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Car Lands Upside Down On Roof; New Scandals Hit Catholic Church; Four Missing At Sea; Plains Blizzard Closes Schools, Roads; Obama Talks To Governors About Cuts; Forced Spending Cuts Coming; GOP Governors Talk Budget Cuts; Cyclists Lost in Peru; Janet Napolitano Speaks on Sequestration

Aired February 25, 2013 - 13:00   ET

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

MICHAEL HOLMES, CNN ANCHOR: You don't see this every day. Police say a driver near Houston lost control on a curve, hit a house. It went -- it actually went airborne and landed on the roof, as you can see.

SUZANNE MALVEAUX, CNN ANCHOR: Fuel leaked into the house. A crane operator was actually called in to remove this car. Amazingly, nobody in the car or the house was actually --

HOLMES: That's good news.

MALVEAUX: -- seriously injured.

HOLMES: That's good news. Yes, that's it for me. It's not it for you. Thanks for watching "AROUND THE WORLD." Love the new name?

MALVEAUX: I do, yes. It's kind of catchy.

HOLMES: Yes.

MALVEAUX: Right?

HOLMES: (INAUDIBLE) own identity.

MALVEAUX: I love it.

HOLMES: All right. You've got more work to do.

MALVEAUX: All right, see you tomorrow. Thanks.

CNN NEWSROOM continues after this.

MALVEAUX: Pope Benedict XVI's last week at the Vatican. No short of drama, of course. A cardinal from Scotland now resigning over alleged inappropriate behavior.

And the reports of blackmail, sex parties and abuse.

Then, they were out sailing but their boat reportedly sank. Now, four people, including two young kids, are missing. The search off the coast of California.

And he is now back in the spotlight. Notre dame linebacker Manti Te'o, he is asking NFL teams, judge his skills not his personal life. This is CNN NEWSROOM, I'm Suzanne Malveaux.

Thirty-five million Americans now dealing with a crippling blizzard, a winter storm from Colorado to Texas. Second major storm to hammer the region in a week. So, this is what it looks like. This is Amarillo, Texas. Whiteout conditions now closing roads, even forcing the state to pull its snowplows off the roads. Emergency crews having some trouble actually reaching stranded drivers.

In Wichita, Texas -- Kansas, rather, schools are closed for a third day. Parts of the city could get up to 26 inches of snow. This is on top of 22 inches the city got last week. The governor has extended a state of emergency declaration there.

Up to 19 inches of snow hitting Jefferson, Colorado, about 70 miles from Denver. Hundreds of flights were canceled in Denver because of this weather.

Chad Myers bringing all of this to us. What does it look like particularly in the Texas panhandle?

CHAD MYERS, AMS METEOROLOGIST: You know, it is really a mess. When I heard they were pulling the plows off the roads because it was too dangerous for the plows --

MALVEAUX: That's crazy.

MYERS: -- I thought -- I thought, you know, I grew up in Buffalo. I've never heard of such a thing. Then I saw the pictures and then I saw the white-out conditions. Not only was it white out but it was white out and dark. This is kind of before sunrise. And it's still snowing in Amarillo, still snowing in Lubbock, all the way up now into Woodward, Elk City, not quite to Oklahoma City yet, but it's getting colder there and it will snow. Wichita, you're getting snow and Kansas City, you will get it tonight. In fact, we're getting a crew out there as we speak because the snow will be very, very heavy at times.

This is what it looks like. This is a live shot from the Department of Transportation in Texas. This is I-27 north of Lubbock. It updates about every 10 seconds. But you will not find a car on there. And I tell you what, I haven't seen a snowplow either. It is a mess out there. The radar continues to show that it's going to be coming on up with these winds, 33, 34, 35. I even just saw an Amarillo wind gust over 70 miles per hour. So, it is really coming down. The winds are still blowing here. Lubbock just had a gust there of 53, Amarillo -- now, you think about this, 13 inches of snow on the ground and all of a sudden things are just going everywhere. This entire blizzard is blowing the snow from one side all the way to the other. And we're going to see that snow right along this I-35 corridor right into Kansas City tonight. But it does go north of St. Louis. That's something there. St. Louis, should get an awful lot of rain, but it will just be a cold rain, not snow -- Suzanne.

MALVEAUX: Wow, more big weather. Thank you, Chad.

MYERS: Yes, you're welcome. MALVEAUX: We've got a big story in Washington as well for the forced spending cuts that are going to be taking effect in just four days. President Obama addressing the nation's governors today at the White House.

MALVEAUX: The administration now has laid out specifics for each state on what they're going to lose if those $85 billion in cuts actually happen on Friday.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Thousands of teachers and educators will be laid off. Tens of thousands of parents will have to deal with finding child care for their children. Hundreds of thousands of Americans will lose access to primary care and preventive care like flu vaccinations and cancer screenings. These impacts will not all be felt on day one. But rest assured, the uncertainty is already having an effect. Companies are preparing layoff notices.

(END VIDEO CLIP)

MALVEAUX: The president is blaming the situation on Congressional Republicans. He asked governors to speak to the representatives on Capitol Hill to try to reach some sort of compromise. Well, as you can imagine, Republicans, they see things differently. And you've got live pictures now here. GOP governors, Republicans making their case about the forced spending cuts. They are holding this news conference there, clearly. And they are responding to the fact that this could happen and each side is blaming the other.

I want to bring in two players to talk about this. This is our Chief Business Correspondent Ali Velshi who's monitoring this all from New York. We've got John King in Washington who's covered this years and years at the White House.

So, Ali, I want to start off with you. First of all, --

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes.

MALVEAUX: -- the cuts. Break down for us. What could we actually see in real terms how this impacts all of us starting on Friday?

VELSHI: All right. So, what we haven't got is a breakdown from all the agencies that have to impose these cuts which have to be put into place if they don't have a deal at the end of Friday so starting Saturday. You will probably see -- for most federal workers that the president was talking about, they need 30 days before they're laid off. But if you live in parts of the country where you have a great impact of the federal government, where, you know, military bases or contractors to the defense industry, you'll feel it more in those environments than you will in certain urban centers.

But a whole lot of kids will end up having to get out of the Head Start program. There will be teachers that'll be put on furlough, as a result. The FAA will have to start giving notices to air traffic controllers. They're going to shut down, they said, possibly up to 100 smaller towers at less used airports around the country. The inspection -- security inspections will take a little longer. Bottom line is it's $85 billion over seven months. But they have to start in many of these government agencies, human capital is the biggest expense. Labor is the biggest expense.

Now, just the key thing to remember here that's become fashionable in the last week or so to suggest this isn't going to be as serious as it is. I want to remind people that in the third quarter of 2012, the U.S. economy actually shriveled a little bit. It didn't grow. So, where you want people to be working and paying taxes and creating value, there will be jobs lost. You may not think that's very serious. It may not be as many. You may think this is a great opportunity to get cuts that you otherwise wouldn't get. But bottom line is let's not kid ourselves. There are a small portion of people who think this is actually going to be good for the economy. Probably not in the short term.

MALVEAUX: John, I want to go to you, because, you know, as Bush would say, this is not his first rodeo, right? So, you and I have seen this all before. We've seen this play out, this brinksmanship up until the very end. What does this mean in terms of blame, who blames the other?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, Suzanne, you're right. The United States hasn't had a real budget pass through the real (INAUDIBLE)in 16 years. So, you can say, here we go again, another crisis. But this president and this Republican House is sort of brought to new lows, to new levels, the distrust and the dysfunction of Washington. Who's to blame? If you put that question to public opinion polling as the Pew Research Center does, it's clear one of the reasons the president is pushing and is out so public on this is because he thinks he has the higher ground right now.

According to Pew, 31 percent would blame the president, 49 percent, so nearly half the Americans would blame the Republicans in Congress, 11 percent both. So, in the short term, it's clear the president thinks he has the higher ground. But as Ali just noted, there's a huge risk here because as you know this well from your days at the White House, this is a president beginning his second term. He wants to get more things done. The way to get more done in Washington is to have a stronger economy. It puts everybody in a better mood in Washington, because it's bringing more money in.

So, the president could win in the short term and pay in the long term. If the economy stumbles and if you can't think it get any worse, but he still has to do business with Republicans on immigration, on gun control, on other issues. So, he could be poisoning the well some more, both parties, I'm not just blaming the president, both parties. And in the long term, if the economy goes south on this president, it will impact his second term.

MALVEAUX: It will be interesting, John, if he actually uses executive order to try to get something done if he can't work with Republicans.

Ali, I want to bring you in for the final question here.

VELSHI: Sure.

MALVEAUX: Any agencies, departments, do you think, that are exempt from all of these cuts across the board?

VELSHI: Well, as you know, these cuts -- and this is something to remember because a lot of people are saying, well, it's only this small part of the whole federal budget. That's because most of the federal budget can't be touched, it's nondiscretionary. There's a lot of spending in there that isn't going to get effected. Very little in Medicare will be cut. There are some cuts around the edges. Nothing in Social Security. But again, most federal agencies of the U.S. government are not equipment and building heavy, they are people heavy. Again, you may think that's right or wrong but people are going to get cut.

And if you live in a community where there are lots of people who will get laid off, that is going to have an impact on the small businesses in that community. So, it's going to be a ripple effect. It's not going to be like the government shutdown which you and I are going to talking about a month from now where something will happen the next day, and you'll all notice it, and you'll all feel it. That's not how this is going to be. It's going to be gradual but I think there's a real risk that it could be damaging.

MALVEAUX: And, John, real quick to you to kind of button this all up. What do we think this means in terms of the president's legacy? If you remember the last time we had the triple A going down to -- downgraded one level here. If this actually goes into effect, do you think it's going to have a real dark mark, a stain on his legacy?

KING: I think the big question mark, Suzanne, is how long does this last? Ali just mentioned that deadline at the end of March. One of the calculations in Washington is that this sequester or children at play or forced budget cuts, whatever you want to call it, will take effect on Friday. But because of that second deadline, they'll have to work something out pretty quickly. So, the calculation is they'll do one deal instead of two deals instead of avoiding the sequester and then paying for the government. As to the legacy question, I think it really matters on, A, what happens to the economy in the long term, and, B, can this president somehow create a working environment with Republican House and other Republicans in Congress, because he can't get the big things done? It's guns, immigration, anything else, he can't get it done without the Republicans. And right now, they're back at this again.

MALVEAUX: Yes, not surprising. John, Ali, I want to dip in here and listen to the Republicans. Scott Walker of Wisconsin is speaking now. Let's listen in.

(BEGIN LIVE FEED)

GOV. SCOTT WALKER (R), WISCONSIN (live): -- and we knew that going in. The Federal Reserve in New York projected in their surveys that that would mean $710 less, on average, in spending and the other $290 they would make up in savings. Most people have tapped into their savings and the last thing we want to do is take money out of hands of the Americans consumers. So, I think there's a series of difficult choices. My hope, though, is what -- we see something better than the arbitrary cuts that are being proposed and something that certainly doesn't cripple the economy at such a critical time.

UNIDENTIFIED MALE: I do think -- hold on. I do think it's important to point out that the president's proposal is not about increasing rates, it's about closing loopholes here. I think that Governor O'Malley and Governor Jindal want to say something, too.

UNIDENTIFIED MALE: Yes, go ahead.

GOV. BOBBY JINDAL (R), LOUISIANA: I am going to respectfully disagree with some of my colleague's statements. I do want to echo what Scott has said. I'll make a couple of points. I think it is possible to cut less than three percent of the federal budget without causing these devastating consequences. To go to the earlier question, I think you can you achieve these reductions without, for example, jeopardizing children's access to vaccinations. I think you can achieve these kinds of reductions.

Let's be clear, the spending and federal -- the federal budget -- the federal budget will actually be larger even after these reductions than it was last year. So, I think there is a responsible way to cut less than three percent of the federal budget. I think it's time for the president to show leadership. I think it's time for him to (INAUDIBLE) head into Congress a prioritized list of reductions that preserves critical services. Every governor here has had to balance their budgets during tough economic times. Every family out there has to balance their budget, isn't allowed to spend more than they need. Every business has had to become more efficient, tighten their belt. The reality is it can be done. This administration has an insatiable appetite for new revenues. Over $6 billion of new spending under this president. Almost $6 trillion of new debt. Over $600 billion of new taxes just in the most recent deal. Enough's enough. Now is the time to cut spending. It can be done without jeopardizing the economy. It can be done without jeopardizing critical services.

The president needs to stop campaigning, stop trying to scare the American people, stop trying to scare states. Every American knows that's out there. You just ask the American people. They believe there's at least three percent of the federal government spending that is wasteful spending and they would tell there is room to cut the waste without jeopardizing critical services. So, I happen to disagree. I made a suggestion. The president didn't agree with it. I said, if these cuts really are that devastating, would you at least consider delaying some new spending instead of cutting existing programs, for example, the Medicaid expansions? And he disagreed with that. He did not want to do that. He did not agree. If these cuts are so devastating, why are we spending new dollars to create new programs?

So, I respectfully -- look, he basically -- and I don't want to put words in the president's mouth. But my sense was that he felt that the election has consequences and he felt that the majority -- he was not open to having that conversation again. But again, I'll let the White House speak for themselves. Bottom line is I -- you'll hear a diversity of views from the different governors. My perspective is you can cut less than three percent of the federal budget without devastating consequences. The president needs to show leadership. Now is the time for him to work to avert some of these consequences --

(END LIVE FEED)

MALVEAUX: Louisiana Governor there, Bobby Jindal, speaking there at the mic at the White House.

I want to bring in -- I want to bring in back Ali because, Ali, I know you've got some things that you're taking issue with here. But is he correct when he says that?

VELSHI: No.

MALVEAUX: That it's not going to hurt the way we think it is?

VELSHI: No. And it's funny, it's this weird math that the Republicans are using, that it's just three percent of the federal budget. That would be fine if you were cutting three percent across the board. That sounds very reasonable. Except you can't touch entitlements. So, it's 3 percent of a small part of the federal budget which makes it a very big part of some major agencies. So, it's just misleading stuff that Bobby Jindal is saying, number one.

Number two, when he says families understand they have to live within their budget. I don't know a lot of families who buy a house with cash. Buying a house on a mortgage, is that living within your budget or is that not living within your budget? Because you'd have to be 80 years old to be able to buy a house with cash. We have an understanding in our society, it may be flawed, that we borrow money based on our future earnings potential. All people do that, companies do that and governments do that. Now, there's a point at which you can say, we've gone too far with that or we're too much of a risk of not paying back so we'll end up paying a higher interest rate. When you borrow too much money, your personal interest rate goes up.

MALVEAUX: Right, right.

VELSHI: Your credit cards go up. That is not -- but to suggest this within your means and balanced budget nonsense is just misleading. That is not how families live. It's not how businesses conduct themselves. And it is certainly not since the history of time the way governments run themselves.

MALVEAUX: So, Ali, --

VELSHI: Bobby Jindal is a smart guy. He runs a state. He needs to not talk like this and it's become common to hear this kind of stuff coming out in these press conferences.

MALVEAUX: Well, where -- Ali, where is the compromise, though? Is there a compromised proposal here that is reasonable for both sides that they could actually be satisfied with?

VELSHI: Well, they both want something that's in this thing. The Democrats really want these massive defense cuts that there's no other way they'll ever get achieved politically. And the Republicans want what a lot of these cuts to these things that they call are waste. But the truth is the only way you balance the budget in this country, the only way you get to a debt that doesn't keep growing is to attack the entitlements. Social Security, Medicare, those kinds of things and nobody wants to touch that. The compromise is Simpson/Bowles or some version thereof, which does include higher taxes and includes more strategic cuts than these ham-fisted ones we're seeing right now. That's the issue. The compromise, neither party wants to sit at the table and sign off on.

MALVEAUX: Let's bring back John real quick here. John, are you seeing any signs of potentially the two sides deciding they are going to compromise? It looks like from what we've been following, nobody is even talking to each other, that it is essentially a done deal on Friday.

KING: Before the deadline the answer is no. There are some members of Congress circulating proposals just in case, there some staff members drawing up plans in case? Absolutely. But in terms of is the president reached out last week and called the Republican leaders, but just essentially to check in, no negotiating. I asked would Vice President Biden go up to the Hill. Remember, the last couple of crisis he's gone up and cut a deal with the Republican leader in the Senate Mitch McConnell. I'm told that's not happening.

Now, it's only Monday, but see what happens as we get closer to Wednesday and Thursday. But as of now, Suzanne, both sides are calculating that these go into effect on Friday. The question then is, what happens? The Republicans are betting people won't see devastating cuts and they won't have that outrage Ali talked about and therefore they'll get some leverage with the president. The White House is calculating quite differently. It certainly looks like on this day we're going to drive over this, because what the president wants, Suzanne, is the Republicans to agree for the second time in six or seven weeks to raise taxes. A, they say they're not going to do that. B, they're especially not going to do that unless it's part of a huge grand bargain where they get Medicare, Social Security, those entitlements Ali's talking about. That's not on the horizon for this week.

MALVEAUS: All right. We'll bring you back every day this week to try to sort this out, figure this out, see if anything changes. Big, big stakes, very high stakes if this does not work out. Thank you Ali, John. Appreciate it.

Here's what's coming up this hour- they were on a bike trip through Peru when all communication stopped.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I haven't seen a video of her since January 25th. So, to me, anything could have happened since then.

(END VIDEO CLIP)

MALVEAUX: Now, the U.S. state department is joining the search for this missing couple.

And then Pope Benedict XVI's last week at the Vatican, not short of drama. A cardinal from Scotland now resigning over alleged inappropriate behavior. There are reports of blackmail, sex parties and abuse. Live report from Rome up next.

A new study showing Americans drink too much. This is CNN NEWSROOM, that's happening now

(COMMERCIAL BREAK)

MALVEAUX: There's a mystery unfolding in the mountains of Peru. Two American cyclists on a bike trip from Peru's coast to the capitol, Lima. They are now missing. Jamie Neil and Garrett Hand had been updating regularly on social media, checking in with family members. That abruptly stopped last month and nobody has heard anything. Jamie Neil's twin sister says she trying to stay hopeful.

(BEGIN VIDEO CLIP)

STACY FINGERS, SISTER MISSING IN PERU: I mean, she's my sister. I'm just not going to listen to anybody until she calls me.

(END VIDEO CLIP)

MALVEAUX: Rafael Romo has been following this story for us. Very touching, very moving. They want to hold onto some kind of hope here. What do Peruvian police believe?

RAFAEL ROMO, CNN SENIOR LATIN AMERICAN AFFAIRS EDITOR: And there may be some home. I've been in contact with the Peruvian national police today and what they tell me is that unlike what the family is telling media, is that they were seen for the last time on February 16th in Peru at a hostel where they stayed.

The area where they're traveling is a remote area, you're talking the mountains, the jungle. You're lucky if you find a phone connection, not to mention an internet connection. Now, the family says they had been chronicling their travels in Peru. They were also in Argentina and Chile. But this area, I have been there, and it's very difficult to get communication unless you're carrying a satellite phone, which I don't think it is the case.

We're talking about Jamie Neil and Garrett Hand. She's 27, he's 25, both avid cyclists. Their idea was to go to different countries in South America and travel by bicycle. Now, the Peruvian national police say part of the trip was using a river and it takes 15 days to go from one end of the river to the other so the hope out there is that they may be in the middle of this trip, they may be just fine, unable to communicate with their family.

MALVEAUX: Is there anybody who suspects foul play at this point, or they think they just can't contact them right now?

ROMO: Not at this point. The Peruvian national police is not investigating the case where foul play was involved. Again, from the family's perspective, not being able to know anything about them for about a month, it is very, very difficult and, again, the embassy, the U.S. embassy in Lima also involved, providing assistance to Peruvian authorities. But it is the Peruvian authorities who have to do this investigation.

MALVEAU: All right, Rafael, thank you. Give us an update if you find out anything at all.

Coming up, Pope Benedict XVI's final days in power. Now filling up with scandal. A top British cardinal resigned after four priests accused him of inappropriate acts.

Plus, there are allegations of gay priests at the Vatican being blackmailed by male prostitutes. The details from Rome up next.

(COMMERCIAL BREAK)

MALVEAUX: Want to go live to the White House. Secretary of Homeland Security Janet Napolitano there speaking about how she believes that these automatic spending cuts that go into effect on Friday impact the security of our country. Let's listen in.

(BEGIN LIVE FEED)

JANET NAPOLITANO, SECRETARY OF HOMELAND SECURITY: -- tornadoes in places like Tuscaloosa, Joplin and other major disasters across the country. And homeland security grant funding would be reduced to its lowest level in seven years, leading to potential layoffs of state and local emergency personnel across the country.

Let me close by saying this, threats from terrorism and the need to respond and recover from national disasters do not diminish because of budget cuts. Even in the current fiscal climate we do not have the luxury to making cuts to our capabilities without significant impacts. We will work to continue to preserve our front line priorities as best we can. But no amount of planning can mitigate the negative effects of sequestration.

So, as we approach the 1st of March, I join with all of my other colleagues and with the governors, who we just heard outside, to ask the Congress to prevent sequestration in order to maintain the safety, security and resiliency of the country. Thank you.

UNIDENTIFIED MALE: We'll take some questions for the secretary. Yes.

UNIDENTIFIED FEMALE: Thank you. Secretary, you were talking about --

(END LIVE FEED)

MALVEAUX: Hearing from the secretary of homeland security, again, making the case why she believes these automatic spending cuts that go into effect on Friday would, in fact, hurt the country and specifically the security of the country.

Coming up, Pope Benedict XVI's final days in power, now full of scandal. Top British cardinal resigned after four priests accused him of inappropriate acts. Plus, there are allegations of gay priests at the Vatican being blackmailed by male prostitutes. The details from Rome up next.

(COMMERCIAL BREAK)