and across europe, markets suffered their biggest losses in two and a half years. good evening. i'm jeffrey brown. >> suarez: and i'm ray suarez. on the "newshour" tonight, we assess what prompted the global sell-off with susie gharib of "nightly business report" and jeffrey saut of the financial firm raymond james. >> brown: and spencer michels offers an inside look at how one of the biggest investors in the u.s.-- california's 'public employee retirement fund is navigating the volatile market. >> you look at the portfolio and you decide what steps need to be taken. but there's no need to panic. there's no need to get overly emotional. >> suarez: then, we examine the obama adminstration's new tough stance on syria calling for president assad to step down and imposing more sanctions. >> brown: we get the latest on the deadly attacks in israel by palestinian gunmen and the retaliation by the israeli military. >> suarez: and judy woodruff explores the rapid rise in poverty levels among american children with patrick mccarthy of the annie e. casey

foundation. >> those kids who fell into poverty in fact were less likely to graduate from school, more likely to have school problems, more likely to have educational difficulty and even health was affected over the long term. >> brown: that's all ahead on tonight's "newshour." major funding for the pbs newshour has been provided by: >> auto companies make huge profits. >> last year, chevron made a lot of money. >> where does it go? >> every penny and more went into bringing energy to the world. >> the economy is tough right now, everywhere. >> we pumped $21 million into local economies, into small businesses, communities, equipment, materials. >> that money could make a big difference to a lot of people. >> and by the bill and melinda gates foundation.

dedicated to the idea that all people deserve the chance to live a healthy productive life. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> suarez: a wave of economic worries-- at home and abroad-- drowned any optimism on stock markets today. investors from tokyo to new york were caught up in a rush to the exits and the dow jones industrial average plunged more than 400 points. the momentum was already irresistible by the time the opening bell sounded on wall street. u.s. stocks became the last domino to fall in a massive global sell off.

in the end, the dow lost 419 points to settle at 10,990. the nasdaq fell 131 points, ending the day at 2,380. the collapse-- after a few days respite-- was driven in part by a barrage of bad economic data. sales of existing homes dropped in july for the third time in four months, while inflation, driven by higher gas prices, rose half a percent-- the most since march. and new claims for unemployment benefits rose back above 400,000 last week. >> unemployment, too. i think every trader down here, that is the most important number. you get auto sales, you get everything else, but at the end of the day, in a nation that's powered by consumer spending, 70% of this country is powered by consumer spending, it comes down to jobs. i mean, jobs is the bottom line, and that's something that there is no silver bullet for.

>> suarez: here and in europe, the concern was overlaid with new fears about the solvency of european banks. german shares took the hardest hit-- down 6.5%. >> ( translated ): we have insecurity that now arrives in the real economy and in the banks. we can see that the banks distrust each other, that the equity bond market has dried out. at the moment there is an aversion against risk, nobody wants to lend money. >> suarez: adding to the pessimism, economists morgan stanley issued a grim warning that the u.s. and european economies are dangerously close to recession. meanwhile, in beijing, china, vice president joe biden met with his chinese counterpart and stressed the need for u.s. chinese cooperation to calm things down. >> as the two largest economies in the world, at the moment when the world economic circumstance is uneasy. i think we hold the key together to, not only our own prosperity,

but to generating growth and jobs worldwide. >> suarez: key market averages in china and much of the rest of asia were also casualties of the day's volatility-- down one to 2%. for more on the market turmoil here and abroad, we turn tonight to jeffrey saut, chief investment strategist with the firm, raymond james. and susie gharib, the anchor of "nightly business report" on pbs. susie, what's driving this. there have been triple-digit plunges all through this recent spate of weeks. why another one today? >> i think you hit on it in your st. set-up story, the combination of the weak economic data in the u.s., inflation, housing, the labor market, and manufacturing, and with that morgan stanley report saying we're dangerously close to a recession, these are not the kind of headlines investors like to see anywhere in the world.

and a report today in the "wall street journal" that the federal reserve bank in new york is having extensive meetings with leaders of european banks, worried about their solvency, with their ability to meet financial obligations. all of this made for what some traders call the perfect storm. >> the bad news seems to move from time tone to time zone across the globe. is everyone so exposed to everyone else now your retirement is, at least a little bit, on whether pearlysconey is getting along with his finance minister? >> there is interconnectist in the world market. i just got back from a two-and-a-half-week tour speaking to institutions and portfolio managers. i don't think they're all that worried about greece and portugal. the worry is spain. if spain goes, i think you have huge issues. my hunch is spain is not going to default. >> but then just today we knot reports that several countries are balking at the terms of a

greek bailout, that we may be seeing bailout fatigue, or the early signs of it, very heavy in many of the euro-zone countries. >> i think that's especially true in germany. the germans i spoke to are tired of bailing out of other countries. but i don't think you're going to get the financial meltdown that's going to spill over into the u.s. and i also think the u.s. is going to skate on morgan stanley's prediction of a recession. >> let me just say something, ray. i was going to say that on this whole european thing, i think what worries so many investors is, is there going to be a default by a major bank or by a country? and they want to see some assurances from policymakers that there will be some kind of bailout, that this won't happen. and some analysts have been talking about a tarp-like solution for the solvency of banks there. and on tuesday, the head of germany and the head of france

met, and they had a meeting and everyone was hoping for some kind of action and it was more about agreements to talk with each other but no actions. i think people are looking for some kind of action. >> so on just that point, every day that there's not a final settlement, every day there's not reassurance, is that a day that we could see this kind of volatility yet again? >> well, i liken it to what happened in october of '78 and october of '79. you came down, made a selling climax low and then you rallied like we did the latter part of last week and you came back down and retv the lows. i think that's what we're doing right now. i think we're in a bottoming phase. >> susie, were you going to say? >> today i was speaking with-- interviewing the c.e.o. of dow chemical, which will be on our program a little bit, and i asked him about all this, and he said confidence is the key to everything here. and businesses, in order for them to vest and hire, they need to see that policymakers are giving them incentives to hire and invest, whether it's about

regulations, tax policy or tax breaks. and they're just not getting it, and confidence is key toeg. so until we see policymakers taking some kind of action-- people have just lost confidence. >> jeffrey saut, who the vix, or the volatility index. if it's over 30 what's that measuring and why should we be worried? >> it does measure will haveility it on the c.b.o.e., and it has picked up dramatically in the past two weeks, but if you map it up against the '87 crash or some of the read it is gave off in the financial fiasco of 2008, it's nowhere near where it was in the 87 crash or 2008. in fact, in 2008, the market as measured by the dow jones industrial average, experienced 12 sessions where it was off more than 400 points. so i don't think we have nearly the volatility we saw in 2008.

>> so what's an individual investor to do? are they-- are they leading the charge out of the markets right now, susie? >> well, we sure have seen the statistics that-- of huge fund flows out of stock mutual funds, much more so than with bond funds. there is a feeling it's just not safe to put your money in stocks. we're talking about the average, individual investor. and so they're-- that's why you're seeing the price of gold skyrocket to record highs-- $1800 an ounce-- and into treasuries where you get no yield because they feel-- even if you're not going to make money on your money at least you won't use it. >> jeffrey saut, we have high unemployment, low growth, rising inflation. does it sound like the 1970s to you? >> i lived through the 1970s, and this certainly doesn't feel like the 1970s to me. you had 14%, 15% mortgages for homes. you had severe crackses in the economy. and we're just not seeing that

right now. to susie's point, this is the kind of stuff where whereyou get market liquidation of mutual funds that you get around major lows like you saw in october of 2008 through march of 2009. the time to panic was four or five months ago, not at valuation levels that we haven't seen since the mid-1970s. >> susie, what now? it seems like the asian markets will be watching, and they're opening in a couple of hours. will the dow and major indices in the united states affect what happens in tokyo and china tomorrow morning? >> ray, my crystal ball is kind of cloudy today. maybe jeff will be better on this. look, i really don't know. i don't think anybody knows. anybody who says they do know, they don't know. i think what's going on here is we need to see some good headlines. the headlines are more negative than positive. even corporate profits that we

were really counting on to be a reason to buy, a lot of companies are ratcheting down their forecast. they're talking about negative and cloudy outlook for the future. some companies are talking about laying off more workers. none of this is positive right now. >> susie gharib, jeffrey saut, thank you both. >> you bet. >> brown: today's plunge-- like similar whipsaw moves in recent days-- clearly makes for anxious moments and steely nerves. marked the fifth time in just "newshour" correspondent spencer michels reports on how one of the country's largest institutional investors is handling that volatility. >> reporter: if you want to get a sense of what it's really like to have to deal with losing billions of dollars in the course of a single day, try spending some time in the company of a major public investor: calpers-- the california public employee retirement system-- based in sacramento.

it lost $18 billion in one day earlier this month when the stock market dropped precipitously. that's a lot of money, even when you figure calpers' investments total $228 billion, more than any other investor in the u.s. the fund represents 1.6 million state and local government workers and retirees, who depend on a strong, steady return on their collective investment for their pensions. a trading day like today, where the market spent much of the day dropping by hundreds of points threatens that. >> it's impossible not to get emotional, but there's no need to do something dramatic and sudden. >> reporter: joe dear, the chief investment officer at calpers, admits he has had a sleepless night or two, but his instincts are to stay calm and look for opportunity, even when the bottom seems to be dropping out. >> you look at the portfolio and

you decide what steps need to be taken. but there's no need to panic. there's no need to get overly emotional. >> reporter: dear is a 60-year- old former labor researcher, who headed osha in the clinton administration and was chief of staff to the governor of washington state. then he took over the state investment board, and learned how to play the markets. for the past two years, he's guided calpers' investment strategy, following the big market downturn in 2008. at that point, calpers had little cash on hand, and had to sell assets to pay pensions. today, the fund has adequate liquidity and when we visited, dear was hoping 2011 would not be a repeat. >> okay, is this 2008 over again? are we going to get a credit market seizure, that is where the lubricant which is what credit is, what banks trade and what businesses borrow and what consumers, are we going to get a stoppage in that? because that's like the lubricant in the economy. if it's not there the economy seizes up.

then you get the abyss. you get the financial armageddon. so that's the first question. you look around and go no, this is not one of those. >> reporter: that's what you said. >> that's what we said, so okay, so we've got some time to really think about this. >> reporter: what was different this time dear said, was that because banks were in better shape, there would be no credit freeze like there was three years ago. this was mostly a political, not a financial crisis. dear's boss, calpers c.e.o. anne stausboll keeps a close eye on the market as well, but she too is worried about a repeat of 2008. >> it's always tough when we have these market downturns, and i find myself stuck in my tv every couple of hours, which is probably not what we need to be doing. >> reporter: the wide market swings that started last week were a sharp departure from where calpers and the market had been. >> we had a 20.7% return as you probably know for the year. and it was our best return in 14 years and we felt like we had

really bounced back, so kind of looking at this period of a few weeks really makes you reflect on the ups and downs of the market and how misleading it can be to focus on too small of a time in the market. >> reporter: last year the calpers stock portfolio did better than the s&p, or the dow jones. calpers traders are into all sorts of investments: the system recently raised its target on stocks to 50% of its portfolio, hoping to better guarantee pensions, while lowering its troubled real estate holdings goal to 8%. bonds are at 19% and the rest is in commodities and hedge funds. those targets guided dear's decisions, but the big sell off last week presented him with some crucial choices. >> okay, market's really down. is it going to go plunging into gigantic losses that will persist? probably not.

let's buy stocks to get back to our target. so as the market was going down, we were going in to buy to move back to our rebalance as it's called. rebalance back to our target. >> reporter: you did buy when the market went down? >> yes, yes, we bought $4 billion of stock on a tuesday and wednesday. >> reporter: some analysts have blamed the market volatility on high frequency trading, where computers are programmed to buy and sell stocks within a second. that's one thing calpers doesn't do, though some of the hedge funds it invests in do. but dear has to deal with it. >> the volume of trading done in the new york stock exchange has fallen dramatically over the past six years. where is it going? it's going to a lot of electronic trading. some of its exceedingly fast trading and it's introduced new risk into the system that we didn't have before. >> reporter: so it sounds like even for you that stuff is pretty hard to predict and, and deal with. >> well, we're in there as an investor with a value

orientation and a long horizon, and we're trading in the same market where people are executing the trades within a second, buying and selling. >> reporter: what bothers dear even more are the looming troubles in europe which again rattled global markets today. dear is worried about what that could mean for calpers. >> i'm way more worried about europe than i am about the united states. here we're talking about banks. if there's real trouble in italy and in spain, there isn't the market in italy is the third largest in the world. if there's real trouble in italy and in spain, there isn't the capacity today in the european banking system, in the european political system, to deal with that problem. i so think about it. you've got the smoke coming up. and you're wondering, are you going to see flames and if you see flames, is there going to be enough water to put out that fire? don't know. so there's real reason to be concerned about how things will play out across this intermediate term. it could go badly. >> reporter: until yesterday,

calpers had recovered about half of the $18 billion it lost earlier. but today's results on wall street could alter that downward. still, dear distributed tee shirts and signs reminding his staff of 270 traders and others to keep calm, and by implication, keep trading. >> suarez: still to come on the "newshour": a tough stand by the west on syria; the deadly violence in israel and the rising poverty rates among children in the united states. but first, the other news of the day. here's kwame holman. >> holman: a second bailout for greece-- totaling more than $150 billion-- ran into new trouble today. it followed news that greece agreed to put up cash as collateral to secure finland's part of the bailout. four other euro-zone nations austria, the netherlands, slovakia and slovenia said they want similar arrangements. that could mean greece will need even more bailout funding, to cover the cost of the collateral.

the bond rating agency standard and poors is under federal investigation. today's "new york times" reported the justice department wants to know if s&p inflated ratings for mortgage securities prior to the financial meltdown in 2008. the probe began before s&p downgraded the u.s. government's credit rating this month. rebel fighters in libya scored a new advance today. they took control of an oil refinery in the western town of zawiyah just 30 miles outside tripoli-- moammar qaddafi's last stronghold. we have a report from lindsey hilsum of "independent television news." >> reporter: this is the rebels' latest prize-- the oil refinery at zawiya, along the road from tripoli to tunisia-- a key installation and a sign of the pressure colonel qaddafi is now under. >> the rebels are more than happy to drive us around the oil refinery, to show that they now control it. there was fighting here until yesterday. it's not that it was supplying

so much fuel to tripoli, just a trickle. but it's a very important symbolic victory and they want to show they've got it. yesterday, qaddafi landed soldiers here by boat. but after fighting they fled overnight. nato said they hit a military boat in the area. the local rebel commander told us what happened. >> they came in, they started to fight us, but late when our soldiers-- they have heavy, really heavy fighting, some of those soldiers-- they are they try to escape from here to the boat. nato still bombed them. some of them are surviving, they're catching them in the... >> reporter: so some are prisoners? >> yes, and some dead. >> reporter: but from the refinery we could see the smoke from a rocket fired into the town. the shelling continues, zawiya still disputed, and colonel qadaffi's spokesman in tripoli is calling this a temporary

crisis not a rebel victory. a few miles out of town rockets hit a house. a family was eating outside and escaped injury. but others were hit and a small local hospital leaving a steady stream of casualties, and even bodies of qadaffi's soldiers killed in the fighting. colonel qadaffi's green flag still flies over zawiya's eastern gate, leading to the capitol. the momentum is with the rebels now, but the war is by no means won. >> holman: people fleeing tripoli said tensions there are rising and living conditions growing worse, with gun battles at night and power outages by day. in western afghanistan today, a roadside bomb killed at least 21 passengers aboard a minibus. they were traveling through herat province when their vehicle ran over an explosive. most of the victims were small children. to the east, a suicide bomber struck a coalition base in paktia province, killing two

afghan security guards. there were no nato casualties in that attack. the taliban claimed responsibility. across the border, in southwestern pakistan, a wave of fresh violence rocked the country's largest city. police in karachi said 39 people have been killed in the last two days in a spasm of attacks blamed on criminal gangs. many of the victims were tortured before being shot, stuffed into burlap sacks and dumped in the streets. karachi has been plagued recently by such violence, linked to competing political factions. the government of chile today added another 9,800 names to the list of victims of the pinochet era. that brings the total to more than 40,000 chileans who were tortured, imprisoned, killed or seized and never seen again. it took place under the military regime of general augusto pinochet, who seized power in 1973 and ruled for nearly 20 years. pinochet died in 2006. those are some of the day's major stories. now, back to jeff.

>> brown: and we turn to the situation in syria. today, the world laid down a new challenge to a government that rights groups say has now killed some 2,000 of its own people. after five months of the syrian uprising and the regime's recent escalation of its crackdown on protesters, the u.s. and the u.n. sharply raised the stakes. until now, president obama had criticized syrian leader bashar assad, but stopped short of insisting he step down. that ended today, when the president issued a statement that said of assad: "his calls for dialogue and reform have rung hollow while he is imprisoning, torturing, and slaughtering his own people. the time has come for president assad to step aside." secretary of state hillary clinton followed up with a statement of her own. >> this morning president obama called on assad to step aside and announced the strongest set of sanctions to date targeting the syrian government.

these sanctions include the energy sector, to increase pressure on the regime. the transition to democracy in syria has begun, and it's time for assad to get out of the way. >> brown: the sanctions will also freeze all syrian government assets under u.s. jurisdiction and bar financial transactions with syria. the obama administration had worked for weeks to shore up support for today's step. and canada, britain, france and germany swiftly followed with their own demands that assad give up power. and investigators for the u.n. human rights panel joined in recommending a referral to the international criminal court. their report accused the assad regime of committing numerous atrocities, including the summary executions of 353 people. today, the syrian government rejected all of the criticism and reportedly accused president obama and the west of seeking to

stoke more violence in the country. but many dissenters in and out syria-- like this expatriate couple living in jordan-- welcomed the day's developments. >> we support and endorse the decision of secretary hillary clinton and before that, the u.s. president. we demand even more-- the regime of assad is no less than the nazis. we demand that they be referred to a criminal court. >> god bless her, clinton. they felt our pain in syria that we are an oppressed people for the past 30 years and our families live under oppression. they killed the people and displaced them. >> brown: just yesterday, president assad had told u.n. secretary general ban ki- moon that the military crackdown on protesters has now ended ended. but activists in the country disputed that. they said attacks in several cities continued overnight with at least 18 more people killed. we assess today's developments, with theodore kattouf, a career diplomat, and u.s. ambassador to

syria from 2001 to 2003. he's now president of an international education organization. and murhaf jouejati. he's a syrian-born scholar and professor at the national defense university. professor, i'll start with you. how important are these developments? >> very important. this new stance that the united states has taken is a very, very important step. it leads the way for other states, also, to declare assad as no longer the legitimate leader. it puts great pressure on the assad regime, and it pressures the members of the security council who have been reluctant to condemn the regime. in addition to the diplomat pressure, there is, of course, a lot of psychological pressure and i think this will be a boost for the protest movement in syria. already they dubbed tomorrow, friday, as the promise of

victory. so this is, again, a major boost for the protest movement. >> brown: when you say "psychological" you mean within the country. >> within the country, certainly. >> brown: ambassador, what is your assessment and what kind of comment do you expect? >> i agree with what professor jouehati said. the administration has been criticized a lot for not being more clear sooner about wanting assad to step aside. the fact of the matter stiming is everything. and it would have been a rather hollow gesture if the president ask secretary of state had made this call a couple of months ago and nobody else went along. now, i think the whole international community is coming to recognize the criminal actions of the assad regime. >> brown: why did that happen? what happened to trigger everybody finally getting on board? >> bashar al-assad did it to himself. he did for those who wanted him

out what they could not do themselves, by acting so brutally, making virtual war on his own people. it was incredibly heavy handed. >> brown: one of the key players here, turkey, reportedly had been counseling some patience in the last few days. do you have any insight on that? they wanted to deal with assad themselves and try to get him to come up with some reforms before all this happened? >> well, turkey had a-- has a policy of zero problems with the neighbors. and syria was one of the keystones of this policy and the prime minister had forged a very close relationship with bashar al-assad and tried to give him every chance, tried to throw him a life line and said, "please, take it." but bashar made promises he never kept and humiliated and embarrassed the turkish leadership. >> brown: when you referred earlier to this allowing other drizz get involved, you meant europe, i suppose. does it also mean countries in the region? >> countries in the region already, saudi arabia has come

forward and pulled out its ambassador. the case is also true-- i understand tunisia has withbrawn drawn its ambassador. jordan has condemned the violence in syria. bashar al-assad is galvanizing the international community, including the region against himself remarkably. >> brown: and yet the immediate reaction was disdain or just pushing back. we have just a wire that just ran, the syrian u.n. envoy said-- accused the u.s. of waging a "diplomatic and humanitarian war against syria." >> it's the usual regime bravado, but i'm sure now bashar al-assad is coming to recognize he is in deep trouble because essentially tomorrow, we will role see european union follow suit with the u.s. and ban a lot of economic activity with the syrian regime, including buying

its exported oil. and syria's going to have to find customers elsewhere, sell it at a discount, much more difficult to do. and for a regime like this, you have to pay those security people, those intelligence people, the senior officers, et cetera, if you want to keep them on board. they're going to become increasingly difficult to do that. >> brown: we heard secretary clinton referring to the energy sanctions-- that's the oil are you talking about that. the u.s. itself does not import much syrian oil but it's a bigger deal for europe? >> it's a bigger deal for europe because they are importers of syrian oil, specifically germany, italy, france, and holland. but syria's oil production, 390,000 barrels per day, which generate a revenue for the government of anywhere between $25 and 30%, which is a big deal in the syrian budget, is thought so much of a big deal for these

countries because of these 390,000 barrels, only 117,000 are exported. this is peanuts in terms of the oil market, and so in the end, holland and germany and italy and france can easily find alternative source elsewhere while this would dramatically hurt the syrian economy. >> brown: you were talking earlier about the calls for the u.s. to act earlier. is there still a balancing act the united states in the sense that not looking-- to look strong but not look too heavy handed so that it looks like foreign intervention? how important is that still? >> it's important. i think in the statement of either the are the or the secretary today, it was made clear that we're not here to impose any kind of solution on the syrian people. >> brown: they felt they had to say that. >> yes, they felt it's up to them to choose their leader and make this transition. but i think one of the things

that has concerned the u.s. and european governments is that this opposition is rather amorphous and unformed, and they don't have a clear leadership. and so even if bashar al-assad would fall tomorrow -- that's not going to happen-- but if he would, it's not clear how they would organize themselves to replace governmental authorities such as it is. >> brown: that's where i wanted to go next. what do we know about what's going on inside in terms of the opposition and how well organized it is or how much-- who the leaders are at this point? >> well, thus far, it is a leaderless revolution, and it is intentionally so, so that the regime could not be able to decapitate the leadership of the revolution. there are protesters on the ground. this is one layer of the protest movement. there are the traditional opposition leaders in syria. and there is an opposition and expatriate opposition. and as we speak, these three are beginning to organize and

coordinate and communicate and cooperate because they know that there is going to be more bloodshed among syrians as a result of the actions of this murderous regime, and so they need to get their act together. >> brown: president assad has clearly tried to play off some of the sectarian divisions in the country. you're suggesting that's not working. >> assad has every intention to show this as sectarian warfare in order to scare the minorities into not joining this protest movement-- namely, the christian minority. but this is truly a national uprising against 48 years of authoritarian rule, and within the opposition in the protest movement, there are a large number of christians ask kurds and so it is, again, cross-national. >> brown: and do we know yet whether, to what extent all of this outside pressure is having on his support, the army,

powerful groups within the country? >> well, up to now you would have to say if one is being honest, that he's done a remarkable job of keeping the support oflet aloi dominated army and security services. the defections have not been that huge, and various army units have been deployed. they can't keep sending the same army unit all across the country, obviously. they're using multiple units. sometimes i'm told less-reliable units cordon off the cities while the more reliable units go in and do the heavy lift ago let's be honest, the killing and where you tality, if you will. but this is-- you have to worry about sectarian schisms following all of this and revenge taking. i agree the demonstrators have been largely peaceful, but assad is laying the-- or he's planting the seeds of possible sectarian warfare. >> brown: and just briefly,

does that concern you that this might spin into more violence? >> certainly. how much longer can the people take being peaceful in the face of attentions and so on. and when his regime collapses, i fear there is going to be a lot of vendettas, a lot of revenge killings and so on. so, you know, when the regime collapses, it is not going to be a peaceful day after, i fear. >> brown: all right, theodore kattouf murhaf jouejati, thank you very much. >> suarez: now, the attacks in southern israel. squads of gunmen killed at least eight people and wounded 20 others in a series of strikes today and drew swift retaliation from israel. a tourist bus lay idled at the side of the road, filled with bullet holes. it was strafed with gunfire on its way toward the southern resort town of eilat. >> ( translated ): i was just talking to a guy sitting next to

me and we suddenly heard shots and we immediately bent over and that's it, pieces of glass were flying, and we realized some people were injured. >> suarez: some of the victims were airlifted to a nearby hospital. but the bus attack was quickly followed by two more coordinated assaults. within minutes, an anti-tank missile blasted a private car, and a roadside bomb blew up israeli soldiers on their way to help the bus victims. israeli officials immediately blamed hamas militants based in gaza. they charged the attackers got into israel by traveling through egypt's sinai peninsula. israeli defense minister ehud barak: >> ( translated ): the egyptian control grip over sinai is weakening as a result of general events in egypt and this is why this attack, which probably originated in gaza, struck eilat and we will act so that events like this will not happen again. >> suarez: but hamas, which controls gaza, insisted it had nothing to do with the attack. >> ( translated ): we deny that

there is any relation between the gaza strip with what happened today in eilat. and we consider barak's, and other occupation leaders' threats, as an attempt to express their internal crisis and transfer it to gaza in an attempt to calm the situation with their people. >> suarez: within hours, the israeli military launched an air strike into southern gaza. medical officials said five militants and one child were killed. israeli prime minister benjamin netanyahu underscored his government's determination in a broadcast statement. >> ( translated ): if the terror organizations think they can hit our civilians without any response, they will find out that israel will exact its price-- a very heavy price. >> suarez: across southern israel this evening, security forces were on high alert. officials said five of the attackers had been tracked down and killed.

>> egypt said two security officers were killed along the border as israeli forces chased the gunmen. before that development, i spoke with calev ben-david, israel bureau chief of bloomberg news in jerusalem. calev has there been some time since an attack with this kind of loss of life? >> absolutely, with this kind of loss of life, it's been three years, a little more than three years since there was an attack on a religious school here in jerusalem. this is the most severe attack in that time, and really even then it was a lone terrorist. we haven't this kind-- i can't recall the last time we've had this scope of a terrorist atta attack. >> suarez: a lot is close to the egyptian frontier and jordanian frontier. has it been vulnerable to attacks of this kind before? >> yes, there have been in recent years primarily rocket attacks. a year ago there were rocket

attacks from egypt, from sinai that fell into jordan. i mean, israel has a real security problem now with the-- with sinai, the israeli military feels that the egyptian security forces have basically lost control of areas of sinai, and they've really made it a territory from which terrorists can launch attacks into the south of israel. >> suarez: well the defense messagester said the egyptian grip over sinai is weakening as a result, the direct result of the current events in egypt. has that brought a different kind of residence from israel itself? has it had to watch its own western border more carefully? >> this is, it's definitely had to increase its vigilant on thank you border. it's also on occasion had to give egypt pernotification bring in more security forces to deal with, for example, at least four attacks on a gas pipeline in sinai that brings natural gas

into israel from egypt. under the camp david accord, the egyptians are limited to the number of troops ask security forces they can bring into egypt so israel has had to give it special permission at times. it does not want to yet give them permission to more permanently increase their forces there. >> suarez: hamas went out of its way to deny its had anything to do. do wdo. >> the israel's retaliation was against the palestinian resistance committee, a militant group in gaza, not under direct coal of the hamas but the israeli policy is hamas is responsible for all terrorist attacks emanating from the territory. hamas is inn control of the gaza strip. it's shown when it wants to crack down on these groups when they threaten hamas' own control, hamas does take action. it's more a case of israel

holding them responsible rather saying hamas is directly involved in the attack. >> suarez: so israel is saying you could stop this if you wanted to, hamas? >> yes, that's the stance they're taking and they have said repeatedly and warned hamas, even if hamas is not directly involveed in the attacks, the retaliation could come against hamas or hamas-linked groups. this evening, in fact, it wasn't case. it was this group. six members of this group, the palestinian resistance-- at least five groups were killed in the attack. >> suarez: as we discussed earlier, there is instability in egypt. there's also on israel's northern border instability this syria. has there been a rising feeling of threat in israel because of all the tumult on its border? >> yes, there has, and a lot of that is linked to next month's possible declaration of palestinian statehood by the

palestinians at the united nations. the palestinian authority, based in the west bank today and hea headed by president abbas, will declare a palestinian state. israel is warning it could jeopardize the peace process. there is concern in israel that could lead to widespread demonstrations at the west bank, gaza and some of the borders, for example what we saw in syria earlier-- a couple of months ago when palestinian refugees living in syria and lebanon stormed the border. so there is a lot of concern heading to september. >> suarez: calev ben-david from bloomberg news joined us from jerusalem, thanks a lot, thank you. >> brown: finally tonight, another in our series on inequality. judy woodruff looks at some new and troubling numbers about its impact on the youngest americans. >> woodruff: it's been widely reported that poverty levels rose during the recession.

but a new report documents the magnitude of that rise among families and finds that poverty rates among children rose substantially throughout the last decade. the kids count study from the casey foundation discovered the official child poverty rate rose by nearly 20% from 2000 to 2009 ask in 2010, 11% of children lived with at least one unemployed parent. patrick mccarthy is the president of the foundation. and he's here to tell us more about those numbers and their effect on children. it's good to have you with us. thank you for being here. >> thank you for having me. >> woodruff: the foundation every year looks at children through different indicators. this year you looked, as we said, the effect of the recession on children. what did you find? >> we've tracked the wellbeing of children for 22 years and this year decided to look at how the children had been faring as the recession played out. we found some very disturbing statistics. as you said, the child poverty

rate has gone up. it's now at 20% of all kids living in poverty. even more troubling in some ways is that the children who are on the edge of living in poverty, those children who live with families that are 200% of the federal poverty level, we now have 42% of all children, 31 million children in the u.s., living at that level. we'd like to think of it as two or three paychecks away from economic catastrophe displayed 31 million which were i saw living at or below $33,500 a year. it's a stunning figure. >> it is a stunning figure, especially when you consider what the research tells us what happens when children grow up in poverty or when they slip into poverty as a result of recession. we know that kids who grow up poor are much more likely to end up being poor themselves. they're more likely to have children too early with teen pregnancy. they're more likely to become involved with the criminal justice system as they grow up. they're less likely to be employed and they're less likely

to fully use the talents that they're given. what we found most recently, though, is even children who slip into poverty for a period of time due to recession, are also facing long-term impact as adults on all of those variables. >> woodruff: even if they started out, say, at a middle income level, the effects could still be devastating? >> that's right. we looked at reresearch over the last four recessiones, not counting this one, and for children who slipped into poverty because of one of those recessions, compared to a child at the same level before the recession, those who fell into poverty were less likely to graduate from school, more likely to have school problems, educational difficulties and even health was affected over the long term as those children were followed into adulthood. >> woodruff: you also saw effect of the housing crisis. how did that play out? >> this is also a story that is not often told. between 2007 and 2009, 5.3

million children were directly affected by the foreclosure crisis having to leave their homes. we don't have the figures yet for 2010 and 2011, but you add that to the 5.3 million children, and you get a much larger number. we're talking about 4% of the children in this country being affected by a foreclosure crisis. there's another hidden fact here, though, and that is the children who live in rental housing, when the owner of that report goes through foreclosure, too often, that family renting in that property is forced to move. and we know a lot of about what happens to children when they have to move frequently. again, their school work suffers. they often have to change schools, which puts them behind. they're less likely to graduate from school. they're more likely to have behavioral problems. there's a whole less of problems that come about as a result of the foreclosure crisis. >> woodruff: your organization did this research and you've

recommended strategies for tackling some of this. what are some of the more important strategies you're recommending? >> we recommend a two-generation strategy. we basically look at the research and say children who grow up in poverty have a much tougher time, and now that we have so many children facing economic insecurity, we think it's very important to invest now in their families so that they don't slip into poverty. specifically, unemployment insurance is a key protector of kids and families when unemployment is as high as it is. the earned income tax credit, the child tax credit, these kinds of things help to supplement wages and keep kids out of poverty. the two-generation strategy means focusing on the parentes, but also then investing early in children. we know from research that high-quality prenatal care, high-quality childcare, and pre-k and especially education in the early years is critical to put children on a path towards opportunity. >> woodruff: now all of these things, however worthy, cost the government one way or another,

and we're now in an environment where so much of the energy and noise is around cutting spending. so how do you advance those ideas in this political environment? >> well, that's-- that's actually a very important feature of what we have to look at. when there are these kinds of deficits states have it deal with and the national debt, et cetera, it really is a time to focus. ask we believe what we need to focus on is what's most important so every dollar is used in the best way. what's most cost effective, and what can you do now in 2011 that's going to shape what this country looks like like in 2031, 2041, and in 2051. in in fact the crisis we face right now is an opportunity to focus as sharply as we can on investing in the future. >> woodruff: when are you met with resistance from those who say we just can't afford it, what is the answer? >> the answer to me is that this country is great in part because we have certain core, shared values, and i think the most important shared value that we

all have, regardless of our perspective on economics or politics, is that this is a country where we care about opportunity. we care that parents can tell their kids that if they work hard and they use their talentings they're going to get ahead. and if we don't invest in ensuring that that opportunity is really available for all of our children, we start to come apart as a country, and we lose one of our greatest strengths. so i think this is actually a shared value. i should also point out that investing this children is not what's driving deficit or the debt. in fact, children represent a small portion of our overall budget. we ought to be investing smart as well as recognizing we have to deal with the problem today but not in a way that's going to harm us in the future. >> woodruff: it is a sobering report, and you have given us a lot to think about. patrick mccarthy, thank you very much for being with us. >> thank you.

>> suarez: again, the major developments of the day: wall street plunged again amid weak economic reports and worries about european banks. the dow jones industrial average lost more than 400 points. president obama called for syrian president bashar assad to leave office, and european allies endorsed the move. gunmen staged a series of attacks in southern israel, killing eight people. the israelis struck back with an air strike on gaza, killing six people. two egyptian guards were also killed in a border clash. and a growing number of european nations demanded collateral from greece, in return for taking part in a new bailout arrangement. on our web site, there's more on poverty in america. plus a way for you to share your remembrances of 9-11. kwame holman explains. >> holman: explore more of the data about the rise in child poverty and use our interactive map to track how the figures have changed from 2000 to 2009. our global health unit updates the humanitarian situation in

libya, including a rush to secure medical supplies for civilians injured in the conflict. and we've launched a new project ahead of the 10th anniversary of the september 11th attacks. we call it the "9/11 video quilt." together with our colleagues at pbs stations across the country, we've collected your thoughts on what's changed since 2001. here's a sampling of the responses so far. >> it absolutely was. before 9/11, like any average american i woke up and felt part of society and i was made aware that i was not a full american or not an average or normal american right after september 11. it's like i went to sleep an american and rose up an arab even though i was born and raised in america. >> well, so far, the rest of the

world, you know, they still look at muslim muslims and non-muslie same. in america, we focus on religion as opposed to who you really are inside and that makes a difference because whether you're muslim, christian, or whatever your belief is, you're still capable of the same things. so far it's like what happened in norway. didt didn't matter his religion. he still chose to do what he did. it's just in america we choose to keep our basis on religion, color of skin, and things like that, that don't have much to do with the inside. basically. >> i think it changed things in a way that people began to recognize how destructive it is when you have people that can't communicate and can't get along, and that they resort to that type of violence. and so i'm not sure that the underpinnings of 9/11 are

anything new but to have it play out in this way. and of course now we're involved really in two or three wars, and so it's been pretty stark. and we've come to accept war as a way of life this our country right now. it isn't should go that we talk about. and that's a big difference. >> i think so, yes. i think our country is not the same that it was before. and i don't know if it will ever be the same again in terms of our economy and, you know, the safety and all the threats and we're on red, and we're on yellow, and we really don't know. it seems like they're doing a lot, but i don't think there's a lot of information for us out there to see what each color means. i don't know. >> those four vase were produced in partnership with whyy philadelphia, ktbs, san diego, and wisconsin public television upon you can see more of the video quilt on our web site and also learn how to submit your own video for it.

pieces of the quilt will be feetured in the newshour's special coverage of 9/11 to be broadcast that night on most pbs stations. all that and more its on our web site, newshour.pbs.org. >> suarez: and that's the "newshour" for tonight. i'm ray suarez. >> brown: and i'm jeffrey brown. we'll see you online and again here tomorrow evening with ruth marcus and michael gerson, among others. thank you and good night. major funding for the pbs newshour has been provided by: and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century. and with the ongoing support of these institutions and foundations. and...

this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. captioning sponsored by macneil/lehrer productions captioned by media access group at wgbh access.wgbh.org

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america. >> union bank has put its global expertise to work for a wagering of companies. what can we do for you? >> and now bbc world news america. >> this is bbc world news america. the west speaks out after months of government crackdowns a chorus of international leaders say it is time for a change at the top in syria.