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Carney Encouraged By Work In Senate; President Continuing Message Of No Ransom For Opening Government; Competing Plans; White House Critical of Plan; Reid Warns of Downgrade

Aired October 15, 2013 - 13:00   ET

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

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: That is why a provision like that appears in latest proposal that seems to be going nowhere from House Republicans because it's an effort to try to buy votes from Tea Party Republicans who shut this government down in the first place.

UNIDENTIFIED MALE: They're not telling the truth about that.

CARNEY: Again, that is not -- the conversations that have been had here and up on Capitol Hill about the medical device tax, as far as we're concerned, have been about our willingness in the -- as the president said and others, in a broader context, not ransom for opening the government, not ransom for Congress doing its job to pay our bills, but within the context of the president's willingness to hear ideas about ways we can improve as opposed to ways to dismantle or defund Obamacare. We -- you know, we're willing to have that. But we're not going to pay ransom. The president is not going to pay ransom, you know, from the American people to the Tea Party in order to open the government.

UNIDENTIFIED MALE: I'd like to (INAUDIBLE) that a little.

CARNEY: Sure.

UNIDENTIFIED MALE: To pin you down a little more closely. Thursday, the speaker's spokesman says specifically that a White House official asked for repeal of the medical devices tax.

CARNEY: That's just not -- that's just not the case. That's just not the case. What --

UNIDENTIFIED MALE: Not saying it's in connection with any other part of the plan but simply that it was asked for by the White House.

CARNEY: You're saying that separate from anything, the White House proposed a change to the Affordable Care Act? Obviously, that's not the case. The issue of the medical device tax has been obviously in the air in -- for the last several weeks. And when I've had this question and others have taken this question, we have made clear that we would be willing to talk about lawmakers who want to address that position as well -- that provision as well as other ideas that lawmakers might have about making changes to the Affordable Care Act that strengthen it or improve it.

When it comes to the medical device tax, I think it's very important to note that those the -- you know, those who portray themselves as paragon of -- paragons of fiscal responsibility and discipline often propose making that change without acknowledging the fact that it would raise the deficit. So, that's an important point to acknowledge, too.

But, again, we have never said that -- and we would agree to paying ransom, you know, making changes to the Affordable Care Act simply to placate Tea Party Republicans who shut this government down over their opposition to the Affordable Care Act.

UNIDENTIFIED MALE: (INAUDIBLE) Thursday's meeting, you're saying --

CARNEY: I think I've answered this (INAUDIBLE) three times.

UNIDENTIFIED MALE: -- asked for repeal of the medical device tax?

CARNEY: Correct.

UNIDENTIFIED MALE: What about (INAUDIBLE.)

CARNEY: Go ahead.

UNIDENTIFIED MALE: There are people on Wall Street and in Washington who speak openly about the real crunch point being November 1st as supposed to Thursday the 17th.

CARNEY: On October 17th, as was made clear to Congress in a letter from the treasury secretary, we cease to have borrowing authority. We only have cash on hand. And as everyone knows who understands how the process works, that means we do not -- there is a scenario by which we will not be able to pay all our bills because of the fact that we need to borrow money in order to pay our bills. And these are bills that Congress has incurred. These are obligations that Congress has made. These -- this is not new debt. This is not new spending. There's a lot of misrepresentation of that by those who claim that they came to Congress with a mandate never to raise the debt ceiling because that has nothing to do with spending. OK? It is just --

UNIDENTIFIED MALE: This has to do with the feeling that any obligations like Social Security and other payments come due on November 1st.

CARNEY: What I can tell you is that we have a huge number of payments as a country that need to go out -- be made every day. And that there's a series of obligations that the United States government has to fulfill. For details about how that process works, I refer to you the treasury department. But if anybody -- I mean, I -- we've seen a lot of talk from deficit -- I mean, not deficit but debt limit deniers and default deniers. And it's -- they have been roundly shot down, that talk has been, by experts in the field, including CEOs and financial industry experts including many of whom, I think, tend to have the ear of Republican lawmakers. It is absolutely not the responsible thing to doing to allow us as a nation to enter -- to enter territory we've never been in before which is to not have the authority to pay our bills.

Ted (ph).

UNIDENTIFIED MALE: Jay, thank you. Nice to talk to you.

UNIDENTIFIED MALE: I wanted to ask you about the president's role in the final hours here. Yesterday, there was supposed to be a meeting with leaders in both parties. Today, his schedule just has House Democratic leaders, not both parties. Senator McCain, a short time ago on the Senate floor -- and he's obviously been critical in recent days of his own party and has said that they need to come to a deal. But a short time ago, he said it's a mistake for Democrats to reject Speaker Boehner's latest proposal. He said in his words, a serious proposal. So my question is, does the president plan to, A, let the Congressional leaders work this out in the final hours or does he see that his role in the final hours, because this is so critical as you say, that he will play some direct role in trying to force a deal?

CARNEY: I have no doubt that the president will be in contact with Congressional leaders of both parties as this process continues. As you know, Ed (ph), but didn't include in your question, we postponed the meeting yesterday because of the progress that was being made in the Senate. And so, the -- it is the president's intention and it's reflected by the meetings and conversations he's been having with leaders as well as the fact that he invited every member of Congress to the White House last week for discussions on this issue to engage directly with lawmakers as they try to resolve this issue and try to do it in a way that hopefully reflects the bipartisan spirit that we've seen in the Senate process.

And we continue to hope that that will bear fruit and will produce something that can, in the end, lead to a resolution that opens the government, provides the authority to the treasury for the United States to pay its bills so that we can then focus on some of the bigger issues that we face as a country instead of getting distracted by these manufactured crises that only do harm to the economy, only do harm to the American people and apparently, according to a lot of Republican commentators ,do a lot of harm to the Republican Party. We need to get beyond this for the sake of the country.

UNIDENTIFIED MALE: Two other quick topics on the -- some of the big issues you're talking about. NSA, "Washington Post" has another revelation today saying that they're collecting -- the NSA is collecting e-mail contact lists not just of foreigners but of Americans. How do you justify that?

CARNEY: As you know, I'm not in a position to discuss specific tools or processes. As you know, the National Security Agency is focused on discovering and developing intelligence about valid foreign intelligence targets such as terrorists, human traffickers and drug smugglers. They are not interested in personal information about ordinary Americans.

Moreover, they operate in accordance with rules either approved by the attorney general or the Foreign Intelligence Surveillance Court, as appropriate, designed to minimize the acquisition, use and dissemination of any such information. So, again, the purpose here is to discover and develop intelligence about foreign intelligence targets. That is the mission and that is the purpose of the various methods that the NSA employs.

UNIDENTIFIED MALE: But part of what you just said was they're not interested in the private information of Americans except "The Washington Post" says, they collect the telephone numbers of Americans, the street addresses of Americans, business information, family information. So, doesn't that contradict what you're saying?

WOLF BLITZER, CNN ANCHOR: All right. So now, they've moved on to in over important issue. But we're going to monitor what they say about the NSA and the latest report in "The Washington Post" about the NSA going ahead and monitoring some U.S. phone lists, chat rooms, other stuff like that. We'll have much more on that part of the story.

But the most important story here in Washington right now clearly what's going on as far as this debt ceiling needing to be raised and the partial government shutdown is concerned. Now in day 15 and you just heard Jay Carney say he likes -- the White House likes, basically, what they're hearing from Senate Democrats and Republicans but doesn't like what they're hearing from the Republican leadership in the House of Representatives. Looks like there's some serious problems underway right now, just 48 hours or so until this deadline is reached when the nation's debt ceiling needs to be raised.

Ana Navarro is a Republican strategist, a CNN Political Commentator who is joining us right now. Do you see light at the end of this tunnel over the next 48 hours, Ana, or is this gloom and doom?

ANA NAVARRO, CNN POLITICAL COMMENTATOR: You know, I don't feel it's optimistic that it's going to be a quick resolution as I did yesterday. But I do see some light at the end of the tunnel because I do think it is a serious proposal by Boehner. I think the Senate also put up a serious proposal. And I'm not hearing the White House say dead on arrival. They're continuing to say, we need to analyze the bill. We haven't seen the language. So, it's not the flat no and we have definitely come a very long way from where we started 15, 16, 17 days ago, Wolf.

BLITZER: Do you think that John Boehner is under enormous pressure, obviously from the Tea Party supporters in his Republican caucus? Do you think he -- at the end of the day, let's say the Senate passes something and it's sent over to the House. He would allow it to come up for a yes or a no vote without any additional strings attached and see what the majority in the House of Representatives is willing to do even if that irritates some more conservative Tea Party supporters in his caucus?

NAVARRO: I don't know. What I do know is that today, John Boehner can say to that Tea Party caucus what he couldn't say two weeks ago, three weeks ago which is, look, guys, we've tried it your way. We've gone around in circles trying this over and over again and we haven't gotten anywhere. It's time to try something else. He can say that because he has bent over backwards and he has tried tactic after tactic for the last two weeks. He can also say this is buying time for a bigger negotiation. This is not the last time we're going to bat. You know, these are short-term fixes. The government -- the budget until January, the debt ceiling until February. So, it requires further negotiation. Or, Wolf, he can say to the White House and to the Senate, look, this is my last and best offer and you'll either take it or not. I think the White House, the Senate would be smart to meet John Boehner halfway. And then let's buy the time, let's avoid the debt ceiling default and let's have more negotiation. But if John Boehner is asking for two years of the medical device tax for the love of god, give him one. You know, this is -- we're talking about something that 79 senators agreed with, the repeal of that tax. And John Boehner is not asking for the repeal of that tax. He's asking for two years delay. I mean, does that sound irrational? I just -- you know, I don't see why we have to continue this posturing. Both sides needs to come to the table and they need to be rational about a real solution and do it quickly.

BLITZER: All right, Ana, thanks very much. Ana Navarro reporting -- assessing for us what's going on based on our latest reporting, I should say. All right, Ana, thanks very, very much.

NAVARRO: Thank you.

BLITZER: Less than 35 hours until the debt ceiling deadline. Is there real progress today on what's going on? Deal or no deal? We're going to have live reports from Capitol Hill and the White House right after this.

(COMMERCIAL BREAK)

BLITZER: The clock is ticking and the pressure now building to break the fiscal stalemate here in Washington. Right now there are competing plans in the works to try to resolve the crisis. The Senate majority leader, Harry Reid, says he's confident a Senate deal can be reached this week, but the House is working on a counter proposal right now. The plan by Reid and the minority leader Mitch McConnell would fund the government through January 15th. Budget negotiations would take place by December. It would raise the nation's debt ceiling through February 7th and it could include some minor tweaks to Obamacare.

The House proposal would include much of what's in the Senate plan with even bigger changes to Obamacare. It would, for example, suspend the tax on medical devices for two years and remove health care subsidies for the president and members of Congress. Just a little while ago, the House speaker, John Boehner, said he's trying to find a way forward that avoids a government default.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R), HOUSE SPEAKER: There are a lot of opinions about what direction to go. There have been no decisions about what exactly we will do. But we're going to continue to work with our members on both sides of the aisle to try to make sure that there's no issue of default and to get our government reopened.

(END VIDEO CLIP)

BLITZER: All right, so that's just part of the story. Let's fill in some of the blanks right now. We've got our senior White House correspondent Jim Acosta and our chief congressional correspondent Dana Bash both standing by.

Dana, let's start with you.

The Senate deal, the House deal, they're on the table right now. Any votes coming up as far as we can tell any time soon, either in the House or the Senate, to deal with these pieces of legislation?

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Nothing is scheduled right now, but all eyes are on the House first.

Let me just tell you what is going on as we speak. I'm over in the Senate side of the Capitol. Right now, behind me, there are two lunches, it's their weekly lunches, going on. The Democrats are meeting in one room, Republicans are meeting in another room. Republicans were supposed to get a fill, and they probably still are, from the Republican leader, Mitch McConnell, on the deal -- at least the framework of the deal that he worked out with the Democratic leader, Harry Reid, late yesterday. This was where the action is.

But, as you just mentioned, this morning, the House speaker and his Republican leadership came out and said that they, or at least they didn't come out but it was telegraphed to us that they were telling their rank and file in a private meeting that they were going to have their own competing plan. But it hit a snag and that's where we are right now. we are very much in a holding pattern.

And the snag is that the House Republican leadership right now is struggling to find the votes from within its own caucus. They don't have 217 votes locked up from Republicans, which is what they would need to pass this version of a plan, which is to fund the government through January 15th, to raise the debt ceiling till February 7th, and also, as you said, deal a little bit more robustly with changes in Obamacare.

Conservatives are saying that's not good enough. so what we are told is that they're trying to figure out inside the walls of John Boehner's office right now how to placate those conservatives, whether to try to placate those conservatives, or just put it on the floor and hope that it pass. The earlier word was that the House was going to vote tonight. It is now up in the air whether or not that's going to happen and, more specifically, exactly what they are going to vote on.

But just in terms of process, which is really, really important now that we're just two days away from this deadline of October 17th when the U.S. - the Treasury says it going to default, having the House go first now Senate sources are saying in both parties is really critical because they can -- it can move faster. The process just allows for it to move faster. It starts in the House and it comes to the Senate. If it starts in the Senate, we are told that it is just much more likely that we are going to blow through that Thursday deadline. Not entirely sure, but it is more likely. So that's why waiting on the House, seeing if they can come up with the 217 votes, even if it's something that Democrats are blasting on the Senate floor, which they are, might be just procedurally something that benefits everybody. So that's what we're waiting to find out right now.

BLITZER: We'll know soon enough. All right, Dana, thanks very much. Don't go too far away.

Jim Acosta is over at the White House.

Jim, if it the White House is ready to accept some relatively modest tweaks in Obamacare that the Senate Republican and Democratic leadership apparently have come up with, the House wants to go a little bit further. But in principle, is the White House ready to accept some changes to Obamacare no matter how moderate, how reasonable they might be in order to get the government fully operational and raise the nation's debt ceiling for a few months?

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: I think that's right, Wolf. I mean one thing that you heard during the briefing with Jay Carney just a few minutes ago is that the president is pleased with what is coming out of the Senate right now, but they were willing to heap all sorts of scorn and criticism on what was coming out of the House. Listen to what Jay Carney just said a few moments ago about the plan coming out of the House.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: We cannot engage in a process here that then becomes normalized where a minority in Congress, a faction of one party in one house, can threaten the full faith and credit of the United States if it does not get what it could not get through the normal legislative process or through elections. So, you know, that's -- those are the stakes when it comes to the essential responsibility of Congress to ensure that the Department of Treasury can pay our bills.

(END VIDEO CLIP)

ACOSTA: So, interesting to note the juxtaposition, Wolf. We haven't seen the final details of the Senate plan, but the president is pleased with the progress in the Senate plan. The White House has also not seen the details in the House plan, but as you heard Jay Carney say during the White House briefing, they see some of the elements as trying to extract some sort of ransom from the president.

I mean I think just to boil down to the brass tacks here, Wolf, I think what is going on here is that there -- the White House is just saying no to the medical device tax. That was not in the Senate plan as it came out yesterday evening, at least the boiler plate framework of the Senate plan, but it is in the House plan. The Senate plan doesn't extract ransom, according to this White House. The House plan does. So I think that is the crux of the issue. And if the House can dispense with a delay of that medical device tax, then we might be heading towards some sort of deal.

Also interesting to note, Wolf, what we also heard from Jay Carney during that briefing when it comes to the debt ceiling. Jay Carney said during that briefing that the time for uncertainty has passed. Basically, what the White House is signaling at this point, and something that Harry Reid said on the Senate floor earlier today, is that we may be in sort of this danger zone, this red zone now. We've gotten too close to the debt ceiling to avoid any kind of ramifications in the short term, a credit downgrade, what have you.

It was curious to note Jay Carney using that sort of language. He was kicking everything over to the Treasury Department in terms of, well, what would they do in terms of prioritization. Jay Carney would only say that prioritization, and that is choose -- picking and choosing which bills to pay after the debt ceiling when they run out of borrowing authority, that prioritization equals default, but he wouldn't say which bills would get paid and how long they could continue to do that without the bottom really falling out. But interesting to note, Wolf, that he said that the time for uncertainty has passed. That is - that is not good language to come out of the White House right now, Wolf.

BLITZER: Yes, not good language. And Harry Reid, the Senate majority leader, he had a very ominous statement, I'm going to play it for our viewers when we come back, about a possible downgrading of the U.S. credit rating. Richard Quest is standing by for some analysis. Much more of our coverage right after this.

(COMMERCIAL BREAK)

BLITZER: Still have about a day and a half until we hit the debt ceiling, according to the U.S. Treasury Department. But that timetable got a jolt on the Senate floor today. Listen to this.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D), MAJORITY LEADER: Mr. President, the debt is here. The deadline is looming. Rating agencies are talking about downgrading us as early as tonight.

(END VIDEO CLIP)

BLITZER: As early as tonight. So Harry Reid says this could be an awful, awful situation, as early as tonight. Let's talk about that very ominous statement with our own Richard Quest who is joining us from New York.

Is he right? Could there be a downgrading of the U.S. credit rating as early as tonight, Richard?

RICHARD QUEST, CNN CORRESPONDENT: I don't know whether it to be as early as tonight, but I think it's certainly true if you look back at 2011. One of the reasons that the U.S. was downgraded from its AAA was not just because the debt ceiling became very close, the deadline, but because of the political paralysis. And if you remember and you look back at what the rating agency said, it was the inability to reach compromise that took it to the edge that was one of the principal reasons.

And, indeed, in hindsight, that was justified because the great committee that was put together failed to reach an agreement. And if you listen to what they're talking about now, the idea of coming to some long-term budget or fiscal agreement, the rating agencies would say, well you didn't do it last time, why should we have any doubt or belief that you'll do it this time. Wolf, I've just been looking at some numbers which really makes the point very clear. If you look at the U.S. Treasury's website, and some numbers aren't updated because of the shutdown, but you really do see on the daily cash management list that the Treasury is now running $20 billion, $30 billion a day that it has. It closes the account at the end of the day. Compare that to last year, Wolf, the Treasury was closing the day with $60 billion -- $50 billion, $60 billion, $70 billion a day.

So what's happened is they have pulled down and down and down. And this is exactly what Jack Lew was warning about. They have been moving the money around. They have been robbing Peter to pay Paul and all that sort of stuff and now the crunch time has arrived. The Treasury will have roughly $20 billion to $30 billion a day and that won't be enough by the end of the week.

BLITZER: They downgraded the U.S. credit rating, as you remember in 2011, after a similar showdown between the Obama administration and Congress, the Republicans in Congress specifically. Even if a deal gets done in time, let's say in the next day or two or even three, would you anticipate that the rating agencies might also once again further downgrade the U.S. credit worthiness?

QUEST: For those that didn't come off the AAA, yes, I would think that there's a very strong chance because you can't mess around. I mean I'm not -- let's be clear, I'm not sitting here forecasting that Moody's and all the others are going to immediately come off and say the AAA is gone. But for those that held the line and didn't move off, they would certainly be looking at it again. And not because they believe there's any long-term default opportunity. This is a case of won't pay, not can't pay. And there's a big difference from the rating agency's point of view. You're not going to (INAUDIBLE) get a "d" and default and all that sort of stuff, but you are going to pay a price. There will be a spike in bond yields. There will be a spike in mortgage rates. Everything that's interest rate related will eventually feel the effects of what's taking place.

BLITZER: Richard Quest, thanks very much for that analysis.