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In the Arena
Taxes Versus Entitlements; Murdoch Scandal; Tea Party Tactics Twisting Arms?
Aired July 12, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
E.D. HILL, CNN CONTRIBUTOR: Good evening and welcome to the program. I'm E.D. Hill.
We begin tonight with the ongoing off-putting debt ceiling negotiations. Each side basically calling on the other to act like adults. And that's kind of what happened, as they engaged in a late- night game of Texas Hold 'Em but with our money in the pot.
First, the president jacked up the stakes in an interview with CBS News, warning that Social Security, veterans benefits and disability checks are at risk.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue, because there may simply not be the money in the coffers.
(END OF VIDEO CLIP)
HILL: Well then, Senate Minority Leader Mitch McConnell raised the ante by putting a whole new gambit on the table. The clip notes version of the backup plan is to pass the buck, drop responsibility for the debt ceiling solidly in the president's lap by forcing him to raise the debt ceiling on his own.
McConnell is already catching flak. Presidential candidate Newt Gingrich called it an irresponsible surrender to big government, big deficits and continued overspending.
So are the Republicans handing the president a hot potato or a blank check?
We'll have more on that in a minute. But first, here are the other stories we're looking into tonight.
(BEGIN VIDEO CLIP)
HILL: The ultimate game of hide and seek. The CIA in Pakistan using DNA to track the most dangerous terrorist in the world.
REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: It sounds like it's straight out of a spy novel.
HILL: But the story is fact, not fiction.
And Republicans held hostage by the Tea Party. I'll ask one of their leaders, Dick Armey, will their hard-line position on the debt ceiling take down the GOP, along with the rest of the country?
Then, off with his head. In England, that's how parliament once dealt with the king. Now they're after the head of another great empire. Will Rupert Murdoch keep his crown?
(END OF VIDEO CLIP)
HILL: We'll discuss that later. Now back to the top story. Those partisan gamesmanship ramping up in debt ceiling crises talks.
Joining us from Capitol Hill, CNN congressional correspondent Kate Bolduan.
All right, did they accomplish anything tonight?
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: I wish I had a different answer than I had last night, E.D., but again no breakthroughs today.
I'll tell you that going into today's meeting the prospects from the perspective of Capitol Hill reaching a deal, the prospects really seemed grim today. Both sides up here on Capitol Hill hardening in their positions.
Well, inside the White House, inside this meeting, we are told by Eric Cantor as he returned to the Capitol following the meeting, that inside this meeting, the president laid out in further detail his plan for entitlement reforms, that Eric Cantor -- this is the number two Republican in the House -- that he said the Republicans could actually support, but here's the big but, unfortunately.
But they're still not budging on the issue of taxes. And Democrats are insisting on new revenue, on tax revenue, if they're going to give on entitlement reform. So hence why I say no breakthroughs again today.
Another thing discussed in this meeting, E.D., was this new proposal being pitched out there by the top Republican in the Senate, Mitch McConnell, his so-called backup plan.
HILL: And what about this plan? Because Dick Durbin apparently is saying, well, I'll consider it.
BOLDUAN: Very interesting. And we should warn the viewers, very complicated. Basically, I actually really enjoyed your clip notes version. It's probably the best way for people to understand this.
(LAUGHTER)
BOLDUAN: But my version of the clip notes version of this really is that what Senator McConnell is trying to say is that this process, this backup plan, would give the president the authority to raise the debt ceiling. But that -- but it comes with a few catches.
It would require three very politically tough votes on this issue going into the 2012 election. Another way to read that is it would give Republicans and people opposed to raising the debt ceiling without serious -- spending cuts three opportunities to vote against it and be on the record.
So then the president, if Congress would, say, disagree with him and say you can't raise the debt ceiling, which is possible, he'd have to override them. And it would then put on him the full responsibility of this new debt.
Quite a bit of political background to this new process that he's saying. But Mitch McConnell says that he hopes it's not the plan they have to go with but it's pitched out there as a backup plan.
HILL: I need the rules to all the games they're playing there because it's hard for me to follow.
Kate, thanks so much.
BOLDUAN: I would say the same thing.
(LAUGHTER)
HILL: Well, just hours before the debt ceiling negotiations resumed, Senator Mitch McConnell stood on the Senate floor and declared that any deal at all is impossible as long as President Obama is in the White House.
Well, my guest tonight spent much of his career fighting against the partisan finger-pointing that is now paralyzing Washington. I spoke with Senator John McCain just a few moments ago.
(BEGIN VIDEOTAPE)
HILL: Senator McCain, thank you so much for joining us today.
SEN. JOHN MCCAIN (R), ARIZONA: Thanks for having me on.
HILL: Today Senator Mitch McConnell blamed President Obama for the failure to reach a debt ceiling deal. Listen to this and then give me your opinion.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL (R), MINORITY LEADER: After years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is probably unattainable.
(END OF VIDEO CLIP)
HILL: Do you agree with that?
MCCAIN: Yes, I do. And unfortunately but predictably, the president has now gone from the blame game to the scare game.
According to CNN, that unimpeachable source, which you know, President Obama in a CBS News interview scheduled to air Tuesday night warned that absence a deal he can't guarantee older Americans will continue to receive their Social Security checks, so now they're switching in to scare the Americans, the disability checks, the Social Security checks, pay to the members of the military.
It's really -- it's really, really unfortunate, and it's demagoguery.
HILL: You know it just came out that Senator McConnell also brought this up today, and perhaps it really takes that argument away from the president. He says that he wants to pass legislation authorizing the president to make a successive request to increase the debt limit.
Three different requests he would approve. $700 billion to $900 billion. And that is saying basically if you think it's so bad that the sky is going to really fall, you can do it and we would only have to disapprove it by a two-thirds vote I believe it was.
I mean, it sounds like a brilliant political plan. Does this put the president, though, in really a political pickle?
MCCAIN: Well, I think it certainly puts the -- takes the air out of the balloon of the president that says where there's no long-term -- excuse me, there would be no short-term agreement, we're giving him a chance to have an agreement that would keep the government from shutting down which would keep the Social Security checks going. So it certainly does that.
Also what I hope it does is put pressure on some of the things that were agreed to between the vice president, Senator Kyl, and others would be restored, which have now been taken off the table, unfortunately.
Nobody wants to shut down the government. Nobody wants to. I'm old enough, E.D., that I remember 1985 and we scared a lot of people in 1985. That's not the role of government.
HILL: I agree with you, but I've looked at the numbers. And I'm not a business major, however, I can do, you know, simple math. And when I look at the numbers, it appears that, come August 2nd, we have a very serious choice to make. We can't pay all of Social Security, Medicare, Medicaid, our interest payments and the military pay.
There's got to be, in one of those slots, somebody who doesn't get their money.
MCCAIN: Well, listen, I agree. And perhaps as that effect that would take place of course is the market is imploding. I mean, people's savings would be dramatically reduced because the markets would tank also as the good faith and credit of the United States of America is called into serious question. So no, listen, I have no doubt that that has to happen. But the consequences are incredibly serious. But let me also point out that we should have in my view Medicare reform on the table. We should have Social Security reform on the table. That could be done in a bipartisan fashion.
That was done in the case of Social Security between Ronald Reagan and Tip O'Neill back in 1983.
We could have all these things on the table. But we promised the American people last November they would cut taxes. Not that we would increase spending.
HILL: But at the same time --
MCCAIN: That was not promised. Go ahead.
HILL: If you're saying that Republicans -- the Democrats should have this on the table, you --
MCCAIN: Excuse me.
HILL: -- you would expect that Republicans should have something on the table as well. And you're -- when you're speaking to our Candy Crowley, you know, you said Americans don't want compromise. They don't want their taxes raised. We will not raise taxes.
So if you start from that position, we won't budge on revenue at all. How do you get a compromise? How do you find a solution?
MCCAIN: First of all, I think I misspoke. I said the lesson -- I meant to say the lesson of last November is they want us to cut spending, not raise taxes. Now I think that there are many, quote, "subsidies" and loopholes that could be closed. Ethanol subsidies is a classic example. Agricultural subsidies.
There's many that I don't view as anything but loopholes that should be closed. And unneeded subsidies that could be closed. And I think we'd be willing to talk about those. But to simply just raise people's taxes, no matter whether they make over $200,000 a year or not, is, one, not the mandate we got, and two, it's harmful to the economy.
Our problem is not -- is not taxes. Our problem is spending. The size of government has doubled since 1995. We can't stay on this route.
HILL: Can I switch away just for a moment from, you know, the debt ceiling and our budget here at home, and ask you, because you have such vast experience in international relations.
Do you believe it when Pakistan says that they really are doing everything they can and they want to work with us?
MCCAIN: No, and I do believe that we have to base our relations on the realistic assumption that the Pakistan military, specifically the ISI, has relations with and cooperates with the Taliban, Haqqani network and others, which is directly responsible for the deaths of young Americans. We have to approach our relationship on that realistic basis and no other.
HILL: Senator McCain, thank you very much for your time. Always good to talk to you.
MCCAIN: Thanks for having me on.
(END VIDEOTAPE)
HILL: So as you can see, we have a lot of serious issues to deal with internationally. And the games just continue in Washington. We'll follow up on that a little bit later in the program.
But coming up, England gave us the Magna Carta, the Beckhams and cell phone hacking. We are going to take a look at the British parliament which is now launching an investigation into one of the most powerful men in the world.
Is Rupert Murdoch's media empire driving on the wrong side of the road?
(COMMERCIAL BREAK)
HILL: "In Depth" tonight, the Murdoch newspaper scandal gets even uglier. Disturbing new details emerge in the phone hacking investigation, now pulling in Rupert Murdoch, one of the most powerful men in the world.
British lawmakers want Murdoch, his son James, and the former editor of "News of the World" to testify next week. This, following reports of spying and police payoffs. Targets allegedly included movie stars, the royal family, terror victims and even a British prime minister.
CNN's Becky Anderson is in London. I spoke with her just moments ago.
(BEGIN VIDEOTAPE)
HILL: So it seems the hacking scandal in the UK just continues grow. What is the latest news today?
BECKY ANDERSON, CNN INTERNATIONAL ANCHOR/CORRESPONDENT: There are two incredibly important strands to this story today. The first is this. They have been called to account for their actions. And by them, I mean Rupert Murdoch and James Murdoch and Rebekah Wade Brooks, the CEO of News International, which is the News Corp's UK arm.
Now this is important because this is official. British lawmakers have asked them to appear in front of a parliamentary committee next Tuesday. The statement from News International goes like this. Senior executives, they say, will cooperate with the parliamentary subcommittee's request to appear. It doesn't say who will appear. And it doesn't say that they will appear. It just says that they will cooperate.
And what the MPs or the lawmakers in that committee want to know is why James Murdoch said that he has discovered that parliament, and by that they mean this committee, was misled by some of his executives.
Who are they? Who knew what, when and how? That is the first important point.
Will Rupert Murdoch stand before British parliamentarians on Tuesday? That certainly remains to be seen.
The other really important point today was almost without precedent all three major parties have decided they will back a motion by the opposition Labor Party that Rupert Murdoch should not, should not, make his bid for BSkyB.
Remember the story?
HILL: Yes.
ANDERSON: News Corp owns 39 percent of BSkyB. They want the remaining 61 percent. It is an enormous part of their business going forward if they were to buy it.
Now that effectively means, E.D., that even if the competition commissioner here in the UK, say, in six months' time decides that they can go ahead and effectively bid for this company, it's still going to be returned to parliamentarians.
And what I've been told today by many who work in the House of Commons is don't, Mr. Murdoch, expect any of us to pick up the phone to you anytime soon. And at the end of that whole process, Murdoch will still have to get the green light from British parliamentarians.
Two really important points. So you can see shares in News Corp today, well, they pretty much evened out. But that may be because shareholders know that News Corp have decided to go after their own shares, effectively buy them back for 5 billion quid.
What they're saying is effectively probably the deal or the acquisition for BSkyB is over and News Corp is prepared to go in and shore up their own shares in their own company. Really important news out today.
HILL: We'll continue following this. Becky Anderson, thank you so much for your time.
(END VIDEOTAPE)
HILL: Joining us with more right now is Phil Bronstein, editor at large for "The San Francisco Chronicle."
Thanks for coming on with us.
PHIL BRONSTEIN, EDITOR AT LARGE, SAN FRANCISCO CHRONICLE: Sure. HILL: So, you know, it seems like there was a line that was crossed that there's been no point of return here. It went from royals and movie stars, which was apparently A-OK with people, to the victims of terror attacks and their families, murder victims.
When you listen to the story, were you shocked?
BRONSTEIN: Well, which part of the story? I mean, you know, I think it's a great -- not to make light of the victims, people who are deceased, but I think it's a great rollicking tabloid story. It's worthy of, you know, London tabloid history.
I wish we could have a scandal here in this country like that and maybe our parties would get together and actually figure out the budget.
HILL: I think that is a scandal, the parties themselves. You know, it does seem to be that it is continuing to, you know, wrap up a bigger and bigger portion of this. I mean you've been in the newspaper business for quite a while, and you know that the Murdoch family has been trying to pull off a very big deal to buy BSkyB, the rest of it that they don't already own.
And them as human beings plays into this in England, where they assess whether they're worthy, basically, of buying the rest of this company. When you take a look at that, does it appear that the empire there is about to collapse, the Murdoch empire?
BRONSTEIN: Well, it's hard to know. I mean, you know, it's always the cover-up that gets people much more than the crime itself. And we're just embarking on the journey of the cover-up. We're just starting to see, you know, when the police commissioner in London said that his own investigation was crap, I mean I think, you know, that tells you that we're in for a fun ride.
But I don't know if you're probably too young to remember the movie "Network." And there's a scene where Ned Beatty is playing this Murdoch-like press baron who's scolding this errant TV anchor, and he said you're messing with the forces of nature, Mr. Beale, was the famous line.
And you could almost imagine Murdoch saying that throughout his history, in terms of lecturing people and getting them to do what he needs to do.
Here, we have a circumstance where the forces of nature may be messing with Mr. Murdoch.
HILL: Having been the head of a paper and worked in television as well, you know, I know that they're bringing in Mr. Murdoch, son James and the former editor of "News of the World," but in real life, in normal day-to-day operations, does it go that high?
Are they the ones who would go down to a reporter and say, listen, I want you to -- you know, to phone hack somebody and snoop into them and spy and those sort of things? Or does it normally happen at a lower level?
BRONSTEIN: Well, I've never hacked phones. In fact, I wonder how they managed to do it. I think that's a big unanswered question -- or voice mails in particular. But I think if I were under any circumstances a reporter who's going to hack into someone's voicemail I might tell somebody higher up than me and they probably will feel obligated to keep going up the chain.
You know one can never tell. But I suspect one of the reasons that Rupert Murdoch showed up in London was to make sure that, you know, his first in command, Rebekah Brooks, was sort of toeing the appropriate line. So whether there's a cover-up there that reaches the highest levels of News Corp or whether it's just the head of a company where there are problems, and he's trying to fix them as best he can, I guess we'll -- we may find out. We may not find out.
HILL: Yes, some people seem to feel that it's really that connection between the -- Rebekah Brooks, the "News of the World" editor formerly, and the power that she really had in politics -- and David Cameron's former assistant also having worked over at the paper -- that there just seems to be this coziness that is making people uncomfortable.
BRONSTEIN: Well, I mean, we have the same thing in Washington frankly. There's been a lot of coziness over the years. The White House press corps and the -- and government at all levels. I think that that's a problem when people live and work and depend on each other for their livelihood as the press and powerful people do.
But, you know, I think that Murdoch is probably -- may not be the person this hits. I mean, I wonder if there's -- if there's an equivalent of the Fifth Amendment in London, in Britain. I hope there is, for his sake. But certainly Rebekah Brooks, as the one running the operation there, has a responsibility whether or not she knew.
And I was trying to figure out today, you know, is she more like the G. Gordon Liddy in the Watergate era or she's sort of more like Matahari because of all the tentacles that she has going out to, you know, government and the press and powerful people.
HILL: Did it -- you know, I think -- when I think about this story, I'm sort of surprised that -- and I want to -- give a conflicting message to people, that nothing really seemed to happen when it was just, you know, listening to Hugh Grant's phone conversations. And just a little bit happened when it was actually the royal family.
But it was the -- when it hit common people, regular everyday people, crime victims, that seemed to change everything. Why do you think that is?
BRONSTEIN: Well, I think there's a sympathy factor which is understandable when you're talking about crime victims, when you're talking about minors, when you're talking about soldiers who have been killed. I think that's -- that strikes a sympathetic chord in most people. And also, you know, I think we look at celebrities the way we look at powerful people in general. You know, they have a different sort of mythological perspective about them. And we view them mythologically. And so, you know, we always like to sort of peek behind the curtain and see if there's a little the guy winding up the "Wizard of Oz" behind all that, you know, pomp and ceremony and fame.
But I think when victims are, as you said, you know, sort of everyday people, we all, as everyday people, can relate to that a lot more. And we wouldn't like that if it happened to us. We're voyeurs right along -- we're rubberneckers right along with everybody else when it's rich people --
HILL: Yes.
BRONSTEIN: -- and royals and powerful people. But when it's us, no, we're not so comfortable with that.
HILL: That's a very good point. And that does seem to be where this whole story began to change.
Phil Bronstein, thanks so much for joining us.
BRONSTEIN: You're welcome. Thanks for having me.
Coming up, a compromise on the debt ceiling. Well, that would be good for both parties, right? Not so fast. There is another party. The Tea Party. And I'll ask one of their leaders, Dick Armey, is compromise a dirty word?
(COMMERCIAL BREAK)
HILL: As both sides in the debt talks try to hammer out a deal, Tea Party activists are making no bones about it. You raise taxes, you can lose your job. And at this point, so many Republican House members have taken a no tax pledge that it may be impossible to reach a deal.
And with only weeks before the nation defaults on its debt, many wonder whether the Tea Party's influence within the GOP is pushing the country into financial ruin.
My guest is Dick Armey, former House majority leader and chairman of FreedomWorks, a Tea Party umbrella organization.
Welcome.
DICK ARMEY, CHAIRMAN, FREEDOMWORKS: Good morning.
HILL: So --
(LAUGHTER)
HILL: Good evening. But it's dark in here.
ARMEY: Good evening. HILL: It does seem as if the caboose is kind of leading the train now. That the Republican establishment doesn't have the control. Does it seem that way to you?
ARMEY: No, it really -- first of all, you have to understand, from our point of view, those of us are outside of political parties. The Tea Party activists are independents. Now they have -- many of them have a history in the Democratic Party and the Republican Party. But frankly have just become disillusioned with the two political parties.
And the disillusionment is this. We've got serious work that must get done and can get done. These guys are always putting their own personal partisan political purposes ahead of the nation's purposes. And we're fed up with it.
Now what we've said is the first economic problem that is beleaguering this nation is this government is just physically too big. And we have to cut this government, cap it at a manageable level, where it isn't, in fact, choking out the private sector. That will do more than anything else to get the deficits under control.
We have to demonstrate that we're not going to just go on with business as usual, borrow and spend, so we put the circumstances in place.
Now take a look at the work that Senator Lee has done. And that's the kind of leadership they say we want. Stay focused on the job and leave your partisan politics out of it.
HILL: But the problem that seems to be there is that so many people have taken such a hard line stance. And it's primarily the -- more the Tea Party candidates that have come in. And they've said we've been sent here to do one thing, and that is stop this crazy spending.
ARMEY: Right.
HILL: Now even if you agree that it's crazy spending, you realize the nation has to function. It's got to -- it's got to move forward.
ARMEY: Absolutely.
HILL: And there -- it seems to be an intractable position, where they just won't budge.
ARMEY: All right. OK. Well, let me -- no, I don't think that's intractable at all. First of all, you have to understand about President Obama. He's a fine person I'm sure but he says many insincere things. And he said --
HILL: Well, I feel like all politicians do, frankly.
ARMEY: They all do, absolutely.
HILL: No offense.
ARMEY: He just happens to be exceptionally active in that -- he wants tax increases instead of spending cuts and we've been down this road.
(CROSSTALK)
HILL: But he wants -- he's come out and he says that he would agree --
ARMEY: Now look, in George Herbert Walker Bush showing us in 1990, the Democrats gave us the whole thing, you give us the tax increases and we'll come back later with your spending cuts. That later never shows up.
Our folks are saying very clearly, first of all, understand, the way economies work. If you raise taxes on the private sector, you suppress the opportunities for growth in the private sector.
In the long run, the only growth that's going to give you -- the only source of revenues that will sustain your government will be drawn from the private sector and it must grow. It can't grow now because it's being choked out by this big old sloppy, messy public sector.
President Obama comes out and says, Lord, have mercy, worst of all circumstances, if you don't give me what I want by August 2, I'll have to stop Social Security checks. Let's try this, Mr. President, why not stop sneaking money out the back door to ACORNS?
Why not stop -- why not stop AmeriCorps, one of the most asinine programs ever conceived by men? Will America miss a beat if it loses Ameri Corps? How about corporation from public spending? How about farm subsidies? How about ethanol?
E.D. HILL, CNN ANCHOR: What about the -- what about the jets and the oil subsidies and all those things?
ARMEY: Go ahead. This nation is not in financial peril and our Tea Party activists across the country know this point. We're not in financial peril for what we've done through our government to help truly needy people.
It's what we are doing through our government to oftentimes force assistance on people would don't need to be. How many banks who did not need to be part of the bank bailout were forced to participate by the secretary of the treasury.
That brought them in and said you will take these bailout funds, whether you need them or not, or suffer serious consequence in the -- by the regulators for your refusal to do it.
HILL: It's definitely got to change. David Brooks, I'm sure you read his articles in "The New York Times." This is something he said, talking about the Republican Party in general. He says, "over the past few years, it's been infected by a faction that is more of a psychological protest than a practical governing alternative."
Let me tell you about two polls that I just recently saw. One asked people if they -- if they thought that it was serious, if we -- if we, you know, had this debt ceiling and we defaulted, and we said absolutely.
And then when they were asked, you know, should they raise the debt ceiling, no. They were at odds with each other. Do you think that the Tea Party thing is more of an emotional -- a lot of it isn't logical, it seems emotional --
ARMEY: No, that's unfair. Give me the screaming mimis (ph) on the left and tell me that these serious people who have raised families, going to church every Sunday, run their own business, are unreasonable?
I mean, I've seen -- I've seen the historical nonsense that comes out of the left for years. Remember, I was on a college faculty for 13 years. I've seen the -- stuff you can imagine.
So David Brooks I think he needs to go spend just one afternoon in a college faculty lounge if he wants to see goofy irresponsible people. Now --
HILL: Do you think he can work with either of the parties?
ARMEY: Yes, you can, but basically what this movement -- the Tea Party Movement is born out of America, out of America being concerned for our country.
Because we got a government that will not be serious about their work and want to use the resources of governance for partisan political purposes, neglecting their duty, while they tend to their political haggling.
HILL: That continues. The haggling continues as we heard from our correspondent.
ARMEY: but the practical realities -- if he were alive today, I'm an economist. I'm trained in the profession, I'll tell you, if the Lord John Manner King were on this country's soil, he would say, the first thing you must do is get this government pared down to size, make room for growth in the private sector, then you will get that growth by giving tax relief to producers --
HILL: Well, hold on, I'm sorry, we'll have to have you back because there's just too much to talk about and we've got to go. Dick Armey, thank you very much for joining us. A lot of ideas. Not enough time to get to them. We'll be right back.
(COMMERCIAL BREAK)
HILL: International news today, when the half-brother of the president of Afghanistan was shot dead. Joining us now is Michael Semple, a former U.N. officer with three decades of experience in Afghanistan. He joins us from Geneva via Skype. Michael, thank you for being with us. Tell me about this brother that was assassinated today.
MICHAEL SEMPLE, FELLOW, HARVARD KENNEDY SCHOOL OF GOVERNMENNT: Well, it's really quite remarkable news because he was sort of the linchpin around, which they -- the whole security and political system inside of Afghanistan has been built. He was an absolutely pivotal figure.
HILL: I understand he was allegedly working for the CIA and he was also, from what I hear, one of the big drug players in the country as well. Is that accurate?
SEMPLE: Well, I mean, even when people are described as working for the CIA, I think what it means is that agencies like the CIA, when they wanted anything done in Kandahar, they knew the person they had to go to for it was Ahmed Wali Karzai.
HILL: But doesn't that indicate the level of the problem in Afghanistan. That you don't go to the government. You go to the bit players in the region or bit players overall, but they rule their area.
SEMPLE: Yes, absolutely, because the official position that Ahmed Wali Karzai had was he was the chairperson of the provincial council, which actually is an elected post. But normally these provincial councils have no power whatsoever.
But actually, he wielded enormous power, both in Kandahar and in the neighboring provinces. Of course, nowhere was it actually written or spelled out exactly what his power was.
But everybody understood that it was impossible for anybody to get -- to do anything inside the civil administration or even in the security organs of the Afghan government there. Ahmed Wali Karzai was the one who's decision counted.
HILL: So if this guy was so important, should it be more cause for concern that he's assassinated out of the blue, that someone this important, the half-brother of the president, is killed?
SEMPLE: Yes, absolutely. Inevitably, his passing leaves a power vacuum, which the government and its NATO supporters will struggle to fill.
Now there might have been other ways of building a government in Kandahar and southern Afghanistan, but this is the way that President Karzai had chosen.
So now that the person he relied upon has been shot and you know, they're left with a great big hole in the center of power.
HILL: Do you think that the Afghanistan of today operates that much differently than the Afghanistan of, say, a decade ago?
SEMPLE: Absolutely. You know, the Taliban had their own distinctive way of running Afghanistan. It was a fairly to the totalitarian system. There wasn't freedom of thought.
A lot of criticism of the way they run it, but certainly there was a certain form of security there. Now the Afghanistan, under Hamid Karzai, got the notion of freedom, but chronic insecurity and deep corruption.
HILL: Michael Semple, thank you for joining us with your perspective. Appreciate it.
SEMPLE: Thank you.
HILL: Coming up next, it's an American tradition, baseball, hot dogs and the IRS? It may seem that way to one lucky or perhaps not so lucky fan who caught Derek Jeter's 3000th. You won't believe the story.
(COMMERCIAL BREAK)
HILL: This is one of those "what the heck" kind of stories. Only in America can the simple act of rooting for your home team turn into a tax nightmare.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Guys, this is it.
HILL (voice-over): That could be the fate of New York Yankee fan, Christian Lopez. Lopez, a 23-year-old Verizon store worker, was enjoying the game in the outfield stands Saturday when a baseball came sailing his way.
Lopez who played college football outwrestled his father and the rest of the crowd for the ball. This particular baseball was a home run hit by Yankee star Derek Jeter and not just any home run. It was Jeter's 3,000th hit, an extraordinary milestone.
UNIDENTIFIED MALE: I saw the ball. I was like wow, this is it.
HILL: In the past, home run baseballs of this magnitude have sold from anywhere from $200,000 to $3 million. But when Lopez was hustled into a backstage area, he turned over the ball to Yankee management for free. Well, the grateful Yankees gave him four season tickets, parking and signed bats and balls.
UNIDENTIFIED MALE: I had an opportunity to meet him just a little while ago. Got his ticket from his girlfriend so he owed her quite a bit.
HILL: The total estimated value of Lopez's gift bag, somewhere around $50,000, plus a meeting with one of his idols. Not bad for a day at the ballpark, right?
But here's the bad news. When you win something like on "The Price is Right" or when Oprah gave those cars away to audience members, you're liable for taxes. And Lopez, who owes $100,000 in student loans, now may have to pay an estimated $14,000 in taxes on the gifts the Yankees gave him.
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HILL: Can you believe that? Catches the ball, does the right thing, hands it over to the Yankees, Jeter gets it, and the IRS may tell him 14,000 bucks.
Well, fans say -- I can't of agree with this, maybe the Yankees should step up to the plate, perhaps Jeter himself, and help cover the cost of any tax payments. At the very least, Christian Lopez should not be penalized for superior fielding ability. We'll be right back.
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HILL: Over the years, the CIA has come up with creative ruses in the pursuit of information, but this one is straight out of a spy novel.
They reportedly sought an elaborate program to try to collect DNA in the Pakistani town where they ultimately found and killed Osama Bin Laden.
I spoke with CNN's Reza Sayah in Islamabad a short time ago.
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HILL: Reza, this has to be one of the most fascinating stories of the week. We're learning more about the Bin Laden hunt and that the CIA was able to get a senior Pakistani doctor to set up a clinic. I guess a fake clinic, but actually to administer shots in the hopes of obtaining DNA. How did that all get set up?
REZA SAYAH, CNN CORRESPONDENT: This is a rare look into high stakes international spying at its best. Despite the intricacies we should point out it's not clear that it worked.
But here what we know. A Pakistani security official is telling us that this Pakistani doctor is in custody because he's being suspected of helping the CIA set up this plot to find out where Bin Laden was hiding.
The plot was this doctor setting up, staging a fake vaccination campaign, offering free shots and vaccinations to the children and the people of Abbotabbad where the Bin Laden compound was located. According to "The Guardian" paper, he hired two nurses. These nurses went around from home to home and the plan was to get to the Bin Laden kids, extract some blood.
Match the DNA samples from that blood to the blood and the DNA sample of Bin Laden's sister who passed away last year in Boston, Massachusetts.
We haven't verified if these nurses got in the compound but we did track one of them down by phone. This is one of the nurses allegedly involved in this plot. She repeatedly said I can't talk about this matter. We talked to residents of Abbotabbad who said indeed, just days before the Bin Laden raid, two nurses were going around in Abbotabbad delivering, administering vaccinations. So fascinating look at what the CIA was doing and it sounds like it's straight out of a spy novel.
HILL: Yes, that they were able to get a Pakistani senior doctor to work with them. The ISI, sort of the CIA in Pakistan, the ISI there immediately arrested this doctor. The U.S. is intervening, trying to secure his release.
The ISI was just criticizing Washington for allegedly having complete knowledge of a recent assassination of a journalist in Pakistan who had been writing about the links between the ISI and militants, terrorist organizations. So what's the mood there?
SAYAH: Well, all these drive home the fact that the relationship between Islamabad and Washington is in the tank. It's struggling. It started deteriorating after the raid on the Bin Laden compound. It's no secret that Pakistan didn't like how this raid went down.
Of course, the U.S. taking unilateral action without informing Pakistan. Pakistan used this as a violation of their sovereignty. Immediately after that raid, they've arrested a number of people suspected of being involved with the CIA, setting up their network of intelligence here.
The latest being this doctor. It's not clear why he was picked up or if he's going to be charged. It could be this is pay back to Washington or payback for some of these Pakistanis who helped the CIA.
Another likely reason could be that the Pakistani intelligence agencies simply want to find out how the CIA set up this elaborate network on their soil behind their back.
HILL: All right, Reza Sayah, thank you so much for getting something on this.
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HILL: In another sign of deepening distrust between the two allies, this week, the White House announced that it's cutting off about a third of the aid going to Pakistan.
Tonight, a warning from one of its most experienced diplomats that closing the U.S. pocketbook may cut off any influence. Maleeha Lodhi has been Pakistan's ambassador to the United States and the United Kingdom.
She has a new book called "Pakistan, Beyond the Crisis State." And earlier tonight, the ambassador and I had a candid conversation.
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HILL: Thank you very much for joining us. I'd like to get your thoughts on what the outcome of suspending aid will be. Will it get Pakistan to behave in a way that we've been asking for or will it simply make the ties even weaker?
MALEEHA LODHI, FORMER PAKISTANI AMBASSADOR TO THE U.S.: I think at a time when the relationship hit work bottom, this is likely to worsen the relationship and not to improve it because we've been here before.
Back in 1990, the United States imposed military and economic sanctions on Pakistan and what did it do? It left the U.S. without any influence with Pakistan or its military for 11 years.
It wasn't until after 9/11 that the relationship changed because Washington needed Pakistan's help. So I think at this point in time any kind of punitive action against Pakistan is likely to really make matters worse.
HILL: Some have suggested that because the ties with Pakistan have become so weak, that the U.S. should strengthen its ties with India and try to do an end run that way. What do you think about that?
LODHI: Well, I think the main issue here is what the United States goals are in this region. The goals are very clear and I think there's common ground with Pakistan. The first goal is to defeat al Qaeda. We've heard American officials say recently that this goal is within reach, but the goal has not been achieved yet.
Pakistan is pivotal to defeating al Qaeda. Secondly, the United States is looking for a way to retreat in an honorable way from Afghanistan. And for that, it needs a political settlement in Afghanistan to pave the way for the end of U.S. military intervention in Afghanistan. Again, it is Pakistan, which has a pivotal role to play in that.
HILL: Absolutely, pivotal role, the problem with folks in Washington is that they don't believe that Pakistan really has played the role. That they had to have known Bin Laden was there that they did nothing about it.
And now we find out today it's reported that a senior Pakistani doctor was used by the CIA to try to get DNA from what was suspected of being Bin Laden's family, to make sure he was the person in that compound.
When that came out, Pakistani officials arrested the doctor. So I guess the sense in Washington is that they aren't getting any help anyway.
LODHI: Well, the question that Washington has to ask itself is if it begins to cut off its assistance, and its assistance frankly means influence. If it wants to cut off assistance then it's going to engage in a counterproductive act.
Is it going to achieve what it seeks to achieve by doing that? I think more important is for both countries to step back from the kind of free fall that this relationship is in. To see how we can in a way work the differences because absolutely there are differences between the two countries.
Work at these differences, while trying to find that common ground, which will help achieve common objectives. These common objectives are clear. Defeating terrorism and ensuring that there's a political settlement and an end to the war in Afghanistan.
HILL: Well, I know that you understand the way Washington works. You've got a very good grasp on the mood of the American public, having been an ambassador here in the United States.
So as you know we're going through this struggle in Washington, figuring out how to live within its means and there is a limited amount of money. We give billions of dollars to Pakistan.
If you were to make the argument, here's what you've gotten in return for your investment, what would be the best thing that we could say we've gotten from that money that's been spent?
LODHI: Well, look for a start. This is the prerogative of the United States. It must decide whether the assistance it gives builds the kind of influence it wants with Pakistan or it doesn't. Pakistan reacted very coolly --
HILL: I understand the influence, but I'm just asking for something specific, something concrete we can say, this is what we got.
LODHI: Look, Pakistan's cooperation is long-standing. If the United States today says it has managed to degrade al Qaeda to the point where in a way the defeat of al Qaeda is within reach, you know, Washington needs to ask who helped them do this.
And I think that's a question only Washington can evaluate for itself. Pakistan has reacted very coolly to the suspension of military assistance. It has simply said already that this military assistance actually will not stop Pakistan from carrying out its countermilitancy operations, which it is quite capable to do from its own resource.
I think this whole question of it being used in some kind of transactional way is deeply resented by the people of Pakistan. I think if you did a poll in Pakistan today and there had been such polls in the recent past.
You will find the people saying, if this aid comes with these kinds of strings and with the public humiliation of Pakistan, we'd rather not have it.
HILL: I think we all know that it definitely does come with strings. As you said, money buys influence. Influence means, able to say --
LODHI: But money --
HILL: -- this is easy to do -- LODHI: -- but money doesn't buy love and money doesn't need a country abandons its own national interest. I think the challenge here is really not to throw money at the country and say you have to do what we ask you to do, the challenge here is to find common ground.
I think it's important to get away from the transactional relationship and to try to rebuild a relationship that is based on mutual accommodation of each other's interest. It cannot be my way or the high way. This is not the way you conduct diplomacy with the country of 180 million people.
HILL: Well, certainly, as you said, we were at rock bottom now so we have no place to go but up. We'll see if that happens. Thank you very much for sharing your insight, having been the Pakistani ambassador to the U.S. and to the United Kingdom, working over at the Woodrow Wilson Center and also at Harvard University. We certainly appreciate you joining us. Thank you.
LODHI: Thank you.
(END VIDEOTAPE)
HILL: And I'd like to thank you for joining us IN THE ARENA. I'm E.D. Hill. Goodnight from New York. "PIERS MORGAN TONIGHT" starts right now.
