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Object of Interest Found; Rhetoric Heats Up; NYT: U.S. Middle Class no Longer Richest

Aired April 23, 2014 - 09:30   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.

In western Australia, search officials are speaking cautiously about a so-called object of interest that's been found in the search for Flight 370. That object was picked up less than 200 miles from Perth onshore. As you know, Perth is the hub of the search. This object is described as sheet metal with rivets. Now, it's not clear if it's related to that missing plane. Some officials are already voicing doubts, but it is being tested.

In the meantime, Malaysian officials have completed their preliminary report on the disappearance of the plane and its initial handling, but Malaysia is refusing to release that preliminary report publicly, further infuriating victims' families who says the government and airline are ignoring even the most basic questions they have.

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STEVE WANG, SON OF MH370 PASSENGER: They must have covered up something or want to hide something. You know, some of the questions are totally not confidential. It is just a fact. It is - like the (INAUDIBLE) number. I don't know how it could influence the investigation, but they just give the answer that, oh, it is still under investigation. It is just like (INAUDIBLE), not an answer.

(END VIDEO CLIP)

COSTELLO: Let's get the latest from Malaysia's capital and CNN's Richard Quest. We also have CNN aviation analyst Mary Schiavo joining us.

Let's start with you, Richard, because you were at that press conference and you asked Malaysian authorities to release this preliminary report. What did they tell you?

RICHARD QUEST, CNN AVIATION CORRESPONDENT: Well, first of all, under the ICAO, that's the international organization that governs all civil aviation, I basically wanted to know, under the rules, they were supposed to provide a report to ICAO within 30 days. So my question was simple. It was, have you provided a report? If you have, will you make it public? And this was the reply from the head of civil aviation.

(BEGIN VIDEO CLIP) DATUK AZHARUDDIN ABDUL RAHMAN, DIR. GEN., MALAYSIAN DEPT. OF CIVIL AVIATION: Yes, we have issued the preliminary report and we have sent it to ICAO. We have not made any decision yet whether to release it to the media or to the public.

(END VIDEO CLIP)

QUEST: So the report has been sent. And I also understand that, as is normal in these reports, there is a safety recommendation. In this case it is that all commercial airliners should be tracked in real time.

Now, this first report, it must be said, Carol, would be a very basic. It would be a simple statement of facts. Nothing complicated. No analysis. Nothing controversial. But I think the fact that it has been presented, and we don't even - we weren't even told that fact, let alone the report being made public, it's enough to sort of, once again, maybe raise an eyebrow.

COSTELLO: Well, haven't the Malaysian authorities been listening to these families, been listening to criticisms about how it's not being transparent, how it's really making things more difficult for itself? Because if it's a similar report, why not release it? What's the big deal?

QUEST: And that is the pretty unusual point. Look, I went back. Go back to Air France 447. Go back to Qantas in Singapore where the engine blew up. Go back to British Airways, which crash landed at Heathrow. In all those cases, a preliminary report or a basic statement of fact was presented within a timely area. And we never got anything like this sort of (INAUDIBLE). So, I'm at a bit of a loss as to explain why in these situations, except to give them their due. They are dealing with a unique set of circumstances here where there is no plane and most of the effort at the moment has to be, find a plane, because without the plane, you ain't really going to have an investigation.

COSTELLO: Well, that is certainly true, Mary Schiavo, but still, I mean the preliminary report is done. The work is done on that report. So, why not release it?

MARY SCHIAVO, CNN AVIATION ANALYST: Well, let's not overstate what the preliminary report is either. Preliminary reports are unbelievably simple. It's, you know, just basically a Jack Webb, just the facts, ma'am. I mean it sets out what happened, when it happened. Usually they don't have recommendations. So the fact that they put a recommendation in there is somewhat remarkable because that usually comes in the last report, the recommendations report. So - but it's very simple, very straightforward and nations around the world make them public. The NTSB pops them up on the website, you know, just about as fast as they write their preliminary report. So there really is no reason not to put it up. It would not have any unresolved criminal investigative secrets in it because it's just the facts. So, there's just no explanation and no excuse for it really.

COSTELLO: Strange. OK. Well, let's move on and talk about this object of interest. Richard, did they say anything at all in Malaysia about this piece of metal that supposedly washed onshore in Australia?

QUEST: No. Well, yes and no, in the sense that it was raised at the press conference. They certainly knew about it. But it was a couple of hours ago, this press conference, so it was in real time, if you like, to what was being - what was happening in western Australia. Yes, they knew about it. They hadn't heard any facts from western Australia at that point about whether this was more than we already knew. A piece of metal with rivets which may or may not, pardon the phrase, be of importance.

COSTELLO: And, Mary, we've been down this road so many times, a report where objects of interest were found and they turned out to be nothing.

SCHIAVO: That's right. And this may very well, too. I think what's got people interested is it's a piece of metal with rivets. The wings on a 777 have about a million rivets, or fasteners as they call them, aviation fasteners. And the fuselage has another million. So when you see a piece of metal with rivets in the - you know, in the ocean where the crash was, of course it's going to be interest. But they said it had some sort of insulation stuck to it. Insulation on an aircraft is very unique. It's like - kind of like pillows that are lined up on the wall. And they'll be able to tell right away if that's aircraft insulation because it's a very special flame resistant polymer.

COSTELLO: OK. Well, I know they're doing analysis as we speak. Richard Quest, Mary Schiavo, thanks to both of you.

Still to come in the NEWSROOM, U.S. troops now caught up in the crisis in Ukraine as the Pentagon launches military drills in eastern Europe. Is diplomacy done? We'll talk about that, next.

(COMMERCIAL BREAK)

COSTELLO: The Pentagon is backing up Vice President Joe Biden's vow to stand by Ukraine. It announced that U.S. troops will be deployed to Poland and three Baltic nations in response to Russia's actions in the region. Russia, for its part, says it will now begin military drills in the Caspian Sea. A Pentagon official says the U.S. actions are part of an attempt to, quote, "reassure allies." Something that's also the focus of President Obama's trip this week to Asia. Concerns are growing in that region as well that if Russia is allowed to take over more of Ukraine, it could embolden North Korea and Iran.

I want to bring in Nicholas Burns now. He's a former U.S. ambassador to NATO and a professor at Harvard's Kennedy School of Government.

Welcome, Mr. Ambassador.

NICHOLAS BURNS, FORMER U.S. AMBASSADOR TO NATO: Thanks, Carol.

COSTELLO: So, the U.S. is sending troops to eastern Europe. Does that mean diplomacy is officially dead?

BURNS: I think the administration has calculated quite rightly that diplomacy is not going to get us very far with Putin right now because he doesn't want to negotiate anything seriously. He's trying to destabilize eastern Ukraine. And President Obama, quite rightly, has tried not to make this into a military contest between Russia and the United States.

So, what can the U.S. do? Two things. It can move some of our troops not into Ukraine but into those eastern European countries that are members of NATO, to which we have article five in the NATO treaty, collective security guarantee, Estonia, Latvia, Lithuania, Romania, Poland. Those countries need the symbolic reinforcement. These won't be large numbers of U.S. troops. And it really sends a signal to President Putin that his ambitions cannot go as far as the NATO territory because we have this commitment to them. The other thing we can do, of course, is raise the economic cost to them through sanctions. So I think the administration is pursuing the right strategy.

And in particular, Carol, Vice President Biden's visit yesterday to Ukraine was very important because the Ukrainians need that assurance that the United States and Europe are behind them economically and politically and will try to help them emerge from this crisis as best as they can.

COSTELLO: Well, I don't know, I -- if you look at it this way, there are 40,000 Russian troops amassed on Ukrainian's border, right, on the border with Ukraine, I should say, on the Russian side. There's 40,000 troops. We have about, what, maybe 1,000 troops, American, in eastern Europe? Might the Pentagon feel the need to send more as this thing -- if this thing keeps escalating?

BURNS: I think the president's being very careful here. We're not going to be in a position where the United States begins to build up an armored core against those 40,000 Russian troops. It's not going to happen. We're not deploying to Ukraine at all.

But the United States is the leader of NATO. NATO's our most important and successful alliance. We've been in business since 1949. But the members of NATO that are potentially in the future, vulnerable to Russian interference, vulnerable to intimidation, they need the symbolic visible support of the United States.

So I think that moving a couple of thousand troops into this countries does make sense because it's a signal by itself of our continuing commitment to those countries. And we're the world leader. We have to stand by our commitments. So I think the president has done the right thing here.

COSTELLO: Well, I understand symbolic support, but couldn't that translate to empty threat?

BURNS: No, because we're not making a threat. We're not threatening the 40,000 Russian troops. We're not threatening President Putin. What we're doing is saying that he cannot re-divide Europe the way Europe was divided during the Cold War. That the United States will, in effect, with Europe, stand by these smaller allies. And the Baltic states are particularly important, Carol, because they were forcibly incorporated into the Soviet Union in May 1940 and they were treated very, very badly. Their liberation from the Soviet Union in 1991 was a real victory for democracy and freedom. And we've stood beside them for a long, long time since they became members of NATO. So a great power like the United States has to act like a great power with a certain amount of self-confidence. And I think this is the right decision and one would hope that President Putin will understand that there are limits to what he can do in eastern Europe.

COSTELLO: Former NATO Ambassador Nicholas Burns, thank you for your insight. I appreciate it.

BURNS: Thank you, Carol.

COSTELLO: Here's what's all new in the next hour of NEWSROOM. And I'm going to be talking to New York Congressman Peter King to find out if he thinks it's time to give up on sanctions against Russia over Ukraine.

And we'll take you under water to get a new view of technology that could be used in the search for victims of that South Korean ferry disaster.

That's all new on the next hour of NEWSROOM.

(COMMERCIAL BREAK)

COSTELLO: Checking some "Top Stories" for you now at 48 minutes past. The New York City Police Department is facing backlash after encouraging tweets using the hashtag MyNYPD. While some of the responses have been positive, the hash tag was filled with pictures appearing to show police brutality like, oh, that one. And it shows officers holding a man on the hood of a car.

The tweet says "Free massages from the NYPD. What does your police department offer?" The NYPD says the tweets are helping to start a dialogue between police and the people.

Astronauts Steve Swanson and Rick Mastracchio are in the middle of a spacewalk right now. The flight engineers are replacing a spare backup computer after the previous model failed earlier this month. If the mission stays on schedule, they'll spend about two and a half hours getting that job done.

We're watching Wall Street for you this morning, waiting for earnings reports from several high profile tech companies, both Apple and Facebook set to announce their second quarter reports after markets closed today. Let's take a look at the big board you can see the market is down just a little bit about 18 points. Both the DOW and S&P by the way are nearing record levels again.

When it comes to middle class paychecks the U.S. is no longer number one. A new analysis by "The New York Times" shows the United States has fallen from the top spot for middle class income. It now trails Canada. So how did that happened? The study keyed in on three reasons. A lagging education system. Soaring executive pay and a government that doesn't effectively redistribute wealth. To discuss this I'm joined by Seventh Capital Investment managing principal Monica Mehta, and Stephen Moore chief economist at the Heritage Foundation. Welcome to both of you.

STEPHEN MOORE, CHIEF ECONOMIST, HERITAGE FOUNDATION: Hi, Carol.

COSTELLO: Hi. Monica.

MONICA MEHTA, MANAGING PRINCIPAL, SEVENTH CAPITAL INVESTMENT: Thank you Carol.

COSTELLO: Thanks for being here. Monica, I want to start with you. Because you see some problems in "The New York Times" study. What is that?

MEHTA: Well, two big things to point out when you're looking at these numbers. First of all, a dollar earned in Norway is not like a dollar earned in the U.S. It's called purchasing power and here in the U.S. we have a lot more of it. You have to actually earn $52,000 in Norway to live like someone who earns $34,000 in America. And in Canada, there are similar discrepancies; $34,000 in Canada translates to about $27,000 in the U.S.

And the second is, if you actually dig into the numbers of income inequality, what's very interesting is on a pretax basis, the U.S. actually has less income inequality than a lot of the European countries that we typically cite as doing more for their people. But what's happening is on a post-tax basis, we the middle class actually aren't getting that money back from the government.

With a lot of the European countries and Canada, more is actually from our tax dollars is being channeled to programs from the middle class. And when you -- when you factor in that we're collecting about the same amount of taxes per capita in the U.S. and these other countries, that starts to point the finger at the way we spend money, the way the government spends money, and how we prioritize these dollars and why we're not able to get the same kind of services for the American middle class.

COSTELLO: Got you. Ok so I just want to put up a chart. Because I hear you Monica, I do. But this is the chart that "The New York Times" provided and you can see the lack of wage growth the United States has seen since the year 2000. Britain's middle class wage climbed 20 percent since the year 2000; Canada, 20 percent. Take a look at the United States -- Stephen that's nothing.

MOORE: Yes. Look there has been very little wage growth. In fact over the last five years, the American middle class has actually lost about $2,000 of income.

I agree with Monica. I mean this idea that the middle class in the United States is not as well off as those in Europe and Canada I think is extremely flawed. I mean anyone who has been to Ireland or France or Italy or Spain or Greece recently knows that American middle class -- American do better. COSTELLO: What about Britain and the Netherlands and other countries like that. What about Canada? We know that in the countries that you mentioned they had a terrible economic crisis just like we did.

MOORE: Right, right. And you're right there are some Scandinavian countries that you know there are some of the smallest Scandinavian countries like Sweden are doing well. Canada actually is doing very well, Carol.

But what's interesting, two points. One is I don't understand what this has to do with income inequality. I mean the reason the middle class isn't doing well is because there is not jobs. There is not you know there is not economic growth. And when you don't have those things, you don't have the middle class doing well. It has nothing to do with the fact that Warren Buffett and Bill Gates have so much money.

The other point I would make is you know Canada has actually done a lot of the right things recently. They -- they did not go off to this big spending and borrowing binge that we did in the United States in 2008 and '09 and '10. They balanced their budget. They're paying their bills. They cut their tax rates. I mean we could actually learn a lot from Canada about how to turn our own economy around.

COSTELLO: Wow Monica, Stephen is saying we can learn a lot from Canada. You don't hear that very often.

MEHTA: Yikes.

COSTELLO: I just want to say one thing about income inequality.

MOORE: Yes.

COSTELLO: Because according to the census bureau, the average American household in 2012 made about 50 percent less than the median corporate executive. I'm not talking about those executives that make, you know, in stratosphere. I'm talking about executives who made in the six figures. That's a big disparity, isn't it, Monica?

MEHTA: It is a big disparity but I think the point for everyone is to try to make a better life for the middle class and the more we focus on you know populism we're not really addressing the problem. If you actually start digging into the numbers, you're seeing that a lot of the money that the middle class pays into taxes isn't coming back to them and that makes a very big difference in terms of their life and how their life gets lifted back up.

So if we want to give Americans a better life, we need to be more targeted about how we spend money. We just can't afford to be inefficient anymore.

COSTELLO: Yes, you're right about that. Monica Mehta, Stephen Moore, thanks you for your insight this morning. I appreciate it.

MEHTA: Thank you.

MOORE: Good to be with you.

COSTELLO: Ahead -- you're welcome. Ahead in the next hour of NEWSROOM, Australia refuses to abandon the search for the flight while Malaysia prepares to hand over the investigation to an international team. So who would be in control of that team? We'll talk about that in the next hour of NEWSROOM just right after a break.

(COMMERCIAL BREAK)

COSTELLO: Happening now in the NEWSROOM, object of interest. A tantalizing bit of debris washes up on the Australian shore.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: He described the object as sheet metal attached to something with rivets.

UNIDENTIFIED MALE: Australia will not rest until we have done everything we humanly can to get to the bottom of this mystery.

(END VIDEO CLIP)

COSTELLO: Plus, no air pockets. Hope for a miracle fades as more crew members are taken into custody.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We're learning that a young student onboard the ship was the first one to call emergency services.

(END VIDEO CLIP)

COSTELLO: Also, a message for Russia. U.S. troops arrive in Eastern Europe.

(BEGIN VIDEO CLIP)

JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: No nation has the right to simply grab land from another nation.

(END VIDEO CLIP)

COSTELLO: Ukraine ending its Easter truce.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It looks at this stage as though the Geneva agreements are not worth the paper that they are written on.

(END VIDEO CLIP)

COSTELLO: As President Obama heads to Asia to calm fears that Russia's aggression will fuel Iran and North Korea. You're live in the CNN NEWSROOM.

Good morning. I'm Carol Costello. Thanks so much for joining me. We begin this hour with major developments in the search for missing Malaysian Airlines Flight 370. First, an object of interest has been recovered on the southern coast of Western Australia. Officials are calling the lead serious but some have expressed doubt.