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U.S. Nears Debt Ceiling Cliff; Senate Closing In On A Deal; Will Cruz Block The Compromise?; Will U.S. Credit Face Another Hit?; Consequences Of Budget Fight; Obamacare: Tackling Glitches; Florida Bullying Arrests; LAX Employee Arrested; Mr. Booker Going to Washington?

Aired October 16, 2013 - 06:00   ET

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


KATE BOLDUAN, CNN ANCHOR: Good morning and welcome to NEW DAY, everyone. It is Wednesday, October 16th, six o'clock in the east. I am here, as you can see, just outside the U.S. capitol where another round of late-night deal making ended without an agreement. But, they will be back at it today and we will be standing by.

CHRIS CUOMO, CNN ANCHOR: Take a look at the clock. It is ticking, 18 hours until the debt ceiling deadline. And when it strikes midnight, no one really knows. Depending on whom you listen to, the results could be catastrophic for our financial markets and ;long-term economic health or something far less severe could happen.

Here's what we do know. Many of you are angry and upset at the fact that we reached this point at all. So, this morning, we're going to get into all of it. We will lay out the dominos that could fall and on whom. The implications for you and your wallet and we're going to press members of Congress for answers.

BOLDUAN: But first let's bring you up to date on what we know right now. Just yesterday, late yesterday, just past 10:00 the Senate quit for the night, close to a deal but no deal yet. At 9:30 this morning, the financial markets will open. Many wondering if congressional leaders will try to signal a deal is imminent before that to calm investors.

The House returns at 10:00 and the Senate is back at noon. But honestly, beyond that we do not know a whole lot about how this will play out today. It was hard to get how yesterday was going to play out. The hardest to convince remain conservative Republicans especially in the House. It is not known what their next move is quite yet.

We have every angle covered for you this morning, the politics and the possible economic fallout. What it means for you, let's begin with Jim Acosta at the White House this morning.

Good morning, Jim.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Good morning, Kate.

Less than 24 hours to go before the nation hits the debt ceiling. Washington is basically where it was one day ago after the House tried but failed to work out a deal. It's now up to Senate leaders once again to craft an agreement that could make it to the president's desk. We expect to hear from those Senate leaders later this morning, but at this point we're still in the dark.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): Time is running out. The debt ceiling is within sight and the last best hope of avoiding a potential default once again rests with Senate Leaders Harry Reid and Mitch McConnell who are back to working on a last-minute deal.

REPRESENTATIVE CHARLIE DENT (R), PENNSYLVANIA: John Boehner will likely be in a position where he will have to essentially pass the bill that is negotiated between Senators McConnell and Reid. I believe that the House would first pass it and then send it to the Senate.

ACOSTA: President Obama called for quick action.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: We don't have a lot of time. So what I'm suggesting to the congressional leaders is let's not do any posturing. Let's not try to save face.

ACOSTA: The president appeared to put the blame on House Speaker John Boehner's inability to coral Tea Party-backed Republicans.

PRESIDENT OBAMA: There have been repeated situations where we have agreements, and he goes back and it turns out he can't control his caucus.

ACOSTA: That caucus is once again up in arms despite Boehner's tough talk.

REPRESENTATIVE JOHN BOEHNER (R), HOUSE SPEAKER: I have made clear for months and months that the idea of default is wrong. We shouldn't get anywhere close to it.

ACOSTA: The speaker failed to convince House conservatives to line up behind Republican proposals to lift the debt ceiling and end the shutdown. It didn't matter anyway as Reid said, the GOP's plans were dead on arrival in the Senate.

SENATOR HARRY REID (D), MAJORITY LEADER: Extremist Republicans in the House of Representatives are attempting to torpedo the Senate's bipartisan progress with a bill that can't pass the Senate.

ACOSTA: That portrait of Washington dysfunction was all the respected Fitch ratings agency needed to see. Fitch issued a warning it may downgrade the nation's AAA credit rating, a potential repeat of what Standard & Poor's did after the last debt ceiling debate of 2011. Although Fitch continues to believe that the debt ceiling will be raised soon, the agency said, the political brinkmanship could increase the risk the of a U.S. default. Some House conservatives were brushing off talk of dire consequences to come.

UNIDENTIFIED MALE: I think most folks understand October 17th is not the drop dead date. There are no payments due for a couple weeks.

(END VIDEOTAPE)

ACOSTA: But White House officials are hinting that the Treasury Department will have to start making some hard decisions after tomorrow. That means that the nation will have to potentially start picking and choosing what bills to pay. There is a term for that here in Washington. It's called prioritization, but the White House says it basically means default. We may be hearing more of that as the president meets with the Treasury Secretary Jack Lew. They may issue one more stern warning to get Washington cracking to get a deal out to the president -- Kate.

BOLDUAN: Those warnings sure haven't worked yet. We'll see if they have a different impact on Capitol Hill this time around. Jim, thank you so much. We'll talk with you so much more. Let's talk more about where things stand and where things could possibly go from here with CNN's chief national correspondent John King joining me. It's great to see you, John.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Welcome back. Wish the circumstances were better. Remember the home of dysfunction.

BOLDUAN: It's the home of dysfunction. It's a beautiful view. What goes on inside we can't say for sure. So things completely unraveled yesterday. I think we can easily say that. Is a deal assured in the Senate at this point do you think?

KING: We had this conversation 24 hours ago. A deal is only a deal when you see somebody holding it in their hands and they actually file it in the Senate. There was talk that might come last night. It didn't come last night. So that tells you they are not completely done. That said, I've spoken to both Democratic and Republican sources in the Senate.

There's two things they're working on: number one, to put it on paper finally, and number two, to try to issue some sort of a joint statement between Leaders Reid and McConnell before the markets open, some sort of statement from the leadership saying we have something; we're prepared to move forward to keep the jitters in the market down.

BOLDUAN: And even if let's assume things -- there's a done deal in the Senate. This does need to still, of course, pass in the House. Does the House go first, does the House go second? That can be up for interpretation. But how does it make it through in Boehner didn't want this deal. Conservatives have vaulted every proposal that's come before them that didn't completely get rid of Obamacare. How does it pass?

KING: As you know, there are some very strict rules in both the Senate and the House as to how you do things and as you know there are also ways to break every single one of the rules if the leaders agree.

BOLDUAN: Yes.

KING: But you have a scenario if they could get Ted Cruz, Mike Lee, Rand Paul to say we don't like the bill in the Senate, but we won't get in the way. They could pass it relatively quickly, within a matter of 24 to 48 hours. But as of last night, there was no guarantee that would happen. The Republican leadership is trying to convince Senator Cruz, we'll give you time on the floor for speech. We'll give you time to protest, but please don't hold this up.

If they hold it up, it could take potentially seven days or potentially more, three, five, up to seven days to get it through the Senate. Then it has to go back over to the House. There's zero guarantee the House will pass what the Senate passes. Everyone said the pressure would be on the speaker to bring it to the floor. I asked one of his top aides last night, would you bring up any Senate version for an up or down vote? The answer was one word: uncertain.

BOLDUAN: Uncertain. I think that's the only word that applies here. What is certain though, there's street cleaning going on behind us. At least they are cleaning the streets here in Washington.

KING: Essential government service.

BOLDUAN: That's an essential employee. You talk about Ted Cruz. I think if everyone can think back to really how many believed this began. This began -- obviously, we were coming up on funding issues and budgetary issues with Ted Cruz and the prolonged protest in the Senate. That really riled up conservatives. What's Ted Cruz's next move, do you think? I know we can -- we don't know at the moment.

KING: But the big question is he has created a mini movement for himself here. Most of his colleagues here in Washington are furious at him, some are using words I would say get closer to despise him. If you look at the Republican grass roots, he's a hero. So how big is that slice? We won't know until the next election.

But we do know he's raising a ton of money off this. We do know his popularity at the grassroots level is high. The organizations he's worked with, the Heritage Foundation, redstate.com, Tea Party-like groups, they were sending out word yesterday reject both the Senate and the House proposal that they saw outlined so far so all the indications are that Ted Cruz is still in camp no.

We know that he has defied leadership in the past. When Leader McConnell says can I do this on a fast track? Every expectation last night was that he says no. He has friends and colleagues who are trying to lean on him saying we will give you a platform, just don't be a road block.

BOLDUAN: All right, we'll see. Today, a critical day, if this goes five days, three days, anything like that that could be catastrophic.

KING: If you don't see signs of progress by noon at least that the Senate has a deal, even that's still a huge question mark.

BOLDUAN: Right.

KING: If you don't see the first question mark, the financial markets start to shake and then all bets. BOLDUAN: All right, stick close we got -- let's call a rodeo at this point that we're watching play out before us. Chris, back to you. Much more on the debt ceiling and everything unfolding from our side in a little bit.

CUOMO: All right, Kate, we take a look at what may actually happen when this deadline arrives tonight. We'll bring in Rana Foroohar, CNN global economic analyst, assistant managing editor of "Time" magazine.

Rana, great to have you here. Let's take a step back. Let's start at the basics. The rating agency said be careful. We're supposed to be afraid of them. Why?

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Well, you know, on the one hand it's not science, right. They're talking about political dysfunction. They're saying we're going to downgrade you because you're not behaving well. It's not like there's a number that's up for grabs here, but the reality is that a lot of mutual funds look at the ratings for the stocks they hold.

They're not allowed to hold treasuries and stocks that have been downgraded. So if that happens, if there is a downgrade, that could actually trigger a sell-off in mutual funds and that could have more implications across the market. It starts that kind of snow balling cycle and you never know where these things will end.

CUOMO: So the rating agency is relevant because they do set the standard of whether or not this is a good investment.

FOROOHAR: That's right.

CUOMO: It's all about risk. We get that. Then we take a look at what happens if they downgrade us? Didn't they downgrade us and it was a big deal? People like me were getting red faced? We have the lowest borrowing rates in 40 years. What does it mean?

FOROOHAR: OK, so well, what it meant practically back -- you're talking about back in August of 2011.

CUOMO: Yes.

FOROOHAR: When we were at this point again, the markets did fall 13 percent. People took a hit, but you're right. Everyone went back into treasuries afterwards. There were a few different things that were happening in the world at that point. Europe was in a credit crisis of their own, a debt crisis. The emerging markets were slowing down. The U.S. looked like the prettiest house on an ugly block.

Things have changed since then. Europe is recovering. Many of the emerging markets are in better shape. There's a feeling in the economic community that if the U.S. keeps pushing it, keeps getting back into this situation again and again, eventually investors will call our bluff and say we're going to start going into Euros or start spreading our money out into different areas.

That would eventually push our borrowing costs up. One of the reasons we're allowed to have such low rates on our "T" bills is because everyone wants them. If that changes, the whole dynamic will change.

CUOMO: So it seems like what you're saying is that ultimately perception is reality when it comes to the markets and if they are uncertain about these men and women in Washington, that creates fear, risk and they start asking for more money in order to lend you money?

FOROOHAR: That's right. That's right. You know, if you look at emerging markets, places that are considered riskier in the world, their borrowing costs are much, much higher than ours. That impacts everything. It impacts the amount you'll pay for a mortgage on car loan, everything, student loans.

CUOMO: Now if we were to look at what the indicators are right now, the futures market for the stock market is up right now. However, the bond market has been trading down. They're asking for higher yields, more money to lend money so that's what we should keep watching, but probably not catastrophe tomorrow from what we're seeing now.

FOROOHAR: Now, what the markets are really concerned about is the idea that we would not pay the interest on our sovereign debt. We wouldn't pay back, say the Chinese, who own the majority of our "T" bills, the largest portion of our treasury bills. If that were to happen, I think you really would see a market catastrophe.

CUOMO: Right. A little bit of the irony here, with the markets, not to criticize the market, but what they care about most is least likely to happen. The government is going to find a way to pay its debts, its bond holders in all likelihood, but what they're not focusing on may be the greatest pain, right, the people who need the disability payments and prioritized payments that the government may not make going forward.

FOROOHAR: That's right. It's very interesting. There's a lot of fretting about, "can we pay the Chinese?" And you're absolutely right. There are ways I think that can get done. There's a subtler effect here, though not so subtle if you're the person getting the social security check. There starts to be more and more pain. People don't get the money they're owed.

The government may have to cut back its budget further in order to stay under the debt ceiling. That starts to cut into growth, unemployment growth and then you start to get a cycle that takes us back possibly toward recession.

CUOMO: That fear goes from the market into the heads of the regular person. They stop buying.

FOROOHAR: Which they have, by the way. Consumer confidence is way down. Business confidence is down.

CUOMO: They think they're playing with their own football, but the all the rest of us is watching. We'll be affected.

FOROOHAR: That's right.

CUOMO: Rana Foroohar, thank you very much. Appreciate the perspective.

FOROOHAR: Thank you.

CUOMO: All right, we are going to have a lot more on this, but there are a lot of other news as well so let's go to the nice lady next to me.

Michaela, what else do we know?

MICHAELA PEREIRA, CNN ANCHOR: All right, let's take a look at the headlines at this hour, guarded optimism in Geneva this morning as Iran's foreign minister outlines a plan to regulate his country's nuclear program and allow it to enrich uranium. The U.S. State Department official telling CNN they've had very detailed technical discussions. Iran is trying to convince six world powers, including the U.S., that its nuclear ambitions are peaceful.

President Obama has expressed his disappointment with the flaws that has stifled the Obamacare web site. More than two weeks after the launch. The president told affiliate KCCI in Des Moines there are people, quote, "working around the clock to fix the glitches." A high volume of visitors to the health insurance exchange portal contributed to the technical problems, which made it difficult for people to begin the enrollment process.

Two arrests in Florida in a cyber-bullying case that led to the suicide of a 12-year-old girl. The suspects, 14 and 12 years old themselves, they are both girls. They are now charged with felony aggravated stalking. Police say the 14-year-old suspect admitted online she harassed the victim, and didn't care that she had died. The girl's lawyer says she's not behind the post. Sedgwick climbed a tower at an abandoned concrete plant five weeks ago and jumped to her death.

The man who allegedly tried to car-jack the mother of baseball great, Cal Ripken Jr., is in custody this morning. Police in Maryland say the armed suspect approached Violet Ripken in a bank parking lot and demanded her car. She smartly pushed the panic button on her key ring, setting off the car alarm and scared him away. Police say this is not related to her kidnapping last year when Mrs. Ripken was taken from her home at gun-point and held for 24 hours.

Some frightening moments for passengers on board a Spirits Airlines jet, it was forced to make an emergency landing after an engine exploded and caught fire, filling that cabin with smoke. It happened about 20 minutes after takeoff. Passengers say they felt the plane start to shake. One passenger, a man, in fact, texted his wife saying, "We're on fire. Love you." How chilling. The Dallas to Atlanta flight was able to land safely back at the Dallas-Fort Worth Airport. Spirit Airlines officials say they are investigating that mechanical failure.

The wounded warrior project stepping in to help nearly 40,000 veterans, the group tells CNN it is going to send veterans wounded on or after the 9/11 attack $500 if the government can't provide their benefits next month. The secretary of Veterans Affairs warned that the V.A. might not be able to pay 4 million veterans and their families if the shutdown continues. So the Wounded Warriors are stepping in to help their fellows.

I think it's just fantastic. This makes me very happy. It's sad they have to do it, but it's nice to know man is helping fellow man.

CUOMO: Spot on. The Wounded Warriors is amazing organization.

PEREIRA: Great project.

CUOMO: Helping the veterans that needed that most. But can you believe that it's necessary? Can you believe they've become a political football in all of this?

Forget about the markets, they may or may not recover. But these guys have already paid a price. You can't believe it.

All right. Let's get over to Indra Petersons. She's keeping track of the latest forecast.

PEREIRA: Hello.

INDRA PETERSONS, AMS METEOROLOGIST: I like that. Hello, Michaela, and, Chris, you too, I guess.

(LAUGHTER)

(CROSSTALK)

PETERSONS: We're still watching the same cold front, making its way across the country today. A slow mover, still talking about cool air with it as well, but not really a huge rainmaker. I just want to point out, there are two fronts. Once this system makes its way across, we're still going to have another one behind it to deal with.

So, this kind of weather pattern is reaming with us. Light as far as moisture, so only about an inch of rain as it makes its way into the Ohio Valley. But it's the tail end of the system where we continue to get the heavy rain again. I mean, all weekend long, anywhere from 8 to 12 inches of rain through Texas.

And now, we're still dealing with the remnants now of what was octave, remember, the tropical storm in the Pacific, where all that tropical moisture is mixing in with the tail end of that cold front still enhancing the amount of rainfall. So, we're still talking about anywhere from 4 to 5 inches of isolated higher amounts of rain. Of course, all of that does mean flooding concerns as we go forward.

To the rest of you what matters? Well, cold front, cold air, right? So, we're talking about that cold pool of air shifting farther east today. It is, again, slow moving.

So, it is going to take some time. Notice your temperatures if you're on the Eastern Seaboard, Philly, you're still in the 70s. D.C. is still in the 70s. By tomorrow, cold air does make its way to the Ohio Valley, still talking about, 70s out towards Philly and D.C. It's not really until the start of your weekend that you see the temperatures go down into the 60s.

Remember, there's another cold front behind it. So, bundle up.

PEREIRA: It's too cold to go fishing, right?

PETERSONS: I don't know.

PEREIRA: He hasn't asked about the temperatures.

CUOMO: I certainly was getting a cold shoulder on that good morning, I know you --

(CROSSTALK)

PETERSONS: I was afraid you say to that comment, can you man up, can you handle the cold? But that's two in one show.

PEREIRA: Oh, only love here.

CUOMO: Only a drop in the bucket for what happens when we're not on camera, I'll tell you that right now.

PEREIRA: All right. Coming up next on NEW DAY, an arrest in the dry ice bombings at Los Angeles International Airport. How police say the suspect entered restricted areas in order to plant those explosives.

CUOMO: Plus, today is Election Day in a high stakes, New Jersey Senate race. Will a rising star in the Democratic Party find a new home in the nation's capital? Boy, is timing not so great? Not a great time to be going down there. We tell you about when we come back.

(COMMERCIAL BREAK)

CUOMO: Welcome back to NEW DAY.

Breaking overnight, an employee is responsible for the dry ice explosions at Los Angeles International Airport and has been arrested.

CNN's Casey Wian is in Los Angeles.

Good morning, Casey. What do we know about the suspect?

CASEY WIAN, CNN CORRESPONDENT: Good morning, Chris.

Well, the suspect, according to the Los Angeles Police Department, who was arrested last night, 28-year-old Dicarlo Bennett, an employee reportedly of a ground services company here at Los Angeles International Airport, a global company by the name of Service Air. We are still trying to confirm with that company whether he was a current employee or a recent employee. According to a Facebook page attributed to this Dicarlo Bennett, he listed himself as a former employee of Service Air. We're still trying to straighten that out.

He was taken into custody last night in the city of Paramount, California, about 15 miles east of Los Angeles International Airport. He was booked in the metropolitan detention facility in downtown Los Angeles.

What's very significant here, bail was set at $1 million. Now, this is a case where these dry ice bombs didn't injury anyone, didn't really cause damage. Bail set at such a high amount, really shows just how significant and how important law enforcement is taking this case, Chris.

CUOMO: Also, a little bit of a window, Casey, into how much they don't know yet. They want to make sure they have this man available to them.

So, .what do we know about motive here and whether he was part of an organization or alone?

WIAN: We don't know if he operated alone. Police aren't saying that. What they are saying is what they've been saying all along, the most likely motive here is some sort of a disgruntled employee-type situation.

They've said all along, no nexus to terrorism. They doubt it was a prank. Nothing in the arrest that indicates any different theory about what may have been behind this motive, Chris.

BERMAN: All right. Casey, thank you for the reporting. Appreciate it this morning.

In New Jersey, voters are going to the polls for a special election to fill a U.S. Senate seat that was held by the late Frank Lautenberg. Newark Mayor Cory Booker, one of the fastest rising stars in the Democratic Party, is favored to win over Republican rival Steve Lonegan.

CNN's Jason Carroll sat down with Cory Booker, joining us now.

Great to have you on NEW DAY.

Where is his head so close?

JASON CARROLL, CNN NATIONAL CORRESPONDENT: Well, you know, I think his head is in the game. When you think of Mayor Booker, a lot of people think about the man who rescued his neighbor from a burning house, the man who rescued a dog as well. But one political analyst put it this way, he said most New Jerseyians don't know that much about Cory Booker. He said they know the image of the super mayor but not the man itself.

So, during my interview, no subject was off limits. He talked about his record, his personal life and his political future.

(BEGIN VIDEO CLIP)

CARROLL: Are you satisfied with your record in terms of violent crime? Because the numbers are not where they should be.

MAYOR CORY BOOKER (D), NEW JERSEY SENATE CANDIDATE: We have 500 less police officers than my predecessor, a third less police. We were forced to make difficult decisions. We were able to supplement a lot of that from philanthropy. But there always more you could have gotten.

CARROLL: I think there was one quote that said he's made an art of having a presence without being present in terms of how many times you were physically in the city versus going out giving a speech or --

BOOKER: The modern mayor is not going to be able to sit behind their desk and wait for opportunity to come.

CARROLL: Why do you think that question still keeps coming up about your personal life, about your sexuality?

BOOKER: For me at the end of the day, I just believe we should be electing people on the content of their character, quality of their ideas, the dedication to their cause, not on who they're dating.

(END VIDEO CLIP)

CARROLL: Well, Booker says New Jerseyians have an opportunity today to send a message to Washington that they don't support the government shutdown by sending him to the Senate, rather than his opponent. His Republican challenger, Steve Lonegan, who supports the shutdown -- polling shows Mayor Booker ahead of Lonegan from anywhere from 10 to 22 points.

CUOMO: All right. The lead is pretty good going into Election Day.

CARROLL: Right.

CUOMO: But, you know, it's interesting, because you got into some much with him. One of the reasons he gets lot of personal questions because there's so much hype around him, right?

CARROLL: Of course.

CUOMO: So, the test is going to be what for him? Did you talk about who he's going to be if he wins? He can't just talk. He's going to have to do.

CARROLL: Right. The question becomes, you know, whenever you have a senator, whether he or she is going to be a workhorse, so-called a show horse, because he's been so showy for so long, you know, it's a legitimate question. I did ask him about that. As soon as he gets to the Senate, for him it's going to be about getting down to work.

He said he's not going to be afraid to get in there, be rebellious. Maybe break something of the rules. But he definitely says for him going forward, it's going to be about the work.

CUOMO: Rebellion, breaking the rules. That's a little been there, done that with what's going on in D.C. right now.

CARROLL: Yes, we'll have to see when he gets there, if he gets there.

CUOMO: Jason, thank you very much. I appreciate it. We're going to take a quick break here on NEW DAY. When we come back, remember the Florida woman left dangling from that draw bridge? The area was marked off limits. Now, we know why she might have missed that warning. We'll tell you.

BOLDUAN: And Just hours to go before the nation hits the debt ceiling, losing its borrowing authority, is there any chance a deal could reach the president's desk before that?

Much more ahead.

(COMMERCIAL BREAK)

BOLDUAN: Welcome back to NEW DAY. It's Wednesday, October 16th. I'm coming, as you can see, live -- coming to you live from the nation's capital, where we've got a lot of work to do, it seems. It's time for our political gut check of the morning.

We're less than 18 hours away from hitting the deadline to raise the nation's debt limit.

All eyes on the Senate this morning as Harry Reid and Republican leader Mitch McConnell, they're trying to finalize a deal that would increase the borrowing limit and reopen the government finally before the midnight deadline. But their plan may not get passed some hard line Republicans.

So, where do we stand right now?

Joining me to talk more about it, CNN senior political analyst and editorial director of "The National Journal," Ron Brownstein.

RON BROWNSTEIN, NATIONAL JOURNAL: Good morning.

BOLDUAN: Great to see you, Ron.

BROWNSTEIN: Good to see you again.

BOLDUAN: It's almost like you need to look back, to look forward, to find out how we got here, which is almost, it's just amazing.