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ERIN BURNETT OUTFRONT

Did Rick Santorum Win Iowa?; Interview with Reince Priebus

Aired January 18, 2012 - 19:00   ET

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


ERIN BURNETT, CNN ANCHOR: Thanks, John. Well, four days after a cruise ship ran aground in Italy, there are still 21 people missing. Today, the search was suspended..

And then did Rick Santorum win the Iowa caucuses? An exclusive interview with a man who helped expose an error in the vote counting and the bottom line on the man we thought won Iowa., Mitt Romney. We ran the numbers. We can tell you exactly what happened in that tax return. Let's go OUTFRONT.

Well, good evening, everyone. I'm Erin Burnett and OUTFRONT tonight, Mitt's taxes. Now, Romney is caving in to the mounting pressure.

(BEGIN VIDEO CLIP)

FORMER REP. NEWT GINGRICH, R-GA., PRESIDENTIAL CANDIDATE: I think both President Obama and Hillary Clinton released their taxes in 2008. Just strikes me that Governor Romney ought to step and follow the same procedure.

FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: I don't know what my effective rate of tax is, but I'm fairly confidence it's a lot higher than 15 percent.

GOV. RICK PERRY, R-TEXAS, PRESIDENTIAL CANDIDATE: Mitt, we need for you to release your income tax so the people of this country can see how you made your money.

(END VIDEO CLIP)

BURNETT: Well, we know why releasing his tax returns is so hard for Mitt. Romney pays a tax rate closer to 15 percent and part of the reason why is a loophole. But it's only legal, but pretty standard, but it doesn't feel fair and square.

Here' s the bottom line. Mitt Romney was a founder and partner in Bain Capital. And when you're a partner in a private equity firm, you get a cut of the profits you make, usually, 20 percent.

Now, stay with me because what happens here adds up to tens of billions of dollars in lost tax revenue for America. So, say my buddy, Wil Surratt, you've probably heard me talk about him. Yes, he works at CNN, an E.P. of this show. Say he invests $5 million in Bain Capital. And Mitt Romney, as he has done, does a really good job. He invests Will's money well.

So a year later, Will's investment doubles in value to $10 million. Ding-ding-ding. Mitt's cut, $1 million. And that money is taxed at 15 percent. Now, the reason this is unfair is that it wasn't Mitt Romney's money he put at risk, which is the justification for a lower tax rate on things like dividends and capital gains. It was Wil Surratt's money and Will put that money at risk.

Now, this loophole, which is entirely legal and like I said, standard, is ridiculous. But it adds up to a lot of money. If this money which is called carried interest, was taxed at the regular income tax rate of 35 percent, the White House estimates it would raise about $20 billion in 10 years.

And, honestly, when I looked at the numbers, I think you're actually going to be able to get a lot more money than that. Look at the net worth of three of the richest investment titans in the United States, all of whom benefit from this loophole. Steve Schwarzman from Blackstone, net worth for Mr. Schwarzman, $4.7 billion.

Henry Kravitz from KKR, another private equity firm, net worth, $3.7 billion. And John Doerr from Kleiner Perkins -- it's a venture capital firm, net worth, $2.3 billion. Now, Mitt Romney's net worth is reportedly $202 million, so compared to those guys, he's a relative pauper. Now, we may never know how much of Mitt Romney's fortune came from this loophole, but there's a problem here.

James Carville, a CNN contributor and Democratic strategist Stephen Moore is with "The Wall Street Journal." Good to have both of you with us. I really appreciate it.

James, let me start with you. How damning will it be for Mitt Romney when these tax returns are fully put out? And I want to emphasize here, when his father ran for president, he put out 12 years of tax returns. Barack Obama put out multiple years. You can maybe make one year look OK, but this kind of stuff's going to show up with a big tax return like that.

JAMES CARVILLE, CNN CONTRIBUTOR: Apparently, Mitt Romney's thinks it's going to be damning because he's gone to great lengths to not do it and said he wouldn't. Of course, he's doing to succumb to pressure, and I guarantee one thing.

Newt Gingrich, tomorrow night, is going to say that we need to see these returns. Not that we care as Republicans if you pay 15 percent, we wish everybody did, but Barack Obama will make something about this. So before we vote, and you put in jeopardy in general election, we need to see these returns now before even South Carolina. Well, Gingrich will make that point tomorrow night.

BURNETT: And now, let me ask you, Stephen Moore, I know that, you know, you believe strongly that when people put their own money at risk, they get -- they get a lower rate, I know you believe in that.

But what about loopholes like this one, which a very few very wealthy people benefit from a lot, and they lobby in Washington. This has been up several times over the past few years, the likes of chuck Schumer, Eric Cantor and Nancy Pelosi have all conspired to not get rid of this loophole.

STEPHEN MOORE, "THE WALL STREET JOURNAL": Well, it's a tough call, Erin, I'll admit it. You know, I want the lowest taxes possible in terms of the rates, in terms of investment, but you're right, there are some real debate here about whether this is labor income or whether it's investment income.

And you made a pretty persuasive case just a few minutes ago that this is probably labor income and should be taxed at the same rate that wages and salaries are.

But, you know, I think the thing that people should realize when you talk about these low tax rates on investment, capital gains, dividends, let's not forget a key point that a lot of people are forgetting, because not all of Mitt Romney's income comes from private equity. A lot of it is just owning stocks and having a return from that.

And those are corporations normally and those corporations, as you know, Erin, pay a 35 percent corporate rate and then the investors only get money after that corporate tax rate was already levied.

So the real effective rate on investment income isn't 15 percent. It's closer to about 40, 45 percent. And that's, by the way, the reason we impose a lower tax rate on capital gains and dividends because it's a second tier of tax.

BURNETT: And those -- a lot of that is fair points. And I know there's a lot of conversation you could have, all of which, James Carville, argues for a simpler, fairer system, however you want to get there with (inaudible).

(CROSSTALK)

CARVILLE: (Inaudible) system.

BURNETT: Right. And that's --

CARVILLE: And it's absolutely ludicrous that Mitt Romney's paying 15 percent and, you know, a schoolteacher or somebody works in a dry cleaners is paying 25 or 30 percent. It's absurd. But, again, I don't think he did anything illegal, but the question here is, is what did -- was there offshore money involved? Did he bet against the housing market? Is he profiting from the misery of the middle class?

We don't know that until we see these returns. And he's not -- he's not going to get by with doing one year of returns. He's got to release five or six year returns and Gingrich and those are going to put enormous heat on him to do that.

BURNETT: That's right.

MOORE: James, James, I mean, let's give him credit. At least he pays his taxes, unlike half of the Obama cabinet that had trouble with their tax returns.

CARVILLE: (Inaudible), please.

MOORE: But I will say this, though, that do believe, James and Erin, you just kind of repeated the line we made in our editorial this morning in "The Wall Street Journal" that maybe this really does argue for a fundamental restructuring of the tax system in a way that's fair.

But, James, I want to correct you one thing. When you said that these people like Mitt Romney are paying lower tax rates than a plumber or a secretary, which is what Warren Buffett has said, I mean, evidence just doesn't confirm that.

A Congressional Budget Office report just came out a couple of months ago that shows the average effective rate of those top 1 percent, the richest 1 percent in America, is about twice as high as the effective federal tax rate that's imposed on a secretary or a plumber.

CARVILLE: I have a brilliant idea. Let's go back to 39.6 when we created 22 million jobs. (Inaudible). I don't understand how these people with a straight face argue that cutting taxes on the rich creates jobs.

We have living proof that 39.6 is right in the wheel house, and that would be a great idea and then Romney wouldn't have to be embarrassed and could leave his tax returns and everything would be fine.

MOORE: That's (inaudible), but James, don't forget, it was the president you worked for who was -- who did cut the capital gains tax.

(CROSSTALK)

CARVILLE: (Inaudible) the top rate was 39.6 and that was something that the Republicans just (inaudible) -- and there's been no evidence that cutting the capital gains tax has any (inaudible) --

(CROSSTALK)

CARVILLE: -- you know, this is a (inaudible) fact, Clinton created 22 million jobs.

MOORE: But he also --

CARVILLE: And now -- and Bush created one million. End of argument.

MOORE: I'm not here to defend the current tax system or George Bush, but I do think, Erin, look, there's on old saying in tax policy. If you tax something, you get less of it. If we're going to impose higher taxes as President Obama wants to, on businesses' investment, I just don't think, James, that's a very good strategy for creating jobs. BURNETT: I got to tell you, if you let the Bush tax cuts go away for just the over 250s, you get, what, $700 billion, $800 billion. But let them go away for everybody, $2.8 trillion. That is a lot of money, if the rates went back to the Clinton years for everyone.

CARVILLE: Yes, but back to the sort of question (inaudible), because I don't think -- I'm pretty sure that Mitt Romney is not a tax cheat. I mean, he pays his taxes --

(CROSSTALK)

BURNETT: No, I think we need to emphasize that. He did -- this is a standard rate.

CARVILLE: (Inaudible) be very clear, but until he does it, minds will speculate about any number of things and he's going to have to do this and everybody knows it. And Gingrich is going to put heat on him tomorrow night. He doesn't need this going into the debate tomorrow night.

BURNETT: Right.

CARVILLE: Going into a tight (inaudible) in South Carolina.

BURNETT: And even though it's legal and fair, quickly before we go, Stephen Moore, I mean, did you have firms including Bain Capital, all of which lobbied the likes of Nancy Pelosi ,every time this comes up, four times since 2007 to get rid of this loophole, they all lobby to keep it. So they fight hard for this.

MOORE: And you know what, Erin, one of the ironies here is guess what? Most of those big billionaires you talk about who are owners of private equity firms, they're Democrats.

CARVILLE: I didn't know Steve Schwarzman was a Democrat. But you would have knocked me over with a feather. But go ahead. I think he could (inaudible) -- I'm not going to mention the word (inaudible). But you would know better than I do. I don't think he is though. I would be surprised if he is, honestly.

BURNETT: Gets a loophole. Gets his loophole and you know, hey. All right. Thanks very much to both of you. We appreciate it. Everyone, let us know what you think of this.

And OUTFRONT next, did Rick Santorum actually beat Mitt Romney in Iowa? John Avlon has been obsessed, passionate, I don't know what word to use for this, ever since the day after Iowa. Vindication for John, an exclusive interview with the person exposing this.

And Iran versus the West, Defense Secretary Leon Panetta says military action is on the table tonight.

And a story we've been OUTFRONT of for weeks. Wikipedia, dark today. We'll be back.

(COMMERCIAL BREAK) BURNETT: So did Rick Santorum actually beat Mitt Romney in the Iowa caucuses? Now the Iowa Republican Party is going to announce tomorrow morning the official certified winner. Now John Avlon has been reporting that Mitt Romney's razor-thin victory over Santorum may not be a win.

And, John, I -- you know, John said to me in the break, he said, come on, why are you saying I'm obsessed?

You are, and in a good way. Day after Iowa, you said, I think this isn't going to be this simple. So tell me what you mean. What have you found?

JOHN AVLON, CNN CONTRIBUTOR: Sure. This is what's going on. Everyone remembers the eight-vote win, Mitt Romney over Rick Santorum. That led directly to this inevitability narrative, that Mitt Romney's the only candidate to win both Iowa and New Hampshire.

Well, not so fast. Tomorrow, the certification comes in. But here's what we know for sure so far. In a county -- in Appanoose County, Iowa --

BURNETT: Appanoose?

AVLON: Appanoose County, southeastern corner of Iowa, a young guy named Edward True attended that caucus and he found that Mitt Romney was given 20 more votes than he actually received. He got two votes in that precinct, and he -- but he was tallied with 20 in the official GOP total.

Now, initially, there were all sorts of attempts to deny and dismiss and say don't worry about it. But now, nobody's dismissing that fact. So if that number alone holds, that would give Rick Santorum a 12-point edge.

Now here's the thing. Mitt --

BURNETT: I'm sorry, I just have to take a pause to remind everyone. We're talking about eight, 12 people. It's amazing in the United States of America.

AVLON: But every vote counts and this is what matters. All right? We spend six months paying attention to the Iowa caucus. It can make or break presidential candidates, so this matters. And it's really an amazing story. It could be that there are so many voter mistakes, that Mitt Romney does end up coming out ahead.

We won't know till tomorrow morning. But we know this one county, because of the good work and really transparency that's come about that there's a real cause for question.

BURNETT: Now I'm going to bring Edward True in a moment, who's with us exclusively, but I'm going to ask you one follow-up on this, so I get intellectually there's a difference in being the winner and not being the winner. Delegate count wise, it wouldn't change it. Ron Paul came in third and got seven, Santorum got seven, Romney got seven.

So this 12-vote win, if it happened for Santorum, wouldn't change the delegate count, but it changes the headline.

AVLON: That's right.

BURNETT: How much does that matter?

AVLON: Well, you can't unring that bell. It matters a lot. The truth matters. You know, part of the prize of Iowa is money, momentum and media attention. And the headlines and the magazine covers would have been entirely different if Rick Santorum had gotten an eight-vote win instead of Mitt Romney. So this matters enormously. The truth matters, the vote matters.

BURNETT: All right. Let's bring in Edward True now, the voter we were talking about in the Iowa caucuses, who noticed some discrepancies in the voting and reported them.

So, Edward, you went to the caucuses. I know you were actually a Ron Paul supporter. You were tallying. You went online that night, posted the results. When did you realize there was a problem, that the tally that you had walked out of there with did not match the tally that was formally reported?

EDWARD TRUE, IOWA CAUCUSGOER: I first found it -- it would have been the afternoon after the caucus. I started checking things and I seen the numbers reported by the county, and then went on to check it by the precinct.

And when I seen it, I actually had to do a double take on it because, at first, I questioned my own self and then after seeing it again, I noticed, hey, there's something wrong here.

BURNETT: And you called the precinct chairman and you kept calling, right? You've been going all the way to the top.

TRUE: The precinct chairman was the first person I spoke with. He confirmed my numbers as well with me over the phone. After speaking with him, I spoke to the county chairperson. He confirmed my numbers as well, and then I also contacted the Iowa GOP, but it took them more than 24 hours to respond to me.

BURNETT: What does this mean, John, in terms of how -- the frustration, shall I say, that we all feel that we don't know, that this can still happen, that there can be this sort of discrepancies if (inaudible) this is the case?

AVLON: The whole world's watching Iowa. We think there's an eight-vote win. People were told early on that actually that may not be the case, that there's one documented case where the votes are dramatically off, and the person is dismissed, said that you -- you're not allowed to -- you know, Edward True just told, he's not a precinct captain. He's not allowed to talk about the votes.

Here's the big picture. (Inaudible) social media, an organization can't deny accountability and transparency. They will be imposed on them, even if they don't want it to.

Tomorrow, we'll know the final vote. Maybe as has been stated, GOP says it won't have an impact on the ultimate count, but this is a big deal that, after all the attention and focus on here, that we know that at least from one county, Mitt Romney got 20 votes less than was said on election night.

BURNETT: All right, John Avlon, thank you very much and thank you very much, Edward True, appreciate your taking the time.

(MUSIC PLAYING)

BURNETT: Iran versus the United States. Two U.S. officials tell CNN today that the Obama administration has sent a letter to Iran, saying that the blocking of the Strait of Hormuz, through which 40 percent of the world's oil goes a day, would be, quote, "a red line for the U.S."

Now, the administration also suggests the two countries establish direct channels of communication. Now, it may amaze you, as we've said, that these don't exist, but maybe they need to at a time when tensions are at an all-time high. Today, the Secretary of Defense, Leon Panetta, said America is ready militarily.

(BEGIN VIDEO CLIP)

SECRETARY OF DEFENSE LEON PANETTA: We've always made clear that, in terms of any threats to the region, in terms of some of the behavior that they've conducted in the region, that we'll also be prepared to respond militarily if we have to.

(END VIDEO CLIP)

BURNETT: Those are strong words. Just how close are we to a confrontation with Iran? Joining us now, former U.S. Secretary of State James Rubin.

FORMER ASSISTANT SECRETARY OF STATE JAMES RUBIN: Assistant Secretary --

BURNETT: Assistant secretary of state.

RUBIN: That's a big promotion.

BURNETT: I just gave you a promotion. You should have just taken it and run. That's all right. We're about truth and transparency here, whether Iowa or carried interest.

OK. But let's start with this letter, this red line we've been hearing about now, Leon Panetta weighing in. Why the frenzy of activity right now?

RUBIN: Well, there's a lot happening at once. Number one, the United States is imposing new and stronger economic sanctions on Iran. Iran responded by threatening to close the Strait of Hormuz. And, finally, an Iranian scientist was assassinated. This has all happened within a week or so and that has raised the threshold and led, as you reported, to an important communication between Washington and Tehran.

BURNETT: All right, so we have no direct line of communication and there's some video, I think this is it, actually, that's been amazing in the past few days, that the Pentagon just released, of Iranian speedboats coming right up to our big Navy ships.

The bullhorns are blazing, go away, go away. The speedboats ignore. That could obviously have turned into -- here they are -- how close they get before you blow them out of the water. Then you have a military confrontation.

RUBIN: Well, I think --

BURNETT: What's a direct line of communication entail?

RUBIN: Well, I think there are several issues at the same time. One is diplomacy. There has always been a way to communicate with Iran, the through the ambassadors at the U.N., our ambassador and their ambassador, through the Swiss, who represent us in Tehran. But what we're talking about here is that if military activities begin to take place and signaling begins to take place, Iran taking a step --

BURNETT: These speedboats zipping up --

RUBIN: -- these speedboats get in an accident, they can't turn at the last minute. They crash into the U.S. boat -- and military officials need to be able to talk to each other. This has happened between the United States and the Soviet Union.

It happens between the North and South Koreans. If military officials can't talk to each other, you have these incidents at sea could really escalate out of control.

BURNETT: And one final thing, yesterday, we were talking -- we used the "Star Wars" drone -- well, I don't know what it was. Sorry, everyone, "Star Wars" fan. It was a "Star Wars" sort of a thing. It looked like the drone that is missing.

And Iran had said it's going to send a little toy drone with "We will trample you," written on the bottom in pink to Obama. I mean, it is so funny, except for it's not funny. I mean, what do you make of things like that, of this propensity for sand box language?

RUBIN: It's childish on Iran's part, but what you got to remember is for Iran, the United States looms so very, very large. It was the American presidency that fell, that led to the revolution in Iran, when the Shah of Iran was let into the United States, all of these things.

For the Iranians, America is -- it looms so very large that every little step that we take, you've got to multiply it by 10 for them because it's a big deal for them. BURNETT: It's like I remember my high school. That was our -- Tower Hill, the school that always beat, you know, that you wait and you wait and you wait and you care so much about the game. And then --

RUBIN: It's big for them. But the problem is, in just a minute, a second or two, we really got to make sure that mistakes aren't made of miscalculation, that one side thinks the other side is doing something different. And that's why talking -- there's nothing wrong with talking with your enemies. We've been doing it for hundreds of years.

We've got to be able to communicate clearly with each other.

BURNETT: Would we know if there were military -- when will we know? Military confrontation? Because it seems to me almost like that it could happen and get swept under the rug because the United States is so desperate to not have a full-out confrontation.

RUBIN: Well, I think if there were a closing of the Straits of Hormuz and Leon Panetta said we would respond, I think the world would know that very, very quickly because there are many countries in that area, the oil tankers would stop flowing, the oil companies would let us know. I think that couldn't happen quietly.

I think, you know, if these low-level covert activities, like the presumed assassination by some countries of Iranian scientists, those kind of things can happen without us knowing.

BURNETT: It is amazing. I was -- a flight from Dubai into Iran. And just you look down and you see the tanker traffic. It's pretty amazing.

All right, well, thanks very much. Appreciate it. Amazing and important.

All right, thanks very much, appreciate it, Jamie, good to see you.

RUBIN: Nice to see you.

(MUSIC PLAYING)

BURNETT: So U.S. President Barack Obama declared January as National Slavery and Human Trafficking Prevention Month. Now this is an issue that's important to our show, and if you look at the U.S. Department -- State Department's annual report about this issue, the details are disturbing.

So according to this report, last year, 27 million men, women and children were exploited through human trafficking worldwide. Two million of them children forced into the sex trade, and this is not a problem just outside the United States. Get ready for this.

The State Department reports that, every year, between 14,500 and 18,000 victims are trafficked into this country for the purposes of forced prostitution, labor and other forms of exploitation.

Just a few days ago, a young woman named Shyima Hall came out front with her own story of forced slavery. You may remember her face here. She was a slave in California, sold by her family in Egypt. The United Nations Global Initiative to Fight Human Trafficking estimates that modern-day slavery is a $15.5 billion business in the United States of America alone.

And that brings us to tonight's number: 46, as in Super Bowl XLVI. It's set for Indianapolis on February 5th, and the annual Super Bowl is estimated to be the worst sex trafficking event in the United States. In 2010, an estimated 10,000 prostitutes were shipped to Miami to coincide with the game. And during last year's Super Bowl, police made 133 prostitution-related arrests in Dallas.

Now Indiana's doing its best to avoid a repeat. On Tuesday, the state Senate there unanimously passed a human trafficking bill that closes many of the loopholes in existing law. It's now in the state House, lawmakers hoping to have new legislation on the books in time for the Super Bowl.

UPFRONT next, Wikipedia and other websites dark, we told you about that, although not on my mobile. I went there, Jimmy Wales, to Wikipedia, it works. But did the blackout work overall?

And nearly two dozen people still missing from that cruise ship that ran aground in Italy. Rescue operations suspended today. What's next?

(COMMERCIAL BREAK)

BURNETT: Well, we start the second half of our show with stories we care about, where we focus in our own reporting, do the work and find the OUTFRONT Five. Up first, did Rick Santorum and not Mitt Romney actually win in Iowa? John Avlon has been reporting for weeks that Mitt Romney's eight-vote win may not have been a victory.

Edward True, who was a Ron Paul supporter, came OUTFRONT. He had been counting the votes exclusively in his precinct. He came here and talked to us about it, found a 20-vote error. Turns out that, well, that could mean Santorum wins by 12 votes. We will see.

John Avlon had confirmed that reporting. Tomorrow we're going to find out formally from the GOP in Iowa when the certified results come out.

Number two, President Obama rejecting the Keystone XL pipeline today. He says further assessment is needed to study the environmental impact. Republicans attacked the president's decision, saying that he is going to prevent thousands of jobs from being created.

Oil analyst John Kilduff with Again Capital told OUTFRONT the delay will cause crude oil prices to jump $4 to $6 a barrel. That's 10 to 15 cents per gallon at the pump. TransCanada -- that's the company behind the pipeline -- says it is going to reapply to build it from Canada to Texas again.

Number two, online protests today by Wikipedia, Google and other sites against the Stop Online Piracy Act or SOPA had an effect. OUTFRONT learned that at least five senators have withdrawn their support for the current anti-piracy legislation.

Last night, I spoke exclusively to Wikipedia cofounder Jimmy Wales and asked him why he's angry at it.

(BEGIN VIDEO CLIP)

JIMMY WALES, WIKIPEDIA CO-FOUNDER: The right way to fix it is to not place censorship on the Internet, not to force Google to stop listing them, not to force Wikipedia to stop talking about them. The right answer is follow the money. If you've got large scale piracy going on, it's the same as any other trade dispute. And I think that's the right approach.

(END VIDEO CLIP)

BURNETT: By the way, Wikipedia may be dark all day, but we found a little work around and since the protest is almost over, we're going to tell you about it. You just have to hit the escape key before the dark screen takes over on your screen and it works. And, of course, you probably realized it works on your beloved or precious or joy (ph).

Number four, a story we've been following closely -- the American debt ceiling. Today, the Republican controlled House voted against raising the debt limit by $1.2 trillion. Now, this vote was ceremonial because it's likely going to be rejected by the Senate and the president has veto power, but we care about this a lot because of number five.

One hundred and sixty-six days since America lost its top credit rating. The downgrade came after Congress fought last summer over raising the debt ceiling.

All right. Newt Gingrich is getting a boost in South Carolina today and sounding pretty confident. Here's what he just told our Wolf Blitzer.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I think by Saturday, we'll be ahead. And depending on how many conservatives come home, we could be ahead by a pretty comfortable margin.

(END VIDEO CLIP)

BURNETT: He's reacting to our new CNN/"TIME" poll that shows him gaining on Romney in South Carolina. We've got three days to go. The spread is still 10 percent. But it was 19 percent and Newt has been gaining, especially among Tea Party supporters.

OUTFRONT now, the head of the Republican National Committee, Reince Priebus.

Reince, good to see you, sir.

So, how do you think --

REINCE PRIEBUS, RNC CHAIRMAN: Hi, Erin.

BURNETT: -- it's going to go in South Carolina?

PRIEBUS: Well, it's probably going to be close, but, you know, my focus, Erin, as you know, is obviously making sure that we've got a Republican Party that can compete with a campaigner-in-chief that is raising money every day and he's giving campaign speeches on the taxpayer dime.

So, that's what I've got to focus in on. And, obviously, I'm excited about South Carolina as well, it's just that, you know, as a party chairman, getting too far in the weeds with all of this is something that I just -- I can't do.

BURNETT: Now, I know. I'm sure you've got a personal preference. But let me just ask you the question this way then, Reince.

PRIEBUS: Sure.

BURNETT: So, what's better for your eventual nominee -- a process that goes on for many more weeks that takes to find a nominee, or a process that ends now? Because obviously now, a lot of dirty laundry and nastiness is starting to come out. And I'm wondering if you think in the long run, that's good or bad.

PRIEBUS: Well, you're going to hate this answer because I don't think it matters. I mean, I see some positives to it going a long time, like Hillary Clinton, Barack Obama did. I just don't -- I know this is a big topic, but I just don't buy into the fact that a tough primary with a little drama is that bad for a party.

I think if you look at history and you look at these battles between -- you know, you look at Lee Atwater and Bob Dole, or Bush 41 and Reagan, Clinton and Obama -- it's very much part of American history when you look at tough primary.

So, the long battle to me doesn't really mean a whole lot. I think it actually brings a lot of value to our party. I think it brings a lot of talk and excitement to the challenging party.

So, you know, I've been on the other side of this, too, by the way, in '08, when we had pretty much a nominee in mid-February with McCain. It was sort of boring and Hillary Clinton, Barack Obama were -- was all the excitement on that side of the aisle. So, I think it's six of one and half a dozen of another to tell you the truth.

BURNETT: All right. Well, we'll see -- we will see how it goes. We'll know on Saturday whether it's going to be short or long. Thanks so much, Reince. PRIEBUS: We'll know. All right, Erin. Thank you.

BURNETT: Well, Newt Gingrich has been ruffling feathers today. Listen to how we deal with illegal immigrants who have been in this country for a long time.

(BEGIN VIDEO CLIP)

GINGRICH: I think we should go to a World War II draft board model where you have a local citizen review committee in every county. You can apply for residency, not for citizenship, but for residency, if you've been here a long time and have been paying your bills and you have an American family that will sponsor you and you have family now in the United States. I think most Americans would agree we are not going to uproot grandparents and send them out of the country and break up their family. You're not going to put grandmothers on the bus. It's not going to happen.

(END VIDEO CLIP)

BURNETT: Now, South Carolina has one of the strictest immigration laws in the nation and polls in the state show that when it comes to illegal immigrants, the majority of Republican voters favor deportation over any kind of path to citizenship. So how is Newt's view that you just heard there about not uprooting families going to affect his chances of winning the primary on Saturday?

Ramesh Ponnuru is senior editor at the "National Review" and columnist of "Bloomberg View'; Jamal Simmons is Democratic strategist and national Democratic editor of govote.com; and Gloria Borger joins us as well.

Gloria, will this play as humane or just not what voters want in South Carolina?

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: I don't think it's what voters want in South Carolina. I think this is a very conservative state on immigration. And as you said, it's got a very, very tough law. Newt Gingrich is now trying to present himself as the conservative in the race against Mitt Romney, whom he calls the Massachusetts moderate.

But on the issue of immigration, Romney is way to the right of Newt Gingrich. And, you know, this is an issue that comes up at a lot of town halls in this state. People care about it. They care a lot about it in particular when the economy is bad.

You've got 9.9 percent unemployment here, as you well know, Erin. And in tough economic times, people resent, if you will, immigration more because they feel that they're losing their jobs.

BURNETT: Yes. Ramesh, that's an interesting point and I'm wondering your view of how this will play. I mean, there are some counties in South Carolina, I've been looking at the unemployment rate. You've got unemployment of 16 percent, 18 percent in some counties in that state. People are hurting. RAMESH PONNURU, NATIONAL REVIEW: That's right. You know, the politics of immigration are incredibly complicated and it is a real minefield for both parties. I think Governor Romney has to be careful in how he attacks Speaker Gingrich because he wants to avoid alienating Hispanics for the general election.

I think the stronger critique you can make isn't that this is too soft, but it's completely half-baked. It's very much a Newt Gingrich proposal, the idea that you're going to have, you know, thousands of boards all over the country making these decisions with no common standard. There will be constant court challenges. It makes no sense.

BURNETT: Jamal, this is -- Ramesh makes a point, though, that -- you know, look, this is a big issue on both sides of the aisle. You look at all Americans, Democrats and Republicans, two-thirds of them are not happy with the current level of immigration. Sixty-four percent, which is, of course, ironic given at least from the Southern border we're not really having much immigration right now because of the economy.

But how does this play to Barack Obama who had deported a lot of people and has been by some accounts pulling back?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: The president is not exactly, you know, hitting the ball out of the park on immigration issues for many people in Latino community. He has been able to do some things administratively that are going to make life easier for people, but he didn't get the DREAM Act. He didn't get comprehensive immigration reform.

On the other hand, you've got the Republicans, particularly Mitt Romney, who are so far out of the mainstream on where this is -- saying he's going to veto the DREAM Act. It just shows he's out of touch with where people are. Getting kids who have been here most of their lives to be able to go to college while they're here is not that radical of an idea, a lot of people are for it.

Newt Gingrich is really, I think, playing a longer game here. What he realizes when they leave South Carolina, they're going to Florida. And down in Florida, he's going to be able to make a case to some Latino voters and I think he's got some meetings he's setting up. He's going to be able to make the case to them that he's got some idea of how to nuance this and play on this immigration field.

BURNETT: Gloria, before we go, what's your quick bet on who wins the Hispanic vote in the primary on Saturday?

BORGER: Oh, well, that would be interesting. And I don't know how many Hispanics are going to be registered as Republicans to vote here on Saturday. But I would -- I would think that Newt Gingrich would be more popular with them, but I will tell you that in the Republican Party, Mitt Romney was campaigning on Monday with the man who wrote that tough immigration law, anti-immigration law in this state.

BURNETT: Right.

BORGER: So, he is touting that credential in this primary and I think that will serve him very well.

BURNETT: All right. Well, thanks to all three. We shall see. Hispanic vote is going to be front, center, crucial, OUTFRONT for the general election. We know that.

Well, the "Outer Circle" is OUTFRONT next. We go around the world. And tonight, developments from that cruise ship that ran aground in Italy. Rescue operations suspended.

(COMMERCIAL BREAK)

BURNETT: We do this at the same time every night, our "Outer Circle," where we reach out to our sources around the world.

And tonight, we begin in Pakistan. The country reiterating that it will address former President Pervez Musharraf if he tries to come home. Now, Musharraf is wanted in connection with the assassination of former Prime Minister Benazir Bhutto. He has been in self-imposed exile for three years, right now in Dubai, plans to return to Pakistan at the end of January and run in elections next year.

Michael Kugelman is the South Asia associate at the Wilson Center. And we said, is Pakistan actually going to go through with this arrest?

(BEGIN VIDEO CLIP)

MICHAEL KUGELMAN, SOUTH ASIA ASSOCIATE, THE WILSON CENTER: I think it's unlikely. Last week, he was reportedly in touch with the Saudis and they are apparently negotiating for a smooth return for Musharraf and the Saudis exert a lot of leverage over the military establishment, which is, of course, chief power broker in Pakistan. Musharraf is an army man. And the army wants to protect him and do what it can to allow him to return safely and without getting arrested.

(END VIDEO CLIP)

BURNETT: Well, rescue operations were suspended aboard the Italian cruise ship, the Costa Concordia today. Now, sensors determined the ship had shifted, which made conditions too dangerous for divers to keep going through it.

At least 11 people are dead. Two dozen are still missing, including two Americans from Minnesota.

Five days after the ship's hull was ripped open by rocks, many are questioning who is going to be accountable.

Matthew Chance is in Italy for us tonight with the latest.

Matthew, good to see you tonight. And what is the latest in the search and recovery efforts? Do they think they're going to be able to resume it, or is this a -- the ship has shifted, this will not change?

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, they're hoping the ship will stabilize so that divers can get back down there and resume that search. But I have to say, Erin, it's become less of a rescue operation, more of a salvage operation. It's been several days. Obviously, since this catastrophe took place. There are still what, two dozen or so people that are missing or unaccounted for, but very few people at this point with the exception of a few relatives perhaps are holding out much hope they're going to find anybody alive.

And so, as I say, it's turned from a rescue effort to more of a recovery and salvage operation at this point. We're not likely to see any more people being taken alive from the wreckage, Erin.

BURNETT: Yes. It would seem that would be a true miracle if that were to occur. I know that there have been released court documents. Matthew, you've have a chance to look at them. And what do you say about the situation with Captain Schettino, who is charged with abandoning ship?

CHANCE: Well, they bolster those charges of him abandoning ship. They also bolster the idea that he was very negligent indeed and was the route cause of this accident, because in it, the judge says that Schettino has acknowledged, according to these documents, that he made a navigational error, said that he was navigating by sight during the time when the Concordia, the ship that struck those rocks, you know, actually was grounded.

And so, these are things that are revelations that have come out over the course of the past day or so, as a result of the leaking of these documents, previously had not been acknowledged that the captain was the root cause of this catastrophe although, of course, that had been a suspicious all along. And so, that together with the transcripts and recordings of the conversations between the captain and coast guard which showed that he abandoned the ship and refuse to get back on the ship --

BURNETT: Right.

CHANCE: -- are really damaging to his case.

BURNETT: Yes. That -- not even speaking Italian, even without the subtitles, just the tone of that conversation was stunning.

All right. Matthew Chance, thank you very much.

Matthew, as you can see, reporting live from Italy tonight.

Well, Captain Francesco Schettino is actually under house arrest tonight. Italian authorities are considering charges of manslaughter as well as abandoning ship, as you just heard Matthew referred to. Schettino comes from a family of sailors. And the question is, will he be the only one who's going to be held accountable? Not obviously from his family with others related to ship and the ship's management.

Paul Callan is a former New York City prosecutor and criminal defense attorney.

Paul, what do you think is going to happen here? You know, he's admitted that he made a navigational error. He says that he did not abandon ship and that audiotape did not play fairly. What real grounds are there here to hold him personally accountable?

PAUL CALLAN, CNN LEGAL CONTRIBUTOR: I think there is strong grounds to support a manslaughter case, a shipwreck case, an abandoned ship case. You have a black box on the ship which would demonstrate severe navigational errors and, you know, navigating by sight so close to land in a ship of this size is just on its face a reckless, reckless act. And obviously, he hit rocks, endangering 4,000 passengers.

So, it sounds like the Italians have a relatively strong case, at least at first blush against the captain.

BURNETT: Now, I wonder, you mentioned going this close to land. Just to play a video for you that sort of shocked us and everybody. Take a look this. This is today. You can see the shipwreck in part of the video and another Costa Concordia ship actually sailing right by it, looking at it.

Well, we have it. We'll play it.

But let me just ask you your reaction to that. I mean, could the ship company, Costa Concordia, be held accountable? Obviously, that comes up to Carnival Cruises.

CALLAN: Well, yes, and civil actions against the company for negligence.

BURNETT: There it is. It's playing now. You can see the lit ship sailing right within distance. It is sort of amazing to look at.

CALLAN: Yes. You know, when I saw that earlier, the irony of that -- I mean, there are literally may be people trapped in that ship, in the Costa Concordia, at this very moment, while the other ship sails by just on a regular cruise and vacation.

BURNETT: Yes.

CALLAN: It's almost as if you should shut the thing down for a couple of days until they recover the dead, but I guess business goes on.

BURNETT: So what happens here? This incident happened in Italy and as everyone knows, ships have these strange things about where their flags come from. The accident happened in Italy. The parent company of Costa Concordia is Carnival Cruise Lines. That is a company that is based in the United States of America, in Miami.

What does mean for people who are going? Because there's a lot of people who take cruises around the world and they're about to do so this spring break who now will wonder, what if something happens? What recourse do I have?

CALLAN: And, you know, Erin, a lot of Americans were on board and they may think they can find justice in an American court since Carnival is based in Miami. Highly unlikely, though.

This was an Italian-flagged ship. The accident took place in Italian waters. It's going to be litigated in Italy. And that's the only place they'll be able to sue.

BURNETT: All right. Something to make a lot of people take pause.

Thanks so much to you, Paul Callan.

And now, let's check in with Anderson Cooper with a look at what's on "A.C. 360".

I know, Anderson, you're continuing to cover the story.

ANDERSON COOPER, HOST, "A.C. 360": Yes, keeping them honest report on the ship. There's new evidence that it wasn't the first time the ship sailed so close to the coastline, and the company not only knew about it, but condoned it. They've been distancing themselves from it, putting it basically on the captain. Well, they seem to have known about this in the past. We'll have the latest on that as well as a continued search for the missing.

And you just kind of gave reference to it, what everyone should know about legal options if you get injured on a cruise ship. The bottom line is you may not have many legal options because of maritime law.

Plus, tonight, raw politics. "Newsweek's" cover story has a lot of people talking with its headline, "Why Are Obama's Critics so Dumb?" The author of the article, Andrew Sullivan, joins me tonight along with Republican strategist and Mitt Romney adviser, Bay Buchanan.

And just an unbelievable story. Twelve teenage girls in Upstate New York are suddenly all suffering from a mysterious condition that looks and sounds a lot like Tourette syndrome. What's causing it? All of a sudden this occurred.

We're going to speak to some of the girls and our own Sanjay Gupta.

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

BURNETT: I can't wait to see that. Seeing those girls speak, it's disturbing and it's bizarre. I'm really looking forward to seeing what really happened there. Thank you, Anderson.

See Anderson in a couple of minutes.

Well, up next, well, you know, it's the camel report, and we're doing one tonight, because we thought we knew absolutely everything there was to know about camel. You may get a little arrogant about that issue. But you know what? That arrogance was totally misplaced.

We'll be back.

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BURNETT: It's Wednesday. That means it's hump day. And back by popular demand on social media, the camel report.

Now, tonight's report comes al the way from the Indian state of Gujarat, where the Life Network and the National Bureau of Animal Genetic Research honored two camel breeders with the Breed Saviour Award and a cash prize for, quote, "conserving this unique camel species for the last five to seven generations through traditional breeding practices and not giving up these practices, even in adverse conditions."

So what's so unusual about this breed of camel? Well, first of all, they can survive in coastal and dry environments. And unlike other camels, they have a rounded back, long, thin legs, and very small feet. And the most amazing part is that they can swim.

According to camel experts, this breed -- the audio on this is fantastic, by the way -- can swim almost two miles in the ocean to find mangroves, saline shrubs that are their primary food source.

Look at that. Listen to that. When we saw this today, we were floored. We had no idea that camels could swim miles offshore. But there they are, swimming -- although they do sound a little grouchy about it.

A few weeks ago, I was lucky enough to spend the day with camels at the Bronx zoo. The director of the zoo camels, Jim Brouhini (ph), a guy who knows tons about camels said camels were like cats in that behavior, but cats wouldn't swim two miles for food.

Just goes to show you, as much as you think you know about something, there is always something more to learn. You've got to always be more equipped, more prepared, and more OUTFRONT.

Let us know what stories you have and we'll see you tomorrow. "ANDERSON COOPER" starts now.