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Senate Races To Finalize Debt Plan; Americans' Souring View Of Washington; Global Effects Of U.S. Budget Mess; U.S. Investors Anxiously Wait For Deal; Interview with Judd Gregg; "Foolish And Tactically Absurd"; Arrest In L.A. Airport Dry Ice Explosions; Former San Diego Mayor Pleads Guilty; Wounded Soldier's Salute Goes Viral

Aired October 16, 2013 - 10:00   ET

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

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SENATOR JOE MANCHIN (D), WEST VIRGINIA: This is a big thing and it's going to harm, not just this economy, but economies all over the world and we're not going to do that. If we do, I think they should all ask for our resignation. They should ask for all of our resignations if we can't come together for the good of our country.

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CAROL COSTELLO, CNN ANCHOR: And even this 11th hour, the blame game continues. Listen to this shot from the president.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: Speaker Boehner, for example, him negotiating with me isn't necessarily good for the extreme faction in his caucus, it weakens him. So there are been repeated situations where we have agreement and then he goes back and it turns out that he can't control his caucus.

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COSTELLO: OK, so supposedly the Senate is working on a deal. So let's look at some specifics taking shape in that Senate plan. The federal government would be funded through January 15th and the debt limit extended until February 7th. There would have to be a detailed tax and spending deal for the next decade probably by mid-December. And the only issue related to Obamacare would be the anti-fraud provision to verify income.

So let's bring in CNN's Wolf Blitzer for some analysis. You have been covering politics I think forever since time began. Have we ever been at such a point?

WOLF BLITZER, HOST, CNN'S "THE SITUATION ROOM": I'm sure we have, but let's -- off the top of my head, I don't remember. But it's a very serious situation. It looks like they're going to resolve it today. They're going to punt, as you point out, to January and February and move the ball down the road. But it looks like when all is said and done, except for the relatively very, very modest tweak to Obamacare. It's going to be a clean bill in the Senate and House of Representatives --

COSTELLO: So this was all for nothing? This fight over Obamacare was all for nothing.

BLITZER: Well, a lot of Republicans are saying that as well. If you listen to, you know, Congressman Peter King, he's a Republican from New York. He's been pointing it out to his fellow Republicans from day one. They started off and wanted to defund Obamacare. That wasn't going to go anywhere. Certainly didn't have the votes in the Senate.

Even if it did, the president would have vetoed it. Then they said, delay it. That didn't have the votes. Then they wanted to make more significant changes. In the end this anti-fraud provision is something very few people can give a quarrel with. Nobody wants fraud and people who are trying to get Obamacare down the road.

But and in the end, it's going to be a clean bill in the Senate and House for all practical purposes. But in January and February, we may be going through this one more time. If you think that by the middle of December, Carol, that even is going to come together on the grand bargain as far as entitlement reform and tax reform and balanced budget and that all stuff, maybe they can do it but they've been trying for years so far unsuccessfully.

COSTELLO: It doesn't sound promises because the House cannot even come up with its own deal. They will likely vote on whatever deals the Senate comes up with. I mean, John Boehner can't even get Republicans to agree on a compromise. It's really frightening, actually.

BLITZER: Well, Republicans were agreeing on all sorts of proposals that they sent to the Senate, which never even came up for a real vote. They were tabled procedurally in the Senate. The Republicans were pretty unified in terms of Obamacare and earlier, you know half a dozen or so pieces of legislation over the past 15, 16 days that they sent trying to avert a government shutdown.

But yesterday they weren't united add he couldn't get the 217 nearly all Republican votes that he needed to pass what was a relatively modest proposal when you take a look at what the Republicans were pitching only a few weeks earlier. But he couldn't do it. The ball is in the Senate court. Let's see what the Senate does.

I assume that Harry Reid and Mitch McConnell have worked a deal out. It will pass the Senate, and maybe even it will pass the House first procedurally. That will make it easier for the Senate. They could get deal done more quickly and allow a lot of those lawmakers especially in the House who are anxious to go back to their districts and get out of D.C.

It's time to fly out, make -- if they can resolve it all today, you'll see them running to the Reagan National Airport to get out of dodge.

COSTELLO: I'm sure voters will be thrilled to see that. Wolf Blitzer, thanks for your insight. Appreciate it. As we reach the deadline for default, it's hard to find anybody with a positive view of the way the Washington is handling this crisis. A recent ABC News/"Washington Post" poll found 74 percent of Americans disapprove of the way the Republicans are dealing with this mess. Democrats' disapproval rating is at 61 percent, and the president's disapproval rating is at 53 percent. But those feelings might be just as strong across the globe.

The Australian newspaper says it is hard not to believe lunatics have taken charge of the asylum in Washington. Shasta Darlington is in Sao Palo, Brazil with more on how our shutdown and debt deadline is affecting South America. David McKenzie is in Beijing, but we begin with Isa Soares in London.

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ISA SOARES, CNN BUSINESS REPORTER: We're comparing the crisis that we're seeing in Washington to a bit of a soap opera albeit a real bad one where you see politicians fighting with each other. We see a cliff hanger here and there and that is it. By the time they realize we're over the cliff and that's the concerns they have. One trader said to me this is not on for the world's biggest economy to be acting this way. Politicians need to get their act together and come to a solution before we have impact across the globe in the stock markets.

DAVID MCKENZIE, CNN CORRESPONDENT: The economy will have enormous exposure to a default. This country owns more than a trillion dollars of U.S. Treasury bills and economists tell me that the officials at the People's Bank of China are preparing for a dooms day scenario, a default that would cause a global chain of reaction.

SHASTA DARLINGTON, CNN CORRESPONDENT: There's no doubt that a U.S. default would have a negative impact on the economy here and the irony of the situation is not lost on Brazilians. In the short-term, Brazil's currency has a gotten a boost on speculation the United States will continue to buy back bonds sending investor money into emerging markets like Brazil.

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COSTELLO: OK now some are comparing the United States to Greece. One teacher from Athens told the "New York Times" said, quote, "We've been held hostage by the reckless politicians and the interest they serve for more than three years now. I guess our American friends are getting a taste of the same medicine."

Washington's brinkmanship has angered other countries as well knowing that the U.S. economy is vital to their own well-being, but investors seem to have mustered some confidence in a deal getting done. London's FTSE 100 index, Germany's DAX and Japan's Nikkei, all of these are pretty much flat on this critical day. What about Wall Street?

Maggie Lake is a business anchor and correspondent for CNN International, she joins us with more from New York. Good morning, Maggie. MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: Good morning to you, Carol. As you can see, as we look at the Dow, we're in rally mode in the U.S. It sort of defies logic. But traders absolutely in the short-term are betting on the fact that politicians are not crazy enough to push what they call the nuclear button and push us into default. They still think they're going to get a deal done. There are some optimism.

And very important to remember, traders keep telling us, this is not an issue of solvency, this is an issue of solvency, Carol. This is an issue of stubbornness and some would say stupidity. This is political theatre that they think is ultimately going to be resolved. Very different than what we saw back in 2008.

Traders are banking on the Senate getting a deal done even though we're getting uncomfortably close. Be careful. These gains can evaporate quickly if there seems like there's any kind of delay. People say this is no way to run a country, no way to run your fiscal affairs. And Congress looks like they are unable to deal with these affairs. Those are going to be lasting effects that we're going to have to evaluate.

COSTELLO: I hope they are right. Maggie Lake reporting live from New York City this morning. Still to come in the NEWSROOM, the Senate could be close to announcing a debt ceiling deal. There's the hope for you, but it will only set the stage for another fight in a few months. Former Republican Senator Judd Greg joins me next to talk about that.

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COSTELLO: Shopping for insurance. Have you been on health Care.gov? Did it work? Well, it's been two weeks since the launch. And for the second morning in a row, the government is still not telling us how many people have been able to successfully sign up or when problems will be fixed. The "Miami Herald" says House Republicans plan to investigate the launch.

The paper says the House Energy and Commerce Committee will ask Health and Human Services Secretary Kathleen Sebelius and federal contractor to explain why things went so wrong after the earlier testimony which they said the site would run smoothly. On Tuesday, President Obama further expressed his frustration with the disastrous launch.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: I am the first to acknowledge that the web site that was supposed to do this all in a seamless way has had way more glitches than I think are acceptable. And we've got people working around the clock to do that. And we've seen -- seen some significant progress, but until it's 100 percent, I'm not going to be satisfied.

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COSTELLO: The president went on to say people are still able to sign up for programs by phone and by mail, snail mail with little or no problems at all.

My next guest calls a Republican strategy to take down Obamacare, quote, "dysfunctional, foolish and tactically absurd." And that's coming from one of the party's former senators. Judd Gregg joins me now from New York. Good morning, Senator.

JUDD GREGG, CEO, SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION: Good morning, Carol. How are you?

COSTELLO: I'm good. Thank you so much for being with me this morning. John McCain, Senator John McCain says Republicans need to understand they lost the Obamacare battle. Now one House committee plans a probe of the law's disastrous launch. Why does this continue to be a focus for some members of your party?

GREGG: Well, there's no question that the Obamacare has serious problems and going through significant changed as a moves forward. The Congress should stay on top of that. The original tactic, which was proposed by a small group within the party that they would hold the debt ceiling and the government hostage to the full repeal of Obamacare never had a chance. We have a divided government. The president is not going to repeal his signature public policy initiative and the Senate is not about to repeal it. It didn't have a chance.

COSTELLO: So what's behind their strategy? Because they were told by many fellow Republicans that the strategy would not work, and yet they persisted. Why do they hate this law so much?

GREGG: Well, I don't think it's about the law, to be honest with you. I think it's about a few members who wanted to raise the visibility within a group of folks who feel very strongly about the issue of Obamacare. And it also raised a lot of money for their political action committees.

COSTELLO: So they did it all for selfish reasons just to put themselves in the spotlight and raise money for another political run?

GREGG: I think they genuinely believe in their position, but it doesn't get to the core issues, which is getting our deficit and debt under control. If you want to get that under control, you've got to make proposals that will actually adjust the way our entitlements are growing and reduce the rate in which they're growing. The good news is we're no longer talking about the issue of whether or not you're going to kill Obamacare of a condition of opening the government orring a debt ceiling. We're talking about the bigger issue of how you get the deficit and debt under control.

COSTELLO: Let's go to that just a second. These are difficult issues too. And people have different ideas about how to fix our debt problem, deficit problem. Members in the House of Representatives can't even come up with a bill to get ourselves out of this government shutdown. They're going to depend on the Senate to do that. What do you say to the American people that will make them believe that members of the House of Representatives can actually sit down and come up with solutions to our deficit crisis? GREGG: Well, you know, there's been significant process. As a member of Simpson-Bowles, we identified that we needed to reduce the debt. But we've done about half of what's needed done through the debt and budget balancing act of 2011 and half of it was done with the fiscal cliff. We've got about another 2.5 trillion. But in the context of the amount of money that the federal government spends over ten years, it's only about 5 percent.

And the way you do that, put people in a room and say, let's reach a agreement on the big issues and the only positive thing that's come out of what's going on today is that they may set up a process to do exactly that. Get people in a room and start talking substantively about how to get it under control.

COSTELLO: Let's go back to the current crisis. The debt ceiling now less than 14 hours away, do you think Congress will make a deal?

GREGG: They have to make a deal. It would be inexcusable and it would be total malfeasance if they were to default and bring into question the full faith and credit of the United States. Just in the last two days, it's costing the American taxpayer in about $200 million in the increased interest cost as a result of this eruption.

And that number will increase if we were to actually have a default whether a technical default or absolute default. They really do have to come together here. I can't imagine that they won't. It would be total incomprehensible, that our country, the strongest and most vibrant and prosperous in the world will not pay its debts.

COSTELLO: Again, all of America hopes you're right. Senator Judd Gregg, thank you so much for being with me this morning.

GREGG: Thank you.

COSTELLO: Still to come in the NEWSROOM, an injured soldier's salute goes viral.

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UNIDENTIFIED FEMALE: He's the epitome of what a man and American soldier is.

COSTELLO: You've got to hear more of this story. That's next.

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COSTELLO: Checking top stories at 22 minutes past the hour. Police have arrested a suspect in connection with the two dry ice explosion at the Los Angeles International Airport. This 22-year-old was booked with possession of explosive or destructive devices near an airport. Two bottles filled with dry ice exploded in restricts areas.

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DEPUTY CHIEF MIKE DOWNING, LOS ANGELES POLICE: It does reveal a vulnerability that we're going to shore up. We should have cameras in restricted access areas to maintain the integrity of the security system.

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COSTELLO: De Carlo is being held on $100 million bond. Former mayor of San Diego is now a felon. Bob Filner pleaded guilty to felony false imprisonment and two other misdemeanor charges in connection with his behavior with three women. Under a plea deal Filner will forfeit his right to vote and hold public office. Filner's sentencing is set for December 9th.

The 75-year-old mother of baseball great, Cal Ripken Jr.'s managed to thwart a gunman who said he wanted to steel her car. Violet Ripken used the panic button on her key ring to scary them away. The suspected was arrested two hours later. Police say the attempted carjacking is not related to Violent Ripken's abduction last year. She was taken at gunpoint from her home in Maryland and found the next day.

Take a look at this picture. This is 24-year-old Corporal Josh Hargis. He was seriously injured in an IED attack in Afghanistan. He saluted his commander who had just placed the Purple Heart on his blanket. In the midst of lawmakers of this back and forth in Washington, he might not get paid because of the partial shutdown.

Josh' wife spoke with CNN affiliate WBBH about her brave husband.

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TAYLOR HARGIS, WIFE OF JOSH HARGIS (via telephone): The commander leaned over to thank him for his service and sacrifice. My husband, who everyone thought was unconscious, raised his hand to salute him. I think of how proud I am. He is a bad -- and strong and epitome of what a man and American and soldier is.

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COSTELLO: Four of josh's fellow soldiers were killed in the attack. They call his salute from the hospital bed, quote, "The most amazing thing he's seen in ten years in the Army."

Well, the Army is reported the reviewing of the Medal of Honor recipients request to return to active duty. President Obama awarded the nation's highest military honor to Retired Captain William Swenson. He's been reportedly unemployed since he left the military in 2011. Returning to active duty is rare for a Medal of Honor recipient.

Still to come in the NEWSROOM, lawmakers bicker. American's farmers are suffering. We'll tell you how it's costing them and you.

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COSTELLO: Time is running out in Washington and there is just a little tiny bit of hope in sight for beating the deadline to avoid default on our debt. Now one of the more outspoken members of the House, Republican Congressman Peter King of New York, hopes his colleagues in the Senate can save the day.

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REPRESENTATIVE PETER KING (R), NEW YORK: The game is over. We have to get this done and John Boehner has tried everything he can. And there's people in our party that no matter what he tries to do, they won't go along. So hopefully we'll get adult supervision from the Senate.

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COSTELLO: Adult supervision from the Senate. Athena Jones joins us from Capitol Hill this morning. Is that possible?

ATHENA JONES, CNN CORRESPONDENT: Good morning, Carol. That's the question we're watching to see. This deal looks like it's close to be finalized and announces, but it's still unclear where it's going to start. Will the Senate go first and send it over to the House or will the House go first.

You heard from Congressman Peter King. And I have a clip from Congressman Steve King a Republican out of Iowa who sounds like he might be standing in the way. Let's listen to that.

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REPRESENTATIVE STEVE KING (R), IOWA: I don't believe it's a hard break tomorrow. It's just a date they picked on the calendar and we expected this to come maybe as far back as last May --

KATE BOLDUAN, CNN ANCHOR: All the way to this point to --

KING: Seriously, delayed enough. We are where we are today and I don't think it's a hard break. I'm more concerned about market reaction than I am default itself.

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JONES: Now you're hearing Congressman King talk about how he doesn't think that this deadline tomorrow is such a hard deadline when it come to do so raising the debt ceiling and he also told us that he's not prepared to vote for anything presented in the next 36 hours. On the Senate side, we haven't heard a final decision from Senator Ted Cruz. He's going to wait and see what is put on the floor, but GOP Senator has aid, it all depends on what is put on the floor.

COSTELLO: Let me say what Steve King just said, he's waiting for the markets to tank so he can have prove that it will have an effect if they don't raise the debt ceiling?

JONES: We know that there's likely to be strong market reaction if this isn't solved soon. But I should tell you, even the White House has said that tomorrow's deadline, October 17th, isn't necessarily a drop-dead date as long as it looks like a bill is going to be passed. An that's really the big if. You've got a deal. They're still working out where it's going to start. We'll have to see how quickly it can get through. The thinking is if it starts the House, it might expedite things. No decisions have been made.