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Clock Ticking Toward Spending Cuts; Bob Woodward Says He Was Threatened; Kerry Meets Regarding Weapons in Syria; Mexican Drug Cartels Using Unusual Delivery Methods

Aired February 28, 2013 - 12:00   ET

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

SUZANNE MALVEAUX, CNN ANCHOR: Flew from the Vatican to his summer residence outside Rome.

MICHAEL HOLMES, CNN ANCHOR: He made his final farewell to the crowds there. Sent out one final tweet for his 1.5 million followers. It said this, "thank you for your love and support. May you always experience the joy that comes from putting Christ at the center of your lives." We are going to have full coverage of the pope's last day this hour.

Syria's rebel forces are about to get a lot more money from the United States, not for bullets or bombs, we're told, but for food, medical supplies and more of what the U.S. calls non-lethal assistance. Secretary of State John Kerry announced the package in (INAUDIBLE) today. He said a lot about it. There's a lot of nuance in all of this. Stay there, we've got more details coming up in a live report.

Well, the clock is ticking towards those automatic across-the-board spending cuts. They are, of course, due to kick in tomorrow. Well, last night, President Obama told business leaders the cuts will be bad for them and will cause the economy to tumble downward. Republicans have accused the president of resorting to scare tactics and politics instead of focusing on the debt and the deficit.

All right, we are talking, of course, about $85 billion in cuts over the next seven months, known in Washington jargon as sequestration. Let's bring in Ali Velshi in Washington, Richard Quest standing by in London.

Ali, you know, for days now we've been hearing these dire scenarios from the Obama administration. Before we get to the questions, have a listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The sequester will weaken America's economic recovery. It will weaken our military readiness. And it will weaken the basic services that the American people depend on every single day.

ERIC HOLDER, ATTORNEY GENERAL: The reality is that it is going to be hard. There is going to be pain and the American people are going to be less safe.

ARNE DUNCAN, EDUCATION SECRETARY: Kids are going to get hurt. Kids are going to get hurt. That's just the reality.

(END VIDEO CLIP)

HOLMES: And this is also what the president said to business leaders last night. Have a listen to this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is not a cliff, but it is a tumble downward. It's conceivable that in the first week, the first two weeks, the first three weeks, first month, a lot of people may not notice the full impact of this sequester.

(END VIDEO CLIP)

MALVEAUX: I want to go to Ali first.

So, first of all, Ali, is this simply the president softening his tone here? Is the sky falling or not? What's the real deal?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: It's a good thing I get to go first, otherwise I wouldn't get a word in edge wise with Quest.

But let me just tell you, he has to say this because when you wake up on Saturday morning, and this is now almost inevitable this is going to happen, it's not like Y2K, it's not some event, things won't change. They'll have to send out furlough notices. You're not going to feel this till March.

But, look at GDP. In the fourth quarter of 2012, it grew. The economy grew by a smidge, 0.1 percent. It was minus 0.1 percent and now it's plus 0.1 percent. That is virtually nothing. So if you take out 750,000 jobs, if Ben Bernanke says it's going to take 0.6 percent off of economic growth, that actually could send America into recession.

Now, there are some people who think there should be nothing cut. There are others who think we should be cutting more than this. The real issue here is that it's just a bad way of cutting. It's using a sledgehammer where you need a scalpel. And that's really the problem. It's ham-fisted and stupid.

MALVEAUX: But, Ali, are you -- is anybody going to feel anything right away?

RICHARD QUEST, CNN CORRESPONDENT: (INAUDIBLE).

MALVEAUX: Oh, my goodness. Richard already weighed in here. Richard, go ahead.

HOLMES: You can't even (INAUDIBLE). No, I'm in solidarity with my fellow foreigner. Right of reply, Mr. Quest.

QUEST: Well, Ali Velshi's scalpel would be fine if there was a surgeon who was prepared to wield it. Unfortunately, Dr. Sanjay Gupta isn't around and every politician in the beltway seems to have their own agenda. VELSHI: Right.

QUEST: And a slight reality check here, Ali. You're talking about a relatively 2 to 3 percent reduction in spending in terms of the total federal budget. And on top of that, Ali --

VELSHI: Yes.

QUEST: You're also talking about vast swades (ph) of the budget that would be unaffected. I'm not saying you're not right in power. I'm saying you're not getting (ph) the whole picture.

VELSHI: OK, OK, OK, OK, OK. Hold on. Suzanne and Michael and Richard, listen to this. OK. So you look at me, Richard, and you say, you're a pretty good looking guy, but you're about 50 pounds to fat and you refuse to diet, you will not do that, so we are going to have to take 50 pounds off but you can't touch your limbs because then you won't be able to write, you can't touch your feet, you can't touch your lips because you can't talk and you can't touch your ears, because you can't do that, you can't touch your brain because you need that to think and your neck attaches your head to your body, so we're going to scrape a little bit off your forearm, we're going to cut your toenails a little bit more, we're going to shave your head a little closer.

QUEST: Well, you know --

VELSHI: That's the problem. You can't touch two-thirds of the U.S. budget because it's entitlements, Social Security, Medicare and Medicaid. And so now you're cutting from all these places where you can't nearly affect the deficit.

QUEST: And yet, Ali, you're ignoring the point that in 2011, when the U.S. was downgraded from AAA, all right the U.K. is also in the same leaky boat, but in 2011, they couldn't do it. They couldn't do it with the super committee. They couldn't do it with the grand bargain. They couldn't do it again with the fiscal cliff. So surely you get to the point where something has to give because to continue your operation ends to nonsense.

MALVEAUX: Ali, I have a question for you here because --

VELSHI: Yes.

MALVEAUX: OK. So I get the analogy, right, with the scraping of the skin and all that stuff, the shaving of your fine head there --

HOLMES: There's nothing left.

MALVEAUX: But what if they were to just to take your heart, right?

VELSHI: Right.

MALVEAUX: What if they say, OK, defense, we're going to pull out your heart, you die, right?

VELSHI: Right. MALVEAUX: So there is a case to be made, whether or not if you take from one particular place --

VELSHI: Yes.

MALVEAUX: It makes a huge difference right away.

VELSHI: Yes.

MALVEAUX: Is that not true?

VELSHI: Which is why you need a properly structured, well-disciplined diet. If I need a guy like me, a slim fit fellow like me needs to lose 50 pound, we're not going to get there easily. And we have a prescription called Simpson/Bowles. They even came out with a second one. But you know why nobody wants to support that, liberals or conservatives? Because you have to cut Medicare, you have to cut Medicaid, you have to reform Social Security and you need overall tax reform. And nobody wants their constituents to know that they cut something that they like.

Cut the stuff that you may never see. Cut national parks, because maybe you don't go to national parks. Cut air transport. Cut all these other things. Cut food inspections because maybe you'll never actually have to be confronted with a hamburger with camel meat or horse meat or whatever other meat they're putting in meat these days, right? Am I right, Richard? Nobody's got the guts to actually go where you have to go to cut the debt.

QUEST: Well, for good reason -- for good reason, Ali, because they're looking over here at Europe, and I realize I've just now arguing the second half or the opposite side of the coin. They're looking at what they see. They fear another Greece on the horizon, which is absolutely nonsense in the U.S.

VELSHI: Right.

QUEST: They're looking at the U.K. with all its problems. But you can't continue as the way it's been going. And that's the unpalatable truth. And unless politicians in the U.S. are prepared to have that serious debate with the public that starts saying, where do we cut, but Republicans want it all on the spending side, Democrats want it on the tax side --

VELSHI: And neither of those work.

QUEST: And somewhere in the middle --

VELSHI: Yes.

QUEST: Correct.

HOLMES: All right, gentlemen, don't go away because we're loving this. I'm just sitting back and being a spectator here. I love those guys. They get into it. But stay there. I want to bring in Alison Kosik. She's at the New York Stock Exchange. The Dow flirting with an all-time high right now while all of this uncertainty is going on in Washington. It's counterintuitive. Why the bullish behavior?

ALISON KOSIK, CNN CORRESPONDENT: Sometimes, Michael, you know what, there is no reason why stocks are moving higher. So you look at yesterday's trading day where the Dow was up 175 points. Why did that happen? Well, Fed Chief Ben Bernanke's comments on Capitol Hill basically saying he's not going to pull back on that Fed stimulus going into the economy. That was really the magic phrase that sent stocks higher yesterday. Also, the clear, stronger recovery in the housing market. That's giving stocks momentum as well.

As for today, clearly not seeing the momentum from yesterday, though the Dow is getting ever so closer to that record high, 14,164, that the Dow reached, you know, about five years ago. The reality is, though, it's really hard to see if the Dow will reach that record level today. You know, we got that GDP number, economic growth from the last three months of 2012. Sure, it was revised higher. But, you know what, it's nothing to celebrate because it went from negative 0.1 percent to positive 0.1 percent. So it's just barely in positive territory.

It's good that it's not contracting. It's good that business investment and consumer spending hung in there in the last three months of 2012. But the reality is, is that the fiscal cliff, which was certainly hanging over everybody's heads in the last part of last year, that really took a big chunk of government spending out of -- out of the economy. So that was hanging on the economy. And we've got sort of the same thing going on this quarter, the first quarter of 2013. So the big worry is, are we going to see a lack of growth again happen for the first quarter this year?

Michael.

HOLMES: All right, Alison, good to see you. Alison Kosik telling us why things are up when everyone thinks they should be down.

And also, Mr. Velshi and Mr. Quest, we'd love to let you continue, but we wouldn't have a show left. We'll get you back another time.

VELSHI: All right.

HOLMES: They've got to do a double header (ph) show, those guys, I'm telling you.

MALVEAUX: Oh, my God, yes, they're great.

The politics of this, of course, getting kind of ugly. You've got veteran reporter Bob Woodward saying a White House official threatened him after reporting on the forced budget cuts.

HOLMES: Yes. And that White House official is Gene Sperling, a top economic Obama aide. That's according to a Democrat aware of the situation. Listen to what Woodward said a White House official said to him. (BEGIN VIDEO CLIP) BOB WOODWARD, "WASHINGTON POST": They're not happy at all and some people kind of, you know, said, look, we don't see eye to eye on this. They never really said, though, afterwards they've said that this is factually wrong and they -- and it was said to me in an e-mail by a top White -- is this what --

WOLF BLITZER, ANCHOR, CNN'S "THE SITUATION ROOM": What was -- what was said? Yes?

WOODWARD: It was said very clearly, you will regret doing this.

BLITZER: Who sent that e-mail to you?

WOODWARD: Well, I'm not going to say? I mean it's somebody --

BLITZER: Was it a senior person at the White House?

WOODWARD: A very senior person.

(END VIDEO CLIP)

MALVEAUX: We want to go straight to Brianna Keilar at the White House.

So, Brianna, first of all, I think a lot of people realize when you're at the White House and the beat that you're doing, that I've done many years, you get a lot of pushback. That's what we call it in the business, a lot of pushback from the White House when you put out something that they don't like. Do you think that Bob Woodward -- do you think he's gone a little -- a step too far here? Do you think there's a little bit of an exaggeration in how this is being portrayed as some kind of threat?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: You know I will say, yes, you do get push back. That's certainly true. But what the White House will say here, Suzanne, is that when he was told, you will regret staking out this claim, which was an op-ed that said the president is moving the goalpost when he's talking about a solution to these forced spending cuts that are right upon us as of tomorrow, because the president has said he wants it to be balanced, as he puts it. He wants tax increases and he wants spending cuts to offset those forced spending cuts. And Republicans just want more spending cuts.

So, Woodward had said in this op-ed that the president had sort of changed his mind. That he'd moved the goalposts from the negotiations that he had over the debt ceiling in 2011. The White House is saying that Woodward completely misinterpreted this e-mail that he had with we now know Gene Sperling. And that when Sperling said, you're going to regret staking out this position, it wasn't meant to be like, you're going to regret doing this because you're going to pay for it or you'll pay for it through access, but you're going to regret it because you're wrong.

And to that point they put out a statement saying, "of course no threat was intended. As Mr. Woodward noted, the e-mail from the aide was sent to apologize for voices being raised in their previous conversation. The note suggested that Mr. Woodward would regret the observation he made regarding the sequester because that observation was inaccurate, nothing more."

I will tell you, Suzanne, we weren't (ph) on the phone call that Sperling and Woodward had. And as you know, having covered the White House, you do sometimes have phone calls where you are getting a substantial amount of pushback. So I don't think we completely know the entire story here, but the White House is saying he misinterpreted this e-mail.

MALVEAUX: Yes. You know, and, Brianna, I guess it all really just kind of underscores how important this whole debate is. And who gets the blame for it, right, the automatic spending cuts?

KEILAR: That's right.

MALVEAUX: A lot of people looking at this thinking, well, you know, don't look at me.

Brianna, you had something.

KEILAR: That's right. Well, and I was going to say that when you have someone like Woodward, who is this icon in journalism, coming out and saying something, people really listen to it. I do believe, talking to White House officials, they believe that he is wrong on this. And so they're doing this coming from a genuine place where they don't think that his op-ed was correct. Obviously he feels it is. But they're really pushing back on this because of that, Suzanne.

MALVEAUX: All right.

HOLMES: All very sensitive, isn't it? You know that beat well.

MALVEAUX: Yes. They get very sensitive. Doesn't matter what administration, they're all very sensitive.

HOLMES: And I'm sure you've been (INAUDIBLE) from time to time.

MALVEAUX: Yes, absolutely.

Here's more of what we're working for AROUND THE WORLD.

He was stopped over a parking violation. Now he is dead.

HOLMES: Yes, so did South African police really tie a cab driver to the back of a van and drag him through the street? There is video. We're going to take you live to Johannesburg, next.

(COMMERCIAL BREAK)

HOLMES: Welcome back, everyone.

The United States doubling down on help for the Syrian opposition, cranking up pressure on Syrian leaders.

MALVEAUX: Secretary of State John Kerry is in Rome today. He met with Syrian rebel fighters, announced the U.S. will add $60 million to an aid package already going to help rebuild and resupply the groups fighting against government forces.

HOLMES: Yeah, let's go live now to Rome, talk to our foreign affairs correspondent, Jill Dougherty.

It was a big meeting there today. It's important to note that the U.S. is saying this injection of dollars is not for weapons or ammunition, so-called non-lethal.

Well, some people -- well, first of all, what is it and why not arms?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, what is it, Michael? It's actually food, MREs, you know, the rations that military people get. They say for hungry fighters.

And then also medical supplies for people who might have been wounded in action.

It's not being given, let's say, the lethal aid, which would be weapons or ammunition, things like that, is not being given because there is apprehension in Washington.

They say, number one, they know and they have said they have concern that there are extremists fighters who are within the opposition. They don't want aid to go to them.

And, so, they want to keep -- you know, keep pretty close watch on how it's spent, make sure it gets only to, as they're putting, carefully vetted members of the Syrian army -- I should say, the Free Syrian Army.

MALVEAUX: Jill, how are they planning on doing that? Because we've already seen examples of weapons getting in the wrong hands of those who the U.S. feels is an enemy.

DOUGHERTY: Yeah, in fact, it really is very difficult. But that is -- they have the ambassador and other diplomats and other people on the ground, in fact, from the U.S. who are watching as much as they can how will this will be used, how it's spent -- I should say the equipment is used, because actually they're not handing over money It is the services and it is the supplies that they're handing over.

But they say they're going to have to watch very carefully. And then, in fact, it's staged. If they live up to things like protecting human rights, the things that they've been promising, then there could be more.

And down the, let's say, the road a bit they might go to other forms. It could be lethal, or at least getting close to that, but not now.

HOLMES: Yeah, John Kerry, of course, and the whole debate over U.S. influence in the world generally anyway in terms of foreign policy, what chance he can convince the two sides to negotiate? What are the Russians saying about that? DOUGHERTY: I think, Michael, you know, that is so far at this point out of the realm of possibility, because even the Russians who do have some influence with Assad have not been able to bring about anything, any type of rapprochement, between the sides.

And, right now, I think Kerry is just trying to help the opposition in two ways, politically and on the ground in kind of a sense of helping communities that have been liberated to make them function well, serve as an example for people to come over, join them and then the other part would be the military.

But as you can see, they're going very carefully on this. They're not giving the opposition, certainly everything they wanted.

HOLMES: All right, Jill, thanks so much. Jill Dougherty there in Rome.

MALVEAUX: Here are stories making news "Around the World" right now.

In Peru, this California couple surfaces after their loved ones, they hadn't heard from them for a month. They were reported missing, but then it turns out they're trekking through this remote village in the Amazon the whole time.

HOLMES: Yeah, it's a bizarre story. Twenty-five-year-olds Jamie Neal and Garrett Hand posted yesterday on, where else, this is 2013, Facebook, that they're at a military base in Peru playing with a pet monkey and getting star treatment, they say, from the government.

MALVEAUX: They posted, "The Peruvian military gave us our own house to stay in and food and a bunch of booze to drink. This is insane."

So, of course, Neal had to apologize, I mean, really, saying they had no electricity, they didn't have any phones or Internet service to stay in touch.

And the couples' friend, family, you know, they got worried because they hadn't been posting pictures from the trip in weeks, and it stopped a month ago.

Your parents would do the same thing, don't you think?

HOLMES: Probably.

MALVEAUX: Yeah. Call the police.

HOLMES: Yeah, I love it. They're posting on Facebook, but they say they had no Internet access.

Anyway, in the waters off New Zealand, check that out in the spot there that you can see in the video where that is a shark, a great white shark.

MALVEAUX: It actually attacked a swimmer off this popular beach, and witnesses really described a terrible scene as they stood by helpless. A 46-year-old victim had died by the time police actually tried to reach him.

HOLMES: They fired shots. The police officer went out in a rubber dinghy and fired an automatic weapon at the shark.

In fact, they were sharks. There were a couple of sharks there at one point, but they weren't able to retrieve the body, initially.

Now, that beach and several close by are closed for at least the next few days. A very popular beach in New Zealand.

MALVEAUX: Maldives, a 15-year-old rape victim has been sentenced to 100 lashes after engaging in premarital sex. She was charged after police investigating the rape say they found out that she had consensual sex with another man.

HOLMES: Yeah, this girl says her stepfather raped her and then killed her baby.

Amnesty International condemning the sentence as cruel, degrading and inhuman.

The Maldivian government doesn't agree with the punishment. They're appealing the court's decision, but for now she is sentenced to receive those lashes when she turns 18.

MALVEAUX: Unbelievable.

For Mexico's drug traffickers, ingenuity still the mother of invention. We're going to show you the homemade cannon that was used to actually fire drugs over the border. That's up next.

(COMMERCIAL BREAK)

MALVEAUX: Drug traffickers in Mexico using unusual methods to get marijuana over the border. This is really fascinating. They're actually shooting it out of a cannon.

HOLMES: Yeah, unusual, you're not kidding. I remember catapults. This is I cannon.

This latest incident happened on the border between Mexicali in Mexico, of course, and Calexico in California.

Rafael Romo?

MALVEAUX: What you got?

HOLMES: This is just amazing. It was catapults at one point.

RAFAEL ROMO, CNN LATIN AFFAIRS EDITOR: There used to be a catapult. Now, it is -- ingenuity is just incredible when there's a market for drugs in the United States.

And this time what authorities found was an orange Dodge Ram pickup truck with a cannon attached to its bed. And what you're seeing right now is the compressor, which was actually attached to the car for power.

And authorities believe that out of this pickup truck, using this make-shift cannon, they were shooting packages, small packages of marijuana, across the border, weighing a few pounds each.

Now, the Mexican authorities confiscated this truck. There were no arrests in Mexico or the United States, but they started investigating this after American authorities told Mexican authorities that they had been finding small packages of drugs in a very suspicious manner.

Now, again, this happened in Mexicali across the border from Calexico, California, just about a week ago.

These images that we're seeing now, that field, that was in Yuma, Arizona. That was about a couple months ago, in December.

Take a look at what authorities found there. These are cans, 33 cans in total, weighing 85 pounds. The value of the drug in the black market would have been $42,500, and authorities believe that they were using also a cannon in this case that was able to shoot the drugs about 500 feet away.

MALVEAUX: So, Rafael, a couple of questions. First of all, is this the first time they've done something like this?

And, secondly, it seems pretty obvious, you know, like they'd get caught. You'd see the truck. You'd see the cannon and the canisters.

Did -- it seems like the simplest thing, right, but, you know, not the smartest.

ROMO: It is not necessarily the first time we've seen incidents using cannons. Michael was mentioning that before going to an idea back to medieval times using catapults.

Look at that video by Homeland Security. That's in Arizona. These men were actually using a catapult to launch drugs across the border, also marijuana. They were caught, apprehended on the Mexican side. They were put out of business luckily.

But I was talking to the police in Mexicali in Mexico, and they were telling me that they have seen cases of gliders, the small planes that have no engines, fitted with engines, so they can fly and not be detected by a radar to a distance of about two miles, drop packages of drugs and return to Mexico.

They were also telling me that they saw catapults, of course, and an idea straight from American football. Somebody with a very good arm ...

HOLMES: No.

ROMO: ... running to the fence, throwing a football-sized package and somebody waiting on the other side and running away with the package.

HOLMES: An NFL scout may be on the other side. ROMO: Exactly. It's just amazing.

HOLMES: Unbelievable. And, of course, the tunnels have been ingenuous, as well, from building to building under the border and ...

MALVEAUX: But they're all getting caught, though, right? I mean, that's the thing, right?

ROMO: For the most part, they're getting caught. It's very important that you mentioned the tunnels.

It's not just any tunnel. They're fitted with ventilation systems. They have electricity, lights.

I mean, they're built by people who know how to do this, and, so, it's just another idea in the many, many ideas that they have to ...

MALVEAUX: Yeah, a lot of money in it, yeah, clearly.

ROMO: A lot of money, too.

MALVEAUX: All right, Rafael. Thank you. Appreciate it.

And, of course, we're also looking at another story that is making news "Around the World."

Sydney, Australia, your home place ...

HOLMES: Home place there, yeah.

MALVEAUX: What you got over there?

HOLMES: Well, they had a huge bust over there. It was a record drug seizure, the largest methamphetamine bust ever in Australia.

Check it out there. Police say they seized more than half a ton of meth. That's twice the previous record, worth -- wait for it -- $450 million.

MALVEAUX: Good lord. They found the drugs in Sydney hidden among cleaning products in a shipping container from southern China.

Now, police arrested three men they believe are a part of what they're calling a major international crime syndicate.

HOLMES: Amazing amount of drugs.

MALVEAUX: Up next, he was stopped over a parking violation. Well, now he is dead.

HOLMES: Wait till you see the video. It's chilling stuff.

Did South African police really tie a cab driver to the back of a police van and drag him through the street? We'll take you to Johannesburg when we come back.

(COMMERCIAL BREAK)