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Government Shutdown Looms; U.S. Intelligence Damaged; There Is No Syrian Civil War, Says Country's Foreign Minister; Obama Meets With Netanyahu

Aired September 30, 2013 - 12:30   ET

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

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SUZANNE MALVEAUX, CNN CO-ANCHOR: Welcome back to CNN NEWSROOM.

Right now, the nation is on the verge of a government shutdown.

MICHAEL HOLMES, CNN CO-ANCHOR: Yeah. The deadline for Congress to pass a budget, if you didn't know it, it's about 11 hours and 27 minutes away.

MALVEAUX: Today, the Senate will the debate a new House spending bill, but the bill passed by House Republicans would delay ObamaCare for a year.

Now that's not going to fly with Senate Democrats. They will reject it.

HOLMES: And barring any last-minute deal, the so-called can-kicking, large sections of government will start closing at one minute past midnight. Hundreds of thousands of workers will be furloughed.

MALVEAUX: On Wall Street, stocks down ahead of a possible government shutdown. They're reacting.

The Dow dropped more than 150 points at the open this morning. The S&P 500 and the NASDAQ also saw declines.

You're looking at 118 at the moment. That is where it stands. And economists are actually warning a shutdown, even if it's brief, could cause stocks to fall even more than they already have.

HOLMES: Three-quarters of a percentage point down today.

And, also, earlier we were saying Europe is down, Asia is down, all on the back of this.

Investors also keeping an eye on Congress ahead of debt ceiling talks. Those haven't even started. We haven't gotten to that hurdle yet.

If lawmakers fail to increase the debt limit, the U.S. government wouldn't be able to pay its bills, or not all of them anyway, and that has its own set of problems.

MALVEAUX: We're following another story, new concerns now that a leaked terrorist plot by al Qaeda has now caused more damage who U.S. intelligence efforts than NSA leaker Edward Snowden. That is according to "The New York Times."

HOLMES: Yeah, according to the report, the revealed plot has undermined U.S. intelligence and forced officials to find new ways to intercept al Qaeda operatives.

Let's bring in Pentagon correspondent Barbara Starr. Tell us about these concerns and what this leak did, what it caused to be shutdown.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, hi there.

You remember a couple months ago, we were all talking about a terrorist threat against U.S. embassies around the world and about two dozen of them shut down. The big threat was against the U.S. is embassy in Yemen.

What we've learned is that U.S. intelligence intercepted communications between top al Qaeda leaders.

Now the question on the table, because of that very crucial intercept, has al Qaeda gone silent for the U.S. intelligence community, and "The New York Times," asking the question, what did more damage, revealing that intercept which some news organizations did, CNN talked about it a bit, or the Edward Snowden links?

Two different cases, Snowden revealed information, officials will tell you, about how the system of intelligence gathering is set up.

In the case of the al Qaeda intercept, the big question right now is whether or not a key method of gathering intelligence has been shutdown and where is al Qaeda now communicating?

Experts will tell you they have encrypted links on the Internet. They have chat rooms. They have methods of communicating that the intelligence community urgently keeps trying to chase down.

But, you know, they can even go back to the old methods, couriers handing off tapes, handing off recordings.

It's a really interesting question to which there's not a lot of good answers because damage is caused by all of this.

How much and where it's caused and how to recover from it is the big question for the intelligence community.

MALVEAUX: All right.

HOLMES: All right, thank you, Barbara Starr there at the Pentagon.

MALVEAUX: We're following Israeli's prime minister, Benjamin Netanyahu, talking with President Obama at the White House.

Hear why he is skeptical about the new relationship that President Obama is forming with Iran's leader.

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HOLMES: All right. We know that the shutdown is going to send more than 780,000 federal workers home, delay paychecks.

But it will also have far-reaching impact on the economy, not just ours but around the world as we've been discussing. You can see it on the markets.

MALVEAUX: I want to bring in CNN's global economic analyst, Rana Foroohar, to explain the budget standoff here.

Obviously, the government shutdown looming, it's probably imminent at this point.

Ultimately, what does it mean in terms of the impact on world markets? This is not something that's just affected and felt here at home.

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: That's right.

Well, you know, to be honest, it depends how long it would last. So if you have a shutdown that goes on for just a week, it should shave only about .2 percent off of U.S. GDP growth. That's still something.

But if you go on for a month, you could start seeing real impact on U.S. GDP growth.

You're already seeing the impact in consumer and business confidence which are down. Consumers are not spending. They're wary. Markets are jittery.

And, since the U.S. is really, along with China, the biggest driver of global growth, that has a tremendous impact on global GDP.

HOLMES: Yeah. As we were saying earlier, we saw Europe down, Asia down, as well.

Of course, after tonight's deadline to keep the government open, there's that even more important deadline, if you like, October 17, the debt ceiling.

Now, it's the country's credit card limit really. And if Congress refuses to raise that, and here we go again, by the way, it's not the first time we've had this discussion, how does that then impact other countries? You know, particularly if the U.S. faces another debt rating impact?

FOROOHAR: This is really the most important thing, particularly for international markets.

So the dollar is the reserve currency of the world, and when -- you know, one of the reasons that the U.S. is allowed to borrow so much money so cheaply is that people frustrate in our ability to pay it back.

Now the fact that we have been, as you say, at this place a number of times in the last few years has already eroded a certain amount of credit.

I think that, if the federal reserve were not dumping so much money into the economy right now, we might see borrowing costs rising.

If the U.S. were to default on debt, that would be a major economic event. It would be unprecedented.

We had one small technical default back in 1979. That was due actually to a word processing error, but even that small technical default in which people actually got their money eventually resulted in greater interest rates for several months.

So it would be a massive event, and we're all just hoping that Congress will get its act together and look over the precipice and not let us go there.

MALVEAUX: We are hoping.

Tell us a little bit about the debt-ceiling limit. It can be confusing to some folks who think that it is new spending for new programs, but not necessarily here.

What does it really pay for?

FOROOHAR: This is borrowing that we have already done. This is interest payments to our creditors, which include big nations like China. This is social security checks for retirees.

These are obligations that we are committed to paying, so it's old, it's new, it's everything.

But basically it's the full faith and credit of the U.S. government at stake here.

HOLMES: Yeah, it's money already spent.

I wanted to ask you something we were discussing earlier. If they somehow kick the can down the road, the already battered can, that in itself does damage to confidence, doesn't it?

FOROOHARD: Absolutely. Because, you know, it, creates more uncertainty.

So let's say you get a situation which the can is kicked down the road to December. We find ourselves in this place again, you and I will be talking in two or three months. Markets will be jittery.

This is something investors don't like, and it weakens an already fragile recovery.

So we're going to be doing well to grow more than two percent this year as it is. To add this kind of fiscal headwind is really a problem for the recovery.

HOLMES: Just seems insane, doesn't it?

Rana Foroohar, thanks you so much.

FOROOHAR: Thank you.

MALVEAUX: Americans are not going be the only ones who are actually suffering if there's a government shutdown.

We're going to be taking a look at the worldwide impact, up next.

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MALVEAUX: There is no civil war in Syria. That is what the country's foreign minister told the United Nations. This was just a couple of hours ago, if you believe that.

HOLMES: Yes, we were listening to that too. Walid Moallem is his name. And he said it's not a civil war, it is a war against terror. These comments coming just as a team of experts heads to Damascus to make sure that Syria meets all of the United Nations' deadlines and demands to get rid of its chemical weapons.

MALVEAUX: So our Nick Paton Walsh, he is at the United Nations to talk a little bit more about this.

And tell us, first of all, the Syrian foreign minister had a lot to say here. How does he explain what's taking place inside the country.

NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it's repetition basically of Damascus's standard line on this. They're not fighting rebels, they're not fighting an indigenous kind of insurgency. They're, in fact, fighting terrorism. And obviously when this whole revolution in many ways began in March 2011, that was born out of peaceful protests but then was cracked down upon intensely and then subsequently turned into a civil war about a year later or so.

And since then, some of the groups fighting amongst the rebels have, in fact, been described (ph) even by the United States as terrorists. So it's an enormously complicated picture. But the Syria government's basic line has been, we are not fighting a rebellion here or revolution. The people we're fighting are, in fact, terrorists and we should be given the same kind of license other international countries are given, as well.

Now, clearly, when you're listening to that too, you have to bear in mind the broader context. They're making an argument that the people backing up the opposition should cease. And, in fact, we heard an interesting line from Walid Moallem himself saying that, look, we're willing to participate in peace talks but we want those assisting the opposition with arms to back off from doing that. Here's what he had to say.

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WALID MOALLEM, SYRIA FOREIGN MINISTER (through translator): Any political solution in light of the continued support of terrorism, whether through supplying arms, funding or training, is mere illusion and misleading. Syria has repeatedly announced that she embraces a political solution of its crisis. It is now for those who claim to support a political solution in Syria to stop all hostile practices and policies against Syria and to head to Geneva without preconditions.

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WALSH: Now, one of the things kind of hidden in that U.N. Security Council resolution last Friday was an endorsement of a peace process that's been going on for a while but stalled constantly from Geneva. They basically said that they backed what's called the Geneva Protocol, which basically calls for Assad to step aside for a transitional government.

Now, Damascus made it quite clear they won't accept that. And also in that statement we just heard there, suggesting that if they're going to attend these peace talks, they've always been partially on the ropes because the opposition wouldn't go or the regime wouldn't go. But if Damascus is going to attend, they would like to see the opposition no longer get arms from the gulf and some western countries as well.

Michael. Suzanne.

HOLMES: And, Nick, very quickly too, the state of play. You've got -- you've got the weapons inspectors coming out. You've got the ones going in to monitor with the chemical weapons. What's the state of play there?

WALSH: Well, we're expecting just to be hearing for the U.N. secretary-general's spokesperson. They're going to outline a broader plan in the next eight to 10 days of how these inspections will continue. The people going in right now, there are about 20. They're setting up the initial hub for this verification mission. There's an hugely ambitious timetable. Those inspectors coming out have been investigating several (ph) other incidents (ph), mostly suggested to them by Syrian regime of chemical weapons use in and around Syria. So a lot of complex inspection missions going on. But what everyone's looking at is that verification mission to dismantle the stockpile.

MALVEAUX: Sure.

HOLMES: Yes. And the report on the ones coming out, hopefully by the end of the month.

Nick, thanks so much. Nick Paton Walsh there at the U.N.

MALVEAUX: And just days after the president held a historic phone call with Iran's new president, Israel's prime minister, Benjamin Netanyahu, is visiting the White House. He is pretty cynical about the relationship that the U.S. plans to have with Iran's new leadership.

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HOLMES: Welcome back.

Some high stakes talks at the White House today. President Obama and Israeli Prime Minister Benjamin Netanyahu discussing, among other things, Iran's nuclear program. Of course, some warming in the relationship between the west and Iran, but the message from Mr. Netanyahu, don't be fooled by the sweet talk.

MALVEAUX: And Mr. Netanyahu's visit comes just days after the president's historic phone call, of course, with the Iranian president, Hassan Rouhani. I want to bring in Jim Acosta, who's joining us from the White House.

Jim, I understand that the notes from the reporter who was in that meeting with the prime minister, as well as the president, they've been released. What's the news out of this?

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, it looks like, just quickly glancing at this pool report, Suzanne and Michael, that the president did not make any comments on the prospect of a government shutdown later this evening. He does have a cabinet meeting later on this afternoon where he might be able to make some of those comments. Then we'll be able to see those.

But it looks like he was sticking to the subject of Iran, Syria, Egypt in this moment when the press was allowed into his meeting with Prime Minister Netanyahu. And it's interesting, just looking at these notes, Suzanne, because of what happened last Friday, the president's phone call with Iranian President Rouhani, obviously Netanyahu not exactly pleased with that and he made that pretty clear in his comments before coming to the United States. But President Obama, during this pool spray that reporters were in the room to witness, said, and this is really sort of paraphrasing, these aren't exact quotes as far as we know, but that words are not sufficient, that you have to have actions that give the international community confidence. And because of sanctions, the Iranians appear ready to negotiate. We have to test that diplomacy. And that the president also said to the effect that, we enter into these negotiations clear-eyed and that this will not be easy.

So, even though there were some kind words, it sounds like, from President Obama and President Rouhani on Friday, when he had Prime Minister Netanyahu in the room with him earlier today, it sounds like he was making it very clear to the Israelis that, yes, while we had this conversation on Friday, we're pretty - we're going to stay on this hard stance here that Iran not develop any nuclear weapons and, according to some of the remarks that came out from Netanyahu through a pool report, from this reporter in the room, Netanyahu basically said the same thing, that that is their bottom line here, that Iran must dismantle its nuclear program. And so it sounds like some agreement from President Obama and Prime Minister Netanyahu on than subject.

But, obviously, the aesthetics of a phone call between the United States and Iran did not go over well with the Israelis. It doesn't appear at this point that that was voiced by Prime Minister Netanyahu in the room as far as what we've seen publicly just a few moments ago.

Suzanne and Michael. HOLMES: And, Jim, you know, this has been a tortured relationship on many levels over the years. Is this going to help or hurt or whatever? I mean a lot of people say, well, give Iran a chance. You know, let's see where this goes. And Israelis holding firm in saying they don't mean it. It's all smoke and mirrors. Well, where does this leave the U.S./Israeli relationship, we're talking about that personal one?

ACOSTA: Right. Well, it's sort of incredible that the president would have this phone conversation with President Rouhani, knowing full well that Prime Minister Netanyahu was coming to town just a few days later. And so the White House made the calculation that it was worth the risk to have that phone call with President Rouhani. Remember all that talk at the United Nations earlier last week when there was, you know, all of this speculation that perhaps President Obama and President Rouhani would have a handshake.

That was apparently too hot to handle for the Iranians. But they still had this phone call. And so that, obviously, was not going to go over well with the Israelis. But it sounds like, yes, it is a strained relationship, but when it comes to the hard facts of what they will allow and not allow, they seem to be on the same page, at least at this point, guys.

HOLMES: All right, Jim, thanks.

MALVEAUX: All right, thanks. We appreciate it. Thanks for watching CNN NEWSROOM. Of course it continues after this quick break. Thanks for joining us this afternoon.

HOLMES: See you tomorrow.

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