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STARTING POINT WITH SOLEDAD O'BRIEN
Explosion in Syria; Historic Drought Hits Half of U.S.; Interview with Senator Mike Lee; Boy Scouts Keep Anti-Gay; Suicide Bomber Attacks Syria's Cabinet; Economist Analyzes Territorial Tax; The Black Swing Vote; Suicide Bomber Strikes Syrian Cabinet Meeting
Aired July 18, 2012 - 08:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOLEDAD O'BRIEN, CNN ANCHOR: Welcome back to STARTING POINT. We begin with breaking news. There are reports that Syrian President Bashar Al Assad's brother-in-law, who is a top defense ministry official, is dead.
There's word that other high profile leaders may also be dead. We've got the very latest. We're going to talk about that straight ahead.
Also crisis is unfolding in America's heartland. More than two dozen states have been hit with the worst drought in this country in more than 50 years. Crops have been ruined. Livestock and livelihoods threatened. We could all feel the effects. Rob Marciano is going to join us from one of the hardest hit areas this morning.
And America is teetering off of that fiscal cliff. Some Democrats are now threatening to let all of the Bush era tax cuts expire rather than extend them for the rich. Can the two parties find some common ground over the next four months? We'll take a look at that.
Plus, the Boy Scouts of America refusing to allow openly gay members. Leaders are still not welcome to join the organization. It's defending its position in the face of growing protests.
It's Wednesday, July 18. And STARTING POINT begins right now.
ANNOUNCER: This is CNN breaking news.
O'BRIEN: Welcome back, everybody. We start this morning with breaking news out of Syria. The country's defense minister, the brother-in-law of the Syrian President Bashar al Assad, is dead. That's after a suicide bomber attacked the national security building in Damascus.
That's coming to us according to Syria's government-run TV. The bombing took place during a cabinet meeting. We're also getting word that other -- several other officials have been wounded.
"Reuters" is reporting this morning that Syria's armed forces have released a statement saying they are, quote, "more determined than ever to confront all forms of terrorism and chop any hand that harms national security."
We're obviously going to continue to update you on that story as it develops.
Here in the United States, a devastating drought has now turned more than half of the United States into a disaster zone. The Department of Agriculture is declaring natural disasters in 1,000 counties across 26 states, blistering temperatures are making conditions worse across the Midwest. Temperatures have dropped -- have topped, rather, more than 100 degrees, and those bone dry conditions are destroying farm crops.
One analyst estimates that 75 percent of the corn crop in the drought region has been wiped out. That could of course drive up the fuel and food prices for the entire nation.
And it brings us to Rob Marciano. He's live this morning in Burnettsville, Indiana.
Good morning, Rob.
ROB MARCIANO, AMS METEOROLOGIST: Good morning, Soledad.
Here in this cornfield, like every other one in the Corn Belt, this stuff is shorter than it should be. These stalks, this time of year, should be well up and over my head. And in some cases, they are a little more than half of that.
This is what the corn should look like this time of year. Just take a couple more months to develop before they harvest in September. This is what it looks like right now because of the drought and because of the heat. And actually this corner that we're in is some of the more healthier plants because it's a corner area that gets a lot of runoff and some circulation.
Ninety-six million acres of corn has been planted this year. They had a great spring, perfect for planting. And they had good growth after that. And then the heat hit and the drought hit. Record heat again yesterday in Indianapolis, 101 degrees -- one of the many record high temperatures.
And the drought, 46-day stretch that they have never seen in Indianapolis, less than a 10th of an inch of rain. But actually it spit just a little while ago, but that's just a tease. They need so much more. We have been talking to farmers all morning long.
Here's what one of them had to say to me earlier today.
(BEGIN VIDEO CLIP)
JOHN SCOTT, INDIANA FARMER: The news keeps referring to the drought of '88. And I guess at this point we think we're probably better at this date, but we have potential to be much worse until we get major rain storms coming through.
(END VIDEO CLIP)
MARCIANO: He went on to tell me that if they do get a lot more rain, it basically is going to save what they have now. It's not going to grow anymore. So what little they have now, which by all intents and purposes is 30 percent to 40 percent of what they should have, they are just trying to hold onto that.
Now, they have had some good years in the past, Soledad. So the more conservative folks have kind of created a little cushion. Some have insurance.
So, most of the farmers will survive. But this goes well beyond that. All this stuff gets much more pricey. The soy beans are much more pricey as well. That feeds the cows and the pigs, and it all comes around to the table and the supermarkets in your neighborhood.
So this drought and this -- these consecutive heat waves is doing a lot more than just drying up the land and making people sweat -- Soledad.
O'BRIEN: What a mess. All right. Rob Marciano for us this morning -- Rob, thank you.
I want to introduce you to my team this morning. You might be able to hear them whispering over my shoulder but out of camera shots.
Richard Socarides, writer --
RICHARD SOCARIDES: I'm sorry. I'm sorry.
O'BRIEN: Margaret Hoover, former White House appointee of the Bush administration.
Will Cain, thank you for being quiet when I was trying to do my job. He is a columnist for TheBlaze.com.
This morning, we are talking about the dire warning really that came from Ben Bernanke -- gloomy, gloomy, gloomy. He is the Federal Reserve chairman obviously.
He said that without congressional intervention, we will be diving head first off of that fiscal cliff. Listen.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Fiscal decisions should take into account the fragility of the recovery. That recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken. The most effective way that the Congress could help to support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both the need for long-run stability and the fragility of the recovery.
(END VIDEO CLIP)
O'BRIEN: In just a moment, Christine Romans is going to break down everything we need to know about what exactly the fiscal cliff is and how it's going to affect us. That's in just a moment.
First, though, we want to talk to Republican Senator Mike Lee. He's a Republican from Utah. He's a member of the joint economic committee and a member of the Tea Party Caucus. He joins us this morning.
Nice to see you, sir. Thanks for being with us. We appreciate it.
You heard Ben Bernanke there saying Congress has to do something. But he was very low on the specifics of what Congress should be doing. Except for be careful, this recovery is very fragile.
What should Congress be doing?
SEN. MIKE LEE (R), UTAH: Congress should extend the tax cuts that were put in place about a decade ago because we need these tax cuts in order to ensure that employers will continue to hire people. At a time when we can least afford to lose jobs, we need to not be putting ourselves in a position where we'll be disincentivizing employers from hiring.
O'BRIEN: So, Dick Durbin, when I spoke to him yesterday, he said he supports tax cuts but not for the wealthy, people over $250,000. So he said actually, let's let that tax cuts expire.
Here is a little chunk of what he told me yesterday.
(BEGIN VIDEO CLIP)
SEN. DICK DURBIN (D), ILLINOIS: We have to have this day of reckoning in order to finally break through and have meaningful deficit reduction that still creates a growing economy, then let's face it.
O'BRIEN: Well, what does that mean? Does that mean that you're saying that if we have to have a day of reckoning that in fact you'd let them expire, which then would raise the taxes for those middle class people you just said you don't want to raise taxes on?
DURBIN: That's a very real possibility unless there's an agreement. But people of goodwill in both political parties should avoid that. I want to work to avoid it.
(END VIDEO CLIP)
O'BRIEN: He says he wants to work to avoid it. Will it be possible if the Democrats are threatening that, to work to avoid that?
LEE: Yes, it is, because the American people aren't going to stand for this.
Look, this is not the fault of hard-working American taxpayers. This is the fault of Congress. This is the fault of Washington, D.C. and it needs to be fixed here and not on the backs of the American people who would pay for this in terms of job losses.
O'BRIEN: John Boehner and Eric Cantor said they are not going to rescind the tax cuts for the wealthiest. If it came down to sort of the choice between the two, extend the tax cut for everybody, even the wealthy, or let them expire for everyone, you would pick the first option, correct?
LEE: Well, I'm not going to vote to increase taxes. A tax increase is not the problem. A tax increase is going to make the problem worse. And that's not the right answer here.
O'BRIEN: But, you know, when you look at polls on this very issue, and this one is from the Pew Research Center, they say when they poll people, raising taxes on the rich would 44 percent say help the economy, 22 percent say it would hurt the economy, and then no difference somewhere around 24 percent. When you look at a similar question, raising taxes on the rich would make the system, similar numbers, 44 percent would make the system more fair.
Do you worry that in fact what you're getting into by focusing on raising -- keeping the tax cuts for everyone and not doing what the Democrats would like to do, which is in effect raise the taxes for the wealthy, that you're not going to be supported by the people who feel, certainly in polling, and this is not the only poll that shows that, that is the system is unfair and the wealthy should have their taxes raised?
LEE: Look, even raising taxes on people earning $250,000 a year or more cuts into small businesses. Many have estimated that could cost us as many as 700,000 jobs in the first year alone if we do that.
What we're concerned about there is not as much the wealthy individual as we are will small business. But more importantly, Soledad, we are focused on the employee, the person who is not going to get hired or is going to lose his or her job as a result of raising taxes. That's what we have to avoid, that's why we got to extend these tax cuts for all Americans.
O'BRIEN: Let me ask you a question about the DISCLOSE Act. It failed to clear the Senate for a second time. As you well know, it would force those who have contributed more than $10,000 to an election to campaign to name names, basically.
Why don't Republicans support that?
LEE: Look, we've got to have everyone operating on an equal playing field. We can't have one rule for individuals and another rule for unions. And this is about basic fairness. We've got to come together in this country and recognize that people have First Amendment rights.
And this ultimately is about preserving the right of Americans to operate on an equal playing field and to be able to operate with the basic protections of the first amendment in the realm of political speech.
O'BRIEN: So you think there's free speech involved and basically keeping it secret if you're contributing a ton of money to a candidate, in excess of $10,000? You don't think that transparency should trump that, that people should know who's giving a ton, $10,000 more or more, to an individual candidate?
LEE: I think at a bare minimum, political contributions in the realm of unions ought not to be treated in a manner that's more favorable than other kinds of political donations.
O'BRIEN: So your issue is that you think the unions are treated differently. So if that was mitigated, do you think that people who give a lot of money to a campaign should in fact -- there should be transparency, we should know who's giving what to whom when there's a lot of money at stake?
LEE: Well, that's not what the DISCLOSE Act. If we're talking about a hypothetical piece of legislation, that's a discussion for a different day. That's not the piece of legislation before us. So, that's not what was on the table yesterday.
O'BRIEN: Mike Lee, I appreciate you joining us this morning.
Senator Mike Lee, Republican from Utah.
LEE: Thank you.
O'BRIEN: Thank you.
You were nodding your head during that entire time.
SOCARIDES: Well, discussion for a different day. That's a non- answer answer.
O'BRIEN: Well, I think what he's saying is that the parts of the DISCLOSE Act that was not exactly what was being put on the table. So, I think that is a fair answer.
WILL CAIN, CNN CONTRIBUTOR: But to answer your question specifically, should the First Amendment trump interest in transparency, the answer is yes.
O'BRIEN: Well, is it the First Amendment I guess would be a better way of putting that.
CAIN: Yes, it's free speech. It's anonymous donations, specifically anonymous political donations, protected by the First Amendment. The answer is emphatically yes. Anonymous political speech has been part of the American process since its founding. It was integral.
MARGARET HOOVER, CNN CONTRIBUTOR: Well, what was interesting is that John McCain actually voted against the DISCLOSE Act. And John McCain has been a leader in campaign finance reform throughout this.
He voted against it because he said it was a partisan proposition. That there was no way this is going to get through. It was only demagoguing the issue, and that's why he didn't vote for it.
SOCARIDES: Well, this is the issue. You say it's part of the tradition. I mean, now with the influence of money in politics, I think a lot of people believe we should be transparent. And just the mere disclosure does not stifle speech.
O'BRIEN: Right. And you're saying -- you know, I think that you'd have to really examine it to see if it is a free speech issue. I understand that that's where people are having this debate. But people disagree that it's a free speech issue, number one.
And, number two, and I do think with the amount of contributions that come in, a lot of people would say, wouldn't you like to know who is giving a massive amount of money, who are the bundlers for the parties?
CAIN: It's incumbent upon your said of the table to then tell me exactly how much is too much and what is the appropriate amount of free speech?
O'BRIEN: Well, I'm just raising the issues.
SOCARIDES: Well, I mean, these are important issues, but I think we should know who's giving to the presidential -- who is making donations to the presidential campaign.
HOOVER: It's fully transparent.
O'BRIEN: Oh, oh, oh.
HOOVER: We're going to do this on the break.
O'BRIEN: I have to go to commercial.
You can do it in the break. And we're going to post it. I have to go to commercial break.
Ahead this morning, we're going to talk about the Boy Scouts of America. They are not going to buckle after the two-year internal review, they say. They are going to continue to ban openly gay members and leadership. Their explanation is up next.
Here's Margaret's playlist, Bruce Springsteen, "Atlantic City." Everybody loves Bruce Springsteen. Our entire playlist can be seen every morning on our Web site, CNN.com/StartingPoint.
O'BRIEN: Boy Scouts of America has reaffirmed its long-standing policy of not allowing openly gay scouts or leaders into its ranks. The organization which currently claims more than 2.8 million members says the announcement is the result of a two-year examination into its membership policy.
And they said this yesterday. "The committee's work and conclusion is that this policy reflects the beliefs and perspectives of the BSA members, thereby, allowing scouting to remain focused on its mission and the work it's doing to serve more youth."
With me this morning, Eagle Scout Zach Wahls. He recently published a book about growing up with two lesbian mothers, and last month, he helped deliver an online petition to the boy scouts headquarters in Texas because he was hoping to change that policy. Zach, nice to see you. Thanks for talking with me. What's your reaction this morning?
ZACH WAHLS, AUTHOR, "MY TWO MOMS": You know, it's an interesting puzzle to sort out for sure. The statement that the boy scouts put out yesterday has all kinds of weird inconsistencies riddled throughout. And one of the things that we're kind of left wondering is when exactly this so-called internal review actually wrapped up.
At this point, the BSA hasn't been willing to put out any names, hasn't been willing to tell us who these people are responsible to, who appointed them. We don't even know if they were within the scouting organization or, quote/unquote, "outside experts." And so, until we have a meaningful level of transparency, a meaningful level of accountability.
You know, calling me very highly skeptical about whether or not this is really a quote/unquote, "definitive decision" by the scouts at this time.
O'BRIEN: So, explain to me where your suspicion lies. Are you saying you don't think that there was a two-year review? Are you saying that you want to know who's on the panel, and you don't think this is a final, final decision? What are you saying?
WAHLS: Well, what we think is that this is essentially the boy scouts of America recycling old news. Now, obviously, we knew, you know, a month ago when we delivered that petition that this was their policy. We knew at the start of the week that this was their policy. And we knew that at the end of the week, this would probably still be their policy.
We think that this is the BSA trying to, you know, run some interference on the fact that on Monday, the vice president of their board, CEO of AT&T, Randall Stephenson, announced his support for ending the policy. The reason this is particularly important is because Mr. Stevenson will be the president of the board in 2014.
The president of this board is one of the three most powerful men inside the organization. So, for such an important person in the group to make this kind of stand is obviously very important, but today, that's not what we're talking about, unfortunately. What we're talking about is this quote/unquote "announcement that the group put out."
HOOVER: Zach, this is Margaret Hoover talking. I'm a big fan. I've followed you for a little while. You're a wonderful spokesman for the effort for equality.
WAHLS: Thank you.
HOOVER: You know, as an eagle scout, you must know there are a couple of other eagle scouts who have been pretty outspoken on this issue. Mayor Bloomberg has been in favor of marriage equality. Secretary Gates and former director of the CIA, an eagle scout as well, who is instrumental in lobbying Congress for the repeal of "Don't Ask, Don't Tell."
So, have you, A, thought about reaching out to other eagle scouts who are outspoken on this issue? And B, do you feel like that actually represents the direction the country is going? That you're on the cusp of change that will eventually come to the boy scouts either way?
WAHLS: Yes. We certainly feel that that's the case. And I haven't personally reached out to Mayor Bloomberg or Secretary Gates, but I certainly would love to have a conversation with them about figuring out a way to get them involved in the organization.
Obviously, with this being the 100-year anniversary of eagle scouting in America, it's a pretty important time for all of us across the country. I'd love to see them stand up and show their support.
SOCARIDES: Hey, Zach. It's Richard Socarides. So, you know, what concerns me about this is the message that this sends to young people, right? I mean, this is the boy scouts not just excluding, you know, instructors, but they won't let kids who may be gay or lesbian or questioning, they won't let them be part of this organization, which is so much a fabric of our country.
I mean, what do you -- I know that you worked a lot with kids and on youth issues. What about the message that this sends to the youth of America?
WAHLS: Yes. It's a great question. You know, I grew up in the Boy Scouts of America, and having lesbian mothers, there were certainly times where it seemed a little contentious. However, if you look at the broad, you know, scope of my experience that I had and that so many other boys all across the country have, you know, I think at the end of the day, the most important message is the one that you'll actually hear on a weekly basis from your leaders.
And so, I think that across the country, really, we're going to see more people kind of saying, oh, the national organization is going to continue this policy and they're just not going to care. You know, growing up in Wisconsin and Iowa, none of the organizations that I was involved with at the local level really cared much what the national policy was and were more than happy to have my moms on as volunteers.
And so until, you know, we really see this kind of change at the local level. I think that's what really drives the change at the top level. And I think that change is already happening all across the country.
O'BRIEN: Zach Wahls joining us this morning. Zach, thanks. We're obviously going to keep watching this story and see how it changes, ebbs and flows, especially with the incoming president of the board. That will be interesting to watch.
SOCARIDES: He's done great work, Zach Wahls.
O'BRIEN: Yes. He certainly has. All right --
SOCARIDES: Did you know that Will was a cub scout?
O'BRIEN: Were you a cub scout?
CAIN: Well, yes. (INAUDIBLE) was weeded me out at that point. I just didn't really make it much further.
SOCARIDES: He believes that people should be allowed to discriminate, but he doesn't support discrimination himself.
O'BRIEN: You don't. We're going to actually make a little time to have this argument down the road.
Still ahead this morning on STARTING POINT, all these warnings from Washington about the fiscal cliff. What exactly is the fiscal cliff? What does it mean for our families? Christine Romans is going to break it down next.
O'BRIEN: Welcome back to STARTING POINT. We've been talking about the fiscal cliff. What is it exactly? Christine Romans has a look at that for us. Hey, Christine.
ROMANS: Good morning. Well, it's replaced Europe as the biggest threat to the recovery here. "The Washington Post" this morning, Soledad, puts it like this. "The main threat to the economy is shifting from what others may do to us to what we are doing to ourselves." What are we doing to ourselves?
Well, first thing, huge automatic tax increases. On January 1st next year, the Bush tax cuts, the alternative minimum tax, they expire. That means if nothing changes, your taxes will likely go up. At the same time, Medicare doctor pay will also go down. On top of all of that, at the very same time, massive cuts to federal spending.
If current law stays in place, the government must slash a trillion dollars from spending over the next nine years, half from the defense department, half from non-defense spending. The Bipartisan Policy Center says it will cost about a million jobs over two years, and those aren't all just government jobs, jobs in the private sector, many from contractors working with the government. They're grappling right now with when to send, you know, layoff notices to thousands of people who work in defense. Now, the economy is barely growing right now. 1.7 percent growth in the first half of the year. Soledad, that's not very good. Second -- this is a UBS forecast here. 2.5 percent maybe for the second half of this year.
If the economy goes off the fiscal cliff, the Congressional Budget Office forecasts the economy will shrink next year, first half of next year, 1.3 percent, unless we back away from the fiscal cliff. That's a recession. This is very uncharacteristic, by the way, of the CBO to make a forecast like this.
Also uncharacteristic of the fed chairman to get involved in politics, but he is, again, yesterday warning Congress about what happens and why this is a risk to the economy. What makes it so scary right now, too, as you well know, it's an election year. No one expects Congress to deal with these issues until after November 6th.
Lame duck Congress. Also approaching the debt ceiling again. We could hit that as early as December. And quite frankly, it's almost like we've got a Congress that's stuck between you do everything or you do nothing. You know, in between, there's some middle ground here, and this is a Congress just not capable of middle ground right now.
O'BRIEN: Right, right. So, it seems like that cliff is getting closer and closer, and there's no real options any time soon. Christine, thanks. Appreciate that.
Still ahead this morning on STARTING POINT, we got some breaking news we need to update you on. A Syrian defense minister has been killed. He's the brother-in-law of the president, Bashar al-Assad. This was a suicide bombing attack that took place inside the Syrian national security headquarters. We'll have the very latest on that straight ahead.
UNIDENTIFIED MALE: This is CNN breaking news.
O'BRIEN: Welcome back to STARTING POINT. We begin with breaking news out of Syria. The country's defense minister is dead. Also dead the deputy defense minister who also happens to be the brother-in-law of the Syrian president, Bashar al Assad. This happened after a suicide bomber attacked the national security building in Damascus. That comes to us according to Syria's government-run TV this morning. The bombing took place during a cabinet meeting. The first word is that it was a car bomb, and we're hearing that several other officials have been wounded.
Defense Secretary Leon Panetta and the U.K. defense minister have scheduled a press conference that's happening right now at the Pentagon. As soon as we get live pictures. We'll bring them to you as soon as the speakers take the podium there.
We want to get to George Lopez. He is a Ph.D. in Peace Studies at Syracuse. He has studied this region and is joining us by phone. Mr. Lopez, thank you for talking with us. Appreciate it. Some people have said this could mark a very pivotal turn in what's been happening in Syria. Would you agree with that?
GEORGE LOPEZ, CHAIRMAN, PEACE STUDIES, SYRACUSE, (via telephone): I think it's possible. Certainly the defections of this week and the killing this close to Assad is the reach of the rebels closer than any of us anticipated and quicker than any of us anticipated. It's also the case that this particular style of attack has not been the style of Syrian army or the rebels. And so you raise the question of whether or not these are outside elements that are also at work here in this increasingly complex and deadly situation.
O'BRIEN: How likely is that, in fact? I thought the same thing, that it doesn't seem to be the hallmark of anything else that we have seen up to now in the months and months of fighting that's been happening in Syria. What would your gut tell you on the way this was pulled off?
LOPEZ: That they learned very quickly they had a quick opportunity, had a particular individual who was willing to go this route. And in the heat of battle here in what we call the fog of war, they availed themselves of a technique that otherwise they would not have and to see what the results would be. And it seems to be certainly reverberating through the Syrian system. The notion that the national media released it within hours of it happening is stunning to me. And obviously it's having international reverberations with the Brits and the Americans talking about it publicly.
O'BRIEN: How does this connect to what we have seen over the last few days, which are the number of officials in Syria, military officials, who have been defecting?
LOPEZ: Well, the circle is closing. Even the footage from our very, very courageous people on the ground, the civilians who are sneaking out footage showing battles in Damascus and the suburbs itself, we keep talking about whether or not we can get a ceasefire and whether or not this is a civil war. This is a regime that is in its last days. And the real question before the international community is what's next. Does the Arab League, the U.N., friendly states, who goes in to try to establish order? Because we may very well wake up 48 hours from now and find out that Mr. Assad and his family are gone.
O'BRIEN: At the same time, Homs is continuing to be besieged, and there are reports that in fact the fighting there has intensified.
O'BRIEN: So to say that these are the last days might sound a little bit premature.
LOPEZ: It might sound premature in the sense of the overall national battle. But the question that I think is whether or not Assad himself has the air of invulnerability and the ability to actually move greater and greater commanders to do things that more of them showed this week they are unwilling to do. So let's call it an unraveling. It may not be the beginning of the end, but it's a more stark unraveling than we would have participated two weeks ago.
O'BRIEN: George Lopez is chairman of Peace Studies at Syracuse joining us by phone this morning. Thank you for your insight. Appreciate it.
We want to talk about the campaign. Our other big story today, it continues to take a nasty turn. We have been hearing the phrase "territorial tax" quite a bit. It's a system that Mitt Romney says he believes would help grow businesses here in the United States. President Obama says it is another route to outsourcing. Here's what he said.
(BEGIN VIDEO CLIP)
BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: We have not found any serious economic study that says Governor Romney's economic plan would actually create jobs until today. I've got to be honest. Today, we found out that there's a new study out by nonpartisan economists that says Governor Romney's economic plan would in fact create 800,000 jobs. There's only one problem. The jobs wouldn't be in America.
(END VIDEO CLIP)
O'BRIEN: Is that true? Will it create jobs? Will the jobs not be in America? Here to help us sort it out is Steve Blitz with ITG Investment Research, chief economist there. Nice to see you. Thank you for being with us.
STEVE BLITZ, ITG INVESTMENT RESEARCH CHIEF ECONOMIST: Thank you very much.
O'BRIEN: Let's start with what the president just said. And you could tell he was teeing up for a turn, a joke almost, you know. 800,000 jobs. But the jobs wouldn't be here. That's been the big slam on this territorial tax. That it's basically outsourcing. Is that in fact correct?
BLITZ: You know, it's really -- this is so typical of the campaign to be sitting here discussing something that really does nothing to stimulate U.S. economic growth at all. If you look over the last 30 years, with the tax system we have in place, it has not been a barrier for U.S. firms to source globally labored capital, whatever. In fact, we have had most firms, if you look at their ratio of employment domestic versus foreign, foreign employment has grown a little less the last 30 years.
So the idea from this starting point that suddenly you're going to get should explosion of employment growth overseas because of this is just not true.
You know, firms do what they want to do regardless of the taxes, right? We had NAFTA, which was supposed to move all this electronic production for TVs into Mexico, right? But then China came along, and what happened? It didn't ever happen in Mexico and it moved to China. And then when China in the last several years became very expensive, a more expensive place to manufacture, including the transportation of these goods back to the United States, it moved back to Mexico. There's nowhere in any of this is taxes really relevant. So what's the big issue here?
O'BRIEN: Are you saying taxes aren't relevant to what businesses choose to do?
BLITZ: I think that's relevant for businesses is knowing what the taxes are going to be.
O'BRIEN: Uncertainty is a big problem.
BLITZ: Yes. The uncertainty is a big problem.
HOOVER: You have to explain to me how territorial taxes isn't going to help businesses. What I understand it means, if you're a foreign company and you're making profits aboard, if we move to a territorial tax system, you're allowed to bring those profits back to the United States and invest in the United States without being taxed at the 35 percent corporate tax rate, which is one of the highest in the industrial world. Great Britain just moved to a territorial tax system. Japan has moved to the territorial tax system. This is advantageous for our American businesses overseas to bring those dollars back to the United States. Is that --
SOCARIDES: That is a statement. Not a question.
HOOVER: Tell me where I'm wrong.
SOCARIDES: And in telling her where she's wrong, also tell us how this is not just another tax break for people who have offshore businesses and offshore accounts. If I were Mitt Romney, I'm not sure I'd want to talk about that.
BLITZ: One at a time. OK, first of all, you have to -- do you really believe in your heart of hearts that American firms with large businesses overseas, IBM, Intel, Apple, Nike, somehow or another have this huge cache of cash over there they can't use if they want to domestically?
HOOVER: They can, but it gets taxed huge domestically.
BLITZ: Two things about that. One, they are involved in banking and global financial systems. There are certainly ways in which they can use that money here in the United States if they want to without having to pay the tax. Number two, the issue about the statutory 35 percent tax rate, most American corporations aren't paying anywhere close to that. So they are not really paying 35 percent.
SOCARIDES: It sounds like the tax system is so messed up anyway, it doesn't matter. BLITZ: Now, does it make it more efficient with territorial tax in order to be able to bring funds back and not having to do things to get there? Absolutely.
SOCARIDES: But is that a good idea? Why shouldn't we tax U.S. companies on their income?
BLITZ: Well, you should tax U.S. companies on their income. But I think at this particular point in time in the economy, the real question is not territorial taxes in and of themselves, but make that part of a broader change in the corporate tax code to incent businesses to build here.
SOCARIDES: Make sure that businesses pay their fair share, make sure that rich people pay their fair share?
BLITZ: Well, I'm going to be Bernanke here for a moment. What's fair is not for me to decide. But what I will say is this -- having a tax system, ok, is an awful lot like having a compensation system in a firm. You want to have it designed to incent people to do the things you want them to do. So anything that makes businesses more efficient, moving things around is a better tax system.
But just in and of itself, being able to bring cash back tax free in this economic environment and say that therefore I'm going to now build a big steel plant someplace in the United States is a specious argument.
SOCARIDES: So that's the Romney argument. Sorry.
O'BRIEN: And in fact in 2005 under George Bush, this was tried, right?
BLITZ: Right. And it brought back --
O'BRIEN: They thought it would spur jobs and investment. They thought it would spur growth. And what they found was something like 92 percent of the money that came back to the United States actually went to the shareholders. Would that be an indication that in fact all those things that they thought would happen didn't happen?
BLITZ: Because what a firm does, whether it's CNN, Time Warner, whoever it is, what a firm does with its cash depends upon what thinks it has a market for for its product and what its return is going to be. No firm is going to sit here just because I can bring the cash back cash tax free, am I going to build here.
Now, can there be incentives to build factories? If you want to go back in time, go back to Bobby Kennedy having IBM build a plant which worked great for years to produce things. So you can create a tax system to incent, OK, firms to build here. But --
O'BRIEN: This is not it?
BLITZ: All you're doing is bringing back cash.
WILL CAIN, CNN CONTRIBUTOR: Analysis is not what we can do. As far as a tax system to require firms to jobs domestically. Under the current tax system, it's almost as if they are prohibited from bringing jobs here.
BLITZ: I don't know if they are prohibited.
CAIN: They are certainly dis-incentivized.
BLITZ: Well, we do employ a lot of people in this country doing an awful lot of things. And one of the biggest issues that has helped to bring jobs back over the last couple of years, there has been an increase in production here, high-tech, low-tech energy. And a lot of it has to do with the fact of the relative labor costs, better productivity here because of the technology.
CAIN: Taxes incentivizes it or dis-incentivizes.
BLITZ: But the tax system itself isn't going to do it. And just bringing back cash free to the United States isn't going to make a firm build a plant in Minnesota.
O'BRIEN: Steve Blitz joining us. Obviously, we have been duking this out a little bit, as you can tell.
BLITZ: So goes election season.
O'BRIEN: Thank you. We appreciate it.
BLITZ: Thank you.
O'BRIEN: We have to take a short break. Still ahead this morning on STARTING POINT, the battle for the black vote. It could be the secret swing factor in the November elections, but maybe not in the way you're thinking. We'll talk to the president and CEO of the National Urban League. He'll stop by to explain right after the break.
O'BRIEN: Welcome back to STARTING POINT.
In less than four months the election, of course; President Obama has 85 percent approval rating among African-Americans. That's according to the latest Gallup tracking poll. This morning, though, the National Urban League is saying that the black voters could swing the election and maybe not in the President's favor.
A new study concludes this. A decline in the African-American voter turnout in 2012 can tip the presidential election outcome in the critical swing states of North Carolina, Ohio, and Virginia. It goes on to say that if the black voter turnout levels -- turnout returns to pre-2008 levels, it could cost the President millions of votes in November.
Marc Morial is the President and CEO of the National Urban League joining us this morning. It's great to see you.
MARC MORIAL, PRESIDENT/CEO, NATIONAL URBAN LEAGUE: Great Soledad, how are you?
O'BRIEN: I'm really well. Thank you.
MORIAL: Thank you good morning.
O'BRIEN: When you look at these, I've been crunching these numbers, obviously, and you know when you think swing vote, I think a lot of people think, oh does that mean the black voters are suddenly running to Mitt Romney? What you're really saying is turnout is critical among African-Americans.
MORIAL: I think there are so many voter groups that are important to either candidate's winning coalition. Because that's what American politics is about. It's about constructing a coalition.
African-American voters, I think, interestingly, in 2008, we achieved something we've never seen in American history. African- American voter turnout and white voter turnout were about equal. Meaning that the number of people who were eligible, the percentage who actually participated in the race.
This broke a pattern that we saw in 2000 and 2004, where there was a differential. What this report says is that in states like Virginia, Florida, Ohio, Indiana and North Carolina, the differential in the African-American voter turnout made a crucial difference in how those states swung in 2008.
And therefore, I think intelligent political commentators have to pay close attention to not only these polls that say who's going to vote for who, but who's going to actually get to the polls and vote.
O'BRIEN: Enthusiasm is everything.
CAIN: So Marc, it's no mystery, right, why the African-American turnout in 2008 was so high. First African-American candidate for president at least in the final ballot between two candidates. Will that enthusiasm in your estimation carry over? Will that same enthusiasm be there for the second go-round?
MORIAL: I think -- I think that on an overall basis, maybe the American electorate, not just African-Americans but also all Americans, may not be as fired up about this election. After all, with Mitt Romney, he's got some softness in the, quote, "conservative base" in terms of his enthusiasm.
For the President, it's been a long tough road. Four years in fighting all of the challenges that have been in front of him. But I think at the end of the day, I think we're going to have a strong voter turnout.
If there is one thing that we also wanted to point out in this report, is I don't think it's coincidental that in those states where turnout made a crucial difference, that now you have efforts to restrict the vote.
These are states where you have new voter ID laws. Ohio, for example; Pennsylvania, for example; North Carolina, where it was vetoed; Virginia. So those things concern me that those new restrictions are going to put downward pressure on voter turnout.
SOCARIDES: I think -- I mean, I think this is a fascinating report. And I think what the findings show is that perhaps the people who have been pleading with the President to return to his roots, to be more of a change advocate, to be bolder.
And you know, a lot of people believe as I do that he kind of moderated some of his views when he was getting started in order to, you know, scoop up more people. But now that he's running for re- election, these are the voters he has to return to. And I think, you know, your findings are very important. They send an important message.
O'BRIEN: And forgive me for interrupting, though.
MORIAL: Yes, yes.
O'BRIEN: I just wanted to crunch some of the numbers that you did. You say black turnout was at 65 percent in 2008. If that drops to 60 percent, just a 5 percent drop, it could by some of your number crunching cost him the election.
MORIAL: If the white voter turnout stays at 65 percent, and the black voter turnout dips to 60 percent, it's going to determine or it's going to affect the outcome in a number of crucial states.
I mean this is a -- a -- a tight, delicate coalition that has to be put together. On behalf of the President but we shouldn't leave a discussion of the Romney campaign out either, because he needs turnout amongst his core base, which requires enthusiasm to get to these numbers. And I -- I think at the end of the day, I think the historic pattern is that come September, people are going to fire up about this election, because the future is at stake.
O'BRIEN: Hmm. I don't know. I don't necessarily feel that. Especially when you look at some of these unemployment figures, which as you know are much higher among African-Americans. How much of a role could that play? I mean, you've got to imagine the high unemployment number could easily dampen enthusiasm.
MORIAL: Yes. I think that will we get to the turnout we had last time? But I think -- but I do think that people are going to want to vote. I just feel very, very strongly that we're going to have more campaign money spent in this cycle than we've spent in any other cycle in American history.
So people are going to be bombarded with messages. Whether that turns them on, or turns them off -- sometimes too much --
O'BRIEN: Right. It is the $64,000 question, isn't it? Marc Morial, nice to see you. MORIAL: Thanks for having me.
O'BRIEN: We appreciate it.
MORIAL: Thank you all.
O'BRIEN: We appreciate it.
We're going to take a break. We're back in a moment.
O'BRIEN: We're continuing to follow "Breaking News" out of Syria. The country's Defense Minister Dawoud Abdullah Rajiha (ph) is dead. Also dead is his Deputy Defense Minister, who is the brother- in-law of the Syrian President Bashar Al-Assad. A suicide bomber attacked the National Security Building in Damascus today. It happened during a cabinet meeting. That comes to us according to Syria's government-run TV. We also hear that several other officials were wounded.
As we get more information on this, we're going to bring it to you live absolutely.
We've got to take a short break. STARTING POINT is back right after this.
O'BRIEN: Coming up tomorrow on STARTING POINT Philadelphia Mayor Michael Nutter is going to join us, New York Jets head coach Rex Ryan will be our guest and "Batman" producer, Michael Uslan will join us live.
"CNN NEWSROOM" with Carol Costello begins right now.
We'll see you tomorrow morning. Hey Carol, good morning.