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Fiscal Cliff Fallout; L.A. Reid Not Returning to "X Factor" Jindal Argues for OTC Birth Control; Mergers Don't Mean Higher Fares; NBA Hoops Hot Again in New York; Angels Sign Josh Hamilton; Obama: "Do Right by your Fans"; Teen's Wonderful Surprise

Aired December 14, 2012 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JOEL ARIO, MANAGING DIR., MANATT HEALTH SOLUTIONS: The exchanges fit into that market and if states maintain control over the exchanges, they then have a coordinated enforcement and implementation of laws across the commercial marketplace.

If the federal government comes in and runs this particular program, then there get to be coordination issues, two levels of government directly involved in the day-to-day activity, and that's probably not in the end is good for the consumer.

The second reason is the state Medicaid programs. That's -- the exchanges work both for people to get commercial tax credits if they're above 138 percent of poverty but less than 400 percent of poverty. If they're below 138 percent of poverty, they have coverage under the Medicaid program.

So again, if states are running the Medicaid program and the exchanges, there can be a more coordinated approach to those two programs as people inevitably move back and forth between them. If the federal government runs the exchange and the state runs the Medicaid program, then there's again some handoffs and potential for the consumer to be not as well served.

I do think the federal government will do a good job but they -- excuse me --

DON LEMON, CNN ANCHOR: That's all right your phone went off.

ARIO: They do have a more difficult time if the state, if there's a coordination between the two programs.

LEMON: Let me jump in here because everything you're saying sounds complicated. I don't know how people are going to figure this out. I mean, obviously, you're an expert here.

But let's on to something that's in more layman's terms here, what about the argument that this is an example of the federal government interfering with state control. What do you say to that?

ARIO: If you look at the way health insurance works today it's a rich mix of state and federal control. We do like the fact that under federal law consumer privacy is protected under a law that passed in 1996. There are a number of other federal laws that passed. There's one that requires states to make sure that in the small group market nobody can be excluded, no business can be excluded because they have one sick person.

Now that federal requirement is being extended to the individual market, so there are some new federal regulations in this program but it's not a new precedent. Today, the state officials when I was insurance commissioner in Pennsylvania, I enforced both state and federal law. What most mattered to me was my ability to enforce that law to the benefit of consumers across the commercial marketplace. And even though some of it was enforced in federal law, it still was the day-to-day control was with me and my department in Pennsylvania.

LEMON: Joel Ario, thank you very much. Appreciate you coming on.

You know, he's known for spotting talent. Now L.A. Reid says he's done with judging on "X Factor." He's done with it. We'll tell you why.

(COMMERCIAL BREAK)

LEMON: All right. President Obama and House Speaker John Boehner meeting for nearly an hour yesterday evening in a fiscal cliff showdown. With 18 days remaining before we go over the edge, both sides say the lines of communication remain open.

Most of us have been stressing over the thousands of extra dollars we may have to fork over to Uncle Sam next year, but along with sequestration comes sweeping spending cuts, too, and that has the Defense Department up in arms.

Here's Pentagon correspondent Chris Lawrence.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT (voice-over): To hear the Pentagon tell it --

ASHTON CARTER, DEPUTY SECRETARY OF DEFENSE: Sequestration, therefore, if it were allowed to happen, would introduce senseless chaos.

LAWRENCE: -- the fiscal cliff --

GEN. JOSEPH F. DUNFORD, USMC: Sequestration will have a chaotic effect on the force.

LAWRENCE: -- is akin to Armageddon.

LEON PANETTA, DEFENSE SECRETARY: What I worry about is being blind- sided by a huge cut because they don't have the strength or the courage or the guts to do what they have to do.

Happy holidays.

LAWRENCE: The cliff would cut $500 billion in defense spending, but spread out over the next 10 years. (on camera): Would these cuts really be that bad?

BEN FREEMAN, PROJECT ON GOVERNMENT OVERSIGHT: Absolutely not.

LAWRENCE (voice-over): Analyst Ben Freeman argues the Pentagon can survive on a smaller budget.

FREEMAN: Sequestration happens it will drop a little bit, but it's certainly not catastrophic or doomsday, or any other sort of hyperbole they want to describe it as.

LAWRENCE: Perhaps the Navy would have to buy less expensive, less advanced fighter jets instead of the new F-35. Or the Pentagon would have to cut the number of soldiers and Marines back to the levels before 9/11.

GEN. MARTIN DEMPSEY, JOINT CHIEFS CHAIRMAN: Sequestration would risk hollowing out our force.

LAWRENCE: Pentagon officials say going over the cliff would actually leave them a trillion dollars in the hole, because it comes on top of cuts they've already budgeted for.

PANETTA: We've put in place $487 billion in savings over the next 10 years.

LAWRENCE (on camera): Are these "cuts" the same sort of budget cuts that you and I think of when we think of cutting our budget?

FREEMAN: I call them phantom cuts because it's not a real savings.

LAWRENCE (voice-over): Freeman says the Pentagon is counting money it was projecting to spend as savings which he says isn't the same as simply spending less.

FREEMAN: But this is the way D.C. does math. It's unfortunate that you or I can't do our taxes like that, but it's the way they seem to do business here.

LAWRENCE (on camera): A senior defense official admits that everyone at the Pentagon, from the secretary on down, is on autopilot to defend their budget. Even though he feels that they need people to go in and challenge their costs, he argues that's better done over time, not forced on them by the fiscal cliff.

Chris Lawrence, CNN, the Pentagon.

(END VIDEOTAPE)

LEMON: All right, Chris.

Are you worried air fares might rise with fewer airlines taking to the skies? What a report found that just might surprise you.

(COMMERCIAL BREAK)

LEMON: Some big changes are coming to the "X Factor." Record executive L.A. Reid says he's not coming back for another season.

A.J. Hammer of "Showbiz Tonight" is in New York.

Hey, A.J.

A.J. HAMMER, "SHOWBIZ TONIGHT" HOST: Hey, Don.

Yes, another shakeup at "The X Factor", and the show, of course, has had quite a few shakeups over the past year.

So, judge and mentor L.A. Reid is going to be leaving Simon Cowell's singing contest after the season wraps up. They're in the second season. Now, they're up for the finals next week. This was confirmed by a spokesperson for Epic Records. That's where Reid is the chairman and CEO.

We're basically told he made the decision so he could concentrate on his responsibilities with the record label. Obviously, it's a pretty big job and it keeps him very busy. So the label tells us Reid really needs to turn his full attention to his day job.

Now, the show has seen quite a few other changes over the past year, some turnover with Britney Spears and Demi Lovato. They replaced first season judges, Nicole Scherzinger and Paul Abdul, of course. Two new hosts come onboard. You have Khloe Kardashian Odum and Maria Lopez, replacing Steve Jones who hosted the first season.

But Reid really seemed to be enjoying last night. It was the final broadcast and I guess it was really good news for him as he's winding things down to see country singer Tate Stevens being voted by fans into next week's finals.

So, Don, the third season of "X Factor" firing up without L.A. Reid and at this point, it's anyone's guess as to who's going to replace him.

LEMON: Why do they have so many changes? I mean, is the show not doing well? What's going on?

HAMMER: Well, from the very beginning, it never up with Simon Cowell's expectations and what he put out for the hopes for the kind of ratings that the show would see. And I think L.A. Reid, you watch him on the show and sometimes you wonder, does he really want to be doing this?

LEMON: Yes.

HAMMER: He's a great judge, I think he calls it like he sees it but he has a big day job. He's running a record label.

LEMON: Yes, it was interesting when they brought him on, it just seemed like an odd fit. Oh, well.

Let's move and talk about Harry Potter, back in the news. Apparently, the highest grossing franchise of all time, A.J.? HAMMER: Yes, this is a pretty great title. "Forbes" just released its list of the highest global box office franchises, and you have Harry Potter on top, ranked number one, earnings of $7.7 billion. As you see, it's followed by "Star Wars" $4.5 billion.

The third is the James Bond films, also the longest lasting, according to Forbes, in the span of 50 years, they've done 24 films staring seven dashing action heroes. That's followed by "Pirates of the Caribbean", that's in fourth place. "Batman" series in fifth place.

Even though "Harry Potter" is the highest grossing franchise, "Lord of the Rings" is a serious contender. They, of course, have new films on the way. The "Lord of the Rings" franchise currently ranks ninth, earnings of almost $3 billion.

But "The Hobbit" three-part series which hits theaters today has the potential to make "Lord of the Rings" one of the most lucrative franchises of all-time and I certainly know they're going to do huge box office, it will be an easy win for number one this weekend, Don.

LEMON: Goodness gracious, we're in the wrong business. My goodness.

All right. Thank you, A.J.

Next hour, A.J. has the story of a man caught trying to break into Taylor Swift's home and he was armed with a knife.

Checking our top stories right now:

The deejays who pranked the hospital where Prince Williams' pregnant wife was staying say they are not getting death threats. So the deejays and 10 station executives have hired bodyguards. And some reports say the deejays have been moved to a safe house. The nurse who answered the prank call committed suicide last week.

A U.S. veteran says he's been put on the FBI's no fly list and doesn't know why. Saddiq Long and the Council for American Islamic Relations held a press conference in Oklahoma City. They said the FBI and law enforcement officials have followed and harassed Long and his sister. In a statement, the FBI says it does not violate anyone's civil rights.

Louisiana Governor Bobby Jindal says birth control should be sold over the counter. In a "Wall Street Journal" op-ed, Jindal writes the political battle over health insurance coverage for contraception wouldn't be repeated if women could buy it without a prescription. He also said, "As a conservative Republican I believe that we have been stupid to let the Democrats demagogue the contraceptives issue and pretend, during debates about health care insurance, that Republicans are somehow against birth control."

The Twinkie and other Hostess brand treats could be back in your lunch bag -- they're hoping. Bloomberg News reports Wal-Mart and Kroger are among the bidders for the iconic brand. But the company declined any comment. Hostess began to wind down its operation last month after failing to resolve a contract dispute with its bakers' union. Hostess will auction brands like Twinkies and cupcakes early next year.

A new report says just because there are fewer airlines, that doesn't mean air fares have gone sky high. Maribel Aber is at the New York Stock Exchange -- at the NASDAQ I should say. Market site is following this story for us. So Maribel what did the report find?

MARIBEL ABER, CNN CORRESPONDENT: Well Don here's the thing it may feel like you're paying more but there's this report you just brought up here. It's from Price Water House Cooper. It says that you're not actually -- there have been a lot of mergers over the past few years. Now think back Delta and Northwest, Continental and United, Southwest and AirTran. And whenever we've heard about an airline merger, people think you know what less competition and higher prices, right?

Well "USA Today" says the dramatic price increases that people -- that some people expected they just haven't happened and now yes prices are higher. The thing is not that much. Domestic ticket prices have been rising only 1.8 percent a year so that's less than the rate of inflation.

Also I want to point out when a carrier moves out of the market another one usually moves in and so that's maintaining the competition -- Don.

LEMON: All right, thank you, Maribel.

The Angels made Josh Hamilton the $125 million man. But can this huge off-season signing lead to post season success? We'll talk about it.

(COMMERCIAL BREAK)

LEMON: New York Knicks fans have something to cheer for a change. The Knicks are living in the penthouse of the NBA's eastern conference and last night won a statement game.

Vince Cellini from Bleacher Report joins me now. Hello, sir. Vince, NBA hoops are hot again in New York. What's up with that?

VINCE CELLINI, BLEACHER REPORT: Well it's a good thing, I tell you. It's not only good for New York Knicks fans but it's good for the entire league. When the Knicks are playing well, the NBA is very, very happy. And they are playing great basketball right now. Last night -- Thursday night it was the Knicks taking on the visiting Los Angeles Lakers. And the interesting point was, Mike D'Antoni the Lakers' coach coming back, the coach against the team that he walked away from, resigned from in March. The Lakers are struggling and did last night.

The Knicks 41 first quarter points 22 by that man Carmelo Anthony the MVP candidate and he sprained his ankle on this game. That was really the only downer and he's iffy for Saturday. But the Lakers now two and eight on the road, 4-9 under D'Antoni and Kobe Bryant is beyond frustrated with his team.

(BEGIN VIDEO CLIP) KOBE BRYANT, LAKERS GUARD: Every game for us has a lot of meaning to it at this point. I don't think -- maybe if we were rolling, playing well it probably has added significance. But at this point, you know, I wish we had the Washington Generals on our schedule.

(END VIDEO CLIP)

CELLINI: It's not going to be Washington Generals but rather the Washington Wizards on Friday Don. So pick up a couple of tickets. They are in town. The Lakers you can watch them.

LEMON: Can we talk about this huge signing in baseball, Josh Hamilton, $25 million a year?

CELLINI: Yes. I mean, I think you're worth what someone is willing to pay you. So Josh Hamilton has been a tremendous power hitter for the Rangers for a number of years. Five years, $125 million. He's headed to a division rival. And that makes it even more interesting.

But in Los Angeles he signed with the Angels, in Los Angeles the Dodgers have been doing a lot of the free agent signing and they grab the headlines but now in this case it's the Angels getting Hamilton to join an already powerful line-up.

So it's a -- it's a double situation there. The Angels making noise in town and they are also now heating up a division rivalry with Hamilton's old team the Texas Rangers.

Meanwhile, former Angel, now Detroit Tiger Torii Hunter tweeted this regarding the economics of baseball, "I was told money was tight but I guess Arte" who is Arte Marino the owner of the Angels "had money hidden under a mattress. Business is business. But don't lie."

So Don someone is always upset when someone else gets big money I guess.

LEMON: Yes well what do they say?

CELLINI: With TV, you know.

LEMON: What do we say, you know, I don't know what the specifics are don't hate the player. Hate the game. It is sports.

CELLINI: Right.

LEMON: Listen President Obama spoke about the NHL lockout yesterday. Here is what he had to say let's listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The President of the United States shouldn't have to get involved in a sport lockout. My message to owners and to players is you guys make a lot of money and you make a lot of money on the back of fans. So do right by your fans.

(END VIDEO CLIP)

LEMON: So they've missed about half a season now. Can that help, the President's comments?

CELLINI: You know, I wish they could help. But I think you know both management and players of the NHL understand what's at stake here. I don't know if that's going to actually move things along. As you said what, 90 days now they have had this work stoppage and the NHL Don is the only league to lockout players for an entire season. They did it in '04 and '05.

So it really doesn't look good for hockey fans right now but hopefully the league is going to come to its senses. That's -- that's going to do it.

But I do want to remind everyone to go to bleacherreport.com where you can check out the latest sports news Don including a bizarre story of a television reporter and newspaper story questioning Robert Griffin III's blackness at Bleacherreport.com. So check it out.

LEMON: I heard that on the radio this morning.

CELLINI: Yes.

LEMON: On my way in the work, I'm like, really? Well, you know it is sports, as we say. Thank you.

CELLINI: All right. Don, thank you. Have a great weekend.

LEMON: You, too.

(BEGIN VIDEO CLIP)

(MUSIC)

(END VIDEO CLIP)

LEMON: It may be some of the most precious silence ever captured in a recording studio. We'll tell you about Stevie Wonder's surprise appearance.

(COMMERCIAL BREAK)

LEMON: An aspiring teen artist may have gotten the surprise of his life. Here's CNN's Jeanne Moos.

(BEGIN VIDEO CLIP)

JEANNE MOOS, CNN CORRESPONDENT: He's a 14-year-old up and coming singer and when Ahsan Watt's record management told him to come to L.A. and record a Stevie Wonder song, he didn't wonder. He just did it and walked with his eyes closed right into the mother of all pranks of having your idol suddenly materialize as you're singing a song can be called a prank.

STEVIE WONDER, SINGER: Son, how you doing? AHSAN WATTS, SINGER: Pinch me. Pinch me.

WONDER: Pinch you?

WATTS: Can I have a hug?

WONDER: What's up, man?

WATTS: Oh.

MOOS: And even after the hug, it can't hurt to double-check.

WATTS: Stevie Wonder?

WONDER: Sometimes.

MOOS: I was waiting for you to ask to see his license.

It turns out an Interscope Records exec had begged Stevie Wonder's manager to get the icon to listen to Ahsan's videos. After listening, Stevie he agreed to show up and surprise the kid.

WATTS: That was just mind blowing.

MOOS: And then Stevie played while Ahsan sang. Imagine your idol's voice joining yours. But it turns out this wasn't the first time that Stevie Wonder has done this.

Oprah calls it one of her favorite moments, Star Search champion Jake Simpson was belting Stevie's song blissfully unaware that Oprah's staff had arranged for a surprise guest.

JAKE SIMPSON, STAR SEARCH CHAMPION: Oh, my gosh.

MOOS: Eventually they turned it into a duet.

The prank on Ahsan was an attempt by his record company to create a viral video but his mom cried and so did Ahsan.