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Republican Leaders Now Meeting; Sources: House GOP To Unveil Compromise; Paying Back American Debt Holders; Hot Air Balloon Hits Power Line, Crashes; Gunman Killed At WVA Federal Building; Roller Coaster Riders Stranded For Hours; Cell Phone Users Didn't See Gunman; Interview with Stacey Stewart; Non-Profits Pinched In Shutdown; Message To Washington; Obamacare Password Problems

Aired October 10, 2013 - 10:00   ET

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

CAROL COSTELLO, CNN ANCHOR: Good morning. I'm Carol Costello. Thank you so much for joining me. The partial government shutdown drags into its 10th day. But that debt deadline keeps racing closer. Now just one week before a potential economic disaster, there is a glimmer of hope. Yes, a glimmer of hope.

Sources tell us House Republicans are working on a plan to raise the debt limit and offer a temporary reprieve to break the budget deadlock. This afternoon, that short-term plan could face its first test at the White House. Republican leaders meet with the president, as strong emotions continue to ripple across Washington and the world.

(BEGIN VIDEOTAPE)

SENATOR HARRY REID (D), MAJORITY LEADER: Warren Buffett said using the threat of default to extract political payment, quote, "ought to be banned as a weapon."

WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: I mean, it should be like -- it should be like nuclear bombs, I mean, basically too horrible to use.

BRENT WILSEY, PRESIDENT, WILSEY ASSET MANAGEMENT: The strongest country in the world, yes, if there is some chance we do default, there could be some problems, but no nuclear war, no Armageddon. I mean, that sounds terrible. That's not going to happen.

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Right now, one of the scariest things I have to deal with, the recovery and our growth potential going forward is in the hands of our elected officials in Washington and I don't like feeling that way as an economist, nor as an American.

SENATOR PAT TOOMEY (R), PENNSYLVANIA: You know, the ongoing tax revenue coming into Washington is about 12 times what it takes to service our debt. The payment mechanism is separate for debt service from all other payments. So the treasury secretary and the president would have to wilfully choose to create a financial catastrophe.

OLIVER BLANCHARD, IMF ECONOMIC COUNSELOR AND RESEARCH DIRECTOR: Prolonged failure would lead to an extreme fiscal and almost surely derail the U.S. economy. But the effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the United States and abroad.

(END VIDEOTAPE)

COSTELLO: OK. So, you heard the dire warnings about not raising the debt limit. Well, Republican leaders are now meeting behind closed doors on Capitol Hill to talk about this. That's where we find CNN's Athena Jones. Good morning, Athena. Tell us more.

ATHENA JONES, CNN CORRESPONDENT: Good morning. Well, the big question now is whether the entire Republican caucus or enough support in the Republican caucus will come for this short-term plan that will raise the debt ceiling for a short period, maybe six weeks, to provide room to negotiate these larger budgetary issues, entitlement reform, tax reform, spending cuts.

There are some conservative Republicans who simply do not want to vote to raise the debt ceiling. So the big question is going to be whether the Republican leadership can win over support for this plan.

But Treasury Secretary Jack Lew testified earlier this morning -- this just ended -- before the Senate Finance Committee to try to drive home the point, just like some of that sound we just heard now did, about what would happen if the U.S. does default on its debt, doesn't raise the debt ceiling.

But it looks like he's going to have a tough sell, especially with some of the Republicans on the panel. Let's play a clip. I believe we have Treasury Secretary Lew speaking with Republican senator from Wyoming, Mike Enzi. Let's listen.

(BEGIN VIDEO CLIP)

SENATOR MIKE ENZI (R), WYOMING: Mr. Secretary, I think this is the 11th time I've been through this discussion about the sky is falling and the earth will erupt. Wyoming families aren't buying these arguments. They're saying, you can't spend more than you take in and you can't -- definitely can't keep doing it forever and ever and ever.

JACK LEW, TREASURY SECRETARY: Senator, those Wyoming families know that after they've run up their credit card, they don't get to ignore it they have to pay the bill. The debt limit is just paying our bills.

(END VIDEO CLIP)

JONES: And those bills Secretary Lew was talking about include bills that will come due between October 17th and November 1st, bills that would pay military troops, active duty troops, Medicare, Medicaid payments, not just bills or payments to bond holders. So a whole lot of people would be in trouble if they do not raise the debt ceiling -- Carol.

COSTELLO: All right, Athena Jones reporting live from Capitol Hill. So those Republican lawmakers, they are meeting behind closed doors. But later a smaller group of Republican leaders will sit down with President Obama and they will meet in the same room at the White House. Brianna Keilar is at the White House. What do you expect to happen?

BRIANNA KEILAR, CNN SENIOR WHITE HOUSE CORRESPONDENT: You know, we don't know. Although, I will say it could have been even more dramatic than perhaps it will be because President Obama had actually invited all House Republicans, Carol, here. A White House official telling me he wanted to really explain himself, wanted to make his case to all House Republicans.

What ended up happening, though, is that House Republican leaders decided that it would be a smaller group coming, pared down to about a dozen and a half members. We're talking about Republican leaders and then the chairs of really relevant committees so the tax writing committee, the budget committee.

But you can imagine sort of, I think, the drama that might have ensued had President Obama shared a room with all House Republicans, including those sort of Tea Party or Tea Party backed Republicans who he has really targeted and blamed for this mess.

COSTELLO: OK, so House Republicans appear to be proposing this short- term extension of the debt ceiling, but want to leave the government shutdown in effect. Will that fly with the White House?

KEILAR: They're not happy about it, Carol. But it appears that that may ultimately fly with the White House, because they've prioritized not defaulting over reopening the government, because the economic ramifications are much more significant when you don't increase the debt ceiling versus the government remaining shut down.

President Obama has said that he will sign a short-term extension of the debt ceiling. The issue, of course, is that it would have to be clean, as White House puts it. They don't want conditions put on it. Of course, Republicans are going to want some conditions. They're talking now about kind of attaching a conversation moving forward.

That may be enough for them. We'll have to see, as these details are worked out and Athena is following them. It's kind of developing as we speak. Hopefully, we'll get more information hearing from House Republicans as they meet with President Obama.

They said they wanted to limit the group coming because they wanted to negotiate and they felt that it was sort of impossible to be negotiating with the president when you had 200 plus members in the room.

COSTELLO: Got you. Brianna Keilar, reporting live from the White House this morning. You talk about reaching the debt ceiling. One of the biggest fears is not being able to pay back the countries that own America's debt.

CNN's Christine Romans, our business guru is here to explain that side of the story. This could have serious consequences. CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: It could. But you know, Carol, I think it's fair to assume that the U.S. will pay its bond holders first and foremost. You just do not want to wreck your credibility among the people lending you money. Let me show you first who those people are. China is our banker. This is true, China is the largest foreign lender to the United States, followed by Japan and then the Caribbean banking centres, offshore banking centres, Cayman Islands, for example, there's $288 billion of U.S. treasuries that are held in accounts held there.

The oil exporting countries, they take their profits from their oil exports and they park them in treasury bonds and Brazil is a big foreign debt holder. But the foreign debt is about a third of all of our $16 trillion in debt. The rest is held basically by U.S. investors. When I say investors I mean social security trust fund, big government holdings, mutual fund companies.

So when you look, the social security trust fund is the largest government holder of U.S. treasuries, $2.7 trillion. You want to pay the interest on those, because, look, that's grandma's retirement, right, invested in U.S. treasuries. The civil service retirement fund has a bunch and military retirement does, too. It's a very safe investment.

That's why so many people put their money into U.S. treasury bonds, because they know they're going to get paid back on time every time. That's why the U.S. is the cornerstone of the world financial market. Something that Jack Lew actually reiterated in his testimony this morning. Look, we pay millions of bills a month, lots of transactions going through.

The computer systems are designed to pay the interest on our debt, pay social security, pay Medicare, pay government retirements, veterans benefits and the like. It's kind of a mess, the idea of paying some and not others -- Carol.

COSTELLO: Christine Romans, reporting live for us this morning. Thank you.

ROMANS: You're welcome.

COSTELLO: The number of Americans who file for unemployment claims surged by 66,000 last week. That is the biggest jump since Superstorm Sandy hit the east coast last October. The week's number was pushed higher, in part, because of the government shutdown and by a delay in claims from California after the state switched computer systems.

Checking other top stories this morning at 9 minutes past the hour, two men are in the hospital with burns after their hot air balloon hit a power line. The accident happened during a ballooning festival in New Mexico. Witnesses say the balloon was flying very low just before impact.

(BEGIN VIDEO CLIP)

LARRY WILLOCK, BALLOON CRASH WITNESS: The explosion shot flames out about 20 feet to the side. I saw him slump. I didn't know about the condition at that point, the gondola really started to drop.

(END VIDEO CLIP)

COSTELLO: People who live in the area were able to rescue the pilot and passenger after the crash landing. It was the third time a balloon hit power lines or power pole during this year's event. In the other two cases, the balloons managed to land safely.

Authorities shot and killed a gunman who opened fire at a federal building in Wheeling, West Virginia. Police say the shooter was a former police officer. No word on a motive and no one was seriously hurt.

Imagine being stuck on your back 140 feet in the air for more than two hours. That's what happened to about ten riders at Universal Orlando theme park. A technical glitch forced the rip rocket to unexpectedly stop. Most riders were able to get off, but it took firefighters two and a half hours to rescue the rest.

You know how easily we get distracted by our cell phones? This story will make you stop and think. Really think. San Francisco D.A. says some transit riders were so focused on their cell phones. They did not see another passenger wielding a gun. By the time they heard the gun go off, it was too late. CNN's Kyung Lah has more.

(BEGIN VIDEOTAPE)

KYUNG LAH, CNN CORRESPONDENT (voice-over): The man looks agitated, shifting back and forth, sometimes smiling for no reason. It's 9:30 at night. The San Francisco Muni train car is crowded with a dozen other passengers. Police say this man is armed and about to murder someone.

(on camera): What happens next is something we can't show you. The gunman lifts his weapon, three to four times in plain view. The dozen or so other passengers on the train, none of them notices. Why? According to the prosecutor, their faces were all buried in their cell phones.

(voice-over): It's not until the gun fires that people looked up. Shot in the back and killed, 20-year-old Justin Valdez, a promising San Francisco State student, seemingly picked at random. He was simply heading home after classes that night.

(on camera): How close are these people to him?

GEORGE GASCON, SAN FRANCISCO DISTRICT ATTORNEY: Some of these people are probably no more than about 2 feet to 3 feet away from him.

LAH (voice-over): San Francisco's district attorney is disheartened that no one was paying attention.

GASCON: We're seeing people that are so disconnected with their surroundings. We know this is not unique. We're seeing people being robbed. People are getting hurt. LAH: Gascon is as aghast as people were in 1964 when this woman was brutally stabbed at her apartment building in Queens, New York. Numerous people heard the attack, but assumed others would call for help, the now famous bystander effect. Today, social phenomenon, people are too absorbed in their smartphones to be aware of what's happening around him.

UNIDENTIFIED MALE: It looks like he's turning into another driveway --

LAH: It's now common place to see examples of it. A man so engrossed in his phone, he doesn't see a giant bear right in front of him -- or another texter walking right into a fountain. Classmates of Justin Valdez are feeling the impact of this behavior.

WHITNEY BULMER, SFSU STUDENT: It's just people's stupidity, I guess, and ignorance towards what's going on around them.

LAH: There's no sign of this changing, as we watched at the very train stop that Valdez boarded for the last time, students were still buried in their phones. Kyung Lah, CNN, San Francisco.

(END VIDEOTAPE)

COSTELLO: Unbelievable.

Still to come in the NEWSROOM, officials at a San Francisco Hospital say they're devastated, but still cannot explain exactly why a patient's body was found in a hospital stairwell.

(COMMERCIAL BREAK)

COSTELLO: In many ways it's been a war of images, military veterans denied access to the World War II Memorial. Fallen soldiers coming home to grieving families who don't know if they will get death benefits, but it's hard for the cameras to catch the faces of the most vulnerable, families who can't feed their kids when WIC benefits run out, moms and dads who can't go to work because Head Start programs have been shattered.

And thousands of other who were seeing funding cuts to the programs they need because Congress can't get it together. Stacey Stewart is the U.S. president of the United Way Worldwide, which is the largest non-profit in the world. Good morning, Stacey.

STACEY STEWART, U.S. PRESIDENT, UNITED WAY WORLDWIDE: Good morning, Carol.

COSTELLO: So, tell us, where are you seeing the biggest hits to programs?

STEWART: Well, I think we can all agree that this shutdown is beginning to have devastating impacts on communities all around the country, from children to families to veterans, many of the things that you mentioned around the impact on head start programs, the impact on emergency food programs, the impact on welfare systems for families in need. Child care assistance.

This is hitting the most vulnerable families, most vulnerable people, people who have served this country in the hardest ways possible. If this continues -- and every day we get a little bit more and more of the story, impact on people. If this continues, we envision nothing more than very, very serious impact on communities, on people in ways that we can't even begin to imagine and this is our biggest concern. And one that's affecting nonprofits very directly.

COSTELLO: Give me a real world example of it so that people can really understand.

STEWART: Well, we operate a call center and work in partnership with others around a call center that's called 211. And 211 is available to any American. It covers about 90 percent of the country where people who are in crisis can call. We're already getting, in many of our 211 centres anywhere from 75 to 100 calls of more of people who are expressing concerns, anxiety even if their benefits have not yet been cut.

They're anticipating their benefits being cut, with respect to child care benefits or worry about food assistance. Many people who are already food insecure are worried about where they'll get food today, tomorrow or next week in order to feed themselves and their children. People are concerned about the very basic services that they need. And they may not have available to them.

Your earlier story about increase in unemployment benefits will have a ripple effect on those people being able to -- not being able to access the needed resources that they have to have in place to help themselves and their families.

So, we are seeing people actually reacting to anxiety and concern and worry, because they see the impact of the government benefits. They feel it already and they already are anticipating, in many cases, over the coming days and weeks that they may not be able to take care of themselves and their families.

COSTELLO: Stacey, we've seen a number of charities stepping forward to fund these government programs that were once helping people. Will the United Way think of doing such a thing? Can it? Should it?

STEWART: The United Way is always, in many, many thousands of nonprofits are always working with these families and communities day in and day out. And it's been wonderful to see some very generous people step up and cover some expenses in a very tough -- during a very tough time. The point here is that the non-profit sector cannot replace the role of the federal government. And the role of government in helping to support programs that society has relied on and our communities have relied on for many, many years.

Head Start, for example, emergency food assistance, these are all programs that the non-profit sector supports and work in compliment with the government to make sure that the people have the resources and the support that they need. But we can't do it all. The non- profit sector simply cannot take up the slack that government is leaving as a result of this shutdown. So, the longer and longer the shutdown continues, the more and more strain that puts on families and communities and certainly the non-profit sector.

COSTELLO: Stacey Stewart, thank you so much for being with me this morning.

STEWART: Thank you so much, Carol.

COSTELLO: Still to come in the NEWSROOM, 17 days. That's how long the body of a missing patient was in a hospital stairwell before anyone found it. Now Lynn Spalding's relatives and her friends are demanding answers.

(COMMERCIAL BREAK)

COSTELLO: Ever since the federal government lurched into a partial shutdown 10 days ago, CNN crews have traveled the country, taking the pulse of Americans and asking what they think about their elected officials.

Today CNN's Anna Cabrera is in Denver, Colorado. Good morning, Anna.

ANNA CABRERA, CNN CORRESPONDENT: Good morning, carol. Do your job, that's what we're hearing from Coloradans today. Now there are tens of thousands of federal workers in this state. These are people who are researchers, park employees, many of them military personnel. All these folks need paychecks. They need to feed their families. They need to pay their mortgage and they are very worried about this government shutdown.

This is a double punch for communities in Colorado who are still dealing with the after-effects of the devastating floods, 18,000 homes, more than 1,000 businesses that were damaged or destroyed. So the folks we're talking to are really hurting. We're hearing a lot of frustration.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Makes me feel angry, especially from the standpoint that they're still collecting their checks and that so many other government workers are not. They're paid to go in and find ways to make things happen, and they obviously haven't done so in this instance.

CABRERA: Right now, do you understand why our leaders let this happen?

UNIDENTIFIED FEMALE: I think there's a lot of ego and people are unwilling to compromise on both sides.

CABRERA: Your message to Washington?

UNIDENTIFIED MALE: Get off your butts and do the job you were elected to do that simple.

(END VIDEO CLIP) CABRERA: The State Department of Labor estimates there are now about 40,000 employees in this state that are eligible for unemployment benefits because they are furloughed or are perhaps furloughed because of the government shutdown. At this point, without knowing when the end is in sight, this could just be the tip of the iceberg as far as the impact that the folks here are feeling -- Carol.

COSTELLO: Anna Cabrera, many thanks.

Still to come in the NEWSROOM, the GOP says delay Obamacare. It seems right now, computer glitches are doing that for the Democrats. We'll be right back.

(COMMERCIAL BREAK)

COSTELLO: Good morning. I'm Carol Costello. Thank you so much for joining me. We know healthcare.gov isn't going so well. There have been a lot of technical glitches with Obamacare. In fact, Elizabeth Cohen, you've been trying to get on healthcare.gov to review insurance policies. What has your experience been is this?

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: I haven't been able to get on and I've been trying since last Tuesday. I couldn't log in this morning and they said you have to reset your password. They said -- the rep I talked to said everyone has to reset their password. If you had a password, you have to reset it and everyone has to call in and do that. I said everyone with an account has to reset? They said yes.

She said I'm going to try to do it for you, but I can't, so you're going to have to call back. I thought everyone? That's crazy. We called HHS, Department of Health and Human Services and they said what that representative said was an error.

They said a script was sent out by mistake to representatives saying this and it shouldn't have been sent out. So, a script was sent out to representatives and they said this morning some representatives were telling people like me, you've got to reset your password, when that is not the case -- and the bottom line is, I still can't log in.

COSTELLO: Even though you reset your password.

COHEN: I didn't end up resetting it, because it's not necessary. But I still can't log in.

COSTELLO: OK, so I guess you can call maybe and get a live person on the phone to fix some of these problems, is that true?