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JOHN KING, USA

FBI Inquiry; High Stakes Negotiations

Aired July 14, 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 the brutal murder of an 8-year-old boy shocks a conservative Jewish enclave in New York.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: And children will usually trust someone who looks very similar to their own father or to most of the people in their synagogue.

(END VIDEO CLIP)

KING: Plus high stakes negotiations resume at the White House, but no reports of tempers flaring or reports of progress, so look to the Senate perhaps for a new proposal to break this logjam. But with no meeting scheduled tomorrow we'll keep our eye on the Senate. But what would happen -- what would happen if the government defaulted on its loans? Would it impact you?

(BEGIN VIDEO CLIP)

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Interest rates will rise. We'll be back in recession. Of course, we already have a nine percent plus unemployment rate. We're starting from a weak position. Unemployment will rise well into the double digits. We will all pay a very significant price.

(END VIDEO CLIP)

KING: But first up tonight the British tabloid hacking scandal catches the attention of law enforcement right here in the United States. A source tells CNN the FBI is investigating whether or not journalists working for Rupert Murdoch's News Corporation tried to illegally gain access to voice mails and other phone records of the victims of the September 11th attacks.

The preliminary FBI inquiry is because of complaints from members of Congress and one report alleging News Corporation reporters tried to access 9/11 victim's phone records using bribes or illegal computer hacking. The new federal investigation here comes as Murdoch defends his company's handling of the scandal. In an interview with "The Wall Street Journal", which is part of his media empire, Murdoch says he is launching an Independent investigation of reporting practices and says he and his management team have made, quote, "just minor mistakes in their handling of the scandal".

CNN national correspondent Susan Candiotti live with us tonight with details of just what the FBI is investigating -- Susan.

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Hi, John. The FBI is calling this a high priority and is digging in its heels. This is going to be a broad ranging investigation. In fact, they're going to be looking into some of the very same things that they were looking at, for example, at the U.K. -- in the U.K. Looking at phone records, looking at voice mails here in the United States, to see whether any employees or associates may have hacked into these records to see if they could get any information about 9/11 victims or their families -- John.

KING: And Susan, preliminary inquiry. Do they have any evidence of this or just suspicions and complaints?

CANDIOTTI: They do have suspicions and complaints, to say the very least. And in fact, there have been some reports that a former police officer, investigator, was asked by News Corp, there is a news story to that effect, to look into phone records but that he said he wouldn't do it. So they do have some things to work with. And certainly there have been a wide ranging number of calls, as you know, by members of Congress to look into this and 9/11 families as well.

KING: Susan Candiotti tracking this new investigation for us tonight. Susan, thank you.

Democratic Senator Robert Menendez of New Jersey is among the members of Congress demanding answers about whether 9/11 victims were targeted by sleazy and potentially illegal reporting tactics. Senator Menendez is live with us tonight.

Senator, let me just start simply here, you've demanded the attorney general look into this. Again, have you heard or seen any firm evidence or are you just trying to connect the dots, you see something horrible that happened overseas and you just worry it could have happened here?

SEN. ROBERT MENENDEZ (D), NEW JERSEY: Well I see a published report in the "Daily Mirror" that says that the same entities that got the British prime minister's personal information, the royal family, victims of crimes in Great Britain and others attempting to do the same thing with an investigator here in the United States. I see a member of Parliament speak to that as well.

And I see Scotland Yard having an investigation of over 5,000 names and several thousand phone numbers. And that all adds up to me to sufficient enough concern to protect the families of 9/11 and make sure that either this was not true, in which case they can have that sense of security, that their messages from their loved ones on their final days was not you know in any way revealed. Or if it is true, that it should be prosecuted in the United States because access to phone records, unauthorized access to them is punishable under federal law. KING: You're calling Senator Jay Rockefeller of West Virginia who joins us in this demand for an investigation. He says quote, "my bet is we'll find some criminal stuff here". You share that view?

MENENDEZ: Well, you know I don't want to jump to conclusions, John, but I do want a vigorous review. I see there are some published reports that the FBI is in fact pursuing a review to determine whether a fuller investigation is necessary. I would welcome that.

That's in essence what I asked the Justice Department to do. You know and many of us who come from the New York, New Jersey area, we -- in New Jersey we lost 700 citizens on that fateful day. Peter King, the Republican chairman of the House Homeland Security Committee is joined in a similar call. You know he understands the grief of these families. I'm glad to see that together we can hopefully get to the bottom of this.

KING: You've asked the prime minister's office, Mr. Cameron's office for help, to share any information that comes to their attention in the British inquiry. You've had some tensions back and forth with the U.K. over the Lockerbie bombing in the past. On this one do you expect and have you received assurances of full cooperation?

MENENDEZ: I haven't had a chance to get a response to my letter to Prime Minister Cameron, just sent out today. But I expect we are in common cause in this. We want to make sure that the privacy of citizens whether they be of Great Britain or the United States is preserved and particularly the victims of September 11th where there were British citizens as well as U.S. citizens who lost their lives on that day, so I think we'll be in common cause on this one.

KING: Mr. Murdoch gave an interview to "The Wall Street Journal", it's a newspaper he owns, of course, he partly owns anyway and he says "We have a reputation of great good works in this country", referring there to the U.K. Does that sit right with you? We have a reputation of great good works?

MENENDEZ: Well, of everything I've read, John, the "News of the World," the invasion of privacy of the British prime minister about his son's illness, the royal family, crime victims, a young child. That isn't in my mind real journalism. That isn't great good works. That's not how you go about selling newspapers.

KING: Senator Robert Menendez, Democrat of New Jersey. Sir, we'll keep in touch as this one goes forward. Thanks for your time tonight.

MENENDEZ: Thank you.

KING: And if there are leads to follow just how would an investigation into possible hacking nearly a decade ago work? Mark Rasch is a former federal prosecutor with an expertise in cyber crimes. Let's just start there.

This was 10 years almost. We're two months shy of 10 years. If someone tried to hack into voice mails, now obviously if there are e- mails, a paper trail of a reporter saying I tried to do this, somebody tried to help me to do this. That's evidence there, but if you had a tip and you had to go back and do the forensics, these have changed a lot in 10 years. Can you still do that?

MARK RASCH, DIR., CYBERSECURITY & PRIVACY CONSULTING, CSC: That's right. Well it all depends on what logs the phone companies have kept. Some phone companies keep logs of access to the data. It depends on how the people got in. Did they just con their way in? You wouldn't have a record of that. But (INAUDIBLE) computer hacking, then there's a pretty good chance that they're going to have a record, at least of the unauthorized access to the account.

KING: So if you're back in your days as assistant U.S. attorney, and this comes to you -- the FBI comes to you and says you know what our preliminary inquiry, we have a few leads here. Here's what we need to do. We need some forensics work done. How do you do it?

RASCH: Well you go back to the companies that were allegedly hacked, which would be the phone companies, and you see what kind of logs that they have. If they have maintained those kind of logs and 10 years out they probably haven't, then you hit pay dirt. If they haven't maintained those logs, then you have to go back to the individual victims and say you know were your phone records ever tapped. Did anybody ever call you based on information they said came from your phone records?

KING: And how is the technology different now? In the U.K. we're watching some of these things done in sort of current day, the royals and recent crime victims. If this were happening 10 years ago obviously your focus would be on sleazy maybe illegal conduct by a reporter, but what kind of help would they have had to have had almost 10 years ago to get access to this?

RASCH: Well to get access to the phone records, to listen in on a voice mail you have to have the user ID and password to log in. Now remember 10 years ago a lot of people had their voice mail at home. They had a cassette tape at home. So that was about the time everybody was starting to move to digital voice mail stored on a server. So it's pretty much the same thing. You log into the server and listen to the voice mail.

KING: Based on your history, if the FBI believes there's smoke given the time, given the technology changes, given the fact you say the phone companies may not have the records, can you prove fire?

KING: Probably not, but you may get confessions. Remember that a lot of this may be done through interviews that are conducted in the U.K. or U.S. persons who admit hey, yes, I was hired by this company to go ahead and do this.

KING: As you have watched this play out, we can talk about suspicions maybe of 9/11 victims or just what you've seen in the U.K., as you've watched this play out, what sort of bells have gone off in your head given your expertise in the technology of how all this works? RASCH: Well the first thing, if you're trying to investigate this in the U.S., the first thing you want to do is find the crime in the United States. So you need to find something that somebody, whether they hacked into a computer, hacked into a phone system, lied, cheated, committed fraud in the U.S., then basically you want to follow the money as well. If there were people paid to do this, one of the ways you can do it is just follow the money.

KING: Follow the money. Mark Rasch, good advice there. We'll see if this one -- how this one pans out. We'll keep in touch. Thank you very much.

Up next here, the president goes back to the table with congressional Republicans. Will their disagreements over spending cuts and tax increases translate into a bigger mortgage payment for you?

And later the suspect in a gruesome New York City child murder is hauled into court and a community now wonders if it missed warning signs.

(COMMERCIAL BREAK)

KING: Two important developments to bring you, some breaking news into the president's effort to broker a deal with congressional leaders, Republicans principally to get an increase in the government's debt ceiling and of course the Republicans want to package their spending cuts to go along with it. For the first development let's go live instantly to our chief White House correspondent Jessica Yellin -- Jess.

JESSICA YELLIN, CNN NATIONAL CORRESPONDENT: Hi, John. Coming now news from a senior administration official that the president will address reporters tomorrow and take questions here at the White House, no doubt part of his effort to push forward on these debt negotiations and get some sort of a deal. Also word this afternoon that there will not be a meeting tomorrow here at the White House after this debt deal broke up.

He has charged this group with going back to Congress to see what kind of deal these leaders can work out, what kind of votes they can get within their caucus, try to come back to him and tell him where they think they can cobble together the votes to have some sort of final deal over the next 24 to 36 hours. He wants some sort of progress to be made. He says if he doesn't hear something from them in that kind of time, he might call another meeting over the weekend -- John.

KING: Jess, stand by for me. Jessica Yellin says no meeting at the White House tomorrow, but we will have a presidential news conference. Here's something I'm told tonight. Remember last night we told about a new proposal from the Senate Republican leader, Mitch McConnell that would essentially allow the president unilaterally to raise the debt ceiling. He would then be required to submit spending cuts to Congress. Many conservatives complained because there was no teeth there, no guarantee those spending cuts would actually take effect.

I'm told tonight they're working on what I'll call McConnell plus, the McConnell plan that gives the president the authority to unilaterally raise the debt ceiling but they would also form a commission. Members of Congress would be the only members of this commission. House and Senate members would then come up with a list of proposed spending cuts. Congress would have to vote up or down, no changes to that package once it's completed much like Congress in the past has dealt with the controversial issue of closing military bases around the United States.

Let's bring Jessica Yellin back into the conversation. Jess, the president has wanted to broker this deal. But this proposal comes in part because of frustration in Congress, especially among the two Senate leaders. It started with Republican Mitch McConnell, Harry Reid the Democrat now involved as well. They're trying to figure out well if the president can't broker this, maybe we can find a plan "B".

YELLIN: And I'm told that this came up in the meeting today, but it was not discussed, Democrats familiar with this debt meeting said that it is seen as a fallback option, but it was not the focus of the conversation today because they still are hoping that they can get to what the president is still calling the biggest deal possible. And he talked to them about trying to go for something in the range of $2 trillion if not more. So he is still hopeful that in the next window through this weekend these leaders can find something that's bigger than the McConnell/Reid package that you just discussed, but they're still thinking about it as a, sort of back pocket option, John, if nothing else comes to pass.

KING: Back pocket option as Jessica Yellin puts it and we'll of course have live coverage of the president's news conference tomorrow. Jessica thanks.

Many conservatives don't like it but don't count on a backup plan being pushed by the Senate Republican leader, Mitch McConnell. He proposes giving the president unilateral power to raise the debt ceiling three times over the next year and a half. The White House would be required to submit spending cuts, but here's the part conservatives don't like. There's no guarantee those spending cuts would actually take effect. Tennessee Republican Bob Corker calls it typical Washington.

(BEGIN VIDEO CLIP)

SEN. BOB CORKER (R), TENNESSEE: I think we all know that our leadership has concocted a scheme where folks on the other side of the aisle can allow the debt ceiling to increase and continue to appeal to their constituencies for the 2012 election and on our side we can continue to call spending to be an issue for us in the election and basically by virtue of concocting this scheme, we're not going to make any tough decisions.

(END VIDEO CLIP)

KING: Is that right? Is the endgame here just another decision to push big problems down the road? Let's begin there with CNN's Fareed Zakaria. Fareed, you would think the possibility that the United States would default on its obligations for the first time in its history, you would think if anything would bring a grown-up conversation to Washington, it would be that, but?

FAREED ZAKARIA, CNN'S FAREED ZAKARIA GPS: It's truly bizarre, John, because what it seems that Republicans are not focusing on is the fact that were the United States to default, were there to be a danger it would default, America's interests costs would go up dramatically. If we were to, say, have a one percent rise in our borrowing costs, that is to say if markets got scared that we were not going to make good on our payments and our borrowing costs went up one percent, that's $150 billion more that we have to spend every year on our interest payments on our debt.

And this is very important. If we do this for a week or two and still resolve things once markets get scared, it takes a long time for those interest rates to come down. Just look at any case in history where there has been a default. Once you have a crisis, even if you settle your books, you do what you need to do, you make the tough decisions, markets are scared. Capitalist cowardly, as the saying goes. It would take a long time for those costs to get down. So what the Republican Party is doing right now by playing chicken with the credibility of the United States has the almost certain effect of increasing our debt and deficits substantially for years to come.

KING: Well we understand the president at a very tense meeting yesterday essentially was trying to have a back and forth with the House majority leader, Eric Cantor to the point in which he said, fine, this could bring my presidency down, but I'm not going to do any more business with you guys unless you give. To view the stakes is that high for the president could this if we have a default, if you have the turmoil in the markets, it would obviously hurt the recovery, could it bring down President Obama?

ZAKARIA: It could. Look, in the short term there's no question that the public will most likely blame the Republicans because it is clear that they are the ones who are literally not willing to move an inch. The president has put Medicare on the table. He's put Social Security on the table. He's willing to do $3 of spending cuts for every dollar of tax increase. He's asking the Republican Party to give him something so that you can get a compromise. But ultimately people vote for a president based on how the economy is doing.

If there's good political science literature on any subject, it is on this. And so if the election of 2012 is going to be a referendum on the economy and the economy stinks to high heaven, it hurts Barack Obama terribly. So he has to play this very delicate game where he needs to make clear that it is the Republican Party that is not compromising. And I think the facts are that that is the case. But he can't drive the -- he can't let the economy fall off a cliff just to prove that point.

KING: Let's take a look at how the world is viewing this and specifically -- I don't know if this is ironic or delicious or a little bit of both, but the Chinese of all people -- China of course holds about $1 trillion in U.S. debt. The Chinese Foreign Ministry says today quote, "We hope the U.S. government adopts responsible policies and measures to guarantee the interests of investors" -- China obviously one of those investors. Talk about that and then more broadly, how this looks to the world.

ZAKARIA: Well look, I think the Chinese government is actually being very responsible. If we held a trillion dollars worth of Yuan, China's currency, and they were to be playing this insane game of political partisanship, we would be complaining. The Chinese have been very quiet so far. And by the way, one of the reasons they're quiet is no one wants to raise the panic because no one wants to drive those interest rates up. This is the crucial thing to understand. Once we drive those interest rates up, they will not come down easily.

The global financial system rests on one sort of bedrock, and that is that U.S. treasury bills are the safest, most liquid, cheapest form of debt in the world. If that changes, who knows what it means? You know, and people talk about Lehman Brothers and this being like Lehman Brothers; actually, this is a hundred times more complex and potentially lethal than Lehman Brothers. Lehman Brothers was a relatively small investment bank that had a big balance sheet. Here you're talking about the full faith and credit of the United States of America, the holder of the reserve currency of the world. Who knows what this could mean?

KING: Fareed Zakaria, as always thanks.

ZAKARIA: Pleasure.

KING: Still ahead, how you'd be affected by the U.S. government if the U.S. government actually defaulted on its debts. And next Moammar Gadhafi, well he's got something new to say.

(COMMERCIAL BREAK)

KING: Welcome back. Here's the latest news you need to know right now. We now have a time for that news conference President Obama will hold tomorrow on the debt ceiling deficit, 11:00 a.m. Eastern. CNN of course will have live coverage.

Minnesota's Democratic governor and Republican legislature have reached an agreement in recent hours to end the state government shutdown within days we're told. A new round of defiance tonight from the Libyan leader Moammar Gadhafi -- in an audio message he declares quote "I will remain with my people and with my firearm until the last drop of my blood".

(INAUDIBLE) Dick Cheney, Bill Clinton and Barbara Bush among the mourners at today's funeral for the former first lady Betty Ford. She was laid to rest alongside her late husband at the Ford Presidential Library in Michigan.

Roger Clemens signed baseballs but no questions from reporters were answered as he left a Washington courthouse today. Clemens' perjury trial ended in a mistrial, when prosecutors gave the jury information, the judge had already ruled they were not supposed to hear.

When we come back, in New York City every parent's nightmare, an 8-year-old boy befriends a stranger and is killed.

(COMMERCIAL BREAK)

KING: In New York tonight an 8-year-old boy's parents are living through every parent's nightmares, but they aren't alone. Look at this huge outpouring of grief at the boy's funeral last night in Brooklyn. Leibby Kletzky was just beginning to be independent. There is surveillance video of him last Monday after he had gotten lost walking the seven blocks between his summer day camp and where he was supposed to meet his parents.

He'd asked a man for directions. Today that man was in court. Prosecutors say he's confessed to killing the boy and dismembering his body. WCBS reporter Sean Hennessey joins us from his newsroom in New York. Sean, you're tracking this case. Tell us about this arraignment today.

SEAN HENNESSEY, WCBS-TV REPORTER: Well, John, I'll tell you what to give you a sense of the outrage surrounding this case, consider this, even the prisoners in their holding cell were yelling things at Levi Aron, the suspect, as he came into the courthouse to be arraigned on charges of first-degree murder.

These prisoners were calling him murderer and other names and as the arraignment began the prosecutors outlined how he killed Leibby Kletzky. And during it all the suspect looked down, didn't say a word, didn't look at anyone. Now the lawyers for Aron claim that their client is hallucinating. He's hearing voices and that he should be on a suicide watch. Now police outside the courthouse were able to confirm that Aron was indeed at a wedding on Monday night, the same night the boy disappeared.

But it's unclear if the boy was with him as Aron does claim. Aron tells police in his confession, that when they got back from the wedding on Monday night, the boy fell asleep watching TV, was still sleeping in his apartment on Tuesday morning.

Aron went to work and Aron says that when he came back from work, his plan was to return the boy to his parents. But when he saw all the attention, all the searchers, all the media on this huge disappearance, he panicked and decided what to do. He tells police he gave the boy a tuna fish sandwich, smothered him with a towel and then cut up the body in an effort to hide this crime.

JOHN KING, HOST: Horrible, horrible. Sean Hennessey of WCBS -- Sean, appreciate your help with the reporting tonight. What a horrible story.

And a short time ago, I spoke to a community leader who is among those trying to come to grips with this tragedy, the New York Assemblyman Dov Hikind.

(BEGIN VIDEO CLIP) DOV HIKIND, NEW YORK STATE ASSEMBLY: And children will usually trust someone who looks very similar to their own father or to most of the people in their synagogue.

(END VIDEO CLIP)

KING: We have more of that interview, I think, if we can try to get it set up for you. It's going to take just a minute.

In the meantime, let's talk to Candice Delong. She's a criminal profiler. She's with us. She works as a criminal profiler for the FBI. She's with us from San Francisco tonight.

Candice, when you look at this case -- and I want to go to the map. I just want to show our viewers here, we're talking about a very tight-knit community here and we're talking about a very small space in which this happened. Leibby Kletzky left his day camp at 5:05.

In today's society, you have these surveillance cameras. You see just a short time later, you see this young boy -- it's just hard to look at. With his backpack walking the streets, just a few minutes later in New York City. And then, of course, in the evening, he's seen at the dentist office here with the suspect, Levi Aron, who was later arrested a couple days later up in here.

When you see this tight space, what goes through your mind as someone who has profiled major cases like this?

CANDICE DELONG, CRIMINAL PROFILER: Well, this is unlikely to have been a crime that could have been pulled off as easily in downtown Nebraska. This is New York City, hundreds of thousands of people, much easier for the offender to kind of blend in and this child was used to be surrounded by lots of people. So I can see why it was pretty easy for Aron to take the boy.

KING: And if you read the confession, which police have now authenticated, Mr. Aron write, "I was still in panic." He's confessing to having the boy in his home. "I was still in panic and afraid to bring him home. That's when I went for a towel to smother him in the side room. He fought back a little bit until eventually he stopped breathing."

He goes on in that confession to describe what he did to the body. We will not repeat it here tonight. Then he ends, Candice -- and I find this -- I don't know if curious is the right word, it's horrible.

But he ends, "I understand this may be wrong and I'm sorry for the hurt that I have caused."

May be wrong?

DELONG: Maybe wrong. Well, I read the confession as well, John and what it appears to me -- and I do have a clinical background, I was a psychiatric nurse for 10 years. The confession seems to be rather disjointed and reading it and I -- he says, I panicked a few times and this may be wrong. What that tells me is that there's a good -- it just impressed me as something that someone suffering from a major thought disorder, disorganized thinking also known as schizophrenia.

There is one report I read said he's possibly hearing voices and delusional. Plus you look at the act itself. First of all, in terms of getting rid of the body, if he did panic, all he had to do was put the body in a suitcase and take it all the way. He didn't do that.

I think what he did and this whole was probably something that had nothing to do with panicking. It had to do with a fantasy that he'd had for many, many years.

KING: Well, based on your experience, is this a young boy leaves camp, gets a little disoriented, asks a stranger for directions, and this all unfolds or is this someone -- I'm talking about the suspect now -- who was out looking, looking, it's just premeditated?

DELONG: He may not have been looking at this moment, but an opportunity to live out a fantasy that he may have been harboring for years presented itself when this little boy went up to him and asked for directions. I think we'd all agree the vast majority of people if a child came up to them and asked directions, it's going to never cross their mind to take the child and kill them.

But that did seem to have happened here. And I don't think it's something that he just thought of that moment. And we've talked to killers. We know how these things happen.

KING: Candice Delong, criminal profiler. Appreciate your help on this horrible, tragic story tonight.

DELONG: You're welcome.

KING: Thank you so much.

Now, let's go back to the conversation I had a bit earlier today with the New York Assemblyman Dov Hikind, who represents this community.

(BEGIN VIDEOTAPE)

KING: Assemblyman, just let me begin by asking about the impact here in this community. You have represented for three decades now -- anything like this, any crime like this happen during this period of time?

HIKIND: Absolutely not. In the 29 years that I've represented this neighborhood, we've had things happen but nothing that even closely resembles this absolute horror. People in my community and way beyond, this is not any more about Borough Park, Brooklyn, New York, when a child, you know, leaving day camp like millions of children all over, his mother waiting two blocks away to take him home, disappears and ends up meeting someone who commits murder and a very violent murder. It has shocked my community. It has shocked New York. And I think it has shocked the country and even beyond that that an 8-year- old, so innocent, that someone is capable of committing the horror that was committed here.

KING: A woman who lives on the same block as this suspect had told police that Mr. Aron had once approached her son and that she was nervous about that, tried to lure him into his car. Was he known in the community as a problem or as a threat?

HIKIND: Absolutely not. That's part of the problem. Now, people are coming forward saying I remember this and this incident, but never -- no one ever really followed up.

And there's no question -- you know, here you have a 35-year-old man. What is he doing with an 8-year-old child? I mean, what were his motives? I think it's pretty clear. He wasn't taking him to Toys "R" Us or to play basketball with him or anything like that. Clearly, his motives are very, very, very clear.

You know, in my community, most of the people in Borough Park, you know, are Hasidic. They wear long beards and have side curls and dress in a particular way. And children will usually trust someone who looks very similar to their own father or to most of the people in their synagogue, et cetera. And I think we have to be aware, you know, that just because someone looks OK to them doesn't mean they are.

You know, perpetrators, people who do these horrible things, they often look no different than you and I. And we have to really protect our children.

I mean, this tragedy is beyond comprehension. You know, I met with the parents this afternoon. I actually met with the grandparents, the pain of a grandparent, of a mother, a father losing a child in this particular way, with the gruesome details -- I don't wish this on my worst enemy.

KING: And to the point you just made about the close-knit community and people perhaps reflexively trusting people who look like them, who worship like them, who live with them. When you hear reports people afterwards saying, well, this guy had acted strangely before, this guy tried to lure my son into his car before -- do you worry that some people kept that to themselves, did not report it to the police, did not report it to community leaders because they thought he's one of us, it can't be true?

HIKIND: Yes. Look, this is a problem that we're first facing in our community. We have an amazing community, a wonderful community. The way people came together in my community, thousands of people volunteering during the search. It was something spectacular.

But at the same time, we have to face that we have people in our community as other communities have, people who want to do terrible things to children. And you can't sweep it under the rug. You can't pretend it doesn't exist. You can't, you know, be embarrassed. You've got to deal with it.

KING: You met with the parents and the grandparents. I'm just wondering on their thoughts, do they think that they had done this just right or do they now question their own path with their son.

HIKIND: The grandparents with the mother, they think their daughter did absolutely -- did nothing wrong and I totally agree. But I can tell you that the mother doesn't feel that way. Her son would come home with the bus from camp every single afternoon. And she's thinking like, my God, I'm responsible. I should never have permitted him to walk.

I don't agree. But how can a mother feel differently knowing, knowing what happened to her child, how her child was murdered, 8 years old. And the violence that was committed against that child.

So, the mother -- again, I don't wish it on my worst enemy.

KING: Assemblyman Dov Hikind, we appreciate your thoughts today, sir. And we wish you and your community and certainly the family the best in the days ahead and they're in our thoughts and prayers. Thank you, sir.

HIKIND: Thank you, John.

(END VIDEOTAPE)

KING: When we come back, a closer look at just how you might be hurt if the government defaults.

(COMMERCIAL BREAK)

KING: Take a closer look now at the stakes of these negotiations between the president and congressional leaders about the debt and the deficit, trying to raise the government's debt ceiling.

Here's one way to look at it. If you look at this in past years, the government right now is due to hit the debt ceiling on August 2nd. Last year, it took in $194 billion in August, had $342 billion in bills, therefore, $159 billion in deficit spending.

Here's the projection from the Bipartisan Policy Center for this year. Slower economy, so less money coming in, $172 billion., about $306 billion in bills. That would leave the government about $134 billion shy.

So, let's say you had to make the choice. Here are the things the government spends most of its money on. Let's just say the government ordered the list up this way, started making the payments. You pay the interest, you pay Social Security. You get down here to unemployment, bang, you are out of money.

So, if you look at this, maybe you're a veteran, on active duty military. You might view this as politicians behaving badly, just a debate in Washington, not true. This is about you.

(BEGIN VIDEOTAPE)

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Everyone's going to get nailed because what it means is the stock prices will fall, the dollar will fall in value, interest rates will rise, we'll be back in recession.

Of course, we already have a 9 percent plus unemployment rate. We're starting from a very weak position. Unemployment will rise well into the double digits. We will all pay a very significant price for that action.

KING: And yet, if you listen in Washington, there is a debate. The majority say if you default, it's a big deal. But there's a vocal minority that says, wait a minute, this could all be scare tactics. Listen here, a difference between the Fed chairman and a Republican candidate for president.

(BEGIN VIDEO CLIPS)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: I think it would be calamitous outcome. It would create a very severe financial shock that would have effects not only on the U.S. economy, but on the global economy.

REP. MICHELE BACHMANN (R), MINNESOTA: That if Congress fails to raise the debt ceiling by $2.5 trillion that somehow the United States will go into default and we will lose the full faith and credit of the United States. That is simply not true.

(END VIDEO CLIPS)

KING: Mark Zandi, who is right?

ZANDI: Chairman Bernanke. I mean, I think it's pretty clear. He's got it right. If we go down that very dark path and don't raise the debt ceiling by August 2nd, we are going to pay a very serious price.

So, I really don't think there's any question here.

KING: Part of this conversation as to whether we get a deal is Republicans say with 9.2 percent unemployment, a very fragile recovery, the last thing you want to do is have any tax increases.

Are they right? Or can this deal have some modest tax increases that cannot affect what Republicans worry about in job creation?

ZANDI: They're right. There should be no tax increases this year. I would advocate no tax increases in 2012. The recovery is too fragile.

But this economy can digest tax revenue increases. My preference would be not to raise tax rates, but to reduce or eliminate the tax credits and deductions in the tax code, broaden the tax base, raise more tax revenue. That would be very therapeutic to the economy going forward. But no tax increases this year or next. I think -- and I don't think anyone's arguing that we should have that.

KING: What's your sense of how this is being digested both in U.S. markets and around the world? For the last week or so, markets have been pretty tame saying, OK, they're yelling at each other, they're being typical politicians, but they'll figure this out. Then with the Fed chairman's warning this morning, the markets seem to think, uh-oh, maybe they won't work this out. There's a tense meeting at the White House yesterday.

What's the tipping point for the market as this goes forward if they don't see progress toward a deal?

ZANDI: Well, you're right. The markets had been very calm up to this point because if history's any guide, we've been through lots of close calls in the past and just a few months ago, we had a very close call with regard to closing down the government. And we always come through at the end.

So, I think that investors rightly believe that when push comes to shove, we're going to get it together and we're going to raise the debt ceiling on time. But now, having said that, if we get into next week and there's no agreement and it doesn't look like one is coming, with each passing day, we're going to see more investors start attaching the probably not raising the debt ceiling in time, the markets are going to become increasingly unsettled.

By the end of July, the markets will be palpably unsettled. We'll see stock prices falling, interest rates rising. And by August 2nd, I think there will be turmoil in the markets.

(END VIDEOTAPE)

KING: August 2nd, again, the deadline. Mark Zandi, just pointed out.

You can see highlighted here some days just after that deadline where the government would have to come up with some big money to make payments, including Social Security, payments, $23 billion, the very next day. One of the issues here is you have freshmen in the House who just ran on deficit spending. They say stand up to the president, get deep spending cuts. That's on the House side.

Among the voices who agree with them on the Senate side, the freshman Republican Senator Marco Rubio of Florida.

(BEGIN VIDEOTAPE)

KING: Senator Rubio joins us now from Capitol Hill.

Senator, first, let me get you on the record here. Senator McConnell, your leader's plan, he calls it plan B or maybe it's plan Z, is it smart or is it surrender?

SEN. MARCO RUBIO (R), FLORIDA: Well, first of all, I understand why he's doing it. And let's be fair, he's a minority leader and he's trying to position his caucus in the best way possible in case things don't work out.

It's not something I can support because I've clearly stated that I think this is an opportunity to solve the real problem here. And the real problem is not the debt limit, the real problem here is the debt, the fact that this country continues to spend 40 cents out of every dollar that it spends. And we have to do something about it.

Look at Ireland. Ireland has got downgraded. Their debt just got downgraded to junk. It wasn't because they refused to raise their debt limit, it's because they can't afford to pay back their lenders and that's what we're headed if we don't do something.

KING: That was a passionate case for deficit reduction, Senator. So, why, as some would ask -- or maybe this is a better way to put it -- do Republicans have a problem saying yes to that grander deal the president was willing to put on the table which would get you $4 trillion in deficit reduction over the next 10 years for, yes, some revenue increases?

RUBIO: John, I've never seen that deal. I don't know if you have. I don't think the president has ever released anything other than what he's said at press conferences.

I've never seen paper on their deal. I've never seen him proposed a plan. I've always believed in a grander deal. I want to us do a lot of things. I outlined that three months ago when I said we need to do tax reform, we need to save Medicare and Social Security, we need regulatory reform, we need a spending cap, we need a balanced budget amendment.

I wanted us to do this months ago, and I continue to say this is a great opportunity to do something really meaningful for the future of our country, but our compromise has to also be a solution. It can't just be a compromise for the sake of avoiding this for another day.

KING: So, help us get to a solution then. And could Marco Rubio support any solution that included some new revenues or is that off the table?

RUBIO: No, I think there has to be new revenues. I think the debate is where does the new revenue come from? I think the new revenue comes not from new taxes, but from new taxpayers, from economic growth, from the addition of new jobs. And I think tax reform will get us there. I think there's broad bipartisan support for tax reform, for simplifying our tax code, for getting rid of things that are part of the tax code that are the result of good lobbying and not good policy.

But what -- our economy, number one, can't afford any tax increases right now. Number two, it wouldn't generate more revenue. And number three, it wouldn't solve the debt problem. The tax increases the president's talking about don't even buy us 10 days worth of deficit spending but they would kill a bunch of jobs. KING: So, what's the problem or maybe the question better put is who's the problem in the White House negotiations? Who to you need to change out maybe on both the Democratic and Republican side in your view to get this conversation headed toward a deal that's acceptable to you?

RUBIO: You know, I was talking to some of my colleagues today in the Senate, including some Democrats. I think on issues like tax reform, things that need to be done to save Medicare and Social Security, I think there exists some consensus. I don't know if politics is getting in the way or what it is. But honestly, we need to begin to teal with this right now.

I hope we can come up with something that's good for our country and deals with the debt once and for all.

KING: You're known as one of the new Tea Party-backed members, but you also have deep experience in legislative politics in the state of Florida. Would you walk across to the House side, to some of the Tea Party guys who may haven't held elective office before and say, you know what, we can find a reasonable, principled compromise here and you know what, it might include some revenues?

RUBIO: You know what? I think these reports that somehow the freshmen members in the House are against all the stuff are exaggerated and not true. I think there are plenty of House members, freshmen House members that stand where I stand, they're looking for a solution and a compromise but one that solves the problem, not one that makes it worse.

When the president says we have to raise taxes, otherwise we're not going to move forward, that would make things worse, not make things better.

But I think -- I think that stuff about freshmen in the House that won't vote for anything, I don't think that's true.

KING: Freshman Senator Marco Rubio, Republican of Florida, sir, we'll keep in touch. Appreciate your thoughts tonight.

RUBIO: Thank you, John.

KING: Thank you.

(END VIDEOTAPE)

KING: There's a nasty, polarizing fight in Washington. One of the smartest thing at good political reporter can do is hit the road in America to see what you think. My next guest, "TIME's" Joe Klein, is about to do just that.

(COMMERCIAL BREAK)

KING: If you're just joining, President Obama and congressional leaders won't meet tomorrow, but the president has a news conference, 11:00 a.m. Eastern, to talk about the debt and deficit negotiations. The House Speaker Nancy Pelosi just put out a statement saying House Democrats stand with the president in support of a grand bargain, saving up to $4 trillion.

Also, "Reuters" is reporting Standard & Poor's just warned it could lower the U.S. debt rating.

All this maneuvering right now has big implications for you, your bottom line, and for the 2012 election campaign.

Joining us now, "TIME" magazine columnist Joe Klein.

You know, politics is a funny business, Joe. Nancy Pelosi saying she stands with the president for this $4 trillion bargain. I think she doesn't think it's going to happen, so she doesn't have to have Medicare or Social security cuts before her caucus.

I want to talk about -- you're going out on the road. It's the smartest thing you can do, get out of Washington, get out of New York, talk to real people.

JOE KLEIN, TIME: That's right.

KING: In the middle in one of these things. But when you watch this, I'll call it politicians behaving badly -- what do you see?

KLEIN: Deja vu. It's kind of like 1995 when the Republicans were about to close down the government and there was all this infighting within the Republican Party, Bob Dole going after Newt Gingrich. You're seeing it on a grander scale now with the Boehner versus Eric Cantor and Mitch McConnell, who has always been a real political guy, not a policy guy, saying, hey, we have to mind the policy here and not allow us to go past this debt ceiling.

But I'll tell you what, John, it's driving me crazy. Washington and New York are coat-and-tie kind of towns, and I'm not a coat-and- tie kind guy, I want to get back on the road.

You know, last September, I spent a month on the road and the best part of that trip was asking "TIME" readers and others to get in touch with me, have you meet, you know, meet me if you want, introduce me to people you respect, your co-workers, whomever. I want to do that again.

If you really want -- I'm going to be leaving from Laredo, Texas, in early September. I'm going up to North Dakota where they're having an economic boom. Want to see what that looks like, right?

And all along that route, right up the middle of the country, about a week in Iowa, some time in Arkansas, I want to go to Joplin, Missouri, to see how folks are recovering from the tornado there. If you are in any of those places and you want to set up a meeting with me, and I may have some interesting traveling guest celebrities with me, you can contact me at Joe_Klein@timemagazine.com.

KING: That's quite a promo there. But your smart advice to get out in the country. I was just in Joplin and I'm interested to see what you hear, how they're recovering.

As you know, Joe, the first year of the Obama presidency, I touched them all. It was part of what I did when I had the Sunday show, "STATE OF THE UNION." And so, one of the things -- this is the 2008 map. One of the reasons we're in this fight now, you see blue in 2008. In 2010, this map went red.

And so, it's the people you'll be talking to. This is in part their fault. They keep swinging back and forth, I say it.

KLEIN: That's exactly right.

KING: If you're going to start in Texas, you're going to go to Iowa, and you've been in Iowa many times. But I just want to pop up it on the map, just want to remind you, if you make it to the west, you can go on Gowalla (ph). I know you tweet. You go Gowalla.

KLEIN: No.

KING: You don't go to Gowalla. When you go in Gowalla, you can see John King's 50-state tour, I give you restaurant recommendations. The Fourth Street Cafe in Sioux City, Iowa, breakfast specials under 5 bucks.

KLEIN: I'll be there.

KING: Here's what I say about that, you won't leave hungry. That's one great place to go.

And you mentioned, North Dakota, let me move this down one more, and then I want to hear what you're looking for out there.

Here's TNT Diner West Fargo. Milk shakes. The locals recommend milk shakes for breakfast. I'm not sure I recommend that.

So, you see the partisanship, the polarizing here in Washington. What are your big questions? Obviously this is a complicated 50-state puzzle. Each state's a little different. You go out with what one big question?

KLEIN: Well, what do you think about what's going on in Washington? What do you think of the president? What do you think of the Republicans?

But also, I want to meet a lot of small business people on this trip. I want to hear about what kind of problems you're having in doing business these days. What does the economy look like from the bottom up?

If you have a small business, contact me at Joe_Klein@timemagazine.com. I'm getting the love doing these promos, John. And I want you to come along with me for a day or two.

KING: I'll meet you out there. And, you know, you can sell cars if you can't do this. Get in touch with Joe Klein. Keep it family- friendly. Get in touch with Joe Klein. Give him some advice to come to your community. Tell him what you think about what's happening in Washington. Give him a good food recommendation, too.

I'll see you in the road, Joe.

I'll see you here tomorrow night.

"IN THE ARENA" starts right now.