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ERIN BURNETT OUTFRONT

Bernanke Says No; Romney's Tax Returns; Drilling in the Arctic

Aired July 17, 2012 - 19:00   ET

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


ERIN BURNETT, HOST: OUTFRONT next, Fed Chair Ben Bernanke made two things clear today. The economy is in bad shape, but he is not going to throw more money at the problem yet. Can America get off its addiction to Ben?

And Mitt Romney standing his ground refusing to release more of his taxes as calls for them reach a deafening pitch. Today he gave another reason why he shouldn't have to and an exclusive investigation into the risks of off-shore drilling. We went OUTFRONT to the Arctic. Shell has a plan to prevent a disaster like the one that happened to BP and the Deepwater Horizon. Does it add up?

Let's go OUTFRONT.

OUTFRONT tonight, Ben Bernanke says no to the addicts. Addicts that are desperate for another hit of the Fed's drugs. Today in hearings on Capitol Hill, America's top banker, the chief of the Federal Reserve got more negative on the state of the U.S. economy.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Given that growth is projected to be not much above the rate needed to absorb new entrance into the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow.

(END VIDEO CLIP)

BURNETT: So what's the solution? Well, in note after note from Wall Street economists and traders today, I read something along the lines of this. Bernanke will launch another round of easy money to help the economy. It will bring interest rates even lower. It's just a matter of time, he'll do it, he'll do it, don't worry. That's the kind of talk the addicts use.

Yearning for more of his powerful drug, which essentially is just cheap, easy money. So many were hoping for another shot of the goods today, but while the Fed chairman painted a darker picture of the economy, he also made it clear that he is not ready -- not ready to hit us with another round of easy money, at least not yet.

(BEGIN VIDEO CLIP)

BERNANKE: We are looking for ways to address the weakness in the economy, should more action be needed.

(END VIDEO CLIP)

BURNETT: Now Ben Bernanke also said, quote, "Congress is in charge here. Not the Federal Reserve. And that Congress needs to reach an agreement to avoid the fiscal cliff." Well, of course, we've joined that chorus until we've been blue in the face over the past year. But the problem, of course, is that Congress does not seem to have any intention of dealing with the tax cuts, debt ceiling, sequestration cuts, the things that comprise the fiscal cliff. Congress seems to be incapable of doing its job, something that Chuck Schumer admitted at the hearing today.

(BEGIN VIDEO CLIP)

SEN CHUCK SCHUMER (D), NEW YORK: So given that the political realities, Mr. Chairman, particularly in this election year, I'm afraid the Fed is the only game in town. And I would urge you to take whatever actions you think would be most helpful in supporting a stronger economic recovery.

(END VIDEO CLIP)

BURNETT: I like watching Ben Bernanke's face. He just looks down as if sort of his heart has been broken. I mean he could cave. He could give us more easy money, drugs, he could do it in August, he could do it in September. But you know what it isn't something to just root for, plain and simple. Because you know what, the Fed's cheap money drugs are not cheap. Congress is the one that needs to act.

We've already had three rounds of Ben's version of stimulus. And it came with a price tag of $3 trillion. So we actually did the math. Were the highs that we got worth the price? So take a look. When the financial crisis first hit, the Fed stepped in with an unprecedented plan to lower interest rates, and stimulate borrowing and economic activity.

They call it QE-1 or Quantitative Easing 1. So it went from November of 2008 all the way to March of 2010. And during that time, we did see effectiveness. Borrowing rates dropped, according to BankRate.com, 30-year fixed rate mortgages fell from 6.33 percent to 5.23 percent. That's pretty good for the addicts. The cost though was $1.7 trillion.

And the economy still was dragging along. So Ben served up another shot. QE-2 went from November 2010 until June of the following year. It was like a bad trip. A 30-year mortgage rate actually went up by the end of QE-2 and we spent $600 billion. The economy still did not get better. So Ben tried again. He gave us a little bit more, a more creative cocktail, sort of a methamphetamine special called Operation Twist.

Maybe bath salts, it launched in September, 2011, goes through the end of this year, and mortgage rates have fallen a little, 4.22 percent, down into the three's, but it's nowhere near the buzz of the first hit. And frankly, the reason that rates have gone down so much, have had a whole lot to do with Europe's problems and everyone pushing money into the United States out of desperation and then the Feds printing another $400 billion.

So the bottom line is every time we got another injection from Ben Bernanke, the highs, the benefits got a little bit lower. The $2.7 trillion total cost of the Fed stimulus, well how about this, another way to see whether it was worth it is to see whether it succeeded in the ultimate goal here, which is to create jobs. And look at this. This does not add up.

For every job created from the beginning of Ben's stimulus, quantitative easing until today, the Fed's money would be $807,205 per job. That's a lot of money. So Ben Bernanke knows the bad side of his drugs. He could have done what everybody wanted today and launched another QE, QE-4. But he had the guts to say sure the economy is slowing more than I thought. That does not mean I will go print another hundreds of billions of dollars of money.

OUTFRONT tonight, Stephen Moore from "The Wall Street Journal" Editorial Board and Christian Weller, senior fellow at the Center for American Progress. What do you think, Stephen Moore? Did he do the right thing by holding out and saying, look, I'm just not going to do it yet, even though you even have people like Chuck Schumer, you know, I've got to give him credit, throwing in the towel and saying, look, we're not going to do it, buddy. It's you or nobody.

STEPHEN MOORE, WALL STREET JOURNAL EDITORIAL BOARD: Yes, Erin, you used the right term. It was gutsy. I thought this was a gutsy speech by the Fed Chairman Ben Bernanke. Look, the members of Congress, you're right, they were like you know crack cocaine addicts. They were begging Ben Bernanke for just one more fix. And he said no to that. And I thought that was an important point in that speech.

He was quite discouraging about the economy. Anybody who thought that Ben Bernanke was going to give Congress a pat on the back and say everything is going to be OK and full speed ahead, that was not the presentation that he gave today. He said, look, we're in some really tough times. He didn't project that the unemployment rate would fall. He basically said we're going to be at eight percent or more for a while to come. And I just found it very discouraging.

BURNETT: I mean that part, Christian, was depressing. The question is, should Ben Bernanke do anything more? I mean, after all, when you look at the amount of money and that he's tried to pump into this economy, it has worked less and less every single time. And certainly per job, that number is pretty frightening.

CHRISTIAN WELLER, FELLOW, CENTER FOR AMERICAN PROGRESS: Well, I mean, let's be clear. That's just the balance sheet of the Federal Reserve. It's not really money spent, it's just shoveling money from long-term into short-term and bringing more cash into the economy. But I think the Fed should do more. What I'm missing, really, from Bernanke is a sense of urgency.

I mean, we're acting as if QE-3 is the only thing we could do. Operation Twist would be another way to go. The Fed could change its targets. For instance, it could target unemployment rates as some have suggested, it could target growth rates, which ultimately -- BURNETT: But Christian, they've been targeting all of those things -- let's be honest, right. I mean he's been trying to get --

(CROSSTALK)

WELLER: Not explicitly and that's the problem like the Federal Reserve was never explicitly --

BURNETT: But if it was an explicit mandate to do so I find it hard to believe that he would have suddenly had a magic tool -- you know bullet that he didn't already try to use.

WELLER: No, but we do know that these explicit targets matter that they do create certainty that they create self fulfilling expectations. That they will bring in more spending, because then it says, OK, well, the Federal Reserve says unemployment rates should be there and the unemployment rate will use all of its tools, a variety of its tools, interest rates, quantitative easing --

BURNETT: Right.

WELLER: -- twist whatever you want, in order to get there. And I think that's sort of what we're missing. It's sort of like, yes, it's not as good as we had hoped, but --

BURNETT: OK.

(CROSSTALK)

BURNETT: This whole issue with the Fed should target --

(CROSSTALK)

BURNETT: Hold on.

(CROSSTALK)

BURNETT: I don't want to get into a debate.

(CROSSTALK)

BURNETT: Hold on.

WELLER: And that's unacceptable and that's truly unacceptable --

BURNETT: Hold on --

WELLER: -- for Congress --

BURNETT: Hold on, hold on, Christian.

(CROSSTALK)

BURNETT: I don't want to get into a debate over what the Fed should target, although I recognize it's a very important one. But Stephen, what about his point that you think the Fed could have done more --

UNIDENTIFIED MALE: No, but the point is that QE-3 is not the only tool that the Federal Reserve has --

UNIDENTIFIED MALE: Here's the problem --

(CROSSTALK)

UNIDENTIFIED MALE: That the Federal Reserve should at this point --

BURNETT: OK. Christian, let Steve respond.

WELLER: -- with a sense of urgency and try to do something.

MOORE: Here's the problem. If just printing money, Erin, were the solution to our problems, boy, would this be an easy crisis to get out of, but as you showed very eloquently, that's what the Fed has been doing for the last four years. We've had (INAUDIBLE) of money --

WELLER: That's exactly the point Steve --

MOORE: -- and we have had the lowest -- look, push interest rates lower? You saw, Erin, what happened today, 1.44 percent interest rates on the 10-year Treasury bill, that's the lowest that they have been any time in my lifetime, and probably since the great depression. So, look, I just don't think printing money is the solution to this crisis. I do think one of the important things Ben Bernanke said today is don't jump off that fiscal cliff. You know me, Erin, I'm a big believer, we should get rid of that tax time bomb on January 1st. Chuck Schumer was wrong. The one thing Congress could do right now, tomorrow, to make the economy better would be to take that tax off the table that I think is having a very unsettling effect on businesses right now.

BURNETT: All right. We're going to hit pause on that.

(CROSSTALK)

BURNETT: Obviously, that tax thing is much more complicated than just doing it tomorrow, although I know everybody would like to. They just have different ways they want to deal with it.

All right, still OUTFRONT Mitt Romney just gave an interview to a local station in Pittsburgh talking about why he will not release more than two years of tax returns. And we have that for you next.

And Victor Bout, remember him, the merchant of death? He is in prison for dealing arms around the world. But others have picked up where he left off and the woman leading the charge to track them down is OUTFRONT tonight.

Plus new developments in the search for those two little girls who disappeared in Iowa on their bikes, FBI dogs were searching today. We spoke to the FBI. That's OUTFRONT.

(COMMERCIAL BREAK)

BURNETT: Our second story OUTFRONT Mitt Romney doubles down, refusing again to release more of his tax returns and claiming the Obama campaign only wants them for one reason. Here's what he said just moments ago in an interview with our Pittsburgh affiliate, WPXI.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: My experience is that the Democratic Party these days has approached taxes in a very different way than in the past. Their opposition people look for anything they can find to distort, to twist and to try and make negative. And I want to make this a campaign about the economy and creating jobs. And they want to make this a campaign about attacking people and diverting attention from our job fixture in this country.

(END VIDEO CLIP)

BURNETT: John Avlon, Reihan Salam and Jonathan Prince join me. Jonathan is a Democratic strategist and veteran of the Obama and Clinton White Houses, both of which, of course, it's only fair to say do have a long and storied tradition of tax return disclosure. So do many Republicans, Reihan, who have run, and it is interesting that Mitt Romney is making this about Democrats who have been very critical. So have many Republicans and conservative strategists. Today the "National Review" come out and said Mitt Romney give it up.

REIHAN SALAM, CNN CONTRIBUTOR: Indeed. Well --

BURNETT: I like how Reihan is like, indeed --

(CROSSTALK)

SALAM: Look you've had a lot of folks -- you've got Haley Barbour, you have a large number of leading Republicans who are saying that the time has come to release the tax returns. Now the theory that I find interesting was advanced recently by Josh Green (ph) of "Bloomberg Business Week" and his theory is this. In 2009, a large number of high net worth individuals experienced big post crisis losses, and as a result of that, many of them paid unusually low shares of their income in taxes. So one possibility --

BURNETT: (INAUDIBLE) my theory. There is going to be one year where the rate is --

SALAM: So one possibility is that --

(CROSSTALK)

SALAM: -- in that year the rate is bizarrely low and that's going to be really, really tough to explain despite the fact that well you know it kind of makes sense that when you take really big losses in any given year you're not going to pay really high taxes that year, but I think that that might be what's at issue here.

BURNETT: But we're going to sit here and discuss it. People are going to talk about it. He can come out and explain it and it would be done. Like as we said, John, the other day, he was vetted for vice president -- I think we made it clear to everybody or I did, where I stand on this, just put him out there --

JOHN AVLON, CNN CONTRIBUTOR: Oh yes, he did. Four years ago he ran for president. He has been governor since 2002. And so we're left to assume rationally what Reihan just said or some scenario like that. Look, it's not worth it. And it's not credible for Mitt Romney to say it's the Democrats who want to see his returns when you look at the litany of conservatives who now have said this. Look, "National Review", Haley Barbour, Ron Paul, Bill Kristol, the governor of Alabama. Probably nothing has united the disparate wings of the conservative movement as much during Mitt Romney's candidacy as this call to release his tax returns.

BURNETT: So all right and let me just make this point, Jonathan that this is a bipartisan tradition. John McCain did only give two years, which is fair to say. But George W. Bush gave eight years of his tax returns. John Kerry gave 20. My God, I can't even believe he saved them 20 years. President Obama gave 12 years. But Jonathan, I mean that's the point, I -- how do you graciously, if you're Mitt Romney, give in here?

JONATHAN PRINCE, DEMOCRATIC STRATEGIST: Well, there's no gracious way to give in anymore, because he's had his back up against the wall for so long. But there still is the opportunity to give in, get it out there and move on for him. I mean, you know, those of us who have, you know, gone to kind of crisis communications 101 have taken those -- 101 course of crisis communications understand that if you've got something that you don't think people are going to like, the best thing you can do is get it out there and get it over with. Meanwhile, Mitt Romney, you notice, continues to dance around the subject and dance around the subject, giving us lots to talk about on cable TV, speculating what's in it, speculating what might be in it. It's fun for us.

BURNETT: One night of aggressive hits on the low tax rate in 2009 or whatever it might be and then you move on. You move on --

(CROSSTALK)

SALAM: Look, it's got to be -- it's definitely going to be more than one night, but here's the issue Erin.

BURNETT: OK.

SALAM: I think that he's right to say -- he's absolutely right to say that this is a distraction. But the problem is that that's the dynamic. That's been unleashed. And, you know, I think that you know you eventually have to deal with that. You have to lance the boil and I think that that's a reasonable point that Jonathan raises.

(CROSSTALK)

BURNETT: OK.

(CROSSTALK)

AVLON: It's a distraction of his own making. And, you know, there is fundamental dissidence (ph). He can't demand apologies for negative campaigns when he is campaigning on no apology. He can take control of the cycle. As Jonathan said, it's communications --

BURNETT: Right.

AVLON: -- crisis communications 101 you've got to play off and to get it out.

BURNETT: Put it out there and then say here's what I'm going to do about jobs. I didn't want to do it, you guys are jerks, but I did it.

UNIDENTIFIED MALE: Yes.

BURNETT: All right OUTFRONT investigation into drilling for oil in the Arctic. Shell says they're ready for a potential disaster like the Deepwater Horizon. We went to the Arctic to see if it adds up and an update on the recovery of Aimee Copeland (ph), the young woman making a miraculous recovery after she was attacked by flesh-eating bacteria, her father, OUTFRONT tonight.

(COMMERCIAL BREAK)

BURNETT: Our third story OUTFRONT it's full speed ahead for Shell Oil and its plan to drill wells in the Arctic. Today the man who has to give final approval before drilling can actually start though said that his agency, the Department of the Interior is going to make the final call on August the 15th or by August 15th. Secretary Ken Salazar wouldn't say whether drilling would occur this summer.

He told "The New York Times" and I want to quote this because it's very important the nuance "We have not yet given the final permits to Shell. We don't know if it will occur and if it does occur, it will be done under the most watched program in the history of the United States." If approved, Shell could be opening up the entire Arctic to the world. Are they ready? We all remember the horrors of Deepwater Horizon. How would Shell ever clean up a spill in the Arctic? Miguel Marquez went north to Alaska to find out.

(BEGIN VIDEOTAPE)

MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): The race for oil and gas in the Arctic is on. Way out ahead, the Russians, Norwegians, Danes, even Canada. When Shell Oil drills exploratory wells this summer off Alaska's North Slope, potentially U.S. oil (INAUDIBLE) will be in the gain (ph), a gain (ph) that will test Shell's technical abilities, above all ice will be one of the biggest challenges.

PETE SLAIBY, V.P. SHELL ALASKA: We do recognize we're going to be working in ice. And our assets are developed to work in ice.

MARQUEZ: Drilling the exploratory wells in the Beaufort and Chukchi seas will be two drilling rigs that have operated in ice before. Each will be anchored to the sea floor by eight massive cables, the cable array can be severed, the rigs can float free in the event of an emergency.

(on camera): This is America's last frontier and one of the most pristine and fragile wilderness areas left in the world. If Shell finds what it thinks it will under the ocean this summer, it will cause a gold rush, a gold rush for oil for decades to come.

(voice-over): That will mean permanent production wells. They'll be heavy and very big, fully enclosed, cement and steel structured so workers could survive year-round. Hovercraft (ph) would allow escape over ice. They would be concaved so as tons of ice crushes in it would run up the side then curl back on itself. But it's now that people here worry about.

CHARLIE KINNEEVEAUK, ANTI-DRILLING POINT HOPE RESIDENT: They have to promise me that there won't be no spill.

MARQUEZ: Along with the oil rigs, Shell has 15 vessels dedicated to clean-up if there is a spill. The problems, say people here, none of it has been tested in Alaska. U.S. government rules prohibit introducing oil or other contaminants into U.S. waters, even for research purposes. Tests have been conducted in Norway and in research laboratories, but not on site in real world conditions.

CAROLINE CANNON, ANTI-DRILLING ACTIVIST: By faith, we believe them. By faith, we have faith on them that they're going to do everything by all means, everything to protect our way of lifestyle.

MARQUEZ: Shell says each well will have maximum protection, reengineered blowout preventers and a capping stack system will be on hand. That's what finally put an end to the Deepwater Horizon disaster. Shell insists risk is limited. Environmentalists and locals counter it only takes one accident to destroy a way of life.

(END VIDEOTAPE)

BURNETT: Miguel I'm curious. I mean how are they -- how do they know if this really works and it seems like every time there is some horrific thing it sort of -- the horses come out of another barn.

MARQUEZ: Well that's the tough thing. They won't know it works until it actually happens. They're going to have a lot of material and men and ships, both vessels at sea, and helicopters and planes at the ready in case a spill does break out. They will try to get it before the oil actually makes it to land but they --

BURNETT: So they live there and sit there and just wait for the hypothetical.

MARQUEZ: Literally 15 (ph) ships are going to sit there and watch these two rigs for the entire time that they're out there, a month and a half, two months that they're out there drilling.

BURNETT: Wow, like watching a plant grow but obviously very important. Why is there such a need though to look for oil in Alaska? We hear so much about how we found so much oil and natural gas in the continental United States.

MARQUEZ: The easy answer is the easy oil is no longer able to be gotten. Any oil well that is pumping today it's only going to get less over time. The Alaska oil -- the oil line coming out of Prudhoe Bay right now is down by like two-thirds of what it was when it was at its peak. So there is tons of room in that pipeline. If they can fill it with oil, they would certainly like to do that.

BURNETT: All right. Thanks very much to Miguel as he continues his special report tomorrow OUTFRONT.

And next, the so-called merchant of death no longer dealing arms to fuel conflicts around the world, but we're learning who is.

And a murder suspect on the run tries to get away by stealing a commercial plane.

(COMMERCIAL BREAK)

BURNETT: Welcome back to the second half of OUTFRONT.

We start with stories we care about where we focus on our reporting from the front lines. First, criminal investigations are under way by the FBI and Dutch authorities after needles were found in six sandwiches on four Delta Airlines flights. All the flights were going from Amsterdam to the United States. One person was injured.

OUTFRONT has obtained a statement from the Gate Gourmet, which is the catering company which provided the sandwiches, saying that, "We take this matter very seriously. Gate Gourmet immediately launched a full investigation to determine the root cause of this disturbing incident, and we are treating this as a criminal act."

A Delta spokeswoman tells us another no other needles have been found.

Well, CNN has obtained a copy of the Senate Democrats bill to extend the Bush tax cuts for couples making $250,000 or less a year. Senator Harry Reid has promised to bring the bill to the floor next week. In addition to extending the Bush tax cuts for those families, it keeps the 15 percent tax on capital gains and dividends, again, for couples who make less than $250,000 a year. It also extends a modified child tax credit. Republicans expected to oppose the bill, because they want the Bush tax cuts extended for all income levels.

And now, the National Highway Traffic Safety Administration has opened an investigation into 2001 through 2004 Ford Escapes and Mazda Tribute SUVs. They're investigating 99 complaints, talking about stuck accelerator pedals. One of them is based on a fatal crash in January of this year, 591,000 vehicles could actually be affected.

And a man linked to a Colorado Springs murder allegedly attempted to actually steal a commercial plane at a Utah airport. But then he committed suicide before the plane took off. Colorado Springs police tell CNN Brian Hedglin was being sought in the stabbing death of a Colorado woman. They also identify Hedglin was an employee of SkyWest Airlines. In a statement, SkyWest says he was currently on administrative leave and no passengers were on board when the incident occurred.

Well, it has been 348 days since the U.S. lost its top credit rating. What are we doing to get it back?

Well, inflation is in check, the index that tracks consumer prices was unchanged in June, partly because of lower gas prices. That's great. If it only wages would grow.

And now our fourth story OUTFRONT: The shadowy world of international arms sales. This week, we're going to be going to Africa and one of our assignment is to shine a light on the bloody conflict in Mali, rebels including those with links to al Qaeda reportedly armed with weapons that came from Moammar Gadhafi's Libya, the same Libya where we spent $1 billion to help opposition fighters overthrow Moammar Gadhafi.

OUTFRONT tonight: Kathi Lynn Austin, executive director of the Conflict Awareness Project. She's just back from Africa, leading the charge to track down those illegal arms dealers. I know you have a major development to report tonight.

First of all, the situation in Mali with al Qaeda gaining strength and traction, it appears. What kinds of weapons are pouring into Mali from Libya?

KATHI LYNN AUSTIN, CONFLICT AWARENESS PROJECT: Well, the main thing you have to worry about is surface-to-air missiles. What happened was, just before the conflict broke out in Libya, Gadhafi had up to about 20,000 arsenal of surface-to-air missiles. After the conflict was over, 5,000 are missing, still unaccounted for.

So that's one of the things you have to worry about. Another thing, Jeeps mounted with machine guns, lots and lots of ammunition belts. These are prowling the streets. Something to be concerned about when you're there.

BURNETT: And so, let me just ask you about the question you've been looking at. Victor Bout, obviously, everybody has heard of him, "merchant of death" and now serving time in jail. And you've been investigating well, when Victor Bout was accosted, who took his place. I think the same thing is clear happening in Mali with arming al Qaeda and other places, there are new arms dealers now, right? What did you find?

AUSTIN: Well, everybody has been asking, who is going to fill Victor Bout's shoes, so I set out on an investigation, a six-week investigation in Africa, in the Middle East, looking to see what Victor Bout's lieutenants were up to. And I came upon two of the top lieutenants, Sergey Denisenko, who had been one of his right hand men, and Andrei Kosolapov, in idyllic island in Mauritius, which is a gateway to Asia, Middle East and Africa. BURNETT: And they were there, and you were able to track down weapons, the planes, everything they were using. Did you find American connections?

AUSTIN: We did. What we found was that because Russian aircraft are aging and also the Russian network wishes to have a new cover of legitimacy, they were trying to source aircraft out of Europe and the U.S. One of those aircraft came from Bangor, Maine. It was involved a company called C&L Aerospace.

What was interesting is when I talked to C&L Aerospace, they said, oh, my goodness, on one hand it appears now we're servicing the arms traffickers in Africa. And on the other hand, we're servicing American companies that are running black operations in Africa. So that just kind of shows the out of control nature of this illicit arms trade.

BURNETT: And is it getting worse, with all of the instability in Libya, in Egypt, in the Middle East right now? I mean, are you seeing sort of an increased flow?

AUSTIN: Well, what we're seeing is a revving up of particular networks. And what they're looking at mostly is trying to place aircraft also in Iran. We believe this is for the Syria contacts. Still lots more work to be done.

(CROSSTALK)

BURNETT: Theoretically transfer weapons into Syria.

AUSTIN: Absolutely. So, these are -- looking -- and they're actually, what's interesting, a new development, is they're looking to do it with passenger aircraft. No one suspected passenger aircraft in the past. So, what I found Victor Bout's lieutenants doing, trying to source passenger aircraft out of U.S., out of Europe to give it legitimacy so they can make these runs into Damascus.

BURNETT: All right. Well, thank you very much, Kathi Lynn. Pretty amazing reporting there and I guess pretty sad to just accept the fact that Victor Bout has been replaced.

And now, Spain is in serious trouble. The unemployment rate you may have heard is about 25 percent, this is second recession since 2009. And today we learned that immigration is dramatically moving. According to the National Statistics Institute, the number of people leaving the country in the first six months of the year was up 44 percent from last year.

Unfortunately, the government is too financially strapped to help. A few days ago, the prime minister unveiled a $80 billion austerity plan, which is forcing everyone to make cuts, and cuts at the top. It means the royal family.

That's our number tonight, $494,000. That's how much King Juan Carlos and Crown Prince Felipe will collectively cut their salaries. It's a 7 percent reduction which obviously is a whole lot better than a lot of other Spaniards have and you can't really cry for them anyway because the royal family still has $10 million budgeted for expenses this year.

OUTFRONT next, new developments in the search for those two missing cousins. Those little girls in Iowa. FBI search dogs were out today for their first day on the ground. We talked to the FBI.

And we're getting an update on Aimee Copeland's recovery. Her father, OUTFRONT next.

(COMMERCIAL BREAK)

BURNETT: We're back with our "Outer Circle" where we reach out to sources around the world.

And we begin in Syria with new footage tonight from Damascus, taken by an activist, shedding light on the massacre of civilians outside the capital that happened last month, 45 people died in the attack, including children. Opposition characterizes as an execution by government forces. The government still claims it's fighting terror groups.

Arwa Damon is following the story and I asked her what the footage says about those claims.

(BEGIN VIDEO CLIP)

ARWA DAMON, CNN CORRESPONDENT: Well, Erin, it most certainly throws the claims into question, as do the reports of just about every single other massacre. Now, in this particular instance, residents say that at the end of June, government forces went through apartment buildings, allegedly searching for weapons, and that is when these killings began.

Now, three activists went into a few hours after the massacre to film what happened, but they ended up trapped inside this Damascus suburb of Douma for over a week because of the intensity and ferocity of the shelling. And it's just an indication of what it takes for activists to bring to light, to bring to the international spotlight, one instance of the ongoing horror in Syria -- Erin.

(END VIDEO CLIP)

BURNETT: Thanks to Arwa.

And now to London, with 10 days left to the Olympics. The games are in the spotlight for some of the wrong reasons. First, the lack of security preparation, and then reports of athletes getting lost on the way from the airport to the Olympic village. And today, cab drivers clogging central London in protest.

Jim Boulden is in London and he told us why they did it.

(BEGIN VIDEO CLIP)

JIM BOULDEN, CNN CORRESPONDENT: Well, just ten days ago before the opening ceremonies, the drivers of London's iconic black taxis decided to stage a protest around here, around Trafalgar square. They're unhappy with the Olympic lanes set up for those who are going to be at the games. They cannot use those lanes.

They also say there are other restrictions during all of the games that will affect their way of doing business.

UNIDENTIFIED MALE: Scandalous. They use us as an icon of London. When (INAUDIBLE) the Games, the buses can use the lanes, the motorcycles and cyclists, but we've been kicked out.

BOULDEN: However, the government made the decision not to let the black cabs use the Olympic lanes many years ago. So with less than two weeks to go before the opening ceremonies, it's unlikely they'll change their minds and many of these drivers say they will not make as much money during the Olympics as they once hoped.

(END VIDEO CLIP)

BURNETT: All right. And now, let's check in with Anderson with a look at what's coming up on "A.C. 360."

Hi, Anderson.

ANDERSON COOPER, "A.C. 360" HOST: Hey, Erin.

We're keeping them honest tonight on the program. There are demands for an investigation into the possibility that the Obama administration has been infiltrated at the highest levels by the Muslim Brotherhood. Now, it's a serious charge, and the facts to back up the charge are seriously flawed. We're going to tell you which high-profile members of Congress are pointing fingers. And we'll speak with Congressman Keith Ellison who is Muslim and wants the accusers to name their sources if they can.

Also ahead, fighting intensifies in Syria's capital, amid reports the Assad regime is moving technical stockpiles. The question tonight, would Bashar al Assad use chemical weapons against his own people. The most Syrian politician to defect says yes, he would.

We'll talk about with former CIA officer Bob Baer.

Also, my interview with a man many are calling a hero tonight for catching this 7-year-old girl who plummeted three stories from her apartment window. He saved her life. He doesn't consider himself a hero. True heroes, of course, never do.

We'll talk to him. Ahead tonight, we'll show that video. Also, the ridiculous and a lot more Erin at the top of the hour.

BURNETT: All right. Anderson, see you in just a few moments.

Now, we go to Iowa for the latest on the search for those two missing girls, 8-year-old Elizabeth Collins and 10-year-old Lyric Cook. It's been five days since the cousins disappeared. They were out for a bike ride together. And authorities are again focusing their search on Meyers Lake where the girls' bikes and purse were found.

Earlier, I spoke to Thomas Metz. He's the FBI special agent in charge of the investigation about the FBI's involvement in the search, and whether he thinks there is a chance those little girls are alive tonight.

(BEGIN VIDEO CLIP)

THOMAS R. METZ, FBI SPECIAL AGENT IN CHARGE: We have also deployed and called in resources from Quantico. We've deployed our rapid abduction deployment team along with our evidence scent team in order to aid with the search.

BURNETT: And so, do you think -- I mean, this is a hard question but the one that people around the country now, you know, have seen the pictures of Elizabeth and Lyric so many times are wondering. I mean, you're five days out from these girls missing. What are the chances that you find them alive?

METZ: Well, in cases like this, you never want to give up. You have to remember, the case of Elizabeth Smart. I mean, there is always hope. We're always going to think positively and continue to cover every lead that comes in until we get this case resolved.

(END VIDEO CLIP)

BURNETT: CNN correspondent Martin Savidge is OUTFRONT tonight in Evansville in Iowa.

Martin, let me ask this key question that I had, I was talking about with Tom from the FBI today, which is there is no sign of struggle, at least we heard. Two little girls together, 8 and 10. You know, you would think if something had happened, with someone they didn't know, there might have been signs of a struggle or someone might have noticed something.

I know the family has been taking polygraph tests today. What's your sense on what you're hearing on whether there was an abduction, whether it was perhaps by someone they knew?

MARTIN SAVIDGE, CNN CORRESPONDENT: You know, really, Erin, the family is faced with two horrible choices here, these two little girls. Either they have drowned and something tragic happened but not a crime, or there is a crime.

And I mean, I don't know as a parent what you would hope is the outcome of that particular dilemma. I asked the parents about what gets them through. I was talking to Lyric's parents, Daniel and Misty, and said how do you just get through every day? It's been four or five days now. And here's what they said.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I don't know, really, how to keep going. But I got to. You know, I'm not going to -- I'm not going to -- I don't know. I'm going to cooperate completely with them and do whatever to eliminate whatever, so they can get on track with what's going on.

(END VIDEO CLIP)

SAVIDGE: And this community is so committed to finding these two little girls that if they have to drain the entire lake, no matter how long it takes, that's what they're going to do, and that's what they're doing right now. That's only part of the effort. They are investigating if it could be a crime, as well -- Erin.

BURNETT: And, Marty, I'm curious. Obviously, you talk about the lake still being drained. People talked about the lake being shallow so they would have a sense of the little girls being there. What are you hearing about that? They will drain the lake, or think that's more likely or less likely than some sort of an abduction?

SAVIDGE: Well, it's a little more complicated than that. The lake is actually -- it was part of a highway system that was built on a highway right behind us here. So it's deeper than many people think. So, it could take a while. There are pools.

In other words, some parts are shallow, some are deeper. So, that's why they've got to get in there. That's why they want to drain it. Will they drain it all? No, they say they got about five acres and they want to uncover and they might have to focus on that effort.

Let me show another interesting thing. Crime scene tape here, pretty common. And a grim sign.

But look, follow it right here to this tree. All around you find these pink ribbons. So it's this mixture of facing the reality of potentially a tragedy but hope is still here in this community. Still very much alive, both with the families and in the town itself, Erin.

BURNETT: And, Marty, what are authorities telling you about whether they are still investigating the families or friends of the children?

SAVIDGE: They are. I mean, they are. I asked that at the press briefing today. I said, are you investigating the families?

It's standard procedure. They have to do that. They know it.

The families know it. They have already been questioned, already given in some cases polygraph tests. They realize that in many cases in the past, family members have been implicated. They gladly do it, part of the investigation. Authorities say no one has been ruled out, but they also say they've got nothing to say this is a crime, yet -- Erin.

BURNETT: All right. Marty Savidge, thanks very much, reporting for us tonight from Iowa.

And now our fifth story OUTFRONT: Aimee Copeland continues her inspiring recovery from the flesh-eating bacteria that cost her a leg, a foot and her hands. But not her spirit. She has inspired so many around the country. Her emotional and physical journey back from near death, though, is a huge challenge.

And her father, Andy, joins us tonight from Atlanta.

It's always good to see you, Andy. Thank you for coming out. I know we have talked so much about your daughter's overwhelming spirit. I know that you said, though, she did have a rough patch, a rough moment. Tell us about that.

ANDY COPELAND, AIMEE COPELAND'S FATHER: She did. I mean, the doctors actually changed around her medications. They pulled her off some medications. Actually, they pulled her off all of the narcotics. And she was on some light doses of certain narcotics. But they pulled her off.

And I think the withdrawal actually had a big emotional impact to her. And this is probably a good thing, because it caused her to actually connect with the fact -- yet again, of her missing limbs. And it was actually a very emotional moment for her.

But this was actually a very healing, a cathartic moment as well, that she could actually mourn the loss of her limbs. And I think be able to come to another degree of acceptance. I think that it's just a process and it's just another step in that process.

BURNETT: Right. And it would -- it would be only right for her to have that mourning. You did say she had a breakthrough. I know she's in the process of learning how to move and operate before she gets prosthetic limbs.

What was her breakthrough?

COPELAND: Yes. You know, it's interesting. We talked about this, that one of the things that she wanted to accomplish was the ability to be able to transfer by herself from her bed to a wheelchair. Well, they actually -- the nurses had actually kind of held off and the physical therapist held off on that.

But yesterday I actually for the first time set it up and told her kind of how to do it. She had already been working with weight shifting with her physical therapist, basically last two weeks. Yesterday was basically the time to put all that to work, and she actually -- on the first attempt, moved herself from the bed to the wheelchair. They rolled her into her therapy room. And she was able to transport herself from the wheelchair to her exercise mat. And then back to the bed again later, after everything was done. So an amazing accomplishment.

She was -- she was really excited. She called me up at that moment when she got back she called me up at that moment to tell me about it so it's great.

BURNETT: That is just -- it is amazing. Is she starting the process of getting fitted for those prosthetics? I mean, how long? I mean, I know it just depends on how things go, but how long do they think it will be before she can get that fitting process and start learning to be normal again with arms and legs? COPELAND: You know, in the fitting process -- is not something that's done one time. They actually came out two weeks ago, they did the casting, on a Friday. And then they actually had what they called the socket. They formed the sockets.

And then ProCare came in and fitted those test sockets on last week. And then they -- there's a couple of spots where maybe it was a little fitting too tight. They adjusted it, cut away a little bit of the excess, brought it back yesterday. And then they fitted it again. It was great.

Actually, everything felt wonderful. They put the straps on. They're going to fit her with hook prosthetics this week. So actually tomorrow, tomorrow's the big day.

But, now, it's another test. It's not the final prosthetic. They're going to take the hooks, fit them on temporarily on to the end of the sockets. So this is just another step in the test socket phase.

BURNETT: Well, I'm glad you took time to describe it in such detail because I think a lot of people have been wondering how the process goes. Is she -- is she excited about that or ready for that? I'm also curious, I know I've spoken to your wife and your other daughter.

But, you know, does she have friends that are able to come and visit her or is that not something she has wanted to do much of yet?

COPELAND: No, actually she's really wanting to have friends come visit her. In fact, this weekend, she has actually reached out to quite a few of her friends she went to school with and asked them to come in on Sunday. So we're actually going to let her spend that time with them and we're going to step back and let her enjoy Sunday with her friends.

So -- and she's really looking forward to the prosthetics it the prosthetics they've got, the hook hands, actually, there's two versions. There's one that doesn't have like a swivel wrist. The other one does have a swivel wrist.

And so, she's going to test both of them and see which one works best.

But I think she'd love it if she had the actual prosthetics fitted when her friends showed up so she could show them some of the things she can do, that would be great.

BURNETT: All right. Well, good to see you as always.

COPELAND: Thank you, Erin.

BURNETT: Next, I'm about to board a plane for an interview with a former president of the United States. We're going to tell you why and where we're going. OUTFRONT, next.

(COMMERCIAL BREAK)

BURNETT: Former President Bill Clinton is in South Africa today. He was meeting with Nelson Mandela. Since first visiting Africa in 1998, Clinton has returned many times to open schools, health facilities and waste treatment centers on behalf of his foundation.

Africa is hugely important and the Clinton Global Initiative is betting on African growth, which is why in addition to South Africa, he will visit Mozambique, Uganda and Rwanda. It's a passion of Africa he shares with George W. Bush who also spends a lot of time there.

I'm going to be in Rwanda for an exclusive interview with former President Bill Clinton. We're going to be talking about the good stories of Africa and some of the crises there that could affect America right now. Of course we'll also talk about the U.S. election.

That won't be our only stop, though. During the trip, we also plan to examine the flight of the silverback gorillas. An outbreak of violence in the Congo has left the very endangered species virtually defenseless. A lot of them are being killed. Their very existence is being threatened every day. We want to find out if anything is being done to protect them.

Sadly, it is not the only violence in Africa now. There are horrible refugee crises around the continent. We're going to be going to be visiting a country engaged in a bitter civil war. We're going to be going to Mali.

We've been bringing you updates from Mali since the day of the coup this spring. Things have gotten significantly worse. Mali is now being called the worst human rights situation in 50 years according to Amnesty International.

We're going to take you to a refugee camp where about two-thirds of the people there are children. And find out the role that al Qaeda is playing in the conflict along of course with those weapons that are coming out of Libya. These are crucial stories developing in Africa, stories that could directly impact the United States. That's why we think it's so important to go.

We're going to be seeing you on Thursday from Rwanda and then from Mali. So, we'll see you on Thursday at 7:00 p.m.

In the meantime, thanks so much as always for watching. We'll see you soon.

"A.C. 360," though, starts right now.