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JOHN KING, USA

Deficit Reduction Plan; Jacob Lew Interview; Selling the Plan

Aired April 13, 2011 - 19:00   ET

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


JOHN KING, HOST: Thanks Wolf and good evening everyone. The man often called Egypt's last pharaoh ruled for 30 years, but tonight the former President Hosni Mubarak is in custody and facing questions about human rights abuses and corruption.

Also we'll go "One-on-One" with the prosecutor building a war crimes case against the Libyan dictator Moammar Gadhafi. But we begin here at home with your bottom line and the country's staggering, staggering deficit and debt challenge. Check this out.

I want to show you this as we start the show. Imagine the federal budget down the road a bit if the United States does nothing, does nothing, about its deficit. Projected spending by 2020, it's not as far away as you think. Imagine this. For every dollar the United States government takes in, this is where it would go -- 28 cents to Social Security, 24 cents, interest on the national debt, little more than 21 cents to pay for Medicare, little over 15 cents to pay for Medicaid.

What does that leave -- 11 cents for everything else? If the country does nothing, Social Security, interest, Medicare, Medicaid, 11 cents on the dollar for everything else. Pretty pathetic, isn't it? President Obama laid down his marker today calling for $4 trillion in deficit reduction over the next 12 years and also calling the leading Republican proposal unfair and misguided.

(BEGIN VIDEO CLIP)

BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: There's nothing serious about a plan that claims to reduce the deficit by spending $1 trillion on tax cuts for millionaires and billionaires. And I don't think there's anything courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill. That's not a vision of the America I know.

(END VIDEO CLIP)

KING: Now the architect of that Republican plan was right there in the front row for the president's speech but if you sense a big bipartisan opening, think again.

(BEGIN VIDEO CLIP)

REP. PAUL RYAN (R), WISCONSIN: Exploiting people's emotions of fear, envy and anxiety is not hope, it's not change, it's partisanship. We don't need partisanship. We don't need demagoguery. We need solutions. And we don't need to keep punting to other people to make tough decisions.

(END VIDEO CLIP)

KING: Now one of the many dividing lines between the Republicans and the president is tax hikes. The GOP says no way. But the president proposes $1 trillion in new taxes over the next decade including another run at eliminating the Bush tax cuts for those making more than $250,000 a year.

(BEGIN VIDEO CLIP)

OBAMA: We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can't afford it. And I refuse to renew them again.

(END VIDEO CLIP)

KING: Extended coverage tonight of the competing plans, the contentious politics and this question, is the president leading or is he following? In a moment we'll talk live to the White House point man on taxes and spending, the budget director, Jack Lew, but first on Capitol Hill our senior congressional correspondent Dana Bash, with me here our national political correspondent Jessica Yellin.

Let ms start, Dana, to you first with a simple question. What did we learn today about the prospects of what we in Washington would call a grand bargain on deficit reduction? Do we end the day with that more likely or less likely?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: I got to tell you, John, as disappointing as it sounds, listening to the president, listening to and watching the House budget chairman and other Republican, it certainly seems less likely. The dividing lines are stronger. They're thicker. They are deeper.

And it has gotten personal. Having said that this -- these are between the two main sides. Having said that, the negotiators, the so-called "gang of six", six senators, three Democrats, three Republicans are still working. They're kind of in the bunker while these rhetorical grenades are going back and forth.

They say that they still believe that they can find a middle ground perhaps in the next three weeks or so. But we're going to watch for that, but I got -- watching and listening to both sides today, it's pretty hard to imagine that they can actually break through.

KING: Hard to imagine they can break through, Jessica Yellin. I just outlined the big disagreements on tax cuts. The Republicans say forget about it. We won't entertain any tax cuts. Another big issue and a huge driver in government spending is health care. Here's the president describing his philosophy versus the Republican philosophy on health care.

(BEGIN VIDEO CLIP)

OBAMA: Now, here, the difference with the House Republican plan could not be clearer. Their plan essentially lowers the government's health care bills by asking seniors and poor families to pay them instead. Our approach lowers the government's health care bills by reducing the cost of health care itself.

(END VIDEO CLIP)

KING: Now, it's about dollars and cents, trillions and billions of dollars and cents, but it's also about the view of government, the role and the reach of government, the philosophy of government.

JESSICA YELLIN, CNN NATIONAL CORRESPONDENT: That's right. I mean as the president pointed out, there is a very stark meaningful debate we're having right now. As much as this is all colored by politic, on one hand, you have a Democrat saying if you let government as it is, if you like it large and helpful in your life in Medicare, in Social Security, you're going to have to start paying more if you're wealthy.

And Republicans saying we want to pay a little bit less and we can accept a smaller government. Now in truth, the president did not lay out as much detail about his proposal for fixing Medicare as Paul Ryan did. And I know Dana has a ton more information about the details of that. So it doesn't seem that they're getting any closer to a real negotiation on entitlement reform this year. We could see some significant new budget cuts to get through our debt limit fight, but in terms of entitlement reform, now the two sides are just locked down and more polarized than ever.

KING: Well let's look at some of the details, a comparison between some of the plans because you have the president's outline today. He calls it a framework. You also have the Ryan budget. That's the House Republican budget. You also have and the president borrowed some from this, the Deficit Commission plan, the Debt Commission. He appointed this commission. He did not include any of their proposals in his budget sent up to Capitol Hill several weeks ago.

But he did take some of them today. Here's essentially what you get. The Debt Commission would cut spending about $2 trillion over nine years; the House Republican plan, nearly $3 trillion over 10 years. The president, smaller spending cuts you see there. Medicare changes, the Debt Commission and Paul Ryan, essentially in the same ballpark, about $400 billion.

The president about half that. Medicaid, the Debt Commission didn't do as much in Medicaid, the Ryan plan very controversial, deep cuts in Medicaid. The president again significantly below the Republican plan. Here's the big difference. The president proposes that trillion dollars in tax increases. The Ryan plan and the Debt Commission would cut taxes. Ryan would cut them quite substantially.

Your maximum tax rate, you see the difference here, the president would have a higher tax rate here. And they all claim to come in somewhere roughly in the $4 trillion ballpark of deficit reduction and they all claim that and then they all dispute the other guy's figures. Back to Capitol Hill -- Dana Bash, the president also laid out, despite these polarizing differences, a pretty ambitious timetable. He says ask the Democrats and the Republicans to name some members. They'll sit down with the vice president. He wants within a couple of months to have an agreement -- feasible?

BASH: Yes, he wants -- he wants them to sit down in May and I think come up with something by June. Is it feasible? I mean, sure, anything is possible -- anything is possible, but given where both sides are right now, not just in terms of the rhetoric, but let's just look at the policy. Let's just give an example of entitlements, Jessica just mentioned those.

Yes, we saw -- we see the numbers that the president wants to cut Medicare and Medicaid. That was new that he said today. But we don't know how he wants to do it. And we do know, like it or not like it, we do know where Paul Ryan and House Republicans want to do it. They want -- we know how they want to change Medicare and Medicaid.

Medicare, they want to really give private plans to people and change the way -- overhaul the program. And Medicaid, they want to give the money to states and let them decide. The president's issue was kind of more amorphous (ph), so that's just one example of how you know the sides are really not even that well defined to try to come up with some kind of plan in the middle. Therefore, it's going to be hard to do in a month.

KING: And so we're watching this from a Washington perspective, can a Democratic president get along with the Republican House? Can he broker a grand compromise? Jessica Yellin, some other people watching this work in the financial markets and work around the world because there are some warnings -- the International Monetary Fund saying if the United States doesn't start dealing with its deficits and debts you could have a global financial crisis.

I just want to show one of the reasons the president got into this debate is because they have to have a vote pretty soon in the Congress on raising the government's ability to borrow, the debt limit. And you see right here our current level is right here and -- see all these bounces. This is all the time your government has essentially said we can put more money on the credit card.

That's one way to look at it here. Now if you look at here, this is the maximum line and how close right here. So Jess, if the government does not essentially say I can borrow more money and Congress would have to approve that, then we are weeks, maybe a couple of months away from bang (ph).

YELLIN: Yes, I spoke today to Jamie Diamond who is the CEO of JPMorgan and somebody who's been very engaged in these issues. And he said that it's potentially catastrophic if you allow this debt limit, if we don't let the U.S. borrow more, we default on our debt. The rest of the world won't take us seriously. It hurts the economy.

He says it's a terrible time to stifle this recovery. At the same time, there is no likelihood that you're going to get major entitlement reform in a matter of weeks or months. Major economists will tell you, you can kick the can down the road a little bit, but they need to do something in the short term, even if it's deficit reduction, cutting spending now, with promises to fix Social Security, Medicare in the future.

KING: Jessica, Dana, thank you. We just mentioned the vice president will take the lead for the administration trying to bring people together, but the president's point man when it comes to counting the money and making these policy decisions is the director of the Office and Management of Budget, Jacob Lew. He joins us live now from the White House.

Mr. Lew, I want to start there, with this ambitious time table because the president was pretty partisan in parts of his speech today. The Republicans fired back in a pretty partisan way. Sometimes we say that's a divide we can't solve. Sometimes we say maybe they're blowing off steam and they'll finally get in a room. Do you really believe that you can get in the room with the Democrats and Republicans and essentially by the 4th of July have a grand bargain?

JACOB LEW, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: John, I think that what we've learned over the last few months is that we can work together. In December, we worked together to do quite a few pieces of important legislation, including a tax bill that nobody thought we'd be able to agree on. Just these last two weeks, we've been able to work together to cut $78.5 billion from spending in the current year.

So I think our track record of finding a way to work together is actually better than people give it credit for. This is a much bigger challenge. And I think that if we look to the next several months, we do have to be realistic. I'm not sure that anyone imagines that all of the specific pieces of legislation would be agreed to in the time frame we've discussed. But I think one could have an agreement on an approach and some initial pieces of it. And I think that that's -- when we get together right after Congress gets back from its break the first week of May, the first order of business. If you start by asking what can you agree on and agree to agree on those things, you can make progress.

KING: So let's go through some of these things. Let's try to go through as many specifics as we can so people watching at home understand precisely what their government is debating. One of the things the president proposes and a lot of Republicans like this is this trigger, essentially a debt fail/safe. That if the United States debt is not reduced to a certain percentage of the economy, by 2014 you want to have this, essentially it automatically triggers across the board spending cuts to make that happen.

A lot of Republicans find that attractive. Would the president sign a deal that has that trigger in there if he does not get tax increases? Because, now, he might not be president at the time or he would be halfway through his second term if he wins reelection. But if you don't get the revenue increases, then of course you might have to make even deeper cuts. Would he sign his own proposal if you don't get the tax increases?

LEW: Well, just to be clear what he proposed was an across the board mechanism that would cut spending and raise revenue. So it was covering both sides of the equation. And I think it's very important that whatever mechanism we put out there should be even-handed because the idea of these kinds of triggers is not that they should take effect but that the policy process should make decisions so that they don't need to take effect.

And it's very important for everyone to feel that there's a consequence to failure to act. I think it's important for the financial markets. It's important for us, staying on a path of meeting our targets, for there to be a fail-safe. But the fail-safe is not plan A. The fail-safe is plan B.

KING: And the president said today, and he was adamant about this, he said he would refuse to sign another extension of the Bush tax cuts. As you know, a lot of people in Washington don't find that to be a very credible threat or marker, promise, I don't know what word you want to use for it, because he campaigned in 2008 on getting rid of the Bush tax cuts. He promised last year to get rid of the Bush tax cuts and he signed an extension to the Bush tax cuts as part of the budget deal -- tax cut deal you were just talking about. Is this a final answer from the president of the United States never, never he would veto anything that includes an extension of those tax cuts?

LEW: I think the president was very clear today. And I think if you look at December, December was a very particular point in time when we were just at the very beginning of a recovery and the risk of a tax increase in January was something that could have set us backwards. It could have put us back into a recession. We're now talking about several years into a recovery and we're not going to be in the same situation.

KING: So Shermanesque never, never?

LEW: I just said, the president was very clear today.

KING: OK. Another thing he said is that wealthy Americans need to pay more. He was very clear about that. And one of the things in addition to not extending the Bush tax cuts anymore, he said if you're a wealthy American, we're going to look at some of the deductions. Maybe you'll have big comprehensive tax reform and this conversation will go away, but under the current system, mortgage interest deduction was one of them. At what point, at what level, how much do you have to make where then you would not get the mortgage interest deduction that you get today under the president's approach?

LEW: Well, the president didn't put out the specific composition of a tax package. He called for a tax reform debate to be undertaken --

KING: Where does -- where does he think that line should be though? That's one of the -- as you know, one of the criticisms is you laid out a vision. What are the specifics? LEW: The president's been clear that we don't need to raise taxes for people at $250,000 and below. There's enough benefit to special tax provisions and lower rates in the higher brackets. There are options that don't require that. That's what he wants to work towards.

KING: Another thing the president said today was that Social Security is not a big driver in the deficit, but it is something both parties should sit down and work on over the next few years. Senator Lindsey Graham, two other Republican senators today proposed raising the retirement age to 70 as part of a package that they said would put Social Security on firmer financial footing.

Would you and the president embrace that as an effort to say you know what, there's a proposal. We're trying to be bipartisan. We're trying to move Social Security and these other bigger issues down the road. Is that a good number, 70?

LEW: I think one has to start the discussion about Social Security and understanding that it's not the driver of the deficit we're facing today, but it is a very important problem, and it's an important problem because we have an obligation to make sure that Social Security is on sound financial footing for the next 75 years, not just for the next five or 10 years.

And we have invited a bipartisan discussion that would put a broad range of options on the table consistent with the principles the president laid out. And I think that rather than saying are you for provision X or against provision Y, we need to have that conversation --

KING: But you know a lot of --

(CROSSTALK)

KING: A lot of your critics say he's the president of the United States. Why don't you be more specific? Why doesn't he lead?

LEW: No, I'll tell you, in Social Security, I can tell you from having worked on this issue for 30 years and having been one of the principal people involved in 1983, advising the speaker of the House when he negotiated with a Republican president, a Democratic speaker, Tip O'Neill, negotiating with Ronald Reagan, that got resolved not because either party put something on the table, but because both parties came to the table and worked together through -- in that case, intermediary of a commission.

There are lots of ways to work together. I've never seen a constructive Social Security debate that started with one side digging in, in one place and another side digging into another. The president has tried to structure a debate, which will actually give us the ability to make progress. And we should do it right away. We shouldn't wait.

KING: One last question for you sir, and then we'll continue this conversation in the weeks ahead, hopefully as we make progress on this issue. The president was very clear today that he wants to raise taxes on wealthy Americans as part of this deal. The Republicans were equally adamantly clear they will not accept any tax increases. If the Republicans hold to that position and you cannot get tax increases in the short term and that becomes a 2012 campaign issue, and we litigate it in the country, would the president this year, if you have some modest down payment on deficit reduction while we fight out the bigger issues, would he change his deficit reduction target if he doesn't get the tax increases or would he agree to more cuts?

LEW: Look I think the important thing -- one of the important things about today is that there is an emerging consensus that the right target is $4 trillion. It's less important if it's 10 years or 12 years, but to be on a path where we're reducing the deficit as a percentage of GDP to the level that we propose that gets it to the point where it's shrinking as a percentage of the economy. I think that the -- what we can agree to this year is something we'll figure out when we engage with the vice president, with the leaders, and we should do as much as we can.

Just agreeing on a goal would be important. Agreeing on components, several components would be even more important. I don't think that the president suggested today that he was not fully aware of the deep divide on the tax issue and on some of the issues regarding the future of Medicare. But that doesn't mean that there's not an awful lot that we can work together on. And I think that's what the coming weeks are about, even if we can't agree on everything, we should agree on what the size of the problem is. We should agree on the pieces of it that we can agree on and we should put a mechanism in place that keeps the political process focused.

KING: Jack Lew is the president's budget director. Mr. Lew, we'll keep in touch as these negotiations continue. Appreciate your time --

LEW: Of course.

KING: Appreciate your time tonight.

LEW: Thank you.

KING: Thank you.

And ahead for us tonight, the war crimes case against the Libyan dictator Moammar Gadhafi, the prosecutor ready to present his evidence and he shares some of it right here with us.

And next, leadership or politics -- we put the president's deficit speech to the credibility test.

(COMMERCIAL BREAK)

KING: President Obama's deficit reduction speech ran about 43 minutes with a lot of policy talk and no shortage at all of sharp political shots at his Republican critics and their plans.

(BEGIN VIDEO CLIP) OBAMA: We don't have to choose between a future of spiraling debt and one where we forfeit our investment in our people and our country.

(END VIDEO CLIP)

KING: But the president also warned liberals they must, must embrace fiscal discipline.

(BEGIN VIDEO CLIP)

OBAMA: To those in my own party, I say that if we truly believe in a progressive vision of our society, we have an obligation to prove that we can afford our commitments.

(END VIDEO CLIP)

KING: The middle between the left and the right normally a pretty good place to be politically was that the president's main goal here? Let's check in with our senior White House correspondent Ed Henry, (INAUDIBLE) two people who understand the deficit and debt crisis from Cambridge our senior analyst David Gergen, with me here in the studio our senior analyst Gloria Borger.

Ed, to you first, the White House is clearly aware the critics right out of the box say the president's not leading, this is a political document. At the end of the day, the question I was talking about with Jess and Dana today, do they think they have moved the ball closer to some sort of a significant deal, or do they move themselves to where they want to be for the reelection campaign?

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well it's some combination. I mean they're realistic inside the White House behind me that they didn't create a deal just with one speech. And they say the president's going to go out on the road now, try to sell this deficit reduction plan, fill in the details, but let's face it, the heavy lifting is still to come, because while in that clip he was saying, you know, Democrats have to realize they can't get everything.

In the next breath, he was saying, we want money for education. We want money for high speed rail. We want money for high speed Internet, you name it. There are all kinds of new spending, so there's a problem there potentially. He talked about defense cuts, but then said, look, we're going to study it, and their going to do a review and they'll get back to me. So there's still not a lot of details here. So in terms of the political guts, the political muscle to actually get this through Capitol Hill, they're still a long, long way from that.

KING: So David Gergen, come in on that point, as someone who has in recent days whether the issue be this question, taxes, spending, deficits, and debt or some of the foreign policy challenges, you have talked about the need for presidential leadership. Did he meet your test day?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Very mixed, John. I think the president does deserve credit for raising his sights on how much debt reduction we need. Remember in his budget just a couple of months ago he was talking about $1 trillion in cuts over 10 years. Now he's talking about three trillion over 10 years, four trillion over 12 years. So he has brought himself -- I think he's bringing his party much closer to where Republicans are on the fundamental.

And Jack Lew was right about that. But when you get into the specifics of what he wants to do, you know, on all the tough issues, he basically punted those over to somebody else. Let the Congress figure that out. Let some commission figure that out. I can't think of anything in this that he proposed today that is unpopular with a majority of Americans.

(CROSSTALK)

GERGEN: I don't think there's anything -- and as you know, to try to balance the budget, you've got to do some unpopular things.

KING: He said there has to be shared sacrifice, but he was not terribly specific. However, you can understand the White House position where you've got to deal with that restive liberal base that already thinks you've given up too much and you've got to deal with the Republican resurgent, Republican House majority that says no new taxes and more spending cuts. He's in a tough spot.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, he's in a campaign. I mean this was the first speech of the 2012 campaign. It was very clear to me the people at the White House say we don't want to propose anything specific because we don't want a target on our back. What they did today was put a target on somebody else's back.

And that is the House Republicans talking about Medicare. I mean you know the language the president used was so emotional. We're not used to hearing this language from him, saying, I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry -- very tough language. Talking to Republicans after the speech, one said to me, does the president know what he did today? Because what he did today is guarantee that we're going to be tougher and compromises will be much, much more difficult.

KING: How do they explain that, Ed? It was a -- was a pretty tough political speech from the president.

HENRY: It was, except they sort of laugh, because they say, look, this wasn't even the hardest shot we've gotten in the last few hours in this town that basically, you know, Republicans are firing away, attacking this president left and right. He fires back ever so gently against Paul Ryan who's had his plan on the table and all of a sudden everyone says whoa, whoa, whoa, don't be tough. Don't be partisan, so they kind of laugh it off --

BORGER: That wasn't so gentle. I didn't think that was gentle --

(CROSSTALK) HENRY: I mean you know they say, look, he's had his plan on the table. They've been beating up on the president, saying you haven't gotten anything on the table yet. And he finally gets it on the table and they say, oh, you're too tough -- so I mean look there's going to be some of this back and forth. I think at the end of the day one of the most interesting reactions came from Erskine Bowles and Alan Simpson who led the president's commission and they gave him kind of a lukewarm support.

They said look, this is a good first step. But they said we're also going to look at the "gang of six" on the Hill. We're going to look at Paul Ryan and they put the president in the same level of some of these other guys who have other plans on the table. And then they said the moment of truth is now. So this was maybe a step forward but not a huge step forward.

KING: Huge -- not a huge step forward they say. This is a conversation, and if at home you think it's a bunch of numbers from politicians in Washington trust me, this is incredibly important. We'll stay on top of it in the days and weeks and the months ahead as these negotiations continue.

Ed, David, Gloria, thank you. Ahead tonight here, dramatic new image of Japan's tsunami and next the war crimes case against Moammar Gadhafi straight from the prosecutor.

(COMMERCIAL BREAK)

KING: The latest now on the Libya crisis -- a short time ago Libya's deputy foreign minister called a news conference to accuse Qatar of providing the rebels in eastern Libya with French-made anti- tank missiles. He also claimed Hezbollah fighters are helping the rebels in the western city here of Misrata. CNN's Fred Pleitgen was at that news conference. He joins us now live from Tripoli. Fred, any evidence to support this idea that Hezbollah is in there helping the opposition?

FREDERIK PLEITGEN, CNN CORRESPONDENT: No, there were no -- there was no evidence whatsoever. In fact, he was questioned on that, on why the Libyan government is claiming. On the one hand, there's Hezbollah in there, which, of course, is a Shiite militia. On the other hand, the Libyan government also claims that al Qaeda is apparently in Misrata as well. Didn't give any evidence on that, also didn't give any evidence on the anti-tank weapons apparently supplied by Qatar to the rebels.

There was a CNN crew that did see some Milan anti-tank weapons in Benghazi a couple weeks ago. So, it may be true that they are getting these weapons. However, there was no proof whatsoever provided by the Libyan government that on either of these claims, even though the government was pretty hard pressed on both of those, John.

KING: And, you know, one of the big issues of dispute, Fred, has been Misrata, the city here. I want to show you some video. It's been a city under siege from pro-Gadhafi forces. I want to show a little bit of video. This is a NATO airstrike yesterday in the region there. And you see the strike come right in there and, boom, target this tank or military vehicle on the ground.

The question is: what is the latest from there, Fred? And in the complaints about -- from the opposition of getting more help, are they beginning to get it?

PLEITGEN: Well, I don't think they're still getting the help that they feel that they need. I mean, what you have in Misrata right now is a state where there's really heavy artillery and mortar pounding going on by pro-Gadhafi forces in that city every day, including today. Those are reports that we're getting, there were several killed and wounded in Misrata today as the fighting continues.

You have there the same thing basically that you have in the east of the country. There's somewhat of a stalemate there right now. The opposition forces are not able to make any gains because, of course, they're badly outgunned by the Gadhafi forces. But, on the other hand, the opposition fighters seem to have guerrilla tactics. They are sophisticated to the point where they are able to stop these Gadhafi fighters.

And, of course, this is really taking a heavy toll, especially on the civilians in that area. When I was there in Misrata, in the one hospital that was still functioning, there were a lot of children who had been wounded. There were also other civilians who have been wounded in the fighting because it's just getting so very bad there.

And on top of that, John, what you also have is a humanitarian crisis where not enough medical aid and not enough foot aid is getting into that town. And that, of course, now, as this drags on, is taking a very, very heavy toll. And, of course, today, Hillary Clinton came out and she said that it was clear that the Libyan government is still targeting civilians in that town of Misrata -- John.

KING: Misrata, right here in the west. Fred Pleitgen, live for us tonight in Tripoli -- Fred, thanks.

(BEGIN VIDEOTAPE)

KING: The embattled Libyan leader Moammar Gadhafi is facing diplomatic and military pressure, and he could soon face legal pressure as well. The International Criminal Court is building a case against Gadhafi for his attacks on anti-government protesters. That court created back in '02 tries people accused of genocide, crimes against humanity, and war crimes.

And with us now is the prosecutor, Luis Moreno-Ocampo.

Sir, thanks for being with us.

You say you're 100 percent certain you have a case against Gadhafi. What's the evidence?

LUIS MORENO-OCAMPO, PROSECUTOR, INTERNATIONAL CRIMINAL COURT: And a case on Libya. Who will be prosecuted? The judge will decide.

What I have is evidence showing that after Tunisia, members of the Libyan government tried to plan how to control revolts in Libya. They planned to hire mercenaries, because they don't trust their army.

You know, in Libya, they only handle the ammunition in the same barrack. The army here, ammunition is in different barrack. So they try to hire all the people and planning. And then on the 17th of February, when the demonstration started, they started to shoot demonstrators.

KING: And you say you don't name Gadhafi. But you know the structure of the government. Can anything happen in Libya at that level without his approval?

MORENO-OCAMPO: What I have witness who were in different incidents when they were shoot at. In demonstrations, when they went to the cemetery, in the supermarket, different places, mercenaries shooting people around. So I have all this evidence. And it's still happening.

In Libya, the worst is not what happened in Benghazi. The worst has happened in Tripoli today, because these people in Tripoli, no one protects them. And if they believe you are not loyal, they will abduct you.

What we have is strong evidence of a case. And now, we're trying to define with precision who is responsible.

KING: Do you have strong evidence directly tying it to Moammar Gadhafi?

MORENO-OCAMPO: That's up to the judges. You will know when I present my case to the judges. We are collecting pieces showing how they organized the system. And who will be presented to the judges is something you will know after we present to the judges.

KING: Is there any doubt in your mind that he is in charge?

MORENO-OCAMPO: I think there's no doubt in your mind. There's no doubt in your mind.

I have to present evidence. No doubt (ph) in my mind. I have to have evidence of criminal accountability. I cannot move for political reasons, because people believe.

KING: And what is the scope of things we were talking about? "The New York Times" recently, for example, found some pictures in Zawiya. There were on an old abandoned police building. We have some of the photographs we can you show.

You see what look like somebody, you know, beaten in the back. You see a photograph there on the screen, if you can see it. It looks like somebody who had been beaten in the back, maybe whipped or something across the back.

There's another picture where there's a body on a floor. This is where they smell the blood on the wall there, the people apparently whispering to "The New York Times" that there were, you know, beatings and torture in these rooms. Do you have evidence like this?

MORENO-OCAMPO: We have dozens of these videos, pictures --

KING: Dozens?

MORENO-OCAMPO: Yes. Technology changed -- technology promote those who organize demonstrations. The Gadhafi government also used technology. There was SMS threatening citizens not to make demonstrations. Also, we are collecting evidence in this way, report from this way.

KING: And you won't say whether you will bring -- try to bring charges against Gadhafi himself. How many people are we talking about in the senior level of the regime?

MORENO-OCAMPO: We prosecute few, the most responsible, from one, two, or three. That is the number.

So -- but I first have to bring this before the judges. They will decide. Then you will know who is it.

KING: Put it into context. In your time on this court now, almost a decade, how does this fit in, the abuses in Libya, compared to elsewhere, you know, on a scale?

MORENO-OCAMPO: Oh, it's worst. In terms of numbers, that is worst. But this here is the absolute power the regime in Libya has, they can do whatever they want. If you were against the regime, you're a criminal. So that's why it's so incredible what happened there because what happened just in Benghazi, in Tripoli, they can do whatever they want.

The new thing now is this technology -- this Facebook idea is not just changing Arab leadership. It's changing how the world react, because the Security Council was created 65 years ago. In 10 days, they reacted. And now, we can promote (ph) litigation in a few weeks.

So, the world is changing. And the demonstration of the world can stop these atrocities.

KING: And when will you go to the judges and say, here's my evidence, produce the indictments?

MORENO-OCAMPO: First, I will inform the Security Council in May 4th because they request my intervention -- will be my next step. And after that, I will present my case and the judges will decide. And then the next challenge is how to implement the arrest warrant because that's the beauty of this. You have to go to war, you just go and arrest criminals and stop the conflict. That is a possibility.

KING: So, do you believe within a matter of weeks, you'll have an arrest warrant for leading members of the regime, possibly including Moammar Gadhafi?

MORENO-OCAMPO: (INAUDIBLE) weeks, yes. KING: Weeks?

MORENO-OCAMPO: Yes.

KING: And what happened to somebody like Moussa Koussa, the former foreign minister? He was on your list of people you wanted to look at, you wanted to see if you could tie him to some these allegations you have of these abuses. Once he defects, that he leaves -- is he cooperating with you?

MORENO-OCAMPO: We're in touch with him. We're planning to interview him. So --

KING: Has he indicated he'll be open to that?

MORENO-OCAMPO: Yes, we're in touch with his lawyers, because we -- at the beginning when we saw his role was important role, and we warned them, including Moussa Koussa, saying, you have to control your troops. So the fact is it's a good indication because he could not control so he defected. So, we'll see.

We're planning to interview him to see -- to explain to us his responsibilities.

KING: So, you don't automatically say because he left, because he defected, he gets immunity. You want to talk to him first?

MORENO-OCAMPO: We'll talk to him first. Yes. You have to be sure what's happened.

KING: As you know, there have been some critics who say the existence of your court and your specific investigation of Gadhafi and the regime makes it harder to come up with a political settlement. Makes it harder to say, leave, get out of the way, just find some country to have refuge, because Gadhafi has no guarantee that if he leave, he still wouldn't be prosecuted.

How would you answer those critics?

MORENO-OCAMPO: No, I got nothing. I got to do a role. I had to collect evidence and present it to the judges. Political responsibilities are in the Security Council. They decided to do justice and they can stop me if they want. If they want to do negotiations, they can do it. So, they have political power to do it.

As a prosecutor, I focus of the areas of the crimes. That's my business.

(END VIDEOTAPE)

KING: Our thanks there to Mr. Moreno-Ocampo. He's the prosecutor looking into the Libyan allegations against Gadhafi. We'll keep on touch on that case.

And still ahead here, the Egyptian President Hosni Mubarak and two of his sons are being investigated in connection with the killing of protesters. He denies it. We go live to Cairo, next.

(COMMERCIAL BREAK)

KING: Welcome back.

If you're just joining us, here's the latest news you need to know right now:

This afternoon, a San Francisco jury convicted baseball home run king Barry Bonds of lying when he told a grand jury his trainer never injected him with a needle. But, this is important, the jury deadlocked on charges Bonds lied about knowingly using steroids, forcing a mistrial on three perjury counts.

In Japan today, the president of Tokyo Electric said he's creating a plan for short-term payments to people affected by the crisis at the company's crippled nuclear plant. Despite heart- wrenching new video of abandoned pets inside the evacuation zone around that plant, Japan's government tells CNN it has no plans to retrieve abandoned animals in those contaminated areas.

We've also run across some newly uploaded home video from the day the tsunami hit. Look closely. This is amazing and it's sad. You can see the water in the street rushing directly towards the camera. You can hear the screams, the horrific screams.

The photographer turns to run higher up the hill, and turns back in time to see are car, buses and houses washing away.

We'll be right back.

(COMMERCIAL BREAK)

KING: For 30 years, Hosni Mubarak was the singular force in Egyptian politics and life. Tonight, he's in police custody, detained, along with his two sons, for 15 days to face questions now about alleged corruption. The remarkable turn of events -- well, it's being celebrated on Egyptian streets as a victory for the little guy.

(BEGIN VIDEO CLIP)

IVAN WATSON, CNN CORRESPONDENT: You're smiling?

UNIDENTIFIED MALE: Yes. Happy, of course. Everybody happy.

(END VIDEO CLIP)

KING: Ivan Watson conducted that interview. He joins us now live from Cairo.

Ivan, remarkable to see the happiness and the smiles there. What do we know tonight about the health of the former President Mubarak who apparently had some sort of heart issue? They said on state TV, a heart attack. Do we know any more tonight about his condition and how it affects the questioning? WATSON: There have been an awful lot of contradictory reports from government officials, as well as from local media and state media, John.

One of the latest announcements came from the head of a team of doctors from the Justice Ministry who were with Hosni Mubarak at the hospital in the resort town of Sharm-el-Sheikh yesterday when he was being questioned. The interior minister apparently called for doctors to be present because of his precarious health status.

The doctor said on Egyptian television, his name is Dr. Ahmed al- Sebai, that he suffered heart palpitations and that he had some blood pressure problems, but he was still able to walk on his own and his condition is stable. He also revealed some details that we've never really heard before publicly that Hosni Mubarak suffered colon cancer -- sorry, prostate cancer last year and had an operation for that when the government widely reported he had been treated and operated on in Germany, having his gallbladder removed. His status, he is believed to still be in Sharm-el-Sheikh.

His two sons -- this is very important -- one of them was being groomed to possibly being his successor, been reported to have been moved to a prison on the outskirts of Cairo. A remarkable 180 for the former ruling family of Egypt.

KING: And, Ivan, the gentleman there, the vendor you had in your package there, that remarkable happiness he had -- is that the sense, is there a sense that perhaps -- I know there are a lot of questions about the transition to democracy, will it come fast enough? Who will take advantage or, you know, have the upper hand in that? Is there a sense the investigation of Mubarak, does it give people some confidence the transitional government is serious about real change?

WATSON: This is a very powerful symbol for Egyptians. I saw a taxi driver in the street spot me and wave his hands like this and say, "Mubarak's in handcuffs," with a big smile on his face. Just a few days ago, you had tens of thousands of people in Tahrir Square, John, and they were all demanding that Mubarak be prosecuted. They were also accusing the military government here that took over after he stepped down on February 11th of protecting him and protecting his family from being prosecuted.

So, this is going to give the military some wiggle room with the public that was getting increasingly frustrated, give it some space. It's a popular populist move as well. It's going to satisfy a lot of people on the ground.

However, there are activist, there are human rights workers and some of the revolutionaries who helped push Mubarak out of power who have some very serious misgivings about the military, especially the military tribunals and widespread accounts of torture being carried out by the military when it detains activists, protesters, in the streets of the city, John.

KING: Ivan Watson, live for us tonight, a fascinating time to be in Cairo -- Ivan, thanks. Several important developments also in the Libya political crisis today. The Pentagon revealing that some U.S. warplanes continue missions over Libya under the new NATO command of the no-fly zone there. Eleven U.S. aircraft are under NATO operational control, charged with suppressing Libyan air defenses. The Pentagon says those planes have flown nearly 100 sorties since the shift from U.S. to NATO command, and only three of those missions did the U.S. aircraft fire weapons at Libyan regime targets.

The Libyan opposition was the center of attention today in a major democratic conference in Doha, Qatar. Opposition leaders were promised more humanitarian aid and Qatari officials also promised allies will consider the military equipment needs of the rebels who complain daily they are outmanned and outgunned by the regime.

CNN's Reza Sayah tracked the conference from the opposition stronghold of Benghazi.

(BEGIN VIDEOTAPE)

KING: And, Reza, at the meeting of the so-called Libyan contact group in Doha today, a lot of promises, a lot of diplomatic help, a lot of promises of friendship, promises of humanitarian aid, all welcome. But not what the rebels want most of all, is it?

REZA SAYAH, CNN CORRESPONDENT: No, they want airstrikes and countries like France, Britain, and especially Qatar did call for those airstrikes. It's not clear if NATO is going to heed those calls. But these are calls and promises we've heard before, John. And that really reflects what we saw in this Doha meeting.

What this was, was all the key players in this conflict really restating their position. The only difference was they were in one place, one stage, in Doha, with the exception of course of representatives of the Gadhafi regime. They weren't invited. They didn't show up.

But what you had was the rebels asking for more money, more weapons and more help. The French, the British and the Qataris pushing NATO to do more. The U.S. is continuing to keep a lower profile. They didn't send Secretary of State Hillary Clinton when other countries did send their foreign secretaries. Instead, the U.S. sending senior diplomat William Burns and he didn't show up to the post-meeting news conference. And you also had African leaders who once again showed their reluctance.

So, again, these are key figures who are, once again, restating their position. Not answering a lot of questions where all this is headed, John.

KING: And one of the interesting figures I will say on the sidelines there, Moussa Koussa, the former foreign minister, a former Gadhafi insider who defected and now clearly wants a role of sorts here. What's the reaction among the opposition leaders to Moussa Koussa wanting back into this discussion? SAYAH: They said a meeting with Koussa was not on the agenda. But one opposition official suggesting to me not to rule out a meeting with Koussa in the future. He said if Moussa Koussa would present his intention, what he could offer on paper, in a written statement, perhaps -- perhaps the opposition would be open to meeting him sometime down the road, which signals that the opposition has not decided what they want to do with Mr. Koussa.

On one hand, they don't want to appear soft to a person they have called a murderer, part of Gadhafi's inner circle. On the other hand, this could be a way for them to expose the Gadhafi regime as one that's fracturing as a regime, that has people defecting, and who better than Moussa Koussa to say that.

KING: Reza Sayah for us tonight in Benghazi -- Reza, thanks.

(END VIDEOTAPE)

KING: A quick break. When we come back, the vice president's -- well, sleepy reaction to the president's big speech.

(COMMERCIAL BREAK)

KING: Let's close tonight with a serious and then not so serious moment glance at the president's big speech on deficit reductions today. Your views are probably shape by your politics. Maybe you support the president, maybe you don't.

This is every dollar. By 2020, every dollar that comes into the United States, 28 cents on Social Security, 24 cents on interest on the debt, 21 cents on Medicare, 15 cents on Medicaid. What's that leave? Eleven cents on the dollar for everything else.

Whatever your political views, this is a serious crisis. You should demand the politicians get about fixing it.

Look at all that -- so much of the dollar would be completely dedicated, interest, Social Security, Medicare and Medicaid, that's just by 2020. Major problem. They need to deal with it. It is serious.

This? Not so serious. The vice president will lead the negotiations, the president says. The vice president, he was in the front row from the president's speech today. And -- well, it was a 43-minute speech. And

(VIDEO CLIP PLAYS)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Ten years from, if you're 65 year old who's eligible for Medicare --

(END VIDEO CLIP)

KING: Deep in thought? Maybe sleeping? Maybe a nod.

The Treasury Secretary Tim Geithner seems to be pulling away a little bit from the body language there. I don't know. We'll see how that one goes.

We'll see you tomorrow night.

"IN THE ARENA" starts right now.