been going on for a long, long time.

We had the Iranian hostage crisis, and we had other events that led up to this. I don`t think anyone wants to be in war, but we need to make sure that we do everything we can to protect our troops and do it as quickly as possible and withdraw, but we don`t want to be fighting here in the streets of America, either.

MARGARET WARNER: And, Kevin McCarthy, what`s your sense of the Republicans` role? Do you see your job to support the president`s agenda on this, on Iraq?

KEVIN MCCARTHY: I think Republicans have a vital role. I mean, I think the elections are over. We should not make Iraq a political debate now; we should make it a serious debate.

We`ve got the bipartisan Iraqi Study Group coming. We`ve got to adapt a new strategy. We`ve got somebody heading up that`s different. Rumsfeld is leaving. I think we can look to both sides. If we take a very honest approach -- and I think, from one perspective, if we`re talking about bipartisanship, Iraq can be what brought us together.

YVETTE CLARKE: That`s right.

KEVIN MCCARTHY: And if we are successful with Iraq, with adapting a strategy that actually wins in the process, and listening to both sides, I think you will see bipartisanship grow, from Social Security to everywhere else.

MARGARET WARNER: Finally, all but one of you has been through a grueling election, either in the primary or in the general. You`re finally here...

TIM WALZ: Or both.

MARGARET WARNER: Or both.

(LAUGHTER)

So give me just briefly your impressions from this week. What does it feel like to be here finally?

ED PERLMUTTER: Well, I was saying we were just, as a group, we were talking about our experience here. And I was so focused on 7:00 last Tuesday night. Then to be here on Sunday, and the bus was taking us over to the Library of Congress, and to see that dome lit up -- I mean, it really does send chills down your spine.

And you recognize the responsibility that you have, the privilege that you`ve been granted, and that`s kind of thing that I think brings us all back to reality, to want to work together, because we are privileged here. We have a responsibility that goes way beyond any one of us. And I think we all take that very seriously, and it`s just a fantastic time to be here.

YVETTE CLARKE: It`s truly an honor to know that you will have a direct bearing on the course of our civil society, moving forward at such a very historic time. I`m taking it moment by moment, because if I were to take it in its enormity, it would be overwhelming. So, you know, it`s a privilege, as been stated by my colleague, and I look forward to really getting to business at this stage.

MARGARET WARNER: What impression are you left with from this week?

DAVID DAVIS: I`m absolutely blessed and honored to be here. I come from humble beginnings. My father grew up in the Depression era in the mountains of east Tennessee, has a sixth-grade education, and one of the wisest men I`ve ever known in my life. And to be able to come and do this, just absolutely honored.

Henry Ford once said, "If you think you can, or if you think you can`t, you`re right," and that`s one of the things that I hold my hat on.

TIM WALZ: I think with me I walked in the Capitol for the first time -- it`s the first time I`d been in the building -- and knowing that I`d been elected. And I went back to last Tuesday night after the election. I had a large number of my students that were there and that had worked on the campaign. I remember a young girl crying.

And I said, "We should be so happy." And she said, "I am happy." She said, "We really can change the world. You had us believing that." And I said -- when I walked in there, I got to think this is what it was. It`s inspiring the next generation. I walked in there with students, walked in as the true citizen legislator. It was humbling, gratifying, and I guess, more than anything, I`m just incredibly optimistic.

KEVIN MCCARTHY: Nobody can`t be moved by walking in. I mean, they say -- I guess it was Tip O`Neill -- if you`re not moved when you see the Capitol, you`ve been here too long. But then when you walk -- and we all went into the chambers -- but you walk on those stairs. And the marble, but you feel it moved in. You wondered the feet that walked before you. That gives you a sense of responsibility.

So before you walk into those chambers, the responsibility that you have, that you leave the politics at the door and you put the people first, I think it`s tremendous.

MARGARET WARNER: Thank you all five very much. I hope you can retain this spirit, and it`s a fascinating discussion. Thank you.

YVETTE CLARKE: Thank you.

TIM WALZ: Thank you.

DAVID DAVIS: Thank you.

KEVIN MCCARTHY: Thank you very much.

(BREAK)

GWEN IFILL: Again, the major developments of the day.

The top U.S. commander in the Middle East, Army General John Abizaid, warned against setting timetables to leave Iraq.

The U.S. military announced the deaths of six more Americans in Iraq.

President Bush met with Russian President Putin, beginning an eight- day trip through Asia.

And U.S. Airways offered to buy its larger rival, Delta, for more than $8 billion.

We`ll see you online and again here tomorrow evening. I`m Gwen Ifill. Thank you, and good night.