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ERIN BURNETT OUTFRONT

Wall Street Protests; Will Chris Christie Run?; Amanda Knox Trial; Interview with Defense Secretary Leon Panetta

Aired October 3, 2011 - 19:00   ET

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


ERIN BURNETT, HOST: All right. Thanks so much to you, John.

Well, do suicide vests in America sound scary to you? They sure do to us. We're on the front lines with an exclusive interview with Defense Secretary and former CIA Chief Leon Panetta.

And then we went to the Wall Street protest this afternoon. We saw dancing and MacBook, "Seriously?!" and the "Bottom Line", he's a Republican messiah, but can Chris Christie make the numbers work for a run?

That's OUTFRONT.

Hello, everyone, I'm Erin Burnett. First night out of the gate, great to be here and I went to Wall Street today to see those protests for myself. I saw dancing --

(MUSIC)

BURNETT: Bongo drums, even a clown. It was sort of a tent city meets Woodstock kind of feel. And I asked several protesters what it was that they wanted. Now, they did not know. And we have more on that later. But they did know what they don't want.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Capitalism doesn't work.

BURNETT: You're angry at Wall Street, Washington, too, or just Wall Street?

UNIDENTIFIED FEMALE: Definitely Washington, the politicians who are corrupted by a lot of the corporate money from Wall Street.

(END VIDEO CLIP)

BURNETT: So what do you want, protesters? It seems like people want a messiah leader just like they did when they anointed Barack Obama. But, if you don't know what's wrong, no one can fix it for you.

John Avlon is contributor and CNN columnist also for "Newsweek" and "The Daily Beast" -- John, great to have you with us.

JOHN AVLON, CNN CONTRIBUTOR: Good to be with you, Erin.

BURNETT: You spent some time there, as well.

AVLON: Yes.

BURNETT: And I'm curious what your takeaway was. I have to say, I was in Tahrir Square during the Egyptian revolution, and this lacked the intensity, to say the least.

AVLON: It's not remotely parallel. Look, drum circles don't start problems. And it's tough to get your demands taken seriously dressed when you're dressed as a zombie. There's no parallel to the grievances these folks have and some of them are legitimate. People should be angry at some of the economic environments --

BURNETT: Yes.

AVLON: -- but to compare this and the United States of America to Tahrir Square and the Egyptian government or Syrian protesters is very self-congratulatory. But it has got nothing to do with reality.

BURNETT: Right and obviously some of them were trying to make that comparison.

AVLON: Right.

BURNETT: But yes, it was very different although you know there's a little part of you that warms to such idealism. But let me ask you about this, though. There's been -- it's been spreading, which is part of the reason I wanted to go down there today, 700 people arrested this weekend in New York, Spokane. You're hearing of it around the country. I'm curious as to what you think about the parallels people are drawing between it's peaceful and it's fine now, but it could become something like we saw in London where disaffected youths become violent.

AVLON: I think that's a narrative that people want to write because it's sitting right there in front of us. People have been concerned about, can it happen here? But I think that gets way ahead of where it is. First of all these protests --

BURNETT: There they are live now.

AVLON: There you go.

(CROSSTALK)

AVLON: Having fun, this is not about protest and that's a good thing.

BURNETT: Right.

AVLON: Peaceful civil disobedience is an American tradition. That's great. I think you will see satellite protests around the country. But accelerating it to the kind of riots we saw in England, you know that kind of fetishization (ph) of protests and riots, that's got no place in American debate (ph).

BURNETT: And I hope you're right because it's interesting, Hillary Clinton has referenced the risk of unrest in the United States and Michael Bloomberg did recently, getting a lot of attention that he was saying he was prepared for that. But let me ask you about this, because you've got this group of young people, and it sort of makes you think of the Tea Party, right? Where it was just born naturally and then all of a sudden now you have real bona fide politicians who say I'm a card carrying member of the Tea Party. Could we see this sort of a thing come from the left?

AVLON: Look, I think some folks on the far left who are disaffected with President Obama might see this as a rallying point. You could see some politicians say hey there's a crowd; this is a good time for some grand-standing. But at the end of the day, conservative populism has always played a major role in American politics. Liberal populist marches like this tend to alienate more people than they attract at the end of the day. I don't think you're going to see a presidential campaign built around this for example.

BURNETT: All right, well John Avlon, thank you very much.

AVLON: Thank you.

BURNETT: And we're going to take you there live. We have a fun little segment coming up of what we really saw down there today. But is it this need for a miracle, a messiah frankly that's sparking the whole Chris Christie phenomenon. Now he himself has repeatedly said, as you all know, he's not ready, nor is his heart really into running. But he could get forced into it in the next 48 hours if he's convinced that his moment will only come once. But here's the bottom line, can he even raise the money to win at this point?

A lot of big money Dems tell me they're going to give money. A major bank CEO, one of the biggest in the country, said last week to me I'm a lifelong Democrat, Erin; I'd vote for Christie and give him money. You've also got the new CEO of Clear Channel, Bob Pittman (ph), among the many that I saw at a mobile conference in Idaho this summer telling Chris Christie they wanted to give him money.

And (INAUDIBLE) executive Bruce Rezsetter (ph), a top fund-raiser for the current Republican governor in Iowa told us today that Christie won't have a problem in his state. Here's exactly what he told OUTFRONT. Quote, "Christie can win Iowa. There's a lot of money left on the sidelines here."

Well, to compete in the primaries, Christie needs a whole lot of money. Mitt Romney and Hillary Clinton both raised hundreds of millions, 223 million for Clinton, 105 million for Romney, and that wasn't enough. They lost in 2008 -- the ultimate winner, Barack, winning with a cool $745 million. Can Christie get that kind of cash?

Bill Burton is Obama's money man. The former White House deputy press secretary, senior strategist of Priorities USA (ph), a super PAC which means it can raise super large amounts of money set up to reelect the president. Kevin madden who is the Romney camp. He was campaign adviser for Romney in 2008. So I really appreciate both of you being with us. Let me start with you, Bill. From our reporting, it's possible that there could have been PACs created to raise money for Chris Christie that were sort of in a quiet period right now. We may not know for a few days. Do you think that he could raise the money purely technically if he got in this week?

BILL BURTON, FORMER WH DEPUTY PRESS SECY.: I think if folks are really seriously committed to raising money for a super PAC he certainly could have millions of dollars in his super PAC from the moment that he decides to go. But it's interesting to me that there still is so much clamoring out there for somebody else to get into this race who isn't Mitt Romney. I think that's what Chris Christie says more than anything else about the boomlet (ph) of energy and attention around it.

BURNETT: And let me ask you about that question, Kevin, because it's true. Mitt Romney's numbers for the third quarter have come out in terms of fund-raising. They were down. A lot of people, Republicans, have been telling me they're sort of waiting, and if Christie got in that might change the math of who they gave money to. So if Christie does not get in, does that mean you're going to see a surge of money for Romney? I mean how much do you think is on the sidelines?

KEVIN MADDEN, ROMNEY CAMPAIGN ADVISER IN 2008: Well I think it's hard to see a surge of money right now. Look, I think it's a very competitive fund-raising environment. I think the economy has an affect on that. And I do think that money follows momentum oftentimes in politics. And right now, the race has been very unsettled for a long period of time. So nobody really has had an opportunity to get the kind of momentum that's going to bring money with it.

So I think it will be a few more months before you see a lot of these folks, these big dollar folks that will start coming off the sidelines, so to speak. And will move behind somebody who they think has momentum and can unite the party and eventually serve as the nominee going against Barack Obama. But I still think that's not here yet. But, there is a giant -- I will say this, and Bill knows this, because he probably has to do this all day dialing for dollars on the Democrat side.

BURNETT: Yes.

MADDEN: There is a canyon between the promise of money, and the actual raising of money.

BURNETT: Right.

MADDEN: And that would probably be the big challenge for a potential Christie candidacy.

BURNETT: Bill, I mean that's something, you know, Chris Christie seems to be well aware of. I'm curious, though, Bill, from some of the big executives I've spoken to, who are Democrats, gave to Barack Obama last time around, this time say they'd like to give Christie. Now they could be talking, more than they would actually act, but do you see some hesitance on donors on your side, as well, where once the Christie issue is resolved, if he's not in, you could see a surge?

BURTON: Well, I think that any surge is going to go in a Republican direction more than anything. I don't doubt your reporting on Democrats saying that they like Chris Christie. I know that some of them have relationships with him. And I do know that some of the things that the president did on Wall Street to tighten the rules and make things tougher for banks and financial institutions didn't make everybody on Wall Street happy.

BURNETT: Fair point.

BURTON: But it was what he thought was the right thing to do. So I think that any -- any manifestation of a Christie campaign is going to have a bigger impact on the Republican field than the Democratic.

BURNETT: And, Bill, what about this whole idea we were just talking about from the Wall Street protests that there is this kind of need for a messiah or someone to solve all of the problems? Obviously Barack Obama was that guy and it's really hard for anybody to live up to being that person, right? Nobody ever lives up to the hopes and fears of everybody out there. So don't -- do you think that Chris Christie should be worried about the same thing?

BURTON: Well, I think that Chris Christie is a long way from having articulated a vision for this country that's going to do anything to appease the people who are on Wall Street. As your own reporting showed, it seemed like those folks didn't even have a clear sense of what the problem was, or what they were out there fighting for. So, I think that this race will come down to the economy who can make the better argument of their vision for where our economy ought to go and how we ought to get there, and I don't think that changes whether or not Chris Christie gets in. I think that's the case, whether it's Christie, Romney, Perry, Bachmann or whomever.

BURNETT: Kevin, Bill, thanks to both. Appreciate it.

UNIDENTIFIED MALE: Congrats on the new show, Erin.

(CROSSTALK)

BURNETT: All right. Thanks and good to see you.

All right, well still OUTFRONT it's the front page tomorrow in America and Europe and Donald Trump talks to us about someone he knows, Amanda Knox. That's next.

And then the Wall Street protesters, we promise to take you there -- "Seriously?!" And our exclusive interview with Defense Secretary Leon Panetta.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This individual was clearly a terrorist. And yes, he was a citizen, but if you're a terrorist, you're a terrorist.

(END VIDEO CLIP) BURNETT: And that means we can kill you. So what is the greatest threat to America right now? We'll be back.

(COMMERCIAL BREAK)

BURNETT: The number tonight, 1.3. That's how many billions of dollars American Airlines made in fees alone in the first six months of this year. We're talking about blankets and food, excess baggage charges. That is a number so big it is twice as much as the company's value on Wall Street and unfortunately, a number that may go up because it may not be big enough to stave off bankruptcy. American Airlines shares fell 33 percent today on fears bankruptcy is around the corner.

Well, emotional breaking news today in the case of Amanda Knox. It was pretty amazing to see. She's coming home. In her latest appeal she was acquitted of murdering her British roommate. CNN's Matthew Chance is live in Perugia with the latest for us tonight. Matthew, it was pretty amazing. She was in tears and rushed from the courtroom with a gaggle of police around her. What happened then? And where is she now?

MATTHEW CHANCE, CNN SR. INTERNATIONAL CORRESPONDENT: It was a very emotional scene, indeed. Amanda Knox was almost overwhelmed by the emotion. She was crying hysterically. She could hardly walk when she walked past me inside the court. As she was escorted outside the courtroom, there were cheers and woots (ph) from her family, the Knox family that had gathered there to witness this -- this ruling by the appeal court, which, as you mentioned, overturned her 26-year-old sentence for the murder of Meredith Kercher and that of her former boyfriend, Raffaele Sollecito. She went straight back to the jail, signed some paperwork and was whisked away in some vehicles with her family to an undisclosed location. What the family say is they're going to get her back to Seattle, which is their hometown, as soon as they can -- Erin.

BURNETT: And I know, Matthew, I had seen that she said the first thing she wanted to do was lie down in a green field, which I guess gave all of us just a touch of what she's been through the past few years, whatever you think of the verdict. When do you think she is coming back to the U.S.? How quickly?

CHANCE: I think she'll probably be on a flight tomorrow morning out of Rome. We don't know which flight it is. The family are keeping, you know, those kinds of details very close to their chest. They don't want to be pursued, is the sense we get, by the media pack that's descended upon Perugia, understandably. The point will be to get back to Perugia as soon as possible. She made this point all along. She just wants to go home.

BURNETT: All right, well Matthew, thanks very much. We appreciate it. Live from Perugia, Italy.

Well earlier today I was speaking to Donald Trump about actually an entirely different matter, but he brought up Amanda Knox because he's been a supporter of hers for several years, very publicly. So he joins us on the phone and we really appreciate your taking the time. Donald, I know that you said you're a big supporter of Amanda Knox. I know you've spoken publicly about that over the past few years. You mentioned to me that you spoke with her father this afternoon. What did he say?

DONALD TRUMP, CHMN., THE TRUMP ORGANIZATION (via phone): Well, he couldn't have been happier. It's about time that this happened. I mean, it's ridiculous. She was never guilty. All the evidence proves that. If you look at this prosecutor, he has his own issues. He's got a terrible reputation and a terrible past. And he had just a thing.

It was just -- he had this thing about her, somehow, and probably has it about other people, too. So it was time. And hopefully she's now going to recapture her life, and do a good job in doing it. And maybe, frankly, become a big star, and somehow she can get some dividends out of this nightmare for herself.

BURNETT: Well, you've been very outspoken on her defense before, Donald. I'm curious. You talk about her becoming a big star. How do you plan on supporting her from here?

TRUMP: Well, I've been supporting the family. I've been helping the family and I'll continue to help the family. They went through a lot. I just felt badly. The first day I saw this, I said that doesn't sound right. And then we looked at the evidence, and the evidence just wasn't there. And, you know, at least the appeals court had the courage to say, the evidence was not there. But it was never there. For her to have spent four years in a terrible jail is just outrageous.

BURNETT: And did Kurt Knox (ph) give you any sense of when they plan to return to the U.S. or what their plans are when they're here?

TRUMP: Yes, he's going to Seattle is what he told me. And I don't think they can leave quick enough. She went to Italy to learn the language. Well, she learned the language. That's one thing she got out of it.

BURNETT: I guess that's true. Well, thanks so much, Donald. We appreciate it. Maybe we'll see her on one of your shows.

TRUMP: Well, you'll see her someplace. But she's got -- she's a great person and what happened to her was absolutely outrageous, Erin, and good luck with your show, it's going to be great.

BURNETT: Thank you so much, Donald. We'll be talking to Donald again, soon. Thanks again.

Well now let's bring in Paul Callan, a former prosecutor and criminal defense attorney. He's been following the case for us. And Paul, I just want to follow up as Donald was saying and Matthew, that they want to come back to the United States as soon as possible. Can you just explain to me what happens from here? I mean is this really done or could there be further appeals? PAUL CALLAN, FORMER PROSECUTOR & CRIMINAL DEFENSE ATTORNEY: Well, there is an element of danger. This case now can be taken to Italy's highest court, Italy's Supreme Court. The prosecutor could ask that the appellate court's decision reversing the conviction be changed and the murder conviction reinstated. I don't think there's really any possibility of that happening. The evidence was so bad in the case. But it's a theoretical possibility.

BURNETT: Could she be extradited in that case back to Italy?

CALLAN: Well you know what's dangerous? There is an extradition treaty between the United States and Italy and we extradite organized crime figures from time to time and others from Italy. So there would be an argument that someone charged with murder should be extradited back to Italy. This would be a big, big battle -- let me tell you -- between the two countries if it ever develops. And I don't think Italy would let it develop. That's why I think this is pretty much the end of those murder charges.

BURNETT: So, does she have any legal recourse? If she wants to say, I spent four years, I was wrongly accused, what does she have? If she chooses to pursue it, what could she do?

CALLAN: Well you know ironically she really has no recourse. If she were to try to institute an action in Italy, it would have virtually no chance. The police, the prosecutor would be claiming immunity. And there would always be a danger that they would charge her with something else. You know the best advice to Amanda Knox, get out of Italy, get on the next plane -- I don't know why she's waiting until tomorrow morning. If she were my client she'd be on the next plane out before this crackpot McNeeny (ph), the prosecutor, figures out that he's going to charge her with something else. And by the way, now I'll probably get sued for criminal slander in Italy, because they don't seem to believe in the First Amendment over there. You can't criticize the police.

BURNETT: Well, Paul, thank you very much. We're going to be following this one. And who knows maybe she is at this moment being whisked away on a private jet back to the U.S.

CALLAN: OK.

BURNETT: It's possible. All right Paul thanks again. Appreciate it.

CALLAN: Nice being with you, Erin.

BURNETT: All right more OUTFRONT -- the real reason I called Donald Trump originally today, what he had to say about Herman Cain, who came to kiss the ring this afternoon.

And then what Conrad Murray failed to tell the emergency techs trying to revive Michael Jackson and then those protesters -- "Seriously?!"

(COMMERCIAL BREAK)

BURNETT: And now for a story that made us say, "Seriously?!" The occupied Wall Street protests entered its third week today. What started as less than a dozen college students camping out in a park near the New York Stock Exchange is now hundreds of protesters, and it spread to other cities. But, what are they protesting? Nobody seems to know. So, this afternoon, we went to Wall Street to find out. And despite what you heard, here's what I saw.

It's not just a bunch of dancing hippies protesting. There are all kinds of people there, babies, teachers, cheerleaders, Uncle (INAUDIBLE) and --

(DRUMS)

BURNETT: -- that. Seriously, it's a mixed bag. But they were happy to take some time from their books, banjos, bongos, sports drinks, catered lunch. Yes, there was catered lunch, designer yoga clothing -- that's a little lemon logo -- computers, lots of MacBooks, and phones to help us get to the bottom of it. This is unemployed software developer, Dan.

(BEGIN VIDEO CLIP)

BURNETT: What do you do for a living?

UNIDENTIFIED MALE: I'm a software developer.

BURNETT: Software developer --

UNIDENTIFIED MALE: Yes.

BURNETT: So currently employed or unemployed?

UNIDENTIFIED MALE: Unemployed.

BURNETT: Unemployed.

UNIDENTIFIED MALE: Unemployed (ph) we like to call it.

BURNETT: (INAUDIBLE)

UNIDENTIFIED MALE: It's called occupy Wall Street.

BURNETT: So do you know that taxpayers actually made money on the Wall Street bailout?

UNIDENTIFIED MALE: I was unaware of that.

BURNETT: They did. They made -- not on GM, but they did on the Wall Street part of the bailout.

UNIDENTIFIED MALE: OK.

BURNETT: Does that make you feel any differently?

UNIDENTIFIED MALE: Well, (INAUDIBLE) --

BURNETT: If I were right it might? UNIDENTIFIED MALE: Oh, sure.

(END VIDEO CLIP)

BURNETT: "Seriously?!" That's all it would take to put an end to the unrest? Well, as promised we did go double-check the numbers on the bank bailout and this is what we found. Yes, the bank bailouts made money for American taxpayers, right now to the tune of $10 billion anticipated that it will be $20 billion. Those are seriously the numbers. This was the big issue, so we solved it. In fact the only reason we haven't made all the TARP money back is actually GM. But, I don't see any protests in Detroit. It seems the only thing we all agree on is that the police, with the pepper spray and mass arrests, may have overstepped their bounds this weekend. Or do we agree on that?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Oh, good that (INAUDIBLE) cop is leaving or not the (INAUDIBLE).

UNIDENTIFIED FEMALE: He would have been a lot worse.

(END VIDEO CLIP)

BURNETT: "Seriously?!" and by the way, to Dan the very ardent software developer he had a lovely MacBook and when I asked him whether Apple 2 was part of the problem or a hero of the movement, he said well, they've got good design but they need to pay more taxes, too.

All right next, "OutFront Five", the market drops, what's the risk of recession? ER doctors testify Conrad Murray did not give them the whole story on Michael Jackson's death and then my interview with Secretary of Defense Leon Panetta.

(BEGIN VIDEO CLIP)

BURNETT: So what is the biggest threat to America right now?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BURNETT: We start the second half of our show with stories we care about where we focus on our own reporting. We made the calls and we found tonight's "OutFront Five". First up another GOP candidate wooing Donald Trump today looking for a blessing -- this time it was Herman Cain. Donald Trump told me that Cain stayed for an hour and a half. And Trump called Cain terrific. Cain said he pitched his 999 tax plan and talked China, which brings me to number two.

Speaking of China, today, New York Democrat Chuck Schumer and South Carolina Republican Lindsey Graham got one step closer to slapping tariffs on China. The Senate voted to take up their bill, hitting China for managing its currency. But hold on, we did some checking. First of all, did you know the Chinese currency has already risen 21 percent against the dollar over the past six years? Second, bashing China over this may feel good, but it will hurt at home. A rising Chinese currency or tariff both mean rising prices on anything made in China. So, for all of us that shop at Wal-Mart, stand by for sticker shock.

And number three, reports say the United Auto Workers and Ford are on the brink of a new four-year deal. Now one key of the deal is a $7,500 signing bonus for employees. We made some calls and we found out there is not an agreement yet on that bonus.

But it is important to note that if it's true, Ford will pay $2,500 an employee more in bonuses than General Motors. That's what Ford gets for not needing a bailout. Is that fair?

Please let us know on our Facebook page. We want to hear from you and follow up on that.

And number four, America's biggest bond investors predicting another recession today. Bill Gross of PIMCO says America's balance sheet looks like an overweight diabetic on the verge of a heart attack. On top of that, Bill Gross told me he doesn't think the president's jobs plan will create jobs. But some of America's biggest CEOs, investors disagree. We're going to tell you what 20 of the most influential in America think. We're really excited about this.

We're going to roll out our OUTFRONT strike team tomorrow as part of our exclusive interview with Treasury Secretary Tim Geithner.

And number five: it has been 59 days since the U.S. lost its top credit rating. What are we doing to get it back?

And now for my exclusive interview with Defense Secretary Leon Panetta. He was in Israel today, warning the Israelis to work with Muslim nations, or risk rising isolation. Before he left, I asked him about the risk America faces, which is a bigger threat, al Qaeda, or a lone wolf?

(BEGIN VIDEOTAPE)

LEON PANETTA, SECRETARY OF DEFENSE: Well, I think we have to pay attention to both ends.

But the one that worries me the most in my prior job as director of the CIA was the lone individual in this country who is here, and suddenly becomes self-radicalized and suddenly goes out, as we saw with the Fort Hood individual, you suddenly pulls a gun and starts killing people. Or, you know, someone who decides to basically put on a suicide vest and go into the subway in New York City.

The problem there is how do you -- how do you track down these kinds of individuals, know they're out there? I mean, we just had an incident where an individual was out buying drones off the Internet, and threatening to attack Pentagon, and the Capitol. It's those kinds of individuals that I worry about, because they're much tougher to track.

BURNETT: When you visited the Ground Zero Memorial you said, I'm quoting you, the potential for that kind of attack, when you were referring to 9/11, remains very real. The latest CNN poll that we have, only 16 percent of Americans think a terror attack is likely in their community.

Are they wrong? And when you say that kind of attack, are you talking about something with that scale of casualties?

PANETTA: You know, I think it's understandable why the American people would -- would not view that kind of large attack as kind of an imminent threat, in part because, you know, we have protected this country. But having said that, because there are individuals out there that continue to plan attacks in the United States, I just think we have to take seriously their potential, not only to do these kind of lone attacks, where they, you know, go in to a subway, do the kind of sporadic attacks that kill Americans. But that, you know, they're going to continue to work on the big-time attack, if they can.

I think we have impacted seriously their ability to be able to put together that kind of 9/11 attack. But, are they going to continue to work at it? Are they going to continue to try to see if they can do something dramatic? I think the answer to that is yes.

BURNETT: So, if something happens, a terrorist attack or something else that means America needs to put troops into another country, one where we don't have significant troops right now, can you do it a full third war with the cuts that you've agreed to in your base budget of about $450 billion?

PANETTA: Well, you know, we're going to face the challenge, obviously, of having to -- having to reduce the defense budget. We've been handed a number of, now $450 billion plus over these next 10 years. We can achieve the savings we have to achieve.

I don't know that we're going to deploy 150,000 troops the way we did in Iraq and Afghanistan. I think the chances for that, frankly, are small.

But are we going to be able to deploy forces that go after those kinds of targets? And people who would attack this country? I think we'll always have that capability.

In dealing with terrorism, we have learned a lot of lessons. The main lesson is that you can target these guys, as we did in Yemen, as we did in the Fatah. We can target these guys in a very effective way, using a smaller and more effective force.

BURNETT: And I know obviously referring there to drones, I want to ask you about that in a moment. But, first, the super committee obviously charged with significant debt reduction by November. Let's just say they don't hit their target, and you are forced to cut $1.1 trillion, $1.2 trillion, double what you have agreed to, over 10 years. So it sounds huge. But if you actually look at it, and I did, it's about 15 percent or so of your budget over that time. Eisenhower cut defense by 30-so percent. Reagan in his second term cut the defense budget by 35 percent.

In that context it actually looks like maybe you could cut $1.2 trillion. Crazy?

PANETTA: I think, you know, the American people have to make a decision whether they want to hollow out the force. After World War I, after World War II, after the Korean War, after Vietnam, after the Iron Curtain came down, the bottom line is, you know, we cut. Cut defense.

But the result was we hollowed out the force. What does that mean? We weakened our military across the board.

BURNETT: So there was a cost to it?

PANETTA: So there was a cost to it. And the ability, then, to be able to mobilize when there was a threat was very difficult. I don't want to -- I don't want to make that mistake. And if the Congress is irresponsible enough to suddenly turn on this kind of sequester idea because they fail to meet their responsibilities, that would clearly damage our national defense, because that formula says we're going to -- we're going to do it across the board, in some kind of blind fashion, that basically hits everything, and makes us weak across the board.

It's going to result in rifts. It's going to result in -- in not only forced reductions, it's going to result in hollowing out the force -- and that, frankly, we cannot tolerate. We still face to many threats out there to weaken our defense.

BURNETT: I just wanted to ask you about Congress. You've been a Republican, you served in Republican administrations, Democratic administrations. Is this the worst it's ever been in Washington?

PANETTA: In my over 40 years in Washington, yes, I've -- I've never seen it as bad as it is today on the partisanship, and the divisions within the leadership, within the both parties, and the inability to kind of confront the challenges that are out there. That -- you know, that, frankly, I think, at the heart of whatever economic problems we're having, at the heart of the anger that's out there in the American people, I think it all goes to the concern that somehow Washington is dysfunctional, and not able to respond to challenges.

I really do think that both sides have to understand how concerned not only Americans are, but the rest of the world is, about our ability to solve the problems that face us.

(END VIDEOTAPE)

BURNETT: All right. We're going to have much more of our interview with Leon Panetta coming up. I asked him whether we should just get completely out of Pakistan, after I went there, as some young people seemed to indicate -- well, they didn't want any more of America.

We'll also talk about Iran and China. That's coming up after the break.

But, first, let's check in with Anderson Cooper. What's coming up tonight, Anderson?

ANDERSON COOPER, HOST, "ANDERSON COOPER 360": Hey, Erin, welcome to CNN. Very exciting to have you on.

BURNETT: I can't believe we're actually real and live now. Hey.

COOPER: We have more on the breaking news ahead on the program tonight.

It is Tuesday in Perugia, Italy. In just a few hours, Amanda Knox is going to get on a plane nearly four years after being jailed for the murder of Meredith Kercher. She's going to go home to Seattle. There was a grasp in the courtroom when the verdict was read. We'll talk to CNN's Matthew Chance who was in the court.

Also, tonight, keeping them honest, a campaign controversy centered on a racial slur at a hunting ranch in Texas -- a ranch often used by Republican presidential candidate Rick Perry. "The Washington Post" broke the story. Perry is saying they got their facts wrong. Ari Fleischer, Erick Erickson and Roland Martin weigh in.

Also, day five of the Michael Jackson trial testimony. From the emergency room, doctors who tried to save Jackson's life.

Those stories and tonight's "Ridiculist" at the top of the hour -- Erin.

BURNETT: All right. Looking forward to seeing you tonight, Anderson.

All right. We're going to take a break. Like we said, in the other side, more of Leon Panetta and our outer circle. We debut that tonight. Testimony in the Michael Jackson death trial.

And an intense fire sending schoolchildren fleeing.

We'll be back.

(COMMERCIAL BREAK)

BURNETT: All right, we're going to do the same thing at the same time every night. Our "Outer Circle" -- where we reach out to our sources around the world.

And tonight, first to Perugia, Italy, where Amanda Knox is free.

Paula Newton covering the story from outside the prison in Perugia.

Now, Paula, Amanda left her prison cell just a short time ago and we're trying to figure out where she is tonight. Is she on her way back? What is she doing? What can you tell us? PAULA NEWTON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Good luck trying to figure that out. It's a guarded secret. From what we do know from the family is she is very close to that airport in Rome, with her family right now. Expected to board a flight at some point tomorrow morning, perhaps on a flight to London, connecting directly to Seattle. She should be home, in Seattle, late tomorrow.

But, Erin, she's going to have to wait a little bit longer to lay on that green grass. She said that's all she wanted to do if she got out of prison -- Erin.

BURNETT: All right. It's certainly an image that's very memorable. Thanks again.

And now to Los Angeles, where jurors in the Michael Jackson death trial heard testimony about Conrad Murray's curious behavior in those really important moments right after the pop star collapsed.

Ted Rowlands is outside the courthouse.

And, Ted, who took the stand today?

(BEGIN VIDEOTAPE)

TED ROWLANDS, CNN CORRESPONDENT: Erin, we heard from several witnesses today, including some people that were talking on the cell phone with Dr. Murray just prior to Michael Jackson's death. But the most compelling testimony came from two emergency room doctors at UCLA Medical Center, both of them got on the stand and told the jury that they asked Dr. Conrad Murray what he had given Michael Jackson, and he made absolutely no mention of Propofol.

Tomorrow, we expect to hear from Murray's girlfriend, who he was talking to on the phone when he realized Michael Jackson was in trouble -- Erin.

(END VIDEO CLIP)

BURNETT: All right. Ted, thanks so much.

Now to Waxahachie, Texas, where that early morning fire at a chemical plant sent a huge plume of black smoke into the sky. The images were shocking. Authorities had to evacuate the area, including an elementary school.

Ed Lavandera is in Dallas tonight.

And, Ed, we understand everyone got out safely. I'm wondering, do you know what caused the fire yet?

(BEGIN VIDEOTAPE)

ED LAVANDERA, CNN CORRESPONDENT: Erin, the exact cause of the fire is not known yet. But the fire chief did say he was told by company officials that chemicals were being mixed and that there was some sort of reaction. Quite an understatement considering just how dangerous the chemicals that are used at this plant and considering just how large and massive the fire and smoke was, erupting from this plant south of Dallas.

But right now, officials from the EPA and city officials say that air quality tests, amazingly, show that there is no serious threat to people on the ground -- Erin.

(END VIDEOTAPE)

ERIN: Ed, thank you.

Now, America's relationship with Pakistan. It remains front and center in the war on terror. The country -- well, where we spent $20 billion in aid over a decade.

Having traveled to Pakistan recently, I got a firsthand feel for security on the ground. And frankly, there was none. Rich people had their own convoys, with armed guards and ambulances - their own ambulances.

I had a chance to ask the secretary of defense about it.

(BEGIN VIDEOTAPE)

BURNETT: Some people would say maybe we should be disengaging from some of the conflicts we're in completely. We've given them $20 billion in military aid over the past decade. Should we just get out of Pakistan, get out AfPak altogether?

PANETTA: Well, you know, we can't afford to do that. It's been a complicated relationship with Pakistan. But the reality is that terrorism is a much -- is much a threat to Pakistan as it is to the United States. As a matter of fact, they have lost thousands of people because of terror attacks in places like Karachi and elsewhere.

And they -- they understand the threat of terrorism. But they also can't pick and choose among terrorists. If you're against terrorism, you've got to be against all terrorism. And that's where we have some differences.

BURNETT: And let me just ask you about that --

PANETTA: Go ahead.

BURNETT: I'm sorry. Admiral Mullen commenting, obviously, on the Haqqani Network and how the Pakistani intelligence agency, the ISI, was supporting that network. Obviously, that network is responsible for attacks on Americans and coalition forces.

Sources have told CNN that this cooperation with terrorists could go all the way to the top of the ISI. Does it?

PANETTA: Well, I don't really -- I don't know that for a fact. What I do know is that, as we have made clear, the Haqqanis have a safe haven in Pakistan. And you can't have a safe haven. These are individuals who cross over, into Afghanistan, and kill Americans. These are terrorists. And then they return back to Pakistan to that safe haven.

What we've urged the Pakistanis to do is to take action, to make sure that that safe haven does not exist. That's the message we've given to them.

Now, look, the Pakistanis -- I realize, they try to maintain some relationships with some of these individuals. I realize that, you know, they are concerned about how they protect their own country. But, we have got to build a cooperative relationship with them.

What we've got to do is build a trusting relationship where we both understand that our major effort has to be to end terrorism, period.

BURNETT: With the war zones that we have with Libya as an extra commitment for the United States, the Arab Spring, Pakistan -- I'm curious as to whether we're paying enough attention to the world's next superpower, which is China. Sophisticated nuclear subs are under development. They've got a joint strike fighter they're working on that was years ahead of what your predecessor Robert Gates actually expected.

How big of a threat is China to the United States?

PANETTA: Erin, you know, as we reduce the defense budget, I've still got threats out there that I have to meet. We've still got two wars that we're trying to wind down. We're still dealing with terrorism. We've got to deal with Iran and North Korea, and their nuclear threat.

We've got to deal with cyber warfare. And we have to deal with rising powers, places like China. China, my goal, frankly, is to try to develop a cooperative relationship with China. And to try, at least be able to have a transparent relationship where we understand each other and we know what each other is doing.

The concern, however, is that, if they decide to militarize, if they decide to really improve their weaponry --

BURNETT: Right.

PANETTA: -- and then constitute a threat to countries in that region, that concerns us. And so, for that reason, we always have to have a forward presence in the Pacific that makes very clear that we have to protect the international community and their ability to have free access to the sea lanes, but more importantly, to be able to protect their own interests in that context.

BURNETT: I met with Iranian President Mahmoud Ahmadinejad last week. He told a group of reporters -- it was actually pretty interesting. He was much more normal in person than I expected. And he said this.

(BEGIN VIDEO CLIP)

PRES. MAHMOUD AHMADINEJAD, IRAN (through translator): How can a government maintain to be supporters of democracy and freedom yet find standing arms supply contracts worth billions of dollars with the same governments that are continuously oppressing their people?

(END VIDEO CLIP)

BURNETT: I thought it was a pretty interesting thing to say because there was a grain of truth to it and there was a report that came out that was given to Congress on arms sales. The United States yet again the number one arms dealer in the world, the Middle East, the biggest buyer in the developing world. We sell them tanks, missiles, supersonic aircraft.

The hypocrisy of selling weapons to people who are dictators -- is that something you should worry about?

PANETTA: Frankly, I worry about Iran. I worry about their intentions because they clearly are using their weapons to -- in Iraq, it was pretty clear they were providing sophisticated weaponry to go after Americans and kill Americans. They basically try to undermine governments in the Middle East. They basically try to foster terrorism and supply terrorism.

That's not what the United States does. What we hope to do is work with the counties in that region so that they can have the capability to defend themselves against that kind of terrorism. That's what this is about.

BURNETT: So militarizing leaders who are anti-Iran is more important with whether you love or hate that particular leader?

PANETTA: Well, you know, the fact is those countries have chosen in some cases now because of the Arab Spring, they've chosen their leadership. Others have not. But they represent countries that have their own integrity, that have their own sovereignty and that have to, we believe, play a role in the terms of the security of that region.

(END VIDEOTAPE)

BURNETT: All right. Well, you can see our full interview with Secretary Panetta. We're going to be putting it on our Web site. Please give us your feedback on what he said. He next travels to Egypt, then on to Brussels where he has a NATO meeting.

All right. Now, he talked about China. We went to China. How do you measure success in China? It's not what you think.

(BEGIN VIDEO CLIP)

BURNETT: Status in China doesn't only come on four wheels. How much does this dog cost?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BURNETT: And now for tonight's "Outcast." When you think of the CIA, you think of stealth and covert government agents working under a cloak of anonymity. They always keep their cool in stressful situations. That is, unless their name is Ray Davis.

As if our relations with Pakistan weren't bad enough, CIA operative Ray Davis was arrested ten months ago for killing two Pakistanis who allegedly tried to mug him. The U.S. paid $2.3 million to relatives of the victims to free Davis from Pakistani prison.

We go to this past weekend, Davis arrested again this time in Highlands Ranch, Colorado, USA. What was the charge? Not murder, not espionage. Davis got into a fight over a parking stop outside a bagel store.

Way to keep a low profile, Ray.

Davis' career as a spy conjures up images of less than reminiscent of James Bond and more like these guys, Austin Powers. Congratulations to you, Ray, you are tonight's "Outcast."

And now to China where the economy is still booming. All the new millionaires are not shy about showing off their wealth. Gucci, Chanel, Louis Vuitton -- they are some of the must-have brands I see every time in China, just a few months ago in Shanghai. But even these luxury goods pale in comparison to this year's outrageous new accessory.

(BEGIN VIDEOTAPE)

BURNETT (voice-over): Tibetan mastiffs -- the ultimate status symbol for China's newly rich. This is Shanghai (INAUDIBLE), a Tibetan mastiff breeder about an hour outside China's richest city.

Fuo Cha Tong (ph) is the breeding expert.

UNIDENTIFIED MALE (speaking Chinese): Entrepreneurs with money, they like dogs. It is a status symbol.

BURNETT: The big guys weighing up to 220 pounds cost a lot. This is the most valuable dog here. It will cost $1.25 million to take him home.

(on camera): Puppies and, yes, this guy is still a puppy. He's only 5 months old, are a lot less expensive. He'll set you back only about $31,250.

(voice-over): Once he's home, it will be tough to care for. The mastiffs can be violent.

UNIDENTIFIED MALE: They're fierce, mean and wild.

BURNETT: Now, we did see some sweet puppies, but that's the exception.

(on camera): That's why potential buyers view the dogs here behind glass. They have tea and discuss the length of its hair and the shape of its snout. That's what decides whether they'll plunk down for one dog, what would take an average Chinese person 154 years to earn.

(END VIDEOTAPE)

BURNETT: We're going to talk about China tomorrow and about the market. Stocks did fall sharply today, 258 point drop for the Dow. All the indices at their lowest level of the year.

Tomorrow night, we'll talk about whether there's another recession, about the China threat, the American economic crisis, with our exclusive guest, Treasury Secretary Timothy Geithner.

And we want you to be a part of it. Please tweet me @ErinBurnettCNN or our show, @OutFrontCNN or Facebook, our show, with you questions and comments on this question: If an American investment bank like Morgan Stanley is going to fail due to the European crisis, should taxpayers in this country bail them out now? Please let us know.

Well, thanks so much for joining us for our first show.

We plan to share an essay with you at this time most nights. And tonight, we wanted to tell you about the show. We picked the name OUTFRONT as a mission statement. Hey, we'd like to be a verb been. You know, how do you OUTFRONT this story or that story? OUTFRONT means original reporting, creativity, energy, stories we're passionate about and that you care about.

I'm honored to be here at CNN. It is the most powerful news platform on the planet. And getting ready for this opportunity has been a lot of work for our team -- work that we honestly love. But I just want to say I wouldn't be here without the advice of a special person who died a few months ago, my friend Mark Haines.

Mark was my TV partner for five years, my mentor and my friend. He gave me my first shot and he made journalism a joy for me. Mark's intolerance for talking points and his fun loving personal were OUTFRONT. So, wherever you are right now, Mark, this show is for you.

"ANDERSON COOPER 360" starts right now.