♪ lou: evening, everybody. i am lou dobbs, and these are the bodies of u.s. ambassador christopher stephens and three other americans assassinated by radical islamists. their bodies returned to the united states. a solemn ceremony with president obama and secretary of state clinton. among those honoring the murdered americans at andrews air force base earlier today. >> mrs. clinton praising the murdered americans for their

courage and sacrifice to our country. the people of egypt and libya and tunisia did not trade the tyranny of a dictator for the tierney of a mob. lou: a precisely timed two-part operation under cover of more than 200 demonstrators angry at an anti-mohammed movie. the protesters stormed the consulate, armed militants traveled to a nearby safe house to attack the evacuated americans. libyan officials say the people within the governments own security forces to stop the terrorists to the safe houses location. the unrest is spreading beyond the region.

violence erupted in tunisia and the german embassy set afire. american fast food restaurants also torched. demonstrations in afghanistan. palestinians and in jerusalem protests in america. american flags were burned outside the embassy. president obama vow to do better to protect american interests overseas. the administration sending an elite unit of rapid response reins to libya and the sudan area to protect american citizens. we will stand fast against the violence. we will continue to do everything in our power to protect americans serving overseas. whether that means increasing

security at our diplomatic posts, working with host countries, which is an obligation to provide security, and making it clear that justice will come to american. lou: jay carney inexplicably trying to make the case that the obama administration and their policies have nothing to do with the anger about being in the muslim world. >> we also need to understand that this is a fairly volatile situation and it is in response not to united states policy for the administration, not the american people. it is in response to a video. lou: the romney campaign called the reaction to the violence in the middle east amateur hour. we are taking all of that up tonight with the author of "the new york times" book, the amateur. bin laden unit chief, michael

carrier. and christopher hahn and jedediah bila joins us as well. my next guest says protest demonstrations and murders is the latest episode, he says, in the process by which the united states is being driven from the arab world. joining us now is head of the bin laden tracking unit, michael. good to have you with us. it is a peculiar moment to say the least. to hear the spokesman for the presidency but this is about a movie and has nothing to do with u.s. policies or this administration. what is your reaction? >> well, the country is out of control. it is out of control economically, but in the middle east, we have been out of control for 15 years. we have not had an enemy in the

middle east or anywhere in the world that has been so clear about what motivates them since we thought ho chi minh. this is all about american intervention in the middle east. you just mentioned that there is a problem in sudan now. we and the british and the european union ripped 70% of the oil away from its country and gave it to a new christian nation in the south. this has everything to do with what our government does. it should be clear to americans that americans are not hated in the muslim world. but they are government under either party is detested. lou: as we watch what has happened from the response in egypt, we are watching an assertion here in this country that this is a continuation of

the arab spring, where many, it appears to be, the murder of the ambassador in benghazi and three other americans there. it appears to be clearly an assassination. >> the arab spring was never about democracy. we have a lot of bbc journalists reporting and talking to a few english-speaking, well groomed professional egyptians and then reading their facebook. they extrapolated from that very small example to say 100 billion egyptians wanted democracy. 100 billion egyptians wanted to get out from under hosey hosni mubarak and also wanted to assert their religious identity. the arab spring was an entire

construction of mrs. clinton's mind and never really existed in the sense it was described. lou: secretary clinton saying that the ambassador has a loss to the arab spring. what is your reaction to those words and we have shared with the audience tonight? >> i think that clinton may know more about the middle east and jay carney, but not much. mrs. clinton has blood on her hands everywhere. they stuck the ambassador and his team into the middle of a city without guards and the city provided more suicide bombers in iraq than any country except for saudi arabia.

her ambassador ran around syria for the better part of the year, encouraging them to protest, knowing that they would get shot down. this government seems to be trying to make the world a little safer as an anarchy more than anything else. lou: the idea that libya is now arrested four people in regards to that attack. could you explain about the earnest in earnest and honesty about their act? >> i am afraid that i'm getting old and cynical. my guess is that they are kind of like claude rains in casablanca. the libyan government really is, whatever goes on in tripoli, not outside of there, when we supported that revolution, basically what we did was provide their coverage for people, what happened was perfectly predictable.

lou: it was tragic. it is tragic that he was put in a constant that is not safe and not protected, taken to a safe house that was anything but that. the idea that we would not have things underground in libya, now it's clear that we're going to have marine boots on the ground in libya and in yemen to protect americans and our interest in those two countries. your thoughts as we conclude? >> there is no greater admirer of the u.s. drinkware than me. yemen is the most heavily armed country on earth. we are sending those boys on another chase, despite we sent the late ambassador.

lou: thank you for being with us. the president delivering his plan to/defense spending across the board. douglas holtz eakin joins us next. and keeping interest rates low to support housing and create jobs and boost the economy. the stock market rallies big

lou: turning from the obama administration and the u.s. government struggles on foreign policy in the middle east in particular, we turn to breaking news out of wisconsin on the domestic front. a wisconsin state judge had stopped on struck down a state law that ended collective bargaining powers for most public employees in wisconsin. circuit court judge ruling that the law violates both the state and u.s. constitution. that law was passed by the governor, scott walker. sing the people of wisconsin clearly spoke on june 5. now, they are ready to move on. a liberal activist judge wants to go backwards and take away

the lawmaking responsibilities of the legislature and the government. we are confident that the government will prevail in the appeals process. governor jindal was a democrat to the white house finally releasing details on how they will implement $1.2 trillion and across-the-board spending cuts over the next 10 years. the white house warning of the sequestration cuts, which would have a devastating impact on government programs. the president of the american action forum. it is great to have you here, doug. your reaction. i don't expect you to have done a complete analysis. give us a sense of it. >> if you look at the most granular level, what the congress asked for was for the

administration to drill down there are some account numbers that will be affected and we will have 9.2% cuts in defense and 3.2% in non-defense. i think the congress would be not offering a solution to what they admit is it points fingers. i think that that reflects the larger problem that we are assuming straight towards the fiscal court and there is a lack of leadership that will get us there safely. >> is ben bernanke announced quantitative easing. the strongest action taken, he

stood rather alone and it is remarkable. that there are no partners for the federal reserve of the chair in washington dc right now. he is being criticized from every side. meanwhile, republicans and democrats know that it is critically important that everyone understand. democrats and republicans signed up for one of the most perverse bargains, i would say, in u.s. history. >> yes. i'm not a big fan of qe-3 is a policy matter. but i think your comments are dead on. he was quite honest about its limited ability to solve our problems. he has said repeatedly that he needs the congress to take action on fiscal policy and if you look at what is going to happen in the absence of real legislation, we are going to raise taxes and/across the board the core functions of government and not undertake the kinds of

cuts in mandatory spending. entitlement programs that are necessary to solve our problems. we have a policy that is exactly backwards. no one is trying to fix it, and the fed is trying to do something that is unlikely to work out of desperation more than anything else. >> with the labor market as it is, 23 million americans out of work, underemployed or simply having given up the idea of working again, there is a seeming lack of understanding that this election should be about our middle-class and those who aspire to it. and enough of the nonsense about being agents for government or agents for business. it is about time that people focus on this president and the man who would be president, governor romney. >> we need fundamental entitlement reforms that make our social safety not survive.

we need a fundamental tax reform, not because it looks good, but because we need to grow more rapidly to help those people who'll be benefiting those by actually having a job and not anything else. we are not hearing an honest conversation about that. we don't hear about anything about health what he would do. with mr. romney, we are getting lost in the details of this inaccurate let's look at the larger goals. >> i would suggest that focus should be on our middle-class, to people who make this country work in every way. >> absolutely. lou: it's very good to talk with you again or it up next, markets closing out the week with huge advances. because of the fed's new policies. but are those policies enough to turn around a struggling the

struggling economy? restore prosperity and economic growth? moody's chief economist joins us with his analysis. governor romney easing up on his criticism of the president's handling of the events this week. has he not have sufficient support from his own party? we will be talking with the author of the best-selling

♪ lou: on wall street, a fed-driven rally is spilling over into stocks again today. closing out the week, as you would expect, as multi-year highs. the dow jones industrial of the teefor points. it had been up double-digit. but the s&p had dow closing at the highest level in five years.

it ready for the nasdaq. it was up 28 points, ending at the highest level in 12 years. we are getting close to its all-time high. the dow gaining more than 2%, nasdaq adding one-and-a-half percent, s&p up nearly 2 percent of the week. gasoline prices getting kind of importance, driving up consumer prices in august by six tenths of a percent of the most in three years. industrial production, one of the few weeks but in the economy today. all of the economic report. down 1%, the biggest one month decline in more than three years. retail sales however up nine tenths of a percent in august boosted by gasoline prices, demand for cars. outside those categories sales were somewhat modest. apple's shares done nothing modest about a rising to another all-time high, closing at $691. three orders for the iphone five selling out just one hour after become available online.

joining is now, chief economist for moody's capital markets. we have to turn to the market's performance this week, driven, of course, by ben bernanke and his super aggressive leaders and monetary policy. i you happy? >> he did the right things for now. i believe that the market's response might prove to be excessive. there's a reason mothers of three. that is mostly because one end to did not prove to be as effective or powerful as the market initially anticipated. lou: he has been making it very clear from the beginning, quantitative easing, he was trying to push other assets. an open, a limited program.

>> as 0% interest-rate. the dividend yield. nevertheless, there is no guarantee that profitability is going to grow to prevent share prices from falling. lou: you were impressed, i would think, that he was very candid. the design of the exact consequence, but given the new mandate, he really had very little choice but to proceed. >> price stability long term, as long as unemployment remains high, as long as we have enough in terms of -- lou: remains high. >> on employment stays high. there will not be much of a threat from price inflation. high unemployment, long duration. you couple this with continued competitive pressure from the emerging market economies that are doing worse.

rain in wages, perhaps slow wage growth. that all but dismisses the possibility of a persistent rise. lou: i think the fed chairman is exactly right. if the emphasis and focus of policy tell whether monetary or fiscal right now is not in the growing this economy, creating jobs, then i have no idea in the world where the responsibility should be in washington d.c. and let me. >> i agree with you totally. they have the focus on lowering the successively-upon rate. it has to do more to put americans back to work. that is the primary function. lou: what do you expect to be the short-term? trial of the suppression short-term long term. we are in and talk to have won it charted territory. with the imminence apparent to

the arrival of the fiscal cliff. what in the world to you expect in these markets and this economy through the end of this year? >> at a minimum this policy change has to prove effective at extending the upturn by home sales and compresses. that is very important. we have to move from shrinking homeowner equity to growing a homeowner equity. lou: by moving to mortgage-backed securities he is providing as much powerful support to housing as a can possibly. don't you think? >> and it is very important that the ten year treasury which it has risen by 20 basis points this week does not plan any higher because if that is the case it will become more difficult to move mortgage yields lower for the purpose of lending more stimulus to the housing sector. lou: at to get too far into the weeds, he had to attack that yield curve because it was steep

and yet the rate that was going to be absolutely unacceptable. it could reach a point where it was actually going to stifle a fragile recovery in housing. >> we had that happen in 2011 to does intend. unwarranted upturns. the fed will do everything in its power. a stint as badly needed recovery by housing, especially on prices. homeowners' equity begins to grow again you want to get more in terms of business start-ups. ordinarily financed with credit that is collateralized by homeowners' equity. lou: we are at the dividing point. we are at the incipient point as well in policy going forward. housing, jobs, restoring economic growth. what are the odds now that the fed has moved? >> i hate to say this to the

economy. offers no guarantee that qe3 will underline the rate of growth. lou: these are not -- they don't have to have guarantees. they don't have to have the predictive is unpredictability that is so important to so many ceos of this big giant companies . we appreciated as always. one of the best. the crisis in the arab world worsens. the romney campaign says the united states is trapped and obama amateur hour. author of the new york times best selling book the amateur joins us. the chicago teachers union scheduled a vote on the deal. but it is clear that chicago students lost more than just a week of school. the american flag and shredded and burned. protesters chanting death to

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how about you? just call this number or visit selectquote dot com. ♪ lou: joining us now to assess the foreign policy and the politics of this presidential campaign is ed klein, author of the new york times best seller, the amateur and the new york times bestsellers list for 17 weeks. great to see you. let's start with the spectacle of the white house press secretary. jay carney saying, as making pretty clear. all of these demonstrations of violence and assassinations are not about the obama doctrine, obama policies, or america. what in the world, what is going on here?

>> to "the rev. jeremiah right, the chickens are coming home to roost for barack obama. this is a president to win out there to the middle east, apologized for our history there, tried to appease them, showed a lack of strength and resolve in terms of american foreign policy and is reaping the world right now. it was -- lou: it was such a sad and solemn ceremony today. andrews air force base. for americans bodies were returned to this country. but all i kid think at the outset of that ceremony is the president the secretary of state , the president to decided, as this tragic event unfolded to not change his schedule, go out to las vegas and campaign rather than stand his post. but in your mind could be going

on here? >> i think every calculation in the white house today, even the death of an ambassador is strained through the campaign in chicago, how did we play this in order to dougie it an advantage over the public -- republicans and mitt romney. that is all they're thinking about. lou: criticized roundly in the media for his criticism of president obama. what he termed as of failure to the lead here. it is -- i have not quite ever seen the likes of this in which in lockstep the mainstream media picked up on a theme and decided that it was a gas rather than an honest expression of his views and what would be his policies of elected. >> the same thing that happens to romney when he went abroad. went to israel and set some very strong things in his throat which was proper and actually

well thought through. again, it was described by the mainstream media as a gas. he is not running. romney is not simply running against barack obama. he is running against the mainstream media. lou: and he is running against some interesting forces at work from the left. credos super pak. we learned through the daily caller reporting, maintaining, this is extraordinary. calling republicans racist is more effective than criticizing policy. matthew arnold, the national campaign manager saying, when we said that the congressman of iowa, conservative, pro-lifer in belize and cutting social security and voted for the ryan budget, no one cared. when we said steve king is a racist, steve king believes that an empty of average rents of to be putting an electric fences, people move. are you not just shocked?

>> of course i am. i am thinking of, who is the top of the democratic party? debbie watson results. who is the chairman of the democratic national committee. here's a woman -- lou: we have not heard from for some time. >> that's right. i wonder why they have muzzle there. israeli ambassador characterized the republicans as dangerous when he never did, and then she denied that she said it. then, of course, the tape recording. but this kind of vicious partisanship seems to start at the top, and that is that democratic way. lou: i don't believe that she has been engaged in a public statement or speech since she had to make that -- analysis she lied in public. check me on that. let me ask you this.

as you look at these numbers, it seems that this president -- i cannot imagine too many presidents facing these kinds of forces, whether it be his foreign policy an absolute tatters in the middle east. diseconomy struggling. he is standing in the polls. >> november. and it tells the story, it seems to me, you may not agree with me, that the republican campaign of mitt romney has not yet gotten itself into gear and that this president is eminently beatable given everything that you just described, and yet romney cannot seem to make headway against him. lou: all right. we are told that the debbie wasserman shultz does have an event tomorrow, so she returns to the --

>> i can't wait. lou: to the public arena in youngstown, ohio. author of the amateur, all about the obama administration. thank you for being here. up next in the school may be back in session as early as monday in chicago. did the mayor just get his tail kicked by the union? was it your political theater? like i said at the beginning of this? the house of representatives going on vacation. tough times these. they are going home. their unwillingness to try to tackle real issues. what will be the effect? those stories are next. and up next week, former pentagon official katie mcfarlane joins us. wall street legend, fast and furious investigator among our guests. we're coming right back.

lou: i said to you from the outset of the chicago futures strike that it was pure political theater. it appears the show is nearing an end. the president in the chicago teachers union says both sides have agreed to what will be framework to end the strike. members of the union will receive details until sunday when delegates will vote on whether to end the strike. officials expect us to resume monday. the new contract will reportedly increased teacher salaries on average by only 16 percent over four years. that's right. they had that to begin with. and it will reportedly be based on teacher experience. that's right. seniority was already zero role in the insistence on maintaining it. they will be continued, larger increases for tenured teachers. the deal, well, it is expected to call for an annual 2 percent cost-of-living increase as well and establish a joint committee

to draft a new teacher evaluation plan sense the mayor had his torn to shreds. essentially teachers are escaping accountability. the losers in this deal, without question, our students and their parents. the political theater that was states, i still believe, simply, simply to put parents and the citizens of chicago at ease with what is an outrageous results to the negotiations, and the strike. the results of national standardized tests on riding are in, and they're not good. just over a quarter of eighth and 12th grade students in this country have solid writing skills and to achieve that they were allowed to use spell check. still, one in five students in both grades were below basic level. the rest showed up partial,

partial competence and writing skills. education officials say this year's results should not be directly compared to previous years because, as usual, there is a reason not to of all students accountable. this is the first year computers were used or allowed. in 2007 without computers students did better. students scored at the proficient or advanced riding level compared to 30% last year. scary. well, in california some radicals are folding like cheap lunch shares. ucla today announced it is not going through with its national dream university. the first of its kind program going to offer at cases exclusively to illegal immigrants. they decided to shut down the program because it was not established through proper channels. good to know. california assemblyman tells fox news the real reason that it was shut down was because of public

opposition. really? there listening? good for california. on capitol hill members of the house of along to do list. congress taking off until after the november elections. house majority leader an ounce lower chamber canceling a one week session at the beginning of next month. the senate is expected to follow suit after it passes a continuing resolution. a farm bill, the postal service and, yes, of course, the armageddon like fiscal clef. up next, all of these demonstrations and the muslim world not directed at president obama or the united states and america. did he miss those burning flags and the chant of death to america? the "a-team" separating fact from fiction.

hanging out in good company next.

lou: critics say there is very little daylight between president obama and former president jimmy carter until tonight. president carter had this correction for president obama yesterday during a speech in ireland. >> we know egypt well. as i said, last september, orchestrating among other things the conduct. lou: well. president obama had said that egypt is neither an ally nor in enemy.

now he has president carter correcting him. now, perhaps, a member of our "a-team," columnist for the association of mature american citizens, author of the book out numbered. former schumer adviser, fox news political analyst. wall street journal editorial board member. well, your reaction to president carter's -- >> protective of his greatest achievement. he created one of the only lasting peace is in the middle east between israel and egypt and he is protective of their relationship. look, i think that there is, you know, something to be said for his argument and the president's argument. the trick is probably somewhere in the middle or some way that we don't really know where it will end up. lou: you discovered immodesty, moderation. my lord. if you are over. >> i like jimmy carter. i might be the only person. >> i think i -- i think you are

the only person. when jimmy carter is directing your you have it under low. the 1979 hostage crisis. jimmy carter was not our best president when it came to the middle east. but if this were president george w. bush you would be crucified. >> why are there so many mixed messages? why is the embassy saying one thing, the president saying one thing, the state department saying another thing. why do you have this need to constantly correct the president, go back. the american people have no idea where the administration stands on key issues as we face of tragedy right now. >> we do know where they stand. they have no policy. lou: the obama doctrine. journalists been a lot of time trying to define what that is as if it is. but the reality is, when you look at what has happened, libya where he promised boots on the ground and marines are on their way to yemen, libya.

we know not where else. this is getting very, very serious. >> on their way to protect our embassies and assets in those countries. not going into those countries to engage in the conflict. a defensive posture. lou: does it disturb anyone elsh apparenentltly this president do not know who assassinated our ambassador and three other americans in benghazi and does not have a clear understanding of the terrorist act and does not articulate says that he can bring himself to think that this was an act against u.s. interests? emmy, it is bizarre. >> the security was preposterous we have carney coming out and saying this is not the case of protest directed at the united states or u.s. policy. they are burning in desecrating the american flag. the american ambassador is dead. this is an attack on everything. >> at trumped up attack based on, you know, lies being spread through the middle east, misinformation in the middle

east, by radicals in the middle east it is not necessarily an attack on policy. they're not about our policy but something else. and, look. -- [talking over each other] lou: here is the deal. we have a lot of people expressing their anger, they are demonstrating, protesting, and some of those people have killed one of our ambassadors. mr. kohl is sitting at andrews air force base along with the secretary of state. before he was quite happy to go off to las vegas at the outset of this. this is a peculiar, peculiar week for this president. >> this is not just about the middle east. we have had will be called the editorial page an era of slowly building tension and disorder for three and a half years. you know something is wrong when the u.s. secretary general feels that it is okay because tehran, you know something's wrong when china is challenging japan over the islands and sending ships.

lou: they are meeting 120 nations invited to. the united nations general, secretary general. >> but this is not just the middle east. we have lost control. we have lost control in many areas of the world because we have retreated. i was in hong kong, based in china for many years. i saw the start of this apology tour in 2009. this is the inevitable results of us pulling -- >> this would have been a bad week for the president it mitt romney had not bail them out. mitt romney with the fall of ronald reagan's attack as he did in 1981 we had the failed hostage rescue and just waited a little while and said the sticking his foot in his mouth. lou: of love it. [talking over each other] lou: it is unappealing and ineffective. first of all, i doubt your sincerity as you speak, i sure, from the heart.

the reality is, i give governor romney great credit. he stood up. i don't think the republican party stood up with an. that is preposterous. puts a time for politics. >> there was a void. he felt that. >> he did not. he looked like a petulant child. [talking over each other] lou: wait a minute. the president of the united states after these events unfolding went off to las vegas for a campaign tour. more than 200 fund-raisers. >> the worst thing we can do in times of crisis like this is been a political system. lou: with a minute. i'm sorry. what did you just suspend as between romney and obama when you accused one of being political and the other of maintaining your high ideals? >> use this incident politically at the wrong moment. >> look at barack obama's twitter feet. encourage people to buy such as for the campaign.

[talking over each other] >> bigger questions asked. lou: and we are going to have to wait until next week to get them answered. thank you all for being here. appreciated. up next, unique perspective on president clinton's advice. we get to the in-box next.