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Shuttle Diplomacy in Debt Crisis; Compromise or Surrender?; Bachmann's Campaign Headache; Women's Health

Aired July 20, 2011 - 19:00   ET


JOHN KING, HOST: Thanks Wolf and good evening everyone.

Up first tonight breaking news, President Obama shuttle diplomacy and talk of new momentum in the efforts to broker a deal to raise the government's debt ceiling. First today the president met with Democratic congressional leaders, then a bit later the top two House Republicans came calling at the White House, that meeting broke up just moments ago.

No breakthrough to report at least as yet and the fact the Democrats and Republicans aren't meeting with the president in the same room at the same time, well that's proof enough they're not even close, but there's suddenly a lot more talking going on here in Washington and at the center of those discussions there's a new plan put forward by a bipartisan Senate group known as the "Gang of Six". Most liberals don't like the "Gang of Six" approach because it would make significant changes, cuts to Social Security and Medicare.


REP. EMANUEL CLEAVER (D), MISSOURI: We are an anti-gang group. We are -- we're trying to suppress the growth of gangs. We think that it is not healthy for Washington.


KING: Most conservatives complain it doesn't cut spending enough and raises taxes too much.


REP. PAUL RYAN (R), WISCONSIN: The "Gang of Six" is five pages of sort of talking points. It's not an actual plan.


KING: But the president sees it as a framework for a potential -- potential breakthrough and perhaps because they like the other fallback options even less, the House Republican leadership says it's at least worth talking about.

Let's begin with what happened tonight behind closed doors and how the new Senate plan is changing these discussions. Our chief White House correspondent Jessica Yellin and congressional correspondent Kate Bolduan are live at their posts. Also with us Chrystia Freeland of Reuters Global, editor at large -- Jess, the meeting with the Republicans which is the more important meeting on this day just broke up. What do we know about what's happening behind closed doors there at the White House?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Well publicly the Republicans can't talk about anything except what they're still dealing with, this cap, cut and balance proposal, but the idea is how do they get moved forward, John, and they don't want to openly talk about this fallback option, the Reid/McConnell plan, because there aren't the votes for it in their party.

The other proposal, the other notion that's sort of out there is an idea of taking something "Gang of Six"-like, building a framework that has kind of targets and cuts, caps, and spending principles in it that's pretty -- it's sort of outlined but not detailed in legislation and has a big, big dollar figure around it, so sort of the big plan.

Passing that along with a debt ceiling as sort of a big theory option instead of this McConnell/Reid plan, but it's so vague, as you can tell, and nothing that I have as any sort of firm plan, just like something that's sort of out there in the ether, they just don't have a plan at this point. No one does -- John.

KING: It sounds like, and some people at home are saying, my god, there they go into Washington speak again. So I'm going to try to simplify it. That you have a whole bunch of ideas, this is essentially a bunch of politicians with a bunch of Legos trying to fit certain pieces together to get you to several trillion dollars in deficit reduction and I don't mean to make a joke about it, but that seems to be where we are, a bunch of ideas. So, OK, Paul, when you go to Capitol Hill -- I'm going to go over to the wall for a little bit, because Jess talks about the McConnell plan.

That essentially would give the president the authority to raise the debt ceiling and then maybe they would come up with a commission with some spending cuts. That's one backup plan. Another backup plan is the "Gang of Six". And I want to just bring up the "Gang of Six" -- yesterday we talked about that. They have some significant spending cuts. They include about a trillion dollars in new tax revenues. They would make Social Security cuts, defense cuts and the like, but everybody has objections. On the liberal side, Kate, they say touch the Social Security, changes to cost of living in Social Security, liberals would like more taxes.

They don't like the Medicare and Medicaid changes and they don't think it does enough or they think it cuts too much out of corporate taxes. That's why liberals don't like it. So conservatives say wait a minute, as Paul Ryan just said the House Budget Committee chairman, not enough details. It's just a framework. They don't like the tax hikes. They don't think it has enough spending controls on entitlements. They don't think it does significant reforms to Medicare and Medicaid and the list goes on. They don't like the defense cuts and they don't think it slows government growth enough. So, Kate, yesterday it seemed to be maybe some momentum here. Today are people saying, oh, never mind? KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: It seems that that momentum -- it seems the "Gang of Six" themselves, they are definitely trying to push to gain more momentum, but we noticed a marked shift today, and I guess the enthusiasm surrounding it, it seems as you just laid out very well, there is stuff for people on the left that they don't like about it, stuff for people on the right that they don't like about it, and I'm hearing more frustration among especially senators I've heard this evening, John, people saying well if this is not going to be a solution to our debt ceiling problem, because it's simply as a package not going to be ready in time to vote on it ahead of this deadline, then why bring it forward now?

It seems to be muddying the water and frustrating people more than actually working towards a solution. So, there was great enthusiasm yesterday especially among senators. There were some briefings today trying to kind of get more people on board it seems and answer some of those questions that are out there, but it seems there are now more questions than answers in terms of the detail and the nitty-gritty of what is in this "Gang of Six" proposal, and I'm starting to see, and me and my colleagues up here, the enthusiasm seems to be fading towards this proposal at this point.

KING: And so, Chrystia Freeland, help us understand the big picture here. A lot of people get nervous, well, the markets are going to get jittery. They're going to see Washington not having a plan. They see this deadline less than two weeks away. But as you know, sometimes the chaos and the confusion in Washington is -- I don't quite understand it -- I've been here more than two decades -- necessary before you get the clarity. Is that where we're going or do you see this moving apart, not together?

CHRYSTIA FREELAND, GLOBAL EDITOR AT LARGE, REUTERS: Well, let me offer you the market perspective. I think the market perspective, John, is what the markets really want is just for the debt ceiling to be raised. At this point with August 2nd really very close, the markets I think care less about what the content of the deal is and they care more about there just being some sort of a deal.

I think it's very important to appreciate from a market perspective, this is an own-goal situation. There's no external force driving this crisis. This is a "made in Washington" crisis, and particular for America's foreign creditors, and they're increasingly important. That just sort of -- it seems absurd to the world that America could tip the U.S. and the world economy into a crisis just because American politicians felt like it.

KING: And so, Jess, let me go back to the White House, as this all plays out and people at home are watching, how does this affect me, some economists say higher interest rates, some economists say it could cause unemployment to go up if the United States defaults. There's a disagreement about that. The question let's have a process conversation. The president has these meetings today. Now what, the Congress has to work out a deal or are they due back at the White House sometime definitively?

YELLIN: Look John they continue to talk and they say they will continue to talk. But may I point out for you that the president himself set a deadline of July 22nd as the date that he'd like a negotiation to be clear. He'd like a deal to be done. And that's two days from now. So, the fact that they continue to have these vague discussions where they're not seemingly any closer to a deal at this late date when they're still grasping for a big plan, is very frustrating to some people I've spoken to today, some senior lawmakers, who are saying this is the time when they should be cutting bait and saying we cannot go for the big deal. This is when we should just be making a deal to raise the debt ceiling and put off deficit reduction for another day.

KING: And, Chrystia, do you predict if we go past the president's deadline we will see more market volatility? The markets so far have been pretty patient assuming there will be a deal. Will we see more volatility if we get into the end of the week and we still don't have one?

FREELAND: Well I think, John, the markets at this point are going on what maybe I should call the King philosophy of Washington, which is there's a lot of sound and fury but at the end of the day they do reach a deal. I think what would really scare the markets is if we started to hear more of what we were hearing earlier in the month, which is some people saying, look, it's OK if we don't meet the deadline. Some people saying, actually, you know, this debt ceiling stuff, it doesn't really matter. It's just artificial. If we do hear that, I think that you will see a real market scare.

KING: Chrystia Freeland, Kate Bolduan, and Jessica Yellin we'll keep on top of it and see if we get any more inside information on the meetings at the White House. Thank you all.

And let's continue the conversation now with a prominent conservative who is right at the center of this debt and deficit debate, if you think there needs to be a compromise and the Republicans need to give some on taxes, well then you're not a fan of Grover Norquist, but if you believe House Republicans should reject any deal with new taxes included then the president of Americans for Tax Reform, well he sees things your way. Is the "Gang of Six" proposal a framework for a deal is our first question for Grover Norquist tonight, can it be?

GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: No. As you've been saying, it's not even written down. It's an essay. It was deliberately dropped yesterday in order to distract people from what the House representatives actually passed which was a plan which was actually written down. Now the president doesn't like it, the Democrats don't like it, it dropped 2.5 trillion in real spending restraint, called for a balanced budget amendment with two-thirds required to raise taxes, with very serious caps on spending in the future.

Now it's very strong medicine. I don't expect the president to like it and I don't expect Reid to like it, but the whole point of dropping the "Gang of Six" non-plan, non-written-down plan on top of it was to distract from the fact that the House has actually put something on the table and the Senate has nothing. KING: OK. But the House plan says no new revenues. The president wants new revenues. The Republicans control the House. They just won it in an election fair and square. Democrats narrowly control the Senate, a Democratic president, so the White House press secretary Jay Carney -- listen here -- said look, we know you won the House, Republicans, but we have divided government, you've got to give.


JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The Republicans need to be willing to compromise, need to accept that they won't get 100 percent of what they want. That this is a two-party system in a divided government, and it requires compromise and bipartisan cooperation in order for big things to get done. The same is true for Democrats.


KING: Do Republicans have to give the president something to get something done or are you among those who say if we get to August 2nd and they don't have a deal, so be it?

NORQUIST: Look, let's remember the Republicans have always made it clear they're willing to compromise. The Republicans passed a budget, the Ryan roadmap, a real budget, and they fleshed it out through committees which reduces --

KING: But the president won't sign it, so if they have to move off that --

NORQUIST: Right --

KING: Any revenues --

NORQUIST: Of course, not. Of course not --

KING: No revenues --

NORQUIST: The president has known that --


KING: So what happens on August 2nd if we don't have if we don't have a deal? Do you think that's OK?

NORQUIST: If the president of the United States is so wedded to his left-wing ideology that he won't take something less than the six trillion in spending restraint and do two trillion or three trillion in spending restraint, he'd rather close down the government if he doesn't get his tax increase, (INAUDIBLE) to have a hissy fit and do that he's going to have to explain to the American people that the Republicans put six trillion in spending restraint on the table and he's put nothing, nothing in writing on the table to save spending. All he does he wants to talk about tax increases, that's not going to fly. (CROSSTALK)

NORQUIST: He's not going to close the government down over that.

KING: Let's take a walk. I want to say if the president -- he won't, I'm sure of this, but if the president were to call Grover Norquist, if we get no deal by August 2nd, and so the government, then, is faced with the scenario, and I want to bring up the choices here. The government is faced with a scenario, it only has so much money then, about $172 billion, and it has to pay some bills, pick, what would Grover Norquist pick? What would his priorities be if the government --

NORQUIST: Look, of course, that's exactly the position that the president's trying to put other people in --

KING: You don't think we're in this position?


KING: I'm serious. What would -- what do you think? Is it important to pay Social Security recipients?


KING: OK. Let's do that.


KING: What about Medicare and Medicaid?

NORQUIST: The answer -- look, the answer to each of these things is yes, which is why I'm a supporter of raising the debt ceiling --


NORQUIST: -- and it's a false dichotomy -- yes, it's a false dichotomy --

KING: Give the president the power or do you need spending cuts to get it?


KING: If the answer is yes to everything --


KING: -- you only get this far down the list and now you're right there, we're out of money, and so veterans affairs, unemployment insurance, education funding, college tuition assistance, active duty military pay, federal salaries, tax refunds, foreign aid, we don't have the money on August 3rd, so how do we avoid that?

NORQUIST: Look, what the Republicans have been trying to tell the president for six, seven months now, which is they would like to have significant spending reduction and they're willing to give the president significant increase in the debt ceiling. Leader Boehner, Speaker Boehner in the House said you want 2.5 trillion because Obama's overspent the debt ceiling by 2.5 trillion over the next year and half, if you want that 2.5 trillion increase we've got to have 2.5 trillion reduction over a decade, not tomorrow, not August 2nd, but over the next decade.


KING: And if the president says I won't give you 2.5 trillion without some new revenues, you say the House Republicans should hold firm --


KING: -- even if we get to this scenario?

NORQUIST: The president of the United States I do not believe is so irresponsible that he's so wedded to this idea that he wants to raise taxes on people that he's going to close down the government and while he's overspent -- I mean the reason we're dealing with this August 2nd is he spent $800 billion on a stimulus package that failed. He added a trillion dollars to domestic discretionary spending; he tripled the number of troops in Afghanistan --

KING: The question -- so the question I guess -- we need to close this here --


KING: -- going into the next week or so, who blinks if anyone --


KING: We'll see how --

NORQUIST: -- there's going to be a compromise. The president will get less money than he wanted. The Republicans will get fewer cuts than they wanted, but they're not raising anyone's taxes.

KING: All right, we'll see how this one goes. Grover Norquist, appreciate your coming in.

And still to come here Secretary of State Clinton delivers a message that won't sit well with China. Fareed Zakaria helps us put it in context.

And next Michele Bachmann releases new information about her battle with migraines. Will it silence critics who question her ability to be commander in chief?


KING: Minnesota Congresswoman and Republican presidential candidate Michele Bachmann disclosed new information today about her battle with migraines. A letter from the attending physician of the House of Representatives describes the congresswoman as in quote, "good general health." The letter says detailed lab work and brain scans all were normal and that letter went on to say, quote, "your migraines occur infrequently and have known trigger factors of which you are aware and know how to avoid. When you do have a migraine, you are able to control it using two commonly prescribed medications." Last night Dr. Sanjay Gupta told us those medications in most cases are highly successful.


DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: But when I talk about treatment, it can be treated very easily, you know, Ms. Bachmann said that 30 million people roughly in the country have these migraine headaches, that's about right, so this is obviously a common ailment and something that neurologists have gotten a pretty good handle on if patients seek out treatment.


KING: So is this case closed? Has the congresswoman now proven wrong the former aides who anonymously leaked word of her migraine history and again behind the cloak of anonymity suggested she could not handle the stress of the presidency?

"New York Times" national political correspondent Jeff Zeleny is with us, as is our chief political analyst Gloria Borger. Jeff, I said anonymity twice because I think it's pretty reprehensible, if you're going to challenge somebody's fitness to serve you should stand up and do it publicly. But despite the way this was done, it is a legitimate question, if she has a condition that in the past has maybe caused her to miss votes, maybe had her see a physician, has she ended the discussion today by releasing this letter and this new information?

JEFF ZELENY, NATIONAL POLITICAL CORRESPONDENT, NEW YORK TIMES: John, it seems to me that she has ended this discussion, but I guess the bigger question is how many more things like this are out there. She has a lot of former advisers and a lot of former aides. It's been widely reported and well discussed that she's had a lot of turnover in her congressional office, so clearly there are people who have worked for her in the past, who are not eager to see her have a successful presidential bid, so it seems to me that this episode is over.

But going forward, I mean, I've seen her out there on the campaign a lot. She has a lot of energy. On the Fourth of July, I was at a parade with her; she was running so fast, photographers were having a hard time keeping up. So, I would think that this would have settled the matter. More interestingly is how her rivals responded to this today.

KING: Let's listen to some of that because let's listen to the contrast here and I'm going to ask the control room to listen to me so we get the order right. First the former Massachusetts governor -- there's two former governors -- that's why I'm saying it like this -- the former Massachusetts governor, Mitt Romney, he was asked about this. He was pretty straightforward. (BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: There's no question in my mind that Michele Bachmann's health is in no way an impediment to her being able to serve as president. She and I have different views I'm sure on some issues. We'll campaign in various states and express our views, but her health should not be an issue in a campaign. I have no question about that in my mind.


KING: Governor Romney there. Here's a somewhat different take, a little less declarative sense from the former Minnesota Governor Tim Pawlenty, who my language, forgive me, if Michele Bachmann is causing anyone a headache, any other candidate a headache, it would be right now Governor Pawlenty in Iowa.


TIM PAWLENTY (R), PRESIDENTIAL CANDIDATE: Well I don't know enough about her particular medical situation to comment. I just don't have enough facts on that. I certainly would defer to the judgment of the medical professionals. But setting that aside, all of the candidates I think are going to have to be able to demonstrate they can do all of the job all of the time.

UNIDENTIFIED MALE: What does that mean?

PAWLENTY: If you are going to be president of the United States, you got to be able to do the job every day all the time. You know there's no real time off in that job.


GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well I don't know the facts and I'm not going to comment, but I just commented on it. And it's very clear as you point out that Tim Pawlenty is very threatened by Michele Bachmann and I think that was a very ungracious comment for him to make about her. If as he said he doesn't know any of the facts of her migraines, why would you say something like that? Unfit to serve. Challenge her on the issues. Challenge her on her positions. Challenge her on her votes in the House, whatever.

KING: And yet in there, Jeff Zeleny, in there Governor Pawlenty does make the point and its a legitimate point, it's why this is a legitimate issue despite the way in which it was leaked, if you want to be president of the United States, you want to get the nuclear football, you have to prove you're fit to serve. You have to prove you're in good health. Normally this comes up when somebody is closer to the nomination, or when they're the nominee.

They traditionally (INAUDIBLE) your newspaper they go to the medical correspondent of "The New York Times" and it's on the front page of the paper and everybody follows the coverage from there. They release the records (INAUDIBLE) after the doctors. Are we in a different world now, in part you mentioned Michele Bachmann if she were going this way in the polls, not this way, I doubt this would have happened. But in the age of social media, in the age of instant information, are candidates facing these questions maybe a bit earlier?

ZELENY: I think candidates are facing the questions a bit earlier because the stakes are higher earlier, I mean in the campaign right now. It's only July, but as you said, some of these Republican rivals are shocked and surprised and frankly trying to do everything they can to compete with the congresswoman. But I mean, who knows who leaked this. Who knows what their motives were. I mean but I think it's -- I agree with Gloria that the comments from Governor Pawlenty were probably not as gracious as they should have been. But it fits into a narrative of what he's been trying to build in Iowa.

BORGER: Right.

ZELENY: It sounds very similar to what he said last week and the week before when I was out with him when he was saying he's really trying to get people to focus on who has more experience for the job. So, I don't know if he'll be saying that a lot more. I would think he wouldn't.

KING: And the key for the congresswoman is whether you think this is a legitimate issue or not, when you're a candidate and people are asking about this at every stop --

BORGER: Right.

KING: You want to talk about spending cuts. You want to talk about health. You want to talk about whatever proposal, and they are saying what about your migraines, what about your migraines, so it was important for her to act quickly. A little bit -- she made a statement yesterday, then the letter from the doctor today, important to act quickly especially in this cycle, 24-hour news cycle, do you think it's enough?

BORGER: No. I think it's going to come up and I think she has got to be forthcoming about it. She kind of talked about it and then she started to talk about the debt ceiling and other issues and, you know, you have to confront these things head-on and say it's a legitimate question you ought to be asking. Here's a letter from my doctor. I gave you that letter. We'll give you more later on, but don't sort of make-believe like it's not a question that's out there. So, I think this shows us a little bit about the early stages of the Bachmann campaign how they handle this will be -- will be, you know, something for us to watch. But at least they did get the doctor's letter out there and so they get credit for that.

KING: Gloria Borger, Jeff Zeleny, appreciate your help tonight.

And next major medical news for all American women, Dr. Sanjay Gupta joins us with details of new recommendations for women how to combat breast cancer.

(COMMERCIAL BREAK) KING: Important health news tonight for all American women. The American College of Obstetricians and Gynecologists has updated its breast screening guidelines, recommending annual mammograms beginning at age 40. Until now they've recommended mammograms every two years starting at age 40 and every year only after age 50.

The change even more at odds with the U.S. government task force report just a couple of years ago which suggested women in their 40's shouldn't get routine mammograms. Let's talk it over with our chief medical correspondent, Dr. Sanjay Gupta. Doctor, number one, the main reasons, why this change, and how significant is it?

GUPTA: Well, I mean they're looking at a lot of existing studies out there and that's where the change is coming from, and it's pretty significant. The real -- the interesting thing is that, you know, if you look across the board, about 40,000 women a year will develop breast cancer in their 40's. That's the first thing to think about. Twenty percent of those women will die, again, talking about women in their 40's.

They also noted as part of reviewing these studies that a cancer tends to grow faster in a woman earlier in life, so between 40 -- in her 40's the cancer is going to grow a little bit faster which is why they felt they needed to screen a little bit more quickly. That's sort of the bottom line. They know that earlier screening, about 98 percent of women will survive five years if their tumors are found early. They added all up all these facts together and they concluded not only should we not you know reduce screenings, we should increase them, as you say, annually starting at age 40.

KING: So these are today's recommendations; we have them up on the screen here so everybody can see them and as you note, they base it on three factors, the number of cases and that the cancer grows faster, the shorter sojourn time, they call it medically --

GUPTA: Right.

KING: -- potential to reduce death. But I want to show -- this is actually the next question. Here's the mortality numbers, the incidence of breast cancer is highest among whites, but the fatality rate highest among African-Americans. When you look at these numbers, here's what I'm assuming a lot of women are asking tonight. Why this change and why the conflict with the other recommendations just a few years ago that said, no, it's OK to wait until you're in your 50's?

GUPTA: You know this is one of those fascinating things in medicine. I reported pretty extensively on this a couple of years ago. First of all, keep in mind that people are pretty much all looking at the same data, the same studies, so it's not the data that's in question, it's the interpretation of the data. And most of the cancer organizations including the American Cancer Society, the College of Obstetrics and Gynecology that you're talking about even the American College of Radiology had these recommendations beginning in the '40s.

The task force was the only one to release a -- let's start these screenings in the 50's. You know, John, it's a balance and this is where public health hits individual health. That's where the rubber meets the road so to speak. You know there is going to be more false positives, for example, in the 40's, I think to your grasp (ph) point. So if you have more false positives, you're going to have biopsies. You're going to have anxiety. You're going to have missed time from work for you know something that was not cancer. That's a balance with finding, you know, those 40,000 cancers, reducing that death rate, and keeping in mind, again, that the cancer grows faster in these younger women. So let's catch it sooner.

KING: And so here's the question I would have as a layman. Number one, do these recommendations actually influence behavior? And number two, will they change how some woman out there watching how their insurance plan is going to deal with this issue?

GUPTA: Well you know your first point is a really good one, because I think the concern for a lot of people was look, if we you know say the recommendations are annually in the 40's more women are going to out there and get these mammograms that don't need them. In fact, as a practical purpose, it's the opposite problem. About 30 percent, about a third of women, still don't get mammograms who do need them.

So, this idea that it's going to cause mass hysteria, and women are going to go out there and get mammograms needlessly, I think that's probably, you know, not likely to happen. As far as insurance companies go, many insurance companies, you know, see these guidelines like everyone else does, but on a state-to-state basis, you know, these mammograms are typically covered for women whose, you know, doctors prescribe them.

So, if the doctors prescribing the mammogram annually, starting at age 40, the insurance company is going to typically cover it. It's very easy now from insurance company to company and also state to state. But across the board that's pretty much what happens.

KING: And I assume this. I want to show one last thing here. I assume this is the biggest factor in this change, the recommendation -- the survival rate. Ninety-eight percent have at least a five-year survival rate with early detection.

I assume, Sanjay, this is the driving force between -- the earlier, the better.

GUPTA: That's right. You take that stat that you just put up, John, and you balance it with false positives, again -- you know, biopsies and in retrospect did not show cancer, all those things. But the 98 percent, 5-year survival rate, and I'm speaking in part as a son of someone who's dealt with this, and I know you find these cancers early, you can deal with it. And, you know, my mom's living proof of that.

KING: Dr. Gupta, as always, appreciate your help.

GUPTA: You got it. Thank you.

KING: Thank you.

Still to come here: a feisty question time for Britain's prime minister. And Secretary of State Clinton raises eyebrows in China.

But next, Michelle Obama's push for healthier eating habits draws fire from the traditional ally of the Obama White House, organized labor.


KING: Welcome back.

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

State and local law enforcement officials have been told to look out for threats targeting private utility facilities here in the United States. The Department of Homeland Security which put out the alert says it has no specific, credible intelligence, though, of an imminent threat.

A source very close to the former Defense Secretary Donald Rumsfeld confirms to CNN several former top Rumsfeld Pentagon deputies traveled to Austin, Texas, last week to brief Governor Rick Perry on national security and foreign policy issues.

Minnesota's state shutdown is over. The state's Democratic governor gave up on his bid for tax hikes. The Republican legislature gave in a bit on spending cuts. Twenty-two thousand state workers who've been off the job since July 1st will start reporting back to work.

The Federal Reserve today announced a record $850 million fine against Wells Fargo for allegedly pushing borrowers with good credit into more expensive subprime mortgages.

At the White House today, Michelle Obama praised executives of major retailers, including Wal-Mart and Walgreens for agreeing to make fresh fruits and vegetables available to stores in low-income areas.


MICHELLE OBAMA, U.S. FIRST LADY: A fresh food section in Walgreens might be a good solution for one community, while a farmers' market or maybe even a veggie truck might be the answer in another community.


Today's event sparks some rare criticism of the first lady by big labor. The Service Employees International Union and the United Food and Commercial Workers Union took issue with her praising Wal-Mart, saying its move into urban areas cost jobs.

One last footnote, among the retailers on hand at the White House today were some old friends. The Calhoun Foods is a small grocery chain, a small family owned business. We visited one of their stores in Selma, Alabama, when we traveled the country for CNN's "STATE OF THE UNION." Good to see old friends.

Ahead: Secretary of State Clinton is in Asia. What she said about India's role, and why China might take issue. That's next.


KING: Secretary of State Hillary Clinton is traveling in Asia and today nudged India in a way that is likely to cause concerns in China. Secretary Clinton noted India's growing economic power and said it was time now for New Delhi to assert itself as more of a political force across Asia.


HILLARY CLINTON, SECRETARY OF STATE: This is not, therefore, a time when any of us can afford to look inward at the expense of looking outward. This is a time to seize the opportunities of the 21st century, and it is a time to lead.


KING: Why might Beijing take issue with that?

Let's check in with CNN's Fareed Zakaria.

Fareed, let's just start with the basic question -- she's in India, on her way to a regional security conference in Indonesia where Chinese actions will be at issue. Why say that and why say it now?

FAREED ZAKARIA, HOST, CNN'S "FAREED ZAKARIA, GPS": Well, the United States is trying to play a very careful game here, which is to encourage other Asian countries to assert themselves in a way that makes sure that Asia does not end up dominated by China. But they can't do it in a way that suggests that we're trying to gang up on China or create any kind of a policy of containment of China. That isn't the goal.

And so, one of the difficulties here is you're trying to get the Asian countries, Japan and India, principally, to assert themselves a little bit more, and certainly, the Indian case -- this is a vast continental nation, generally speaking, quite internally absorbed. So, the secretary is trying to push them to be a little bit more assertive, to take care of their own interests, to look beyond just India, Pakistan, Afghanistan.

And I think, you know, it's the right way to approach it. It wasn't too explicit, but it was a way of nudging them and saying, come on, guys, you've got to keep an eye on what's going on in Asia right now.

KING: Let's explore a little bit deeper and let's stay on the China part of it, because you note she has to be careful, yet, she's also, pretty obvious. She's talking about India's democracy, India's growing economy. And she says India needs to be -- India can, quote, "inspire others to follow a similar path of openness and tolerance."

It's not hard to guess what she's talking about openness and tolerance. Who is she talking about there?

ZAKARIA: Look, I think that this is a grand tradition of American diplomacy, which is when we want to have a strategic relationship with China, we want to have a cooperative relationship with China, but we do have our preferences and we have always said, every president, Democrat and Republican, for 30, 40 years, that, you know, when compared with dictatorships and closed systems, we prefer democracies and open systems. And so, we're trying to make that association and make it plain.

You're absolutely right, this is a -- this is a coded way of saying something about -- about China. But I think it is really important to recognize that we're almost trying to be the catalyst here, to get other Asian countries to do what they should be doing anyway, which is to be taking care of their own continent, to be taking care of the issues that will concern them.

I think that Secretary Clinton correctly reads India as being somewhat self-absorbed right now, huge internal issues that they have. If you think democracy can get dysfunctional in Washington, you should see what it looks like in New Delhi sometimes.

So, she's trying to get them to take a slightly broader view. Big, messy raucous democracies like the United States, like India, have a tendency to be internally obsessed.

And what are the prospects for that? India has had economic growth in the recent years. You noticed that democracy can be pretty loud and raucous, perhaps even exceeding ours, but given the history, given the culture, given the traditions, is India likely to listen, or is India likely to say, no thanks, we want to enjoy our economic growth and we don't want to be a loud neighbor in the neighbor?

ZAKARIA: It's a very good question because they have tended to be both, somewhat internally obsessed and also somewhat suspicious of the United States. Let's remember that the United States, for most of the Cold War, backed Pakistan, not India. The Indian foreign policy establishment has a tendency to be in any case a little bit, you know, third world-ish and anti-American in its own ways.

And so, it's been a long thaw in relations between India and the United States, a very -- begun by Bill Clinton, crucially improved by George W. Bush, and now being further improved by President Obama and Secretary Clinton.

I think it's still a work in progress. You can see that they have some thorny issues with regard to the nuclear deals. As you know, the Indians are not being as forthcoming in allowing the American companies to participate in the -- in what will be a vast Indian market for nuclear energy. And as long as the arrow is moving in the right direction, I think we're probably doing well.

You know, when we deal with Pakistan, we see all the problems of dealing with a country that is not really a democracy. With India, you see all the problems of dealing with a country that is truly, a completely a porous, functioning, chaotic democracy, which means the government might have the best intentions. It can't get anything through parliament.

KING: And you make a key point about it. As long as the arrow is pointing in the right direction, let's project forward. Secretary Clinton moves on to this regional security conference in the South China Sea is a topic of concern as it has been in recent years. China doesn't like it when the United States has military exercises in the region. The United States doesn't like it when China says, hey, this is our territory, get out of the way.

Where is that conversation headed?

ZAKARIA: Pretty much as you described it. And I think Secretary Clinton, to give her credit, has managed to maintain this balance quite well with regard to that as well. The crucial issue has been the issue of freedom of navigation and freedom of the seas with regard to the South China Seas. The Chinese believe the Americans have no business talking about it. The Americans believe it's an international issue that you want to have freedom of navigation everywhere and that China should -- the South China Seas should not become a Chinese lake.

And Mrs. Clinton has been very firm in making that point. She noted in a speech in Hanoi last night. I wouldn't be surprised if she makes it again. The Chinese do not like it.

But this is one of those cases where I think it actually helps matters if both sides express themselves clearly, unambiguously, so that there's no ambiguity as to where we stand on the issue. And I think Mrs. -- and Hillary Clinton has taken the lead on some of these tough issues of drawing the line in terms of how you deter the Chinese and how you reassure them, and making clear we want a friendly relationship with China, but we don't want -- we don't want to acquiesce in a Chinese takeover of the navigation routes, or the key Asian waterways.

KING: And as she tries to advance these conversations, some of them about international economics, some of them about international security -- how much when she sits down at a table at a regional meeting like this does what's happening here right now, about the debt ceiling, about the United States getting -- trying to get its fiscal house in order, how much does that complicate her work overseas?

ZAKARIA: I think the general problem of American macroeconomic mismanagement and political paralysis has been a huge negative for the projection of American power. Because, you know, the end of the day, even when people didn't think much of the Iraq war and thought George W. Bush's foreign policy was bad, they all believed that America had the most advanced capitalist economy in the world and basically that it was the best run. That the Federal Reserve and the SEC and all of these bodies were state of the art.

What they have come to believe in the last few years is that this whole thing was a house of cards. So, the sooner we can demonstrate to the contrary and, frankly, we could put together a $4 trillion package that would essentially solve the short-term budget problem for the United States, it would put us on very firm macroeconomic footing. That would be a huge boost.

But I'm sure it doesn't come out specifically in the meetings that no foreign minister is going to say to the secretary, by the way, you guys can't get your act together.

But it is in the background. It is in the shadow. And I can tell you in private conversations with particularly Chinese officials. It does come up in my conversation. It comes up all the time. They are often talking about how we have revealed ourselves to be not nearly as competent as we think we are and that only makes our arrogance more unbearable.

KING: Fareed Zakaria, interesting points as always. Thanks, my friend.

ZAKARIA: Pleasure.

KING: Next, parliament questions Prime Minister David Cameron's hindsight when it comes to the tabloid hacking scandal.


KING: Question time today for the British Prime Minister David Cameron, a feisty session guaranteed, because of a tabloid hacking scandal and allegations the prime minister's too cozy with the Murdoch empire and was too quick to hire a former tabloid editor link to some of the scurrilous tactics.

Andy Coulson is that former editor and the former Cameron communications director. Now, Coulson is one of 10 people arrested so far in this blossoming tabloid scandal. Prime Minister Cameron told the House of Commons if he knew then what he knows now, he would not have hired Coulson. The Labour Party leader Ed Miliband took exception.


ED MILIBAND, BRITISH OPPOSITION LEADER: It's not about hindsight, Mr. Speaker. It's not whether Mr. Coulson lied to him. It is about all the information and warnings that the prime minister ignored.

He was warned. And he preferred to ignore the warnings. So that the country could have the leadership we need, why doesn't he do more than give a half apology and provide the full apology now for hiring Mr. Coulson and bringing him into the heart of Downing Street?

SPEAKER: Prime Minister.

DAVID CAMERON, BRITISH PRIME MINISTER: What I would say to the gentleman is stop hunting feeble conspiracy theories and start rising to the level of events.


KING: The prime minister and his conservative allies were quick to note Murdoch and other media bigwigs had close relationships with and access to the Labour Prime Ministers Tony Blair and Gordon Brown. And Mr. Cameron took issues with suggestions his leadership abilities were now compromised.


DAVID WINNICK, LABOUR PARTY MEMBER OF THE PARLIAMENT: Doesn't he realize that to many people, how he has acted in the last few years has been pretty sordid?

CAMERON: (INAUDIBLE) to the honorable gentleman is yes, because which government has set up additional inquiry? This one. Which government has made sure there's a fully resourced and staffed up police investigation? This one. Which government is being totally transparent by its conduct and contacts with the media and ask the others to do the same? That is what this government has done.


KING: So just great political theater or a threat to Prime Minister Cameron's political standing?

The veteran "New York Times" foreign correspondent John Burns is live from London tonight. And with me here in Washington, Nile Gardiner. He's the director of the conservative Heritage Foundation's Margaret Thatcher Center for Freedom.

John Burns, to you first, it is great theater. It was great theater. We don't know where this is heading from an investigation standpoint. But in the sense that Prime Minister Cameron, is his ability with the coalition government to begin with, to perform, to enact his agenda, to advance especially the austerity agenda -- is that the biggest question here?

JOHN BURNS, LONDON BUREAU CHIEF, NEW YORK TIMES: It certainly is. It's the question that lurks at the edge of all of this. He did well today. He came out assertively. He met Mr. Miliband thrust for thrust. And I think they say that he survived the day. Parliament went into recess.

And he may have caught a kind of nescient wave here in Britain that this thing has kind of overwhelmed the country, overwhelmed the political agenda. And it's time to get back to, particularly, to the economic problems confronting Britain and the rest of Europe, which, as you know, are severe.

KING: An excellent point John Burns made. And a leader is challenged in something like this, whether you think these are appropriate questions, whether you think it's over the top, I think there's a lot of volume. There's probably a lot of hyperbole, as to can be in such moments.

The question is how does he perform when tested? How did he do?

NILE GARDINER, HERITAGE FOUNDATION: I think he did rather well today. This is the most difficult day of David Cameron's premiership so far. He came under extremely heavy fire in, by far, the most important debate I think so far of his time as leader of the country.

But I think overall, Cameron put forward a very convincing performance. And I think he has weathered the storm temporarily. Certainly, this is a very big scandal. It's hit the very heart of the British political establishment.

I don't think it's big enough to bring the prime minister down. I think he has survived. Certainly, there will be more and more questions emerging about his judgment with regard to the hiring of Andy Coulson, his former communications director.

But overall, I do think this is the Watergate sort of style scandal that is big enough to bring him down the prime minister of Great Britain.

KING: And that's the key point, John, going forward. Ten people arrested, perhaps more. The investigations will continue, likely some prosecutions. Did the prime minister do enough to say, OK, I made a mistake. I wish I knew more about Mr. Coulson, but I was, you know, trying to hire somebody.

Did he do enough to create enough distance, enough of a buffer that if there are convictions that can be traced back to him in terms of people he knew, people who worked for him, that he has enough of, hey, I dealt with this quickly?

BURNS: Well, I think only for now and it may be some months before we really know the answers to that -- certainly some weeks -- because the two key issues which was the nature of his relationship with Mr. Coulson, whether there was anything more to keeping Mr. Coulson in Downing Street than what he said, a second chance and so forth. And what he did, if anything, to forward -- to support Mr. Murdoch's bid for BSkyB, the satellite broadcaster here, the $12 billion bid for Britain's most lucrative private television operation.

Now, those are issues that were thoroughly gone over in the parliament today. But there are police inquiries. And, of course, the press are now all over this story.

And if, in the course of the next weeks or months, it turns out that Cameron has misled parliament, has not told the whole truth about this, either one of those things, Coulson or BSkyB, it could be the end of his time at Downing Street.

As an analyst of British politics, what's your biggest question? What do you need to know next in?

GARDINER: Well, I really want to know how Cameron is going to lead the country with regard the terrible economic situation in Europe of the moment, how he's going to deal with the budget deficits. These are the big questions of the British public.

I do think that the scandal certainly is a very serious scandal, though. But in the eyes of the British people, they want to move on now, I think, and deal with the issues that Britain is facing as a major international power. So, I think the British public will now be looking to the prime minister to lead the country, put the scandal behind him and move forward.

KING: To pivot as we say in our country. Nile Gardiner, John Burns, thanks for your time.

One quick footnote before we go tonight: many people saw last night Wendi Murdoch coming to her husband's defense last night. Look at this. In the last 24 hours, more than 1.5 million results if you Google Wendi. She's a hit online.

We'll see you right here tomorrow night.

"IN THE ARENA" starts right now.