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Legal View with Ashleigh Banfield

U.S. Federal Government Partial Shutdown Continues; Senate Races to Finalize Debt Plan; Interview with Rep James Clyburn; What a Default Could Mean to You

Aired October 16, 2013 - 11:00   ET

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

ASHLEIGH BANFIELD, CNN ANCHOR: I want to welcome our viewers in the United States and around the world.

Twelve hours, 59 minutes and counting to the default deadline for the United States of America, both the House and the Senate trying to work some last-minute magic, all of this, while the stock market here and around the world reacting, and in some cases in a very big way.

Strangely enough, the numbers on the Dow up 193 points at this time. As we know, that can always change.

Hello, I'm Ashleigh Banfield. It is Wednesday, October the 16th. It is good to have you with us.

It hasn't been announced, but from all indications, we may actually have a deal, folks, at least, and I say at the very least, in the Senate, a deal to re-open the government and to head off a first-of government default of the United States.

I want to get straight to our Dana Bash on Capitol Hill. Dana, you've been working your sources. What can you tell us?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, that the leaders in the Senate, the Republican leader, Mitch McConnell, and the Democratic leader, Harry Reid, have come to an agreement on, as you said, how to re-open the government and how to lift the debt ceiling so that the country doesn't default.

At this hour, Mitch McConnell is meeting with his rank-and-file Republican senators to get brief them on the deal, and shortly after that, maybe within the next hour, we do expect it to be formally announced.

Now the Senate comes in, Ashleigh, at noon, so in an hour. It's possible that the leaders will simply just go to the Senate floor and talk about it there. It's possible we could get a statement prior to that. It just is unclear.

But I think from the perspective of members of Congress who are worried about the markets, what it says at the bottom of our screen for them is key. It says that a deal is reached.

They're hoping that that will calm the markets because there was certainly concern about that after the House, which was on an even more of a rollercoaster than usual yesterday, ended up pulling their bill last night.

And now what are the contours of the deal? It's what we've reporting since earlier in the week and even more specifically since last night. And let's put up on the screen what we're talking about.

Open the government and keep the government running until January 15th. Raise the debt ceiling and keep that up until February 7th. And appoint budget negotiators, people who are going to actually sit down and work out the budget for the year in the way that they're supposed to do it.

And the hope among people on both parties is that they will actually work out something broad enough to incorporate some of the big challenges to this economy and the budget, entitlement reform, tax reform, things like that.

And then lastly you might ask, what about ObamaCare, the issue that started this whole crisis almost three weeks ago now?

Well, it looks like at the end of the day, the only thing that conservatives are going to get with regard to changing ObamaCare at all is an anti-fraud measure, which, again, has bipartisan support, the idea being that people who are getting government subsidiaries because of low income will have to have their income verified.

That is -- those are the contours of the deal. Now we expect, as I said, the senators to announce it. The next question is how is this going to get voted on, especially with the clock ticking?

House Republican leaders are meeting as we speak, Ashleigh, to finalize what we believe is going to be the process that they're going to use, which is that the House will actually take up the Senate bill first, because it's just procedurally -- it will expedite the process.

So that is what we expect. They haven't finalized it. We're waiting for them to come out of that meeting and tell us, yes, that is for sure what they're going to do.

But at this point, it does look like all of the road blocks with regard to the vote counting are not there. The road block now is really the clock and calendar, so that is what we're going to see how it plays out, you know, how quickly they can get this done, and there are hurdles for them to potentially cross.

BANFIELD: Yeah, but at least when you say the road blocks that were there yesterday would not be there today because, of course, there would be the Democrats on board in the House for that kind of vote.

Dana, stand by if you will for a moment. I want to just zip over to the White House.

Jim Acosta, you've been following things from that perspective. Has there been any reaction at this point to this notion that -- and my guess is, we're not the first ones to know that there's a deal in the works, that the White House has known all along of the machinations.

But are they saying anything publicly?

JIM ACOSTA, CNN NATIONAL POLITICAL CORRESPONDENT: No public official grand statement out of the White House yet in reaction into what they're seeing right.

But one thing that we can point out and talk to, an official this morning who said, we'll see as to what will develop after the Senate deal.

They feel like they've seen this movie before. Earlier this week there have been times when it looked like they had a deal up on Capitol Hill only for that deal to get blown up.

And so they are proceeding with some caution at this point and that is understandable.

One thing that we do want to point out is that, as Dana was mentioning, there are those four items in the Senate deal, and one of those items deals with ObamaCare, these income verification requirements that Republicans would like to see beefed up to make sure people who are getting subsidiaries deserve to get those subsidiaries as part of healthcare reform.

And I talked to one official about this who said that that is not a big deal to this White House, that that is not viewed as a major concession being given away by the president in exchange for raising the debt ceiling and getting the government re-opened.

So that is, I think, another sign that this deal could work out.

But, Ashleigh, of course, all of this depends on what happens in the House of Representatives. It looked as if yesterday John Boehner might have been able to cobble together the votes that he needed to get something out, and of course, that did not work out.

So we're not there yet. We're not to the finish line. It's not even noon, so there's still some ways to go.

But one thing that should be pointed out at this point, Ashleigh, and that is, if all of this works out, it will be very interesting to see how the president responds to all of this, because the president throughout all of this has said, I'm not doing major concessions in exchange for opening up the government. I'm not doing major concessions for raising the nation's debt ceiling.

He would talk about how he's not going to pay a ransom. If all of this works out, President Obama will largely be getting what he wants and that is obviously not something that's going to go over well with a lot of Republicans, but at this point, he's got the upper hand.

BANFIELD: And, if I could just for a moment -- Jim, stand by for a moment.

Dana Bash, if you're still with me, I've got to ask you about this notion that the budget deadline is set at mid-December.

When you put that calendar up, there was no date circled. There were no hard and fast guidelines on what that exactly means.

And judging from the past, it seems that this government, Democrat and Republican, can't seem to be do anything unless they have guns held to their heads.

And that little calendar didn't look like there was anything on the line.

BASH: We'll see. Going into this, our understanding was that there weren't going to be really specific parameters for what they needed to get out of those budget deals except a budget.

But the calendar is December 13th. That is the date, if you look there. December 13th is the time that we are told that budget negotiators will have to use as their deadline to get this budget done.

You know, I think the good news is that there does seem to be genuine bipartisan desire from the budget chair in the Senate, Patty Murray, from the budget chair in the House, Paul Ryan, genuine desire to actually roll up their sleeves and start working on this in a bipartisan way.

And that is a new phenomenon. We have not seen that. I mean, you hear Democrats say until they're blue in the face that they tried to get this conference going 19 or 20 times and Republicans were blocking it.

So, if this does go through, that will start a process, really basic process, a really basic process, that should have gone on --

BANFIELD: You mean basic.

BASH: -- that should have gone on for years and it should have gone on for every year and hasn't.

BANFIELD: Yeah.

BASH: They'll restart it.

BANFIELD: I hear you. Dana Bash, stand by if you will for a moment because I want to bring in my colleague, Wolf Blitzer, in Washington, D.C.

Wolf, forgive me if I am not popping a champagne cork at this point, because I miss -- I just now see February 7th and January 15th as potentially the days when we need to block off our vacations because we're going to be in the same boat.

Am I too cynical?

WOLF BLITZER, CNN ANCHOR, "THE SITUATION ROOM": No, you have every right to be very cynical about that kind of stuff, because we've gone through this so many times in the past. Let's see what happens come January, come February.

If on the other hand, and you can be optimistic -- if on the other hand, House-Senate budget conferees can work out some long-term, grand bargain-type issues, entitlement reform, tax reform, by that December, what, 13th deadline -- it's an informal deadline. There's no hard-and- fast rules, no enforcement mechanisms along that line.

But let's say they can. They don't have a lot of time. Then maybe they'll be encouraged to go ahead and once again raise the debt ceiling, come February, once again make sure the government doesn't shut down, come January.

I'm an optimist by nature, so let's hope that cooler heads, smarter people will prevail.

BANFIELD: Yeah, good luck with that. Yeah, I hear you.

Wolf, thank you for that. Stand by if you will.

There's a couple of voices that can chime in on this to help us sort of navigate the significance in all of this.

And my next guest certainly had a front row seat for the government shutdowns in the Clinton years. Robert Reich was the first-term labor secretary for President Clinton.

He's now a professor of public policy at UC-Berkeley and a prolific author and commentator, not to mention that Professor Reich is also at the center of this new film, "Inequality For All." I've seen it. It's great viewing. Everyone should see it.

Thank you, Mr. Secretary, for being with us. I've got to ask you, first of all, for your initial comments, knowing that we may actually finally be at the end of the stream before we go over the waterfall.

I guess it's a big deal. Although it's frustrating to say that we're only in a can-kicking mode.

PROFESSOR ROBERT REICH, UNIVERSITY OF CALIFORNIA-BERKELEY: Ashleigh, I don't believe anything until I actually see it these days.

Yes, it looks like John Boehner will take a bill to the full House, and he will not wait for the Republicans to give him the green light to go ahead.

That's a huge concession on his part. A lot of conservative Republicans in the House are not going to be happy about it.

It looks also as if in the Senate there is some agreement or at least the beginnings of the agreement.

We don't know what Mike Lee, Senator Mike Lee, and also Senator Ted Cruz are going to do about this. They might try to run out the clock. That is a potential danger.

Now the stock market looks optimistic. A lot of investors are thinking that we are on the way to a deal.

The bond market is not yet that optimistic. The actual interest rates being charged on bonds continues to rise. Those interest rates are some indication that a lot of lenders to the United States think that things are still very, very risky.

BANFIELD: Let me ask you this, while there maybe many who are watching this thinking, thank heavens, we've averted disaster, we've been at this point too often, and this time it's been awfully frightening.

Has the damage, or has any damage, been done even if we get a deal?

REICH: Some damage has been done to the faith that global lenders, including a lot of lenders in the United States, have toward the United States, the ability of the United States government to actually do what it needs to do in a timely way.

When Fitch, the credit rating agency, kind of issued a bright yellow warning sign yesterday, what they were really doing is saying that --

BANFIELD: We're putting it up on the screen, Mr. Secretary. As you're answering that, we're putting it up on the screen so people can read along. Go ahead.

REICH: Yeah, investors are worried that the government of the United States -- it's not that the United States can't pay its bills. Obviously it can.

But the government is not capable of making a decision that allows it to pay its bills. So that is going to trouble global investors for quite some time.

BANFIELD: Should I about that concerned about Fitch's warning light, and would today make any difference to Fitch? Might that warning light be extinguished after today if there is a deal?

REICH: You might be a little bit concerned. Again, this is really a warning about the government's capacity to do what they need to do with regard to global financial markets.

I mean, this is not a warning light about the United States' ability to pay. It's a warning light about the government and the government of the United States.

No, the good news here, Ashleigh, is that maybe -- and if you want to be an optimist, and, like Wolf, I am an optimist -- maybe after going through what we are going through, the shutdown and the reaction of the bond markets and credit markets and the stock market, and also the reaction of the business community, which is very important to the Republican Party, all of that may indicate that next time we don't skate this close to the edge.

But who knows? We've done it too many times before.

BANFIELD: I hear you. Secretary Reich, thank you.

I'm not sure how busy you are. You're usually a pretty busy guy, but since we're in breaking news, I'm just going to ask if you might be able to stand by and stick around for a little bit. I have a few other questions for you, as I want to get our viewers updated as well.

Take a look at the bottom of the screen just below Secretary Reich. The Dow is up 203. We're over 200 points, and it is climbing.

Of course, this could be as a result of the news that there is a deal. There is a potential Senate deal that has been struck.

And now, of course, it has to be voted on, because once the plan to stop a default government shutdown reaches the House of Representatives, people have to say yea or nay.

Big question is, what are they going to say? We're going to talk to one Democrat who is going to be in that predicament, probably pretty soon, James Clyburn, coming up next.

(COMMERCIAL BREAK)

BANFIELD: Just want to update you on the debt ceiling crisis. We have breaking news. Look on the bottom much your screen. Senate deal reached. That's always good news. But I've got to be honest, we've been here before. We've had deals in both houses somewhat agreed upon and then, of course, there's always something that scuttles it.

At least now we can say this. There have been some very high-level meetings. There is a deal reached. There are parameters of the deal. They are surprising given where we were three weeks ago. However, now it has to be determined where's it going to be voted on first. Will the House take up the bill first? Will the Senate take up the bill first? One process is a lot longer than others. I'm looking at you, Senate.

And in the meantime, take a look at the Dow. That started to skyrocket within the last 20 minutes, 30 minutes or so. It's up 196 points right now. We were just over 200 before the break as well, so that's significant also. And as we've been reporting, the Senate plan would keep the government open through January 15th.

Here are the parameters it would also extend the debt ceiling, that's the point at which the government runs out of borrowing power, that was about 12 hours away. Instead we can go all the way to February 7th. It is possible, again, that this could come to a vote by noon today. But warring factions within the GOP has so far left the House with no plan of its own. Representative James Clyburn is an assistant Democratic leader in the House. He joins us from Capitol Hill live.

Congreeman, can you tell me what you've heard about this and if you know whether or not this may end up being a deal on the House floor within hours?

REP. JAMES CLYBURN, (D) SOUTH CAROLINA: Thank you so much for having me. Yes, I have heard that we will do something today. I'm -- I'm not going to say whether it will be two hours, three hours, or four hours. But I'm making plans for it to happen today.

BANFIELD: And just given the fact that this would be something that has been reached in a bipartisan way in the Senate, that will effectively say that there would be enough votes in the House to pass this regardless of what a very conservative faction might think about it. Democrats would vote in lockstep on this if Speaker Boehner brought it to the floor? There would be enough votes to pass this?

CLYBURN: You're absolutely correct. If the speaker were to bring this deal to the floor, it will pass. It will pass with an overwhelming Democratic vote. I have no idea what the vote count will be on the other side of the aisle, but I think I know enough people over there well enough to say a significant number of Republicans will vote for it as well. We'll get far beyond the 217 votes that will be required.

BANFIELD: And can I ask you this, if I may. I'm going to say the say thing I just said to Wolf Blitzer, forgive me for not popping the champagne corks. While we're celebrating this, it's just a temporary deal. We're still nowhere near to a solution to the crisis that the United States of America finds itself in because of people like you and your other colleagues on The Hill. Can you promise me, sir, that we're not going to be in this same boat on February 7th or January 15th if this deal with those dates passes?

CLYBURN: Even if I were the speaker of the House or the Democratic leader, that's not a promise that I would make, simply because it is not always in the hands of the speaker or the leader for these things to run smoothly. I think I know Speaker Boehner well enough to know that for a long time he wanted to be where we are today, but circumstances are of such within his conference that it's not solely his decision to make.

And that's what a democracy is all about. If we want things to be very efficient, you'll have one person rule. That's the most efficient way to do things. But when you have a democracy, you have to take into account everybody who is in the process, both the minority and the majority, and sometimes you have to look at the minority within the majority, and that's what's been going on with Speaker Boehner.

So that's the way democracy works. It's not always real pretty. In fact, often it's not. But I believe it's the most effective and most productive way to get things done. So I'm pleased to see that we have gotten to the point where we are today.

I'm not going to make any promises beyond the budget, that is beyond the 13th of December. No other -- beyond the 15th of January. I would hope that the debt ceiling business on February 7th, that we get that done long before the 7th of February. Because that, to me, is what's critical to us maintaining consumer confidence and keeping the plan that is necessary for people to do business, and that is not ever allow the full faith and credit of the United States to be questioned at home or abroad.

BANFIELD: Well, you know, if I could say one thing, it's probably a reason that you've done so well at your job, because you can't make a promise like that to me because I have videotape. And unfortunately, that would come back and bite you.

CLYBURN: That's right. BANFIELD: Congressman Clyburn thank you. Good luck. I hope it works out today and I hope you and I aren't arguing tomorrow about why it didn't. Thank you for being with us.

CLYBURN: Thank you for having me.

BANFIELD: Coming up we're going to be hearing from a Republican who has a stake in this; Jeff Denham is going to be joining us as well. You can find out if the California representative plans to vote to stop a default. If it's an up or down, because clearly everyone has got a steak in this and everyone has got a opinion as well.

If you're running short on cash at the end of the month and you look at your paycheck and bank account and you decide which bills get paid and which ones don't, how do you prioritize? That's the exact thing the government could face tomorrow if this country goes into default. And the guy who is the best in the business add explaining this, the macro stuff on a micro level, is Mr. Richard Quest. He is coming up next.

(COMMERCIAL BREAK)

BANFIELD: Debt ceiling deadline. Welcome back to our viewers in the United States and around the world. Breaking news at this hour here in the United States of a Senate agreement to avoid the debt default.

And the Dow couldn't be happier. Jumping over 200 points a little earlier on in the program. We're settling now at 177, but there is a lot of movement based on the news and the deal isn't even final yet. And with the risk of default still with us, the Fitch rating agency has put the United States on notice. It's threatening to downgrade the United States' AAA credit rating. Yes, I know, Moody has done that but Fitch didn't.

What exactly is that going to mean? The last time it happened, the S&P removed that sterling AAA credit rating, initially the stocked nose-dived. But not much really changed in the long-run. Although some might beg to differ.

we're all worried about what's going to happen when the clock strikes midnight tonight. No worries, no pumpkins. Here is what could transpire and it is serious. Let me warn you: some of these are absolute worst case scenarios, so let's go through them.

The global stock market could crash. There could be a global recession. Money market funds could collapse, which would result in a run on banks. Some financial institutions could fail and that could result in lending -- lending to seize up, drying up of money out there, for you and everybody else to use.

What does it mean to you? You and your kitchen table economics? Richard Quest is here to cut through all the financial jargon and take it down to the consumer level because you know what? When it comes to the government, it's just like balancing your checkbook.

RICHARD QUEST, CNN INTERNATIONAL HOST: Yes. It is completely like balancing your checkbook. The Treasury brings money in and sends it out. And if you look at the Treasury website, you can see exactly how much money is coming in and out. And just as much as you may put money into the tea pot to pay the electricity and you may give your children pocket money, what the Treasury can do is go and get that money back. That's what they've been doing for the last few weeks.

BANFIELD: And putting IOUs in the tea pot.

QUEST: Yes yes. And telling the children it will all be paid in the future and not to worry about it. Now they can no longer do this. What we are seeing at the moment, and this is fascinating, the Dow Jones.

BANFIELD: What is going on? It's not even a deal, no vote.

QUEST: But we saw this last week. The market is so much of a pressure cooker at the moment and so concerned about this, that the mere scintilla of a deal, the mere suggestion has sent the Dow up the best part of 150 points this morning and now over 200 points coming back off the top. But I caution, this is a bit like Scotch mist. It could disappear very quickly. If a deal disappears, you will see it reverse.

BANFIELD: And it will be down just as much?

QUEST: Not necessarily. The market still believes that a deal will be done in time before they have to stop putting money in the tea pot and robbing the children's pocket money.

BANFIELD: I want to play what one of our Congressman said to Kate Bouldan on NEW DAY this morning. I think it bears playing again. This is one of your leaders, folks. It's Representative Steve King, the Republican from Iowa, and he's referring to the potential that we could default on paying all of our tea pot economics. Have a listen.