Return to Transcripts main page


Fiscal Cliff Talks Resume; NRA Speaks Out; Former President Bush Sr. Still Hospitalized; No Deal in Sight for Fiscal Cliff

Aired December 27, 2012 - 11:00   ET


ALINA CHO, ANCHOR, "CNN NEWSROOM": Hi everybody. Welcome to CNN newsroom. I'm Alina Cho, in for Ashleigh Banfield. We're so glad you're with us.

The Senate is in session. The President is due back in Washington just minutes from now. But unfortunately there's no other movement to speak of towards scaling back or avoiding those billions in tax hikes and spending cuts due to start just five days from now.

Happy New Year, fiscal cliff.

CNN's Dana Bash is in Washington. Dana, great to see you.

So, within the past hour, Senate Majority Leader Harry Reid spoke on the floor. He really gave it to John Boehner. He got pretty personal, didn't he?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: He did. He really laid the blame at Boehner's lap, talked about the fact that he was surprised that the House isn't even in session, which is true.

But let's get real. The Senate just came back into session this morning.

And most importantly, he was very, very pessimistic about getting anything done before we reach that fiscal cliff. Listen to what he said.


SENATOR HARRY REID (D), SENATE MAJORITY LEADER: The Speaker just has a few days left to change his mind, but I have to be very honest, Mr. President. I don't know time wise how it can happen now.


BASH: Now, Alina, let me kind of lay out the state of play with a little bit in the weeds, but I'll try to keep it out as much as possible because I know that this is something everybody is focused on since this affects every single American. If they don't do anything, everybody's taxes are going to go up.

The ball is in the Senate's court right now, so what Senator Reid, who you saw earlier, and the president, what they are trying to figure out is whether or not they can craft what the president calls a "scaled- back" bill, which is what he campaigned on, raising taxes for everybody making more than $250,000 a year and adding a few other tax- related items in there, maybe some spending, but it's unclear.

The question is whether or not they can put all that together in a way that can get enough Republican votes in order to pass the Senate and then would have to have enough Republican votes to pass the House, as well.

Whether they can do that in the next four or five days, it is a big, open question when it comes to politics, when it comes to policy and when it comes to process.

CHO: Well, just procedurally, too, Dana, I mean, that -- some of that takes time, obviously, and Congress notoriously, as you know, moves slowly.

But, having said that, you know, one Wall Street economist suggested and this caught my attention, that we might actually -- and this language, I loved -- "bungee jump" off the cliff, meaning we'll bounce right back afterwards, meaning once those tax hikes goes into effect for everyone, Congress will have no choice.

They'll have to get to work. They'll have to introduce a bill that everyone can agree on.

So, what's your take on that? What are your congressional sources saying to you privately?

BASH: They're saying that the sort of the betting money is on that right now. That's a really illustrative and interesting way to put it, the bungee jump, because the whole concept of taking a vote in the next five days on anything would effectively would be to raise taxes.

Each of these senators would be taking a vote that somebody can use against them, saying they voted for a tax increase. After January 1st, everybody's taxes are going to go up so the vote that they can take would be to cut taxes, a very different vote, politically.

The other thing is, if you look at the calendar with regard to that bungee jump, the 1st of January is, of course, a holiday. There is no -- Wall Street is not trading that day and, so, there would be probably a very negative effect on January 2nd.

But the new Congress would be sworn in the very next day on January 3rd. There will be more Democrats in the Senate, more Democrats in the House and, as you said, there -- the discussions going on right now, particularly among Democratic leaders in Congress, is that they feel that they probably would have enough votes and enough political pressure on them and also on Republicans to get something done very fast if they don't do it before January 1st.

CHO: Dana Bash, you're going to be one busy girl over the next week or so, possibly longer.

All right, Dana, thank you. Great to see you, as always.

BASH: You, too.

CHO: As if we needed another deadline, the Treasury is warning that the nation's debt will hit the proverbial ceiling on New Year's Eve.

Now, you may recall that the debt showdown last summer is exactly what led to the fiscal cliff we're facing right now, just one more complication or maybe bargaining chip depending on your politics.

CNN's Ali Velshi joins me now with the facts.

So, Ali, remind us. You're the best at sort of putting this all into perspective. Remind us why the debt ceiling is just as important as the fiscal cliff. Maybe more?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Let me beg your indulgence and take you back a little while to the conversation you just had about the bungee jump.

Here's the problem. Confidence doesn't react to a bungee jump. If you stole my phone, which I know you wouldn't do, and then I got it back from you, it would take that time before I developed that trust.

So, confidence -- we just saw the consumer confidence numbers come out this morning and they have taken a big hit because consumers are worried about the fiscal cliff.

The equivalent of consumer confidence on the investing side is our debt rating, our credit rating, and you'll recall the last time we messed around with the debt ceiling, we got kicked down a notch.

That doesn't bungee jump back, so if we are seen to be so irresponsible that we would do this again, that we would get past our debt limit, the world may sit there and say, you know what? Maybe you're just not that good a bet. Maybe Americans really are irresponsible with their money.

Now, we hit the debt limit on Monday. We've all known that, that that was coming. The treasury secretary reinforced that. He said, this is a problem.

They can fiddle around. Just like if you have bills due, you can fiddle around with things. They can probably get us a few weeks further, but the bottom line is that $16.4 trillion and we will hit that on Monday and, if we -- the world doesn't think that we're getting our act together, we may get another downgrade and that is going to make things more expensive.

The cost of borrowing money -- the government borrows largely in 10- year increments -- is going to go up and that starts to reflect in all sorts of things, like mortgage rates, like loan rates.

It wasn't a catastrophe last time we did this, so a lot of people sit there and say it's not that big a deal, but when thinking about this bungee jump, think about that. Once you've broken someone's trust, investor trust or consumer trust, it doesn't bounce back because you fixed it. It takes a while to rebuild and that could hurt us a lot. CHO: I mean -- and you talk about implications. I mean, listen, traditionally, this time of year, we're talking about the Santa Claus rally in the markets. That didn't happen because now fears that we will go over that cliff.

And you know a lot of smart minds on Wall Street are saying if we don't make that January 1st deadline, the markets are going to take it hard.

VELSHI: Right. And, so, the question is, you can get hit on markets, which is your investments. You can get hit on bonds, which is your loans. We're already seeing consumer spending less which will result in layoffs in January because they're not spending as much over the holiday season.

CHO: You see the Dow down 80 points.

VELSHI: So, this is all taking a toll. So, it's -- people, it's not a switch. It's not a yes or no. Once we go over on January 1st, a switch goes up and things go really bad. Things are already going bad. This has to happen now.

So, while I don't doubt that we might go over the cliff and they might resolve this a couple of weeks later or a month later, I don't want our viewers thinking that no damage will be done. If we go over, there will be damage done. There's damage done already.

CHO: Thank you, Ali.

VELSHI: And please don't steal my phone.

CHO: I won't.

VELSHI: All right. Deal.

CHO: Not now. Maybe later.

Thank you. Great to see, as always.

And we will get the president's take on the debt ceiling and the fiscal cliff in a live report from the White House from our Jessica Yellin at the bottom of the hour.

Some other stories we're following this hour. A rough start to a Southwest Airlines flight in New York. Take a look at this. Flight 4695 headed for Tampa, Florida, skidded off the runway at MacArthur Airport at Islip, Long Island, this morning.

No reported injuries, thankfully, among the 134 people on board. The passengers were taken off the plane, bussed to the terminal. Presumably, they'll get on another flight very soon.

The fierce winter storm now pounding the Northeast is causing major travel delays. I know that doesn't surprise you. The same system left the same calling card in the South, thousands of passengers stranded in Dallas/Fort Worth airport on Christmas Day because of that snow and ice.

American Airlines Flight 1501 was stuck nearly five hours on the tarmac -- at the gate, rather. A clearly exasperated pilot offered this unusual apology, blaming his bosses. Listen.


UNIDENTIFIED MALE: It's beyond reproach. I have no words to tell you how sorry I am for this.

Decisions are being made way above our heads by people that obviously, in my humble opinion, don't have a clue what they're it doing.


CHO: Good for that pilot. Flight 1501 never left the gate on its trip to Vegas and, ultimately, it was canceled.

The National Rifle Association has been getting a lot of flak lately for advocating more armed guards in schools in the wake of the Newtown massacre. Philadelphia Mayor Michael Nutter dismissed it as a, quote, "completely dumbass idea."

NRA President David Keene addressed the controversy today with "CNN Newsroom" with Carol Costello.


DAVID KEENE, PRESIDENT, NATIONAL RIFLE ASSOCIATION: There are 23,000 schools today that have armed guards, private schools and public schools. Cops -- the cops in the schools program was initiated in the 1990s by Bill Clinton.

Now, whether an individual school wants that kind of protection or doesn't want that kind of protection is really up to the individual school and, when we made that statement, when Wayne LaPierre spoke about a week ago, he suggested that what has to happen and what should happen is that, in every school district, administrators, teachers and parents should sit down and ask what's needed to protect the students in that school.

Some of them will want police officers there. Others of them will want private security guards. There may be some places where they want volunteers to do it.


Let's not get into an argument about who teachers unions are mostly interested in, but the fact of the matter is that in some schools -- and we're not urging that teachers be armed -- but in some schools, school districts and teachers are armed today.

And if the school district and the teachers want to do it that way, that's really up to them, it seems to me.


CHO: That was NRA President David Keene speaking earlier today with CNN's Carol Costello.

Hitching a hide to Washington today with President Obama is Hawaii's next senator. Brian Schatz is currently Hawaii's lieutenant governor.

Late yesterday, the governor chose him to succeed the late Daniel Inouye until a special election is held in 2014. He's due to be sworn in this afternoon about three hours from now.


CHO: Welcome back. Doctors in Houston are still trying to bring down a stubborn fever in the oldest-living former president. We're talking, of course, about George H.W. Bush.

Except for a four-day break more than a month ago, the 88-year-old Bush has been in Houston's Methodist Hospital since November 7th. We learned only yesterday that he was moved into ICU on Sunday in guarded condition.

But what exactly does that mean? Our Dr. Sanjay Gupta explains.


DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESONDENT (via telephone): When I take care of patients in the intensive care unit, when we say they're guarded, that typically means we're keeping an eye on several different things.

That could be his lungs. It could be someone's kidney function. It could be neurological status.

Again, we don't know what this means, particularly, with the former president, but it basically means he needs to be on the intensive care unit because we need around-the-clock monitoring. Someone can be monitoring him constantly, all of his vital signs, and there are things that we're trying to prevent from basically going in the wrong direction.


CHO: My colleague, Miguel Marquez, has more now from Houston.


The first thing that the Bush family wants folks to know is that the 41st president is doing OK despite this long stint in the hospital.

A family spokesman saying that they want to thank everybody from around the world for sending in their thoughts and concerns, but the 41st president is doing OK despite this fever that he can't seem to beat.

They are treating him, he says, among other things, with Tylenol and they have him in intensive care now because doctors here at the hospital wanted to keep track of him in various ways as you can only do in ICU.

He is on a liquid diet. They don't mean to downplay how serious things are and that he is getting the best care possible, they say.

He's been here over a month after going in with a bronchial infection. He was in the hospital before that doing physical therapy for a condition he has with his lower extremities, a sort of Parkinson's disease in his lower extremities.

At this point, family spokesman being very, very forthright saying they believe he will get out soon. They don't have a date or a time yet because they can't quite figure out why he can't get over this fever, but they believe that he will be out soon and back to his home here in Houston.


CHO: Miguel Marquez, that would be very, very good news, particularly if he gets out before the new year. All right, thank you for that.

Meanwhile, another ailing former leader is now out of the hospital. Nelson Mandela was treated for a lung infection and had gallstones removed at a Johannesburg hospital.

A government spokesman says the former South African president is now receiving treatment at his home. Mandela, who is 94-years-old, is said to be resting and in good spirits.


CHO: We have this just in to CNN. You're looking live there at Air Force One as it goes out of frame, in there. They're just landing at Andrews Air Force Base. Of course the president onboard there, just back from Honolulu, Hawaii.

As most of you know by now, the president had to cut short his vacation there, his holiday vacation, so that he could deal with the looming fiscal cliff.

Of course, all eyes are on that now and everyone wondering whether Congress will be able to reach a deal by January 1st. If not, spending cuts and tax hikes for every American will go into effect and we're watching that story very, very closely.

As I mentioned, just five days left before the new year. But wait. Before they bring out the champagne and confetti on the 31st, folks in Washington really need to start making big decisions regarding that fiscal cliff.

Here's what will happen if no deal is reached. The economy could fall into a recession. That's been widely reported. The Congressional Budget Office forecasts a drop of .5 percent in the real gross domestic product and a 9.1 percent unemployment rate may be on the horizon by the end of next year. Markets in the U.S. and around the world could take a hit.

Right now, the Dow down almost 100 points. No Santa Claus rally this year.

Senior partner and managing director of the Boston Consulting Group, Hal Sirkin, joins me now from Chicago. Great to see you, Mr. Sirkin. Happy holidays

So, let's talk about the effect on the economy. I think it's important to point out that, if no deal is reached by January 1st, some things will take effect right away -- 2-percentage point increase in payroll taxes, no more unemployment benefits for 2 million Americans. Others, like billions in spending cuts, will take a little longer to take effect.

But, having said that, what will be the impact on the economy, long- term, do you think?

HAL SIRKIN, SENIOR PARTNER AND MANAGING DIRECTOR, BOSTON CONSULTING GROUP: Well, I think you have to look at this more than as a fiscal cliff but as almost a fiscal slide. And what we're doing is we're beginning a slide starting on January 1st when those effects take place and we're going to start slowing down slowly.

If we don't do something by February, we're going to have a debt limit crisis that will also then cause us so accelerate and reduce the confidence in the United States of America, which is something we should not allow to have happen.

And, by March, of course, all of a sudden, there will be a bunch of payroll and tax increases that will be showing up in terms of what people have to pay, whether it's estimated taxes or it is things out of your payroll.

All these things are going to make it more difficult and what we're going to watch declining effort.

Now, this is not the same level as what the euro crisis is. The euro crisis is something that's not in the European's control as much as they would like.

This is something that's in our control. It's in the control of Congress. It's in control of the president. This is something that we can fix if we want to and we have to get the political will and the financial will to do so.

CHO: But you mentioned the euro crisis and we're not there yet, but, of course, the big question is, could we get there?

SIRKIN: Well, if this goes on until the end of the year, maybe the end of next year, 2013, I think we'll be in substantial trouble. We'll see much significant increases in unemployment. We'll watch the stock market drop. We'll watch the confidence in the United States, which is very important to our country, decline.

And this could cause us to go into what could be a significant recession, but it's something we can fix, or, at least, it's something that Congress can fix. So it's in our control and we need to recognize that, but we need to make sure that Congress acts.

CHO: What about unemployment? I mean, we made a big deal just before the election about going below 8 percent. We're at, what, 7.7 percent now, unemployment.

And if we go over the cliff, you know, a lot of smart minds are saying we could hit 9.1 percent unemployment by the end of next year.

I mean, that sounds just devastating. Who would be the most impacted by that, do you think?

SIRKIN: Well, it's going to be everybody at that point in time. It's going to be small businesses who look at the world and say, I can't afford to invest, I can't afford to have the number of employees that I have because I'm starting to see demand slow down.

It's going to be large businesses that are going to suffer from this for the same reason. It's going to hurt our ability to be competitive in the world market because of all this. And, so, we're going to see, potentially, a decline in the growth of exports.

All these thing its are bad for the country and it's going to hurt everybody, so this is something that we have to stop and have to stop quickly. And, again, it is in the control of the United States.

CHO: All right, senior partner and managing director of the Boston Consulting Group, Hal Sirkin, thanks for joining us and happy holidays.

SIRKIN: Thank you.


CHO: 2012 was a dramatic year in the world of business. Facebook went public, but struggled to impress investors, Apple and Yahoo! hired new CEOs and, with just five days left, Washington can't decide on how to avoid the fiscal cliff.

Our Christine Romans and Ali Velshi look back at the top 10 stories in business that caught our attention this year.


CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Number 10, Apple, the first year without Steve Jobs and a company that's trying to prove under a new CEO that it can still invent things we didn't even know we need that we buy, faster than anything has ever been sold in personal technology before.

Number 9, the U.S. stock market. Despite all those worries about the fiscal cliff and maybe slower growth in the U.S. economy, the stock market has had a great year. Too bad you missed out. The smart money has been in the market. The rest of us have been worried about the fiscal cliff. VELSHI: Number 8, Facebook's IPO, hundreds of millions of people like Facebook, but investors did not on its first day as a public company. Trading glitches at the NASDAQ and questions about the company's ability to make money on mobile-users pummeled the stock which has yet to climb its way back to its IPO price.

ROMANS: Number 7, Mother Mayer. The new CEO of Yahoo! who announced she was just going to take a two-week maternity leave as she tried to turn this company around. Thirty-seven-years-old, it looks like mother's touch is just exactly what Yahoo! needed.

VELSHI: Number 6, Mother Nature, an intense drought in the Midwest that scorched the corn and soy crop, sending prices sky high.

Who can forget Superstorm Sandy? Neighborhoods along the Northeast swept away, millions without power and damages as high as $50 billion raising lots of questions about U.S. infrastructure and whether we should be spending some money to fix it.

ROMANS: Number 5, China. Is China slowing or is China leading the world? We do know that China will be the biggest economy in the world by 2020, for sure by 2030.

China also getting more than a few mentions during the presidential campaign, probably because it's pretty clear China is both a competitor and a partner.

VELSHI: Number 4, Europe. The European Union was fractured by too much debt and the austerity plans to fix it. That saga is far from over.

Number 3, the housing market finally -- finally -- bottomed out. The combination of low home prices and continued record-low mortgage rates set off a building and buying spree.