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JOHN KING, USA

No Deal Yet; U.S. Embassy Attacked; "News" by Trickery

Aired July 11, 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.

Tonight's Britain's tabloid scandal escalates. A new report says two Rupert Murdoch-owned newspapers improperly obtained and published information about former Prime Minister Gordon brown's family and finances.

And tensions between the United States and Syria, near a boiling point tonight. A government that beats its own people when they march peacefully slow to offer help somehow when the United States Embassy is under attack.

But first up tonight the clock is ticking toward the once unthinkable, the United States being unable to pay its bills because it's maxed out its credit line. To get more spending power President Obama is trying to broker a deal with Congress that would slash more than $2 trillion from the government's red ink over the next decade, but getting there is proving difficult.

Republicans refuse to consider higher taxes. Democrats insist no Social Security or Medicare cuts. President Obama, well he's left to sound like a nagging parent.

No breakthrough however at this afternoon's White House session and the president will reconvene the talks tomorrow. Let's discuss the stakes and the politics with our chief White House correspondent Jessica Yellin and our chief political analyst Gloria Borger.

Jess, to you first, the sound we didn't quite have there was the president saying it's time to rip off the Band-Aid. It's time to eat our peas. He spent a little more than an hour and a half with the key negotiators in the room there. What happened today, any progress at all?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: No breakthrough as you say, John, but the way it's been described to me by multiple sources is that they essentially turned the floor over to Eric Cantor, the leader in the House of Representatives, who worked out so many of these details with Vice President Biden before Speaker Boehner and the president started negotiating and they sort of let Cantor spell out how he would get to a deal.

Cantor speaking largely for the conservative caucus in the House and the bottom line is when Cantor added up all his cuts, what I've been told is it only came to 1.7 or $1.8 trillion. Well short of the 2.4 trillion needed, according to their own math, to raise the debt ceiling. So they sort of let him walk out there, show that it's just not enough on its own and let the whole group decide, well now how do we get to that 2.4 trillion. Is it through raising revenue or do we now go to that larger deal that they've been talking about, sort of letting everybody see it just ain't enough on cuts alone.

KING: So early in the negotiation, you sort of lay out the parameters. Gloria Borger join the conversation and first, listen to the president earlier today at the news conference, to Jess' point, essentially saying you reach a point, you have so much in cuts, but you have to get to a certain number. The president and the Democrats are saying the only way to get there, there is some revenue, meaning some tax increases. But the Republicans control the House, so the president is saying if they don't budge --

(BEGIN VIDEO CLIP)

BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: I do not see a path to a deal if they don't budge, period. I mean if the basic proposition is it's my way or the highway, then we're probably not going to get something done because we've got divided government.

(END VIDEO CLIP)

KING: How much of this is, look, August 2nd is the deadline, the president would like this all on paper this week, that's simply not going to happen. The president can say I want it done this week --

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Right.

KING: -- as much as he wants. How much of this is the posturing, the positioning and how much of it is this a serious philosophical and policy divide that they might not be able to break.

BORGER: I think -- I think it's a serious philosophical policy and I would add theological divide because at this point you have 230 House Republicans who have taken a no new tax pledge and that's defining their politics. You have presidential candidates, Republicans out on the trail saying don't vote to raise the debt ceiling.

So if this were just about politics for lots of Republicans I think they might have cut the Boehner deal, the John Boehner deal because you would really help the deficit. But at this point, they believe they cannot vote for any kind of new taxes. And so compromise is going to be very, very difficult.

KING: And so Jess, listen to the president here earlier today because he knows that the Republicans are saying he wants to raise taxes now in the middle of a recession and the president is saying well not exactly. Nothing would happen this year or next year. It's down the road.

(BEGIN VIDEO CLIP)

OBAMA: I want to be crystal clear. Nobody has talked about increasing taxes now. Nobody has talked about increases -- increasing taxes next year. What we have talked about is that starting in 2013, that we have gotten rid of some of these egregious loopholes that are benefiting corporate jet owners or oil companies at a time when they're making billions of dollars of profits.

(END VIDEO CLIP)

KING: What is the White House calculation as we get closer to the deadline, what can they get out of the Republicans on revenue, what's their calculation?

YELLIN: Well, first of all, some of it's a little incoherent on all sides because there's so many different potential deals in play. If you go with the middle deal, one of the analyses is you can potentially get Republicans to agree to some of these loopholes that we talk about closing the tax loophole for private jet owners, oil, gas companies, those sorts of things and maybe this payroll tax holiday, extending that and in exchange for some minor tweaking of Medicare, but nothing that really gives the Republicans too big a win on that issue.

And they would also argue, to Gloria's point earlier John, that you actually need this. It's not just a win for Democrats; you need it because you need Democratic votes to get this through because you're going to lose so many Republicans who simply won't vote to extend the debt ceiling under any circumstances. So that's the calculus if you went with the middle deal, there would be an entirely different math for a tax reform package if you went with that larger deal that's more in the $4 trillion range --

BORGER: I don't know if you agree, Jess, but the irony here to me is that a larger deal would in many ways be easier to cut because it's so obvious what you would have to do. If you do a smaller deal, then you have to have Eric Cantor lay out by piece by piece by piece, cut by cut, by cut, what he would do if you don't have the revenue side of it, so it makes their life more difficult --

KING: But to get the bigger deal, you need trust that they would actually then do comprehensive tax reform, rewrite the code so the Republicans could make the case we didn't raise rates. Trust is a word that will be put to the test over the next week plus of negotiations. Jessica Yellin at the White House, Gloria Borger, thanks.

UNIDENTIFIED FEMALE: Sure.

KING: Among those in the room for the talks the number two Senate Democrat, Richard Durbin of Illinois who is with us tonight from Capitol Hill. Senator, let's just start. Take us inside that room. These are a bunch of guys sitting around the table who, in the past anyway, don't have a great relationship of trust. What's it like in there?

SEN. RICHARD DURBIN (D-IL), MAJORITY WHIP: It's been a good meeting. We still have a long, long way to go. The president leads the meeting, as you might expect, with the vice president sitting across the table. He basically gives everyone a chance to speak their mind. We've had a presentation of different points of view and different ideas. We haven't reached to a point we need to be, but we're moving in that direction. The one thing for sure, the president said don't plan on doing anything else until this is done. We're going to meet every single day until it's done.

KING: As you know and I think you catch some of these harpoons or these complaints, if you call around among Democrats, a lot of them will tell you, some in private, but even some publicly, we don't like the way this is going because the Republicans have essentially said we're not going to give you much if anything in the area of revenues, and yet the Democratic president still expects us to give him some Medicare, some Social Security cuts.

Democracy for America, a liberal group, put out this e-mail today. "Cutting Social Security, Medicare or Medicaid is insane. It will be a punch in the gut to middle class families and will send the country deeper into recession." Your base is not happy here.

DURBIN: No, I understand that. They don't know the whole story and, frankly, we're not publishing a blow by blow of the conversation in the room, but this much I can tell you. We are not going to see any cuts in Medicare, in Medicaid, certainly not Social Security. In the course of this conversation OR this negotiation, we're certainly not going to see anything unless we're dealing with revenue that shows it can be sacrificed across the board and, if we go to those programs, it will be to strengthen those programs to make sure that they have a longer life that can continue to provide the basic benefits that we all want to see in those programs.

KING: Let's be clear here. So the Republicans say they're open to closing some loopholes, maybe getting away -- getting rid of a few tax subsidies but rates are not going to change as part of this conversation. If all that you get is loopholes, will this deal also include Medicare and Social Security changes and Medicaid changes?

DURBIN: I don't believe so and I'll tell you why.

KING: Then you won't get a deal, right?

DURBIN: That's right. That's one of the problems we face. When we listen to Congressman Cantor lay out his view of the world, he says oh we've got to close some of these special interest loopholes because you know they are embarrassing, we can't justify them. But then we have to cut taxes along with every dollar we save. That doesn't reduce the deficit.

At the end of the day we're still in this deep hole looking up. What we need to do and I believe it from the Deficit Commission is to put everything on the table in an honest fashion, that's revenue, that's entitlements and that's spending and come up with a package that works, that's fair to all Americans that doesn't destroy Social Security or Medicare, makes them stronger.

KING: But it's clear the speaker of the House doesn't agree with you completely there. Let's listen to a little bit of John Boehner today essentially how he sees a deal.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), HOUSE SPEAKER: Americans would say that a balanced approach is a simple one. The administration gets its debt limit increase and the American people get their spending cuts and their reforms and adding tax increases to the equation doesn't balance anything.

(END VIDEO CLIP)

KING: You're not getting taxes through the House, Senator, so where does this go?

DURBIN: Well, John's my friend, but he's putting nothing on the table with that proposal. Let's be honest about this, extending the debt ceiling is simply paying for things that we've already spent. You know take the wars, for example, strongly supported by the Republican Party. Now when we talk about borrowing the money to pay for them they're saying oh listen that's too big a sacrifice to asking unless we can cut spending. And you know what their spending cuts consist of? Asking for college students to pay more in interest, asking for senior citizens to pay more for Medicare, asking for hospitals that provide help for the poorest in America to receive less in reimbursement. There's no sacrifice for those who are doing well in America under the Republican approach.

KING: And what happens, Senator, if in the end the president very much wants this deal and he gets loopholes from the Republicans and nothing more, so you get some new revenues but not by raising rates, not by getting rid of the Bush tax cuts for the wealthy or anything like that that you would like, and he turns to you and he says all right, I know this is going to be hard but I need you to go get me the votes and we're going to have some Medicare and some Social Security and some Medicaid savings, and I need you to sell this deal?

DURBIN: It's not going to work. If we're going to deal with the entitlement programs and really look at them in an honest fashion, the Republicans have to look at revenue in an honest fashion. To try to spare the most wealthy people, those most comfortable in America making over $250,000 a year from any additional sacrifice, but then to turn to working families who are putting kids through school or senior citizens on Medicare and say you make the sacrifice, that just isn't a good approach. Democrats aren't going to support it.

KING: You served in the House and now you're the number two Democrat in the Senate. You're pretty good at counting votes. Based on where we are today and the Republican adamancy no tax increases, are we going to get a deal?

DURBIN: It's going to be tough. You know the president today challenged their math. He added up all the things that they wanted to cut and said you know we don't get to the number that you're talking about. You have got to be more honest with us. You've got to be I think more forthright in coming up, coming -- putting things on the table and I might add both sides should. But at this point we're not really making a lot of progress. We're really understanding our positions. There's more to be done.

KING: And it's been pretty clear when the speaker wanted to get the grand bargain and that grand bargain would have had to include some more dramatic tax revenues, it was pretty clear the message to the speaker from the Tea Party from the conservative base was no way. They wouldn't give him that long of a leash. What about -- what are you telling the president about -- you just talked here how you could not go to Capitol Hill and sell Medicare, Social Security, Medicaid cuts if you don't get the revenues (INAUDIBLE). How blunt is your message to the president, saying sir, maybe in the past we maybe could get you the votes, but maybe not this time?

DURBIN: Well it's a little different dynamic, John, because the president understands that. That is what he's told us. From his personal point of view he said how can I ask for sacrifice from the people who are struggling the most in America and not ask those who are the most well off and making money to at least put something in to make this work. He understands it. He doesn't have to be reminded.

KING: On a scale of one to ten, one being probably not, ten being a deal, where are we?

DURBIN: Well we're going to pass the debt ceiling. Because in the privacy of that room everybody at that table knows that failing to extend the debt ceiling is going to be very, very damaging to this economy. At a time when we're struggling with high unemployment, we don't need higher interest rates. We don't need the full faith and credit of the United States to be questioned. We need our credit report to be clean so that we can move forward to build this economy. So at the end of the day we're going to have an understanding, we're going to have the extension of the debt ceiling.

KING: All right, we'll see if that comes to pass. Senator Richard Durbin of Illinois, appreciate your time tonight, sir.

DURBIN: Thank you.

KING: Thank you.

And still to come, the Tea Party perspective on the debt talks. Freshman Congressman Tim Scott helps us understand the pressures on the House Speaker John Boehner.

And next the U.S. Embassy in Syria is attacked and the Syrian government is slow to respond. Suffice to say Washington isn't happy.

(COMMERCIAL BREAK)

KING: For weeks now we've shown you Syrian security forces attacking crowds of peaceful demonstrators. Yes, attacking their own people, but in Damascus today those same security forces did nothing as about 300 people attacked the U.S. Embassy and the U.S. ambassador's residence. Members of the mob broke windows and security cameras, defaced buildings with spray paint, threw eggs and tomatoes.

The attacks appear to be retaliation for the U.S. ambassador's recent show of support for those Syrians who are calling for peaceful change in their country. A few hours ago Secretary of State Hillary Clinton condemned the Syrian government's inaction during today's violence.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: We demand that they meet their international responsibilities immediately to protect all diplomats and the property of all countries. The Assad regime will not succeed in deflecting the world's attention from the real story unfolding in Syria.

(END VIDEO CLIP)

KING: CNN's Arwa Damon is in Damascus and a bit earlier I asked her how in a country where the security apparatus is so tight today's violence could have gone on and on and on.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Well John, quite frankly, they haven't explained it just yet. And we did reach out to them for official comment, but they said that you know they were fairly preoccupied with this national dialogue conference and did not have any comment as of yet.

The U.S., though for its part, has come out fairly hard slamming the Syrian government for its inaction. And an official at the Embassy here told us that this is an unfortunate distraction because the Syrian government continues to beat, imprison, torture and kill people who want to peacefully protest. And this really is, is a sign of the deteriorating relationship between the Syrian government and the West.

KING: And the Syrian government, to a degree, blames the U.S. ambassador, Robert Ford, because he has made now a couple of public demonstrations of support. Help us understand that better.

DAMON: Yes and a lot of it really revolves around the trip that both Ambassador Ford and the French ambassador took to the city of Hama. They went there on Thursday, spent the night, and then returned to Damascus on Friday. The Syrian government enraged that such a trip had taken place.

Hama significant in that it has been the scene of some of the largest anti-government demonstrations, but then last week the Syrian military converged around it. The ministry of interior went so far as to post a statement saying that Ambassador Ford had met with saboteurs (ph) while in Hama and that they were inciting the protests.

KING: And so Arwa, would it be wrong to assume that in a country where the security is normally so tight that this attack on the U.S. Embassy could be payback?

DAMON: Well, it is the natural assumption that one would draw, assuming that the Syrian government did have a direct hand in it. It is true that the Syrian security apparatus most certainly is incredibly capable of clamping down on demonstrations as we have been seeing in the past when it chooses to do so. And that is something that U.S. embassy pointed out, too, questioning just how it is that this type of a violent demonstration could take place.

KING: Arwa Damon for us in Damascus, Arwa, thank you.

(END VIDEOTAPE)

KING: Discuss this further now with the former State Department official Nicholas Burns and CNN national security contributor Fran Townsend. Fran is a member of the External Advisory Boards for the Department of Homeland Security and the CIA.

Nick Burns, this relationship has been deteriorating for several weeks and a couple of months now. The Syrian government gets mad at our ambassador, then our Embassy there gets attacked. What now?

NICHOLAS BURNS, FORMER UNDER SECRETARY OF STATE: Well John, Syria's a police state. The group that attacked the American Embassy, the ambassador's residence wouldn't have done that without the incitement and encouragement of the Syrian government itself, so obviously Secretary Clinton was right, fully within her rights to slam the Syrians today, to insist that they adhere to the Vienna Convention of 1961.

That's international law that demands that all countries protect diplomats within its boundaries. Syria did not do that today. And they have a track record. About a decade ago they also unleashed a crowd against another ambassador's, American ambassador's residence, so this is part of their playbook, but it's not going to be acceptable to the United States and it shouldn't and we saw a very good firm response from the State Department today.

KING: A firm response Fran with words, but what next here in the sense that Secretary Clinton can complain and should complain about an attack on the U.S. Embassy, but this government Nick mentioned a recent track record, it includes attacking its own people as well.

FRANCES FRAGOS TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: That's right. But let's be clear about what the motivation of the Syrian government was in sort of condoning and allowing such an attack to take place. Not only are they angry at Ambassador Ford who showed great courage in going to Hama with the French, also the French ambassador. This is an intimidation tactic.

They want him out. As long as he is there, as long as he bears witness to peaceful demonstrations, he's an impediment to their sort of using their forces against their own people. And so this is, as Nick suggests, this is part of their playbook. What they'd like to do is create a secure environment that is chaotic, which our people are at risk and we feel compelled to pull them back. And so this is really -- it's like a brush pitch, John. They're looking to intimidate Ambassador Ford into leaving.

KING: We've talked about this in the past how the U.S. response to each one of these developments in the Arab world, North Africa, is not consistent in part because the circumstances are different. In the case of Syria, you have Israeli complications. You have questions about Iran and Hezbollah. But we do know over the past couple of months the administration is ratcheting it up saying of late that Assad has lost his legitimacy. Nick, listen here. Secretary Clinton seemed to take it a bit further.

(BEGIN VIDEO CLIP)

H. CLINTON: If anyone, including President Assad, thinks that the United States is secretly hoping the regime will remerge from this turmoil to continue its brutality and repression, they are wrong. President Assad is not indispensable. And we have absolutely nothing invested in him remaining in power.

(END VIDEO CLIP)

KING: Is absolutely nothing invested in him, is that taking it to a new level? And if so, what next?

BURNS: I think it is, John. I think it's the strongest statement that I've heard from the Obama administration. It's the correct path to take. I think we may be at an important moment in this crisis. The Syrian government has run that country with an iron fist, the Assad family for 40 years. They're losing control. They don't control the major cities. They don't have enough military personnel to contain these peaceful demonstrations. And it may be that the momentum now is with the protesters. That's why it's so important for us, I think, to keep Ambassador Ford there. He's a very impressive diplomat. He's a fluent Arabic speaker. And as Fran has suggested, he's someone who can bear witness, as she said, to these crimes that the Syrian government is committing against its own people.

KING: And so Fran, if the U.S. government is putting, Nick Burns says justifiably so, increased pressure on Assad, trying to empower the ambassador, trying to support the demonstrators, in Tehran, what are they thinking watching this?

TOWNSEND: Well it becomes very difficult. You want to keep Ambassador Ford there. You got to keep him safe. I have no doubt they would have convened after this assault on our embassy and on the ambassador's residence a security committee meeting and looked for ways to increase our own capability there. The Syrians do have an obligation as Nick mentions under the Geneva Convention to make sure -- the Vienna Convention to make sure they protect diplomatic establishments.

But we won't rely on them given what's happened today and we will reinforce our own security and try to keep him there to increase pressure. I'm sure they're looking at additional sanctions. They may be trying to bolster support for a U.N. resolution. (INAUDIBLE) look at all the diplomatic tools they have available to them and try to ratchet this up now.

KING: And Nick, to the Iranian part of the equation, what are they thinking?

BURNS: Well I think that you know there was a time, John, you remember early in the crisis, months ago, there was a big debate the United States and Israel do we want to see Assad survive or Assad leave? The fall of the Assad regime would fundamentally weaken Iran and weaken Hezbollah. That is good for the United States, so I think the United States will keep the pressure on the Assad government because we may be able to see a reduction of the influence of Iran in the Arab world. That'd be a great positive for us.

KING: Nick Burns, Fran Townsend, as always appreciate your insights. We will keep on track of this story -- fascinating developments in Syria.

And later this hour here the former Alaska Governor Sarah Palin says she can win a national election, but will she run?

But up next, Great Britain's hacking scandal spreads with allegations concerning a former prime minister.

(COMMERCIAL BREAK)

KING: Great Britain's hacking scandal grew even bigger today. A report in "The Guardian" newspaper says two of Rupert Murdoch's rival papers, "The Sunday Times" and "The Sun" improperly obtained and published private information about the former Prime Minister Gordon Brown's family and his finances.

The British subsidiary of Murdoch's News Corporation has already closed down a third paper, "The News of the World" over accusations its employees bribed police and illegally hacked into the phone messages of murder victims, dead soldiers, as well as celebrities. Britain's current Prime Minister David Cameron isn't happy and no wonder, one of his former aides has been arrested in connection with this scandal.

(BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER: These things we are hearing are absolutely appalling. And what people need to know is that I'm determined we will get to the bottom of this.

(END VIDEO CLIP)

KING: CNN International's Becky Anderson is keeping track of Murdoch's rapidly growing list of problems and this emerging scandal and Becky, let's just start with today. Remarkable to hear from the former prime minister saying he was a target here.

BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: We're hearing talk that journalists and private investigators hacked into Gordon Brown's phone, as they had done with other people "The News of the World" but also tried to access by blogging, illegally blogging, pretending to be other people, trying to access information on his bank accounts and indeed trying to talk to his lawyer. Perhaps the worst part of this story, John, though is they somehow gained or gleaned information about the health of one of his kids. That son has cystic fibrosis. We believe that Gordon Brown only found out about this after a journalist actually rang him to talk about the fact that his son was ill and nobody had known at the time.

KING: We'll keep an eye on this one. As Becky notes blink and you might miss something in this scandal -- Becky Anderson for us tonight in London. Thank you.

And today the former British Prime Minister Tony Blair told our Wolf Blitzer he doesn't think he's been hacked and Mr. Blair says he's surprised people here in the United States are so scandalized by the story.

(BEGIN VIDEO CLIP)

TONY BLAIR, FORMER BRITISH PRIME MINISTER: I'm quite surprised how shocked you guys are over here.

WOLF BLITZER, HOST, "THE SITUATION ROOM": We're pretty shocked.

BLAIR: Yes, it's -- and maybe we just --

BLITZER: I'm shocked that you are not shocked.

BLAIR: You know I lived with it and (INAUDIBLE) 15 years.

(END VIDEO CLIP)

KING: Should we be shocked?

With us now, Bonnie Fuller, the president and editor of Hollywoodlife.com, and Nile Gardiner of the Heritage Foundation.

Nile, let me start with you. You know, you live here in the United States for sometime. Now that you're an expert, and you know British politics so well, help us put that into context.

When Tony Blair says I'm shock we're shock, it's pretty shocking when you find out that voicemail messages have been hacked, bank accounts have been hacked, of celebrities, of politicians, of murder victims.

NILE GARDINER, HERITAGE FOUNDATION: Yes. And I think we should be shocked and the British public is clearly are deeply shocked by the whole affair. After all, we're talking here about highly illegal activity carried out by leading British journalists on a major newspaper "The News of the World." the scandal may be spreading to some other newspapers.

And there is real public revulsion with regard to what is going on. And the prime minister, of course, has ordered an independent inquiry into the whole affair, but I do think this has shocked the British people at this time, and we're just seeing even potentially the tip of the iceberg in terms of what is actually happening. So, this is a deeply disturbing development I think for the British media.

KING: And, Bonnie, one of the questions people ask -- I was asked in the supermarket the other day, well, don't you guys do the same thing? You know, we have Web sites, we have some celebrity gossip things, we have tabloids here in the United States, where is the line? And do any of our publications, based on your knowledge and experience, do anything like close to what we're hearing across the pond, if you will?

BONNIE FULLER, PRES. & EDITOR IN CHIEF, HOLLYWOODLIFE.COM: No. To the best of my knowledge, they do not. And yes, I've worked for a lot of organizations. And those news organizations and everywhere I've worked, there's been a tremendous emphasis on doing on the ground reporting, on having excellent sources backing up those sources, and being very clear that before you print or publish anything that is, you know, potentially scandalous or dangerous or, you know, could cross any line, that you really have to back your sources up.

So, I've never seen anything like that here. But let me also say that while we're a competitive media culture here, it is nothing like the kind of almost vicious newspaper wars that have been going on in Great Britain for many, many years. It's a very different popular culture and a very different media culture there than here.

KING: And, Nile, one of the things that makes it fascinating is not just a media competition, a media story, it involves the highest levels of the U.K. government -- former aide to Prime Minister Cameron has now been arrested. And there are allegations of, you know, cozy relationships going back and forth.

Listen to the prime minister talking a bit today where he acknowledges that, yes, there's a problem, and maybe sometimes we're too close to these people.

(BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER: For too long -- and I think all the politicians are to blame here -- for too long, we had a cozy relationship with the media where we didn't ask tough enough questions and didn't actually get to grips with what was going on in terms of media abuse. That, I think, needs to be done. It needs to be done in a way where the media are clear that this is not some vindictive agenda to muzzle a free press.

(END VIDEO CLIP)

KING: So, where does this go? New laws or just a large both a political and cultural conversation about what's fair, what's not?

GARDINER: Well, I think, certainly, the political stakes are very high for the prime minister. After all, his former director of communications, Andy Coulson, has been arrested by the police, he's been interviewed.

And so, this is a serious matter at the very highest levels of government. However, I don't think we need to see a whole new wave of regulations sweeping into the British media. Britain has a tremendous free press. Certainly, we have a few rotten apples here who have disgraced the British media. They should be dealt with. They should be prosecuted.

But I don't think you want to see, I think, a situation where you had the British press' hands tied politically and they're afraid to go after politicians. We don't want to see a British press that is similar, for example, the kind of press you see in France -- a very deferential press towards politicians. And I think the British people do take pride in a tremendously free media and it should remain so.

KING: Bonnie, I just want to bring something up just to show the scope. So far, these allegations have all been publication owned by Rupert Murdoch, his News Corporation. If you look at the News Corporation and its global reach, look at this long list, it's hard to read them all. But I'm just showing you -- showing the scope -- newspapers, television stations in the United States and Canada, in Asia, in the United Kingdom in Europe, film companies, radio, part ownership in sports teams, magazines, publishing empire.

Is this, in your sense, Bonnie, is this just a glancing blow to Murdoch, or is there a fundamental question here that he's going to have to answer?

FULLER: Well, I don't think it's a glancing blow by any means. I think it's a very big blow. I'm sure that he took great pride in his newspapers. And, you know, he's a newspaperman at heart. So, he cannot be happy about this.

But he's got a very large media empire, as you point out. And I think that, at this point, we have to believe that what has gone on is confined to the British newspapers that have been identified so far. I wouldn't -- I wouldn't jump to the conclusion that it's crossed any borders.

KING: And, Bonnie, even though you say none of these practices are employed here in the United States, do you see anything in your business, when you're talking to celebrities, talking about anybody, is there any hesitancy, anything back-and-forth -- there's more of a wariness?

FULLER: I don't se -- there's no difference in I think how reporters are doing business today than they were a week ago before the scandal broke. I think that while we have very competitive journalists and reporters here, I think people are very wary here of not crossing lines. Nobody wants to get sued.

I think that we're very aware of that factor. And I don't think that we required more laws here. I mean, hacking phones is illegal. It's illegal here. And I see no evidence that that's going on.

KING: As it should be. Hacking phones.

Bonnie Fuller, Nile Gardiner, appreciate your insights. This dramatic story unfolding by the day. We'll keep our eyes on it. Up next here, the Obama administration orders gun dealers in four states, only four, to do some extra work. And the critics? Well, they're already taking aim.

(COMMERCIAL BREAK)

KING: Welcome back.

Here's the latest news you need to know right now:

The National Rifle Association says it will sue to stop new gun reporting requirements in four border states -- California, Arizona, New Mexico and Texas. The Obama administration has ordered gun dealers to report the sales of high powered rifles under certain conditions. That's an effort to stem the flow of guns to Mexican drug cartels.

Michelle Obama will join the former First Ladies Hillary Clinton and Nancy Reagan in California for tomorrow's memorial service for former First Lady Betty Ford. Mrs. Ford died Friday at age 93.

Still to come here, the Tea Party perspective on those high stakes negotiations between the president and the congressional leadership about cutting America's red ink.

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KING: Just a few days ago, some believed House Speaker John Boehner might negotiate with the Democratic president a sweeping deficit reduction deal in the ballpark of $4 trillion. Now, the target is about half that amount. Why? Because Speaker Boehner knows in the House of Representatives, with the new Tea Party members, there's one thing that cannot be in any deal: new taxes.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I agree with the president, we cannot allow our nation to default on our debt. But to prevent a default, a bill must pass the Congress. And a bill that doesn't meet these tests can't pass the House of Representatives.

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KING: So, just how much room does Speaker Boehner have to maneuver?

Let's check in with Congressman Tim Scott. He's one of the freshmen members of the Republican Caucus, also one of the Tea Party members who came to Washington promising to do bold things when it comes to the debt, deficit and government spending.

Congressman, let me start right there because Speaker Boehner was saying today, you know, I want to negotiate with the president, I want to cut a deal, but I have to be able to pass in it the House of Representatives. How short of a leash is the speaker on because of demands of freshmen like yourselves and other members of the Tea Party?

REP. TIM SCOTT (R), SOUTH CAROLINA: I wouldn't say the speaker is on a leash at all. Here's what I hear the speaker saying consistently and these are things that we agree with. Number one, the stated ground is simply this, that the $2.4 trillion increase must have a $2.4 trillion offset in spending over the next 10 years. And number two, we simply cannot increase taxes.

KING: Now, when you say no higher taxes -- is that higher rates or does that also mean closing loopholes, taking away, say, tax deductions for the big oil companies, is that OK with you?

SCOTT: I think that we ought to look for parity in our corporate tax environment and one of the ways that you do that is by lowering the top rate and eliminating some of the loopholes. Without question, we'd like to see all things on the table. So, there's nothing that is a sacred cow that is a no. We do look for parity.

So, in other words, if we are going to have a reduction of the rates and we'll close some loopholes, we do not want to increase additional revenues in that scenario.

KING: You heard from the president say, who essentially said, I'm willing to give you cuts in spending, I'm willing to go to my party for cuts in Medicare and Social Security, the Republicans have to give something. He was essentially saying, I hear these guys, and he didn't use your name. And essentially, I hear these guys going around the country saying, send me to Washington, I'll cut spending, I'll work on the deficit. The president is saying here's your moment.

Are you willing to give him something? This has to be a compromise, after all.

SCOTT: I think our message to the president and to everyone else is very clear and very simple. There is not a revenue problem in Washington, D.C. There is a spending problem. There is a problem with priorities. We simply do not have those.

So, if the president is looking for a place for us to compromise, here's our compromise -- let's talk about spending cuts that saves America and our financial future. That's an area that we can compromise on.

And I think that he ought to come to the table with a solution that also talks to the American people about how we are going to right the ship by spending less money in Washington so there's more money to spend at home.

KING: Some conservatives have said, you know, I hope we can work this out, but if we can't, no big deal. Let's go past the August 2nd deadline and the treasury will have just to deal with it. We'll have to figure out how much money it has, what bills to pay, what bills maybe have to be deferred.

The president of the United States has some pretty tough words about that today. Listen here. (BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Some of the professional politicians know better, and for them to say that we shouldn't be raising the debt ceiling is irresponsible. They know better. And, you know, this is not something that, you know, I am making up, this is not something that Tim Geithner's making up.

(END VIDEO CLIP)

KING: Do you agree with the president on that point?

SCOTT: There's no question that the necessity of a deal is very important. What it takes to get that deal is more important. So, there's no question that we have to deal with what's in the interests of Americans in the long term.

Having an increase in the debt ceiling has to be tied to absolute spending cuts, should include statutory limitations on what we can do from a discretionary budget amendment. So, we agree that this is not a game, that we are talking about the future of America. And to the extent that our president simply does not sit at the table and talk about the long-term viability of our economy and of our republic, I don't understand.

KING: Now, the president hasn't said he would resort to this, but there are some who say if there is no deal, that the president has constitutional powers and essentially he can just go and continue spending money without authority from the Congress.

I want you to listen to your own words here when this possibility came up back home.

(BEGIN VIDEO CLIP)

SCOTT: My position is that is an impeachable act.

(APPLAUSE AND CHEERS)

SCOTT: There's lots of things that people say, would you impeach the president for that? I say no. But this? This is catastrophic. This jeopardizes the credibility of our nation. If one man would usurp the entire system set up by our Founding Fathers over something this significant.

(END VIDEO CLIP)

KING: It would be an impeachable offense in your view?

SCOTT: I would say this -- certainly, we stirred up a hornet's nest, no question about that. Ultimately, when you listen to Senator Schumer and Geithner talk about ways for the president to go around Congress, we have to make sure that there's a line in the sand. And the line is simply saying this: it's a warning. We want to make sure that the president stays at the table with Congress and finds a way to do what's in the best interests of the American people. All you have to do is open the Constitution, got to Article I, Section VIII, and it says very clearly -- very clearly -- Congress and only Congress has the authority to borrow money.

KING: You believe that if he went otherwise, it would be an impeachable offense?

SCOTT: I certainly think it would be the war of the ages. It would start the process that we would not want to go down unnecessarily. And so, it's very important for us to send a clear and concise message. Let's stay at the table and let's get this deal done.

KING: Do you believe there will be a deal by the end of the week?

SCOTT: Well, not by the end of this week, no. I think we're going to have to go a little closer to August 2nd and even perhaps a couple days after August 2nd to make this happen.

KING: Congressman Tim Scott, freshman from South Carolina -- sir, appreciate your time tonight.

SCOTT: Thank you, John.

KING: In a new interview, former Alaska Governor Sarah Palin says she is confident she could win a national election. But will she run? That's next.

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KING: We don't know her next chapter, but we do know this: Sarah Palin doesn't lack confidence. The former Alaska governor is on the cover of "Newsweek" and tells the magazine's Peter Boyer, quote, "I believe that I can win a national election." Of course, you have to run to win. Governor Palin isn't ready to answer that question just yet.

But let's discuss her latest hints with Peter Boyer, special correspondent for "Newsweek" and "The Daily Beast." And Shushannah Walshe, co-author of "Sarah from Alaska," she's also a "Newsweek" contributor

Peter, let's start with you. You have this extended conversation with Governor Palin. You talk about going on into the night, coming back and back to the inevitable question, what are her political ambitions. She says this to you, "I'm not so egotistical as to believe that it has to be, or it can only be me, to turn things around. But I do believe that I can win."

You get a gut sense when you're having conversation, that was yours, is she going to run?

PETER BOYER, NEWSWEEK: During that conversation, yes, my gut sense was she was going to run. I mean, but it's complicated. There is the sort of impenetrable Palin sphere that she has erected around herself that, at the gates of which is her husband, Todd Palin, and within that sphere, she operates with a kind of complete freedom. It's a comfort zone for her, which would not be the case if she, of course, undertook to subject herself to that most intrusive process, running for president.

I personally sort of can't imagine her leaving the Palin sphere to run for president, but she is very convincing in suggesting that she is, in fact, ready to run and she believes she can get the nomination and defeat President Obama.

KING: The Palin sphere -- I like the way you put that right there.

Shushannah, you spent some time with her the last go around in 2008. You've watched her and she had her bus tour recently. Here, you've obviously written about her.

To Peter's point about the children, she says the family, "My kids know life isn't supposed to be easy and it's certainly not fair. They know that. Even on their end, they have to make some sacrifices for the greater good."

We went through a lot with the Palin family in 2008. The governor herself had a child not that long before John McCain picked her. We went through Bristol-Levi pregnancy ordeal.

Do we learn any lessons from the Palin family then that apply now?

SHUSHANNAH WALSHE, CO-AUTHOR, "SARAH FROM ALASKA": Well, I think they've been through it. And during the bus tour that you mentioned, I was able to talk to Todd briefly and he said to me that the family has already been tested. I asked, you know, is this bus tour a test for the family? He said the family has already been tested. We have already been out there and really indicated to me as Governor Palin indicated to Peter that the family was all in.

I think there are some family members like Bristol that are more gung ho and would really like her mom to run. Others are more hesitant, but I think that the family is on board.

KING: Peter, what is it she doesn't like about the field? I want to read something she told you, "Thank goodness the field has not been set. I think that there needs to be more vigorous debate, there needs to be a larger field, and there's still. There's still months ahead, where more folks can jump in and start articulating their positions."

When she looks out eight or nine candidates out there now, what doesn't she like?

BOYER: Well, I wouldn't wish to be unkind or to pretend to read Governor Palin's mind, but I guess my take from that was that the thing that she most doesn't like about the field is that she's not in it. And, you know -- I mean, there are people, of course, who -- Michele Bachmann, famously, and potentially Governor Perry of Texas, who represent that segment of the Republican Party that Governor Palin would also, I think, excite and energize.

But, you know, she is ready and I think eager to get out there and articulate her opinion and her views on the subjects in a way that perhaps the others, to her ear anyway, are not yet doing.

WALSHE: What's really interesting about the non-campaign already being waged on her behalf in Iowa is that it's not traditional, there's no one hired, people that -- but there are people on the ground that are trying to lay the groundwork without her even saying that she's there. You'll talk to some people in Iowa who will say that she has more of a groundwork, more of a campaign there than people that are established candidates.

So, that's really, I think, fascinating. And if she doesn't run, those people are going to be devastated. I mean, some of them have left their jobs, their lives, their families, to campaign for a non- candidate full time.

KING: I asked this one fellow who's been out for eight months, a volunteer, Peter Singleton, how do you -- so who pays for this? How do you it?

He said, well, you burn through your savings account.

I mean, you know, that's the kind of passion that I think that, one thing we know about a Palin campaign, should it materialize, is that it would be starkly unconventional. And, I mean, this in fact might be precisely what it looks like.

KING: Peter Boyer, Sushannah Walshe, appreciate your insights. We will await the governor's decision to see what she does.

I mean, fascinating article. Peter, thanks so much. Shushannah, you, too.

WALSHE: Thanks, John.

KING: And that's all for us tonight. Hope to see you right back here tomorrow.

"IN THE ARENA" starts right now.