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ERIN BURNETT OUTFRONT

Israel, Hamas Agree To Ceasefire; Bomb On Tel Aviv Bus Injured 27 People; Israeli Troop Build Up Remains At Border; Boehner: Obamacare's On The Table

Aired November 21, 2012 - 19:00   ET

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


ERIN BURNETT, CNN ANCHOR: OUTFRONT next, ceasefire in the Middle East. After seven days of deadly attacks between Israel and Gaza, and, yet, more rocket fire tonight. Hillary Clinton calls it a critical moment for the region. Everyone wants to know the same thing. Will it last? We have top officials from both sides OUTFRONT tonight.

And speaker of the House John Boehner put Obamacare on the table. He says if we're serious about getting our financial house in order, Obama care has to go. Is he crazy or crazy like a fox? Let's go OUTFRONT.

Good evening, everyone. I'm Erin Burnett. And OUTFRONT tonight, ceasefire. After 142 people were killed in Gaza and five in Israel, Egypt helped negotiate a temporary truce, which took effect at 9:00 at night in Gaza and Tel Aviv.

Now the ceasefire was met with celebratory gunfire in the streets of Gaza City, but it is fragile. Israeli Defense Forces say there are five rockets launched from Gaza since the ceasefire went into effect.

And Prime Minister Benjamin Netanyahu's statement was cautious. He said he was willing to give the Egyptian ceasefire a chance, quote, "before there is a need to use greater force." Not exactly a ringing endorsement.

But here's the key thing, while the United States got involved with a visit from Hillary Clinton, this deal was not brokered by the USA.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: This is a critical moment for the region. Egypt's new government is assuming the responsibility and leadership that has long made this country a corner stone of regional stability and peace.

(END VIDEO CLIP)

BURNETT: The seemingly unexpected leader was Egypt's Mohamed Morsi, a man who we've seen at rallies where Egyptians chanted we are Hamas. He managed to get both sides to the table and get it done for now. It's an impressive feat. And it's the first time that Israel has ever negotiated with an Islamist government, but there are some shady things about the deal. According to an Israeli newspaper, neither side officially signed pen to paper on the ceasefire agreement, which raises some questions about it.

And here's what we know is in the verbal deal. Israel has agreed to hold its fire and end attacks against top militants and this is important, promise to look at ways to ease its blockade of the Gaza border.

Hamas agreed not to strike any Israeli targets and agreed there is no passage of weapons into Gaza and also to insure other Palestinian groups in the Gaza Strip stop their attacks.

Now if you're shaking your head that some of these things are very tall order, well, you're right. Later OUTFRONT, we have the key players, Israel's deputy foreign minister and chief representative of the Palestine Liberation Organization to the United States.

They will be our guests and answer those questions. But CNN's Ben Wedeman is in Gaza City again tonight with the latest from there. Ben, describe the situation if you could because it was amazing to watch it today leading up to the ceasefire. It wasn't as if it went off, you know, quietly in the night, was it?

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: No, in fact, in the hour and a half or so between the time the announcement was made in Cairo and the ceasefire went into effect, we saw increasing numbers of Israeli air strikes, artillery barrages into Gaza City itself.

Some of them quite close to where I'm standing and we saw three separate volley of rockets fired from Gaza city toward Israel. It did seem as if they were working against the clock to get just a few last whips in or hits in to the other side before the ceasefire went into effect.

When it did go into effect, it became very calm, very quiet. Then we started to hear celebratory gunfire coming from a bit of the distance from here. But it came closer and closer and we saw more and more cars out on the street.

More than we've seen now for the last eight days for quite some time. There were very few cars out definitely after dark, hardly any. But it went very quickly from pretty quiet to very noisy here in Gaza City -- Erin.

BURNETT: Ben, and when you talk about celebratory, what -- I mean, and cars in the street, some people obviously celebrating that it's over and they could live their lives and they weren't afraid. Others possibly celebrating that they thought that they had scored some sort of a victory. What was the celebration more about?

WEDEMAN: Well, it was partly victory because I was here at the end of "Operation Cast Led" in 2008-2009. And when finally the guns stopped firing and the air strikes came to an end, people came out and they were shell shocked. They literally were shell shocked.

More than 1,400 people were killed in Gaza and people were just walking around looking in utter amazement and shock at the amount of destruction that happened.

This time around, Gaza was spared an Israeli ground incursion. The death toll was only about a tenth of what it was during the last operation four years ago.

The feeling is they survived. They got some concessions out of Israel and now they can get on with their lives and tonight probably gets some sleep -- Erin.

BURNETT: All right, Ben, thank you very much. Well, you know, Ben is talking about the reaction there in Gaza. But the entire ceasefire was actually in jeopardy earlier today.

Because during the final negotiations, a bomb exploded on a bus in the heart of Tel Aviv, 24 people were injured. That is where Sara Sidner is tonight. Sara, what is the reaction from the Israeli people? Ben talking about what is happening in Gaza, but what about in Israel?

SARA SIDNER, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, there was a lot of concern and frustration and worry and real fear off that bus exploded around noon. It happened very close to the military headquarters as well.

We're talking about injuring nearly two dozen people, five of whom are still in the hospital, police very close to making arrests on that. But the reaction after that in that same area as you might imagine, you have two different reactions.

One, some people are saying, look, we think that prime minister of Israel should finish off the job. That they should go in and take care of this so that this doesn't ever have to happen again where they're seeing rockets come over or bomb blasts in a city like Tel Aviv or any city in Israel.

But then you had other people who are very concerned about the ground war, did not want to see a ground war happen. Didn't think there should be some sort of permanent solution by any means necessary.

But ultimately every single person that we had a chat with and who came up to us and wanted to talk about it wanted a permanent solution to this problem, to this crisis, to this fight, if you will, between Gaza and Israel.

And including all of the militant groups inside of Gaza not just Hamas itself because it will take all of them to stop the rocket fire from coming over and the subsequent air strikes that Israel does after it is hit -- Erin.

BURNETT: All right, Sara, thank you very much. A permanent solution so hard to envision how that could happen, but as we told you, tens of thousands of Israelis were called for duty for that possible ground war.

Fred Pleitgen has been with the Israeli Defense Forces. And Fred, are the Israelis actually putting their -- you know, doing what they say, they are moving back from the border?

FREDERIK PLEITGEN, CNN BERLIN CORRESPONDENT: Erin, the troops are still at the border. We're not seeing the troops move away just yet. Certainly, we believe that they're going to stay there for at least another four or five days.

Because, of course, one of the things that the Israelis are going to be doing, especially in the next couple of hours, is they're going to be monitoring whether or not the ceasefire is actually being kept by Hamas as well.

What we've seen so far is there is that there had been smaller violations. One or two rockets have been fired out of Gaza. However, the Israelis say that by and large the ceasefire is still holding.

If you talk to people here in towns like Ashkelon, however, a lot of them are skeptical about whether or not the ceasefire actually will hold. A lot of them have said they've heard talks like this before.

They think that Hamas is actually still in place and, therefore, they fear that a couple months down the line or a couple of years down the line, they might have rockets raining down on their heads as they have had the past couple of days.

By and large, however, folks that we're talking to here on the streets say that at least for now they're quite happy that the violence has ended or seems to have ended.

And they hope that it might last for longer than the past couple of times, which brought us, of course, to the situation before the ongoing military operation that was going on here when we saw the violence. They hope this time it will last. However, most of them are skeptical -- Erin.

BURNETT: Well, Israel and Gaza both claim the ceasefire as a victory, but there was a clear winner. Officials from both sides come OUTFRONT.

Plus, speaker of the House John Boehner says if we want to avoid the fiscal cliff, Obamacare must go. He is not relenting.

And a judge says Hostess, well, has to make a decision on whether Twinkie dies forever.

(COMMERCIAL BREAK)

BURNETT: Our second story OUTFRONT, Boehner has put Obamacare on the table. The House speaker in an op-ed is arguing that if the United States is serious about getting our fiscal house in order, the president's health care law has got to go.

He wrote, I'll quote him, "We can't afford it and we can't afford to leave it intact. That's why I've been clear that the law has to stay on the table" obviously referring to the negotiating table.

Yes, even though the president won re-election over contender who said he would repeal Obamacare on day one, Boehner is like a dog with this bone. What is behind this move though?

Is he playing crazy or crazy like a fox? OUTFRONT tonight, Reihan Salam, writer for the "National Review," political analyst Roland Martin and David Frum, former senior adviser to George W. Bush.

Great to have all of you with us. Reihan, you know, you'd think that the election is over. There are a lot of things you can argue and fight about in the debt deal. There are a lot of victories you could score. But getting rid of Obamacare is something that was tabled on the election, not put on the table.

REIHAN SALAM, CNN CONTRIBUTOR: Yes, I think that's fair. There are two pieces to this debate. One thing that is a huge contradiction and problem for Republicans is this.

The thing that they campaigned on, get rid of those Medicare savings in the Obamacare law, that's something that would actually make the deficit picture look a lot worse over the next 10 years.

That's obviously, you know, that cuts against this narrative. But on the other hand, there are a lot of things about the Obamacare law that are going to be fiscal problems.

For example, the law treats people who are on the exchanges really differently from it treats people who get insurance through the employers.

So there are a lot of those things that probably should be fixed, but aren't going to yield big savings in the short term. So as a matter of deficit negotiations, I think Boehner is not on strong footing.

BURNETT: Interesting. Look, there are a lot of problems with Obamacare. I think Obama would be the first person to acknowledge that. He didn't get a lot of things he wanted in there on the cost side. But David Frum, what is John Boehner doing? What is he possibly trying to gain from this?

DAVID FRUM, CNN CONTRIBUTOR: OK, I'm going with your crazy like a fox option.

BURNETT: Good.

FRUM: John Boehner is about to have to bring the more conservative part of his caucus, some very bad news. Republicans don't have a lot of leverage. The tax cuts expire whether without anybody doing anything.

And Republicans are going to end up yielding a lot more than they give -- than they get in the negotiations. And John Boehner, as the chief negotiator is the man identified with that surrender. So he needs to put down a marker now that says to the right wheel of the caucus, I'm with you, guys. If it were up to me, 100 percent I'm with you. And I am going to put it in writing.

I'm completely in favor of doing all the things that would have happened if we won the election. However, we didn't win the election and we have facing this fiscal cliff and it's scary.

So I'm about to have to do things you don't like, but be assured, according to the op-ed, my heart is in the right place.

BURNETT: Interesting. All right, so crazy like a fox. Roland, what about this though? This adds to the crazy like a fox, yes, American voted for Obama instead of the man who want to repeal Obamacare.

But when you look at how many people -- CNN poll last week, 51 percent of this country opposed the health care bill, 42 percent favor it. Maybe Boehner is on to something.

ROLAND MARTIN, CNN CONTRIBUTOR: No, he's not because frankly we got to go inside those numbers. Remember, there are significant number of people in this country who felt that the bill should have gone further.

There are people -- again, simply not oppose and favor. If you look a number of the polls done, there are a lot of people said they want a single pair option. So they say, yes, I don't favor this one.

BURNETT: I want Canada.

MARTIN: I favor universal health care. Let me be clear. Let me channel the Obama administration for a second. This is how they're responding to Boehner's proposal. Next! It isn't going to happen. He can sit here and sing all day saying put it on the table. Trust me. It's not going to be on the table.

So it's cute. It's an op-ed. It's great. But trust me, even he knows, the president is not going to put the Affordable Care Act on the table and so it's not crazy like a fox. It's simply crazy.

BURNETT: OK. Reihan, what about the possibility though, I think this is a reality that to get a grand bargain that actually works, and I'm not a crazy person. I don't think we're getting one.

SALAM: So you claim.

BURNETT: So I claim, my own self evaluation. All right, but in order to actually get that done, we do have to make changes to health care, all right, and I believe the president agrees with that, but we do.

SALAM: Yes. I think that's absolutely right. Actually one of the tricky questions is going to be how the president is going to introduce some of these ideas about cost control that weren't part of that original debate.

There is a lot of talk about administrative price controls, all pay rent setting, a lot of terms that we haven't heard bandied about that are going to be talked about in the years to come.

There is another big thing. Setting up those exchanges is really tough complicated stuff that's got to take a lot longer than people think.

So this is going to be -- there's going to be a lot of issues that Republicans are going to be able to pick and poke at and Democrats have to think hard about.

BURNETT: Bottom line, David Frum, can John Boehner get his guys and gals to come along with this deal? He didn't last summer. Can he this time?

FRUM: Sure. In fact, I think something's going to happen. It's not a grand bargain. The whole fiscal cliff problem is completely artificial. It is utterly unnecessary self-inflicted trap that was in response to a dilemma the Republicans created for themselves during the debt ceiling negotiations in the summer of 2011.

I think what we'll end up having to do is just get rid of the sequester. There's no reason for that. It's gone. Goodbye. And the second thing that we then do is have a -- we extend the present tax rates for another six months.

And then argue taxing and spending without an artificial gun to our head. There are enough scary things out there in the world that the United States Congress does not need to invent some additional ones totally unnecessarily.

BURNETT: All right, thanks to all three of you. Quick final word, yes?

MARTIN: Real simple. Both sides are going to have some significant pain in this. You have to deal with the defense. You have to deal with Medicare. You have to deal with entitlements. Nobody's going to get off easy.

But if Republicans think can you balance it on the backs of the elderly and poor, trust me. That's where the fight is going to be. Share the pain if you want to have the gain of being able to deal with the deficit.

BURNETT: Thanks to all three of you. Appreciate it. Reihan wanted to get in there, but it will happen another day.

Well, one of the issues here, tax the rich or tax the wealthy? There is a difference. So we have what we think could be the real Buffet rule, the one he put out there, the real one if we're actually serious here.

Even with a ceasefire, drones are still over Gaza tonight. We're going to give you an exclusive look at the Israeli company that's building the drones.

(COMMERCIAL BREAK) BURNETT: Our third story, OUTFRONT, tax the rich. Well, no, actually, a really big difference. Tax the wealthy. Think about it this way. If your income, what you earn going to work every day puts new the top 2 percent, you know, maybe you're not wealthy.

Because wealth is something you build over time. It shows itself in the form of super expensive assets, massive mansions, boats, art work, expensive wine, Bentleys, things like.

As we're just 41 days from the fiscal cliff and Washington is in bitter partisan deadlock, we want to test drive another idea, solve the problem. The wealthy would pay more, but tax rates on people who work might not go up right now.

Is this what the Buffet rule really should have been? OUTFRONT tonight is Daniel Altman. He is an associate professor of economics at New York University's Stern School of Business.

Daniel, great to see you. So what was amazing to me reading your proposal here that would tax the wealthy as opposed to just the rich, it's against the constitution right now to tax wealth in this country.

DANIEL ALTMAN, NEW YORK UNIVERSITY STERN SCHOOL OF BUSINESS: That's right. You can't have a direct tax like that. In fact, we needed a constitutional amendment just to get the income tax back in 1913. That is the 16th Amendment. So we would need another amendment to get this wealth tax, but you know, it is 100 years later. Let's update our economy and our constitution for the 21st Century.

BURNETT: Look, I got another amendment I want. I want to change the voting day. I'm all for it. Let's go ahead -- put some amendments in, but let's break down your math on how this would work.

If we taxed wealth, right, what people accumulate over time, 2010 are the numbers you're looking at, $58 trillion in wealth in this country on that time. If you just put a 1.5 percent tax on that, $870 billion, that is a lot of money.

I mean, that's actually more than we got an income tax that year in this country. Obviously, it's disproportionately going to affect the wealthy. It kind of seems close to a silver bullet.

ALTMAN: Well, you can you replace completely the income tax and the estate and gift tax. It's with a wealth tax of 1.5 percent. I think it should be graduated and progressive because to me the most important issue is to deal with the wealth inequality in this country, which is it much more severe than the income inequality in this country.

It's getting worse. It's been getting worse for the last 20 years. And the only countries in the world that have let's say more than 10 million people in them where it's even close to how bad it is in this country are all in Africa and Latin America. They are all poor countries.

BURNETT: So we're not necessarily talking about here about someone who works really hard, an entrepreneur works hard, earns a million dollars a year or something.

You're talking about the people who initially are going to get, Teresa Heinz Kerry, Warren Buffett, I mean, people who have massive amounts of money. They're hit the hardest, right?

ALTMAN: Yes, absolutely. I mean, the proposal that I wrote in my op- ed had an exemption for households up to $500,000 in wealth, that is exempting about 80 percent of American households right there.

BURNETT: And how did you draw that line? I can imagine there is all kinds of cheating that is going to happen around that line or even on the Bentley. People are going to say it has dents and all of a sudden, it's not worth very much money. I mean, how do you avoid that?

ALTMAN: Well, we have a lot of cheating right now with income tax. And if we had a wealth tax, I'm sure people would try and cheat on that as well. So we might to have a higher exemption. We might to have to have slightly higher rates and the brackets.

But I think overall fighting wealth inequality is so important because it is really wealth, not income that, affects your access to opportunity and our wealth inequality is so extreme that it's hurting our living standards in the long run.

BURNETT: All right, and 500,000, that was an arbitrary number. Why did you pick that?

ALTMAN: Well, like I said, it already exempts about 80 percent of American households. If you want to make a dent in inequality, you have to have a progressive tax system and this is one way to do it.

BURNETT: All right, well, thank you very much. A really interesting idea and please, everyone, take to Twitter. Let us know what you think. We're trying to be proactive here in solve this problem. We help those guys in Washington out.

Israel and Gaza are both claiming today's ceasefire as a victory, but do the claims add up? Officials from both sides, the senior guys here are OUTFRONT next.

And Hostess gets an answer to Twinkie's death.

(COMMERCIAL BREAK)

BURNETT: We start the second half of our show with stories we care about, where we focus on our reporting from the front lines.

Tonight at the United Nations, Ambassador Susan Rice addressed the controversy surrounding her response to the September 11th attack on the American consulate in Benghazi, Libya. This is the first time she's addressed it. Here she is.

(BEGIN VIDEO CLIP)

SUSAN RICE, U.S. AMBASSADOR TO THE U.N.: I relied solely and squarely on the information provided to me by the intelligence community. I made clear that the information was preliminary, and that our investigations would give us the definitive answers. Everyone, particularly the intelligence community, has worked in good faith to provide the best assessment based on the information available.

I have great respect for Senator McCain and his service to our country. I always have. And I always will.

I do think that some of the statements he made about me have been unfounded. But I look forward to having the opportunity at the appropriate time to discuss all of this with him.

(END VIDEO CLIP)

BURNETT: Senator McCain, of course, has said that Susan Rice is not qualified to replace Hillary Clinton as secretary of state. And he said he would block her nomination.

Well, Representative Jesse Jackson Jr. has resigned from Congress, saying he needs to spend more time on his health. He's been battling bipolar disorder and other things, and he's been on a leave of absence since June. In a letter to House Speaker John Boehner, Jackson said his constituents "deserve a full time legislator in Washington, something I cannot be for the foreseeable future. My health issues and treatment regimen has been incompatible with service in the House of Representatives."

Jackson is still the subject of investigations by the FBI and the House Ethics Committee.

Well, a group of world powers say they want to resume negotiations with Iran over its nuclear program as soon as possible. The last time what is called the P5-plus-one held talks with Iran was in June. And this came after a report from the International Atomic Energy Agency which just said Iran is not cooperating with nuclear inspectors. They also said Iran has completed the installations of centrifuges of the Fordow fuel enrichment plant, a plant that can enrich uranium to 20 percent which is crucial. It's at that level that it becomes exponential easier to convert it to a weapon.

Well, a bankruptcy judge has given a preliminary approval for Hostess Brands, the maker of Twinkies and Ding Dongs to liquidate. Hostess can now start the process of selling its bakeries, brands, and its recipes. It's probably the most valuable thing it has, everybody.

But the CEO told reporters after the hearing that they will move as quickly as possible to sell those brands. The sad part about this is 15,000 of the company's 18,500 employees will likely lose their jobs in the next few days.

It has been 475 days since the United States lost its top credit rating. What are we doing to get it back?

Well, it seems like we say it every week, but mortgage rates just hit another low. The average rate on a 30-year fixed 3.31 percent. As we said now, for well over a year, interest rates are not the problem.

And now our fourth story OUTFRONT: what's at stake for Israel and Hamas tonight as they move forward under a cease-fire? Both sides say that they've come out on top. But during this temporary period of calm, Israeli Prime Minister Benjamin Netanyahu is still talking tough.

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I know there are those who expect an even more intense military response and that may perhaps be needed. But at this time, the right for the state of Israel is to exhaust this opportunity to obtain a long-term cease- fire.

(END VIDEO CLIP)

BURNETT: Long-term cease-fire. So what really happened today? Is the cease-fire for real? And who does it benefit the most?

We have the ambassador from the PLO to the United States in just a moment with the Palestinian viewpoint. But, first, Israel's deputy foreign minister Daniel Ayalon.

Minister Ayalon, thanks very much for taking the time. We really appreciate it.

Let me ask you the basic question. Is this cease-fire for real?

DANIEL AYALON, ISRAELI DEPUTY FOREIGN MINISTER: Well, thank you, Erin. Good to be here with you.

We hope so. You know, since we have held fire, we received 12 rockets coming from Gaza. We have restrained ourselves. And we hope that this is just a residual kind of shooting.

Durable, quiet is important as a first stage. Secondly, we would very much like to see that there will be a regime of inspection installed so that Hamas will not be able to rearm itself. And, hopefully, for the long run, Hamas can become a legitimate interlocutor only if it receives the expectations, indeed the conditions of the international community, as it was reflected by the quartet, the U.S., Russia, E.U., and U.N. That is they have to stop altogether terrorism. They have to recognize Israel's right to exist and abide by former agreements.

If this is the case, then we are on a very auspicious road, but we'll have to wait and see.

BURNETT: It's a tall order, a lot of those things that you say there. I mean, the prime minister's statement -- you know, we just heard him speak there, but, obviously, his statement itself was not a ringing endorsement. It was rather open-ended. It said that he would give Egyptian cease-fire proposal, quote, "a chance", and then continue to say, I'll quote him, "before there is a need to use greater force." I mean it's purposeful that Israel wants to feel the threat there? I mean, our reporters are saying obviously that there has been no withdrawal of IDF forces from the border either.

AYALON: Right, Erin. You know, we have to be very careful. It is not secret that we are preparing and we're still prepared for a land operation ground troops to really uproot all of these terror nests. And we hope we'll not need to use them.

But the next few hours will tell a lot. And if we see that Hamas indeed abides by the cease-fire, then there is no reason for us to go in.

BURNETT: So, let me ask you the terms of the cease-fire. And first of all, something I read in an Israeli newspaper today, that the deal itself was not physically signed, as in there was no pen to paper. There was no physical deal.

Why not?

AYALON: Well, first of all, you know, we do not talk to Hamas. Hamas is avowed on the destruction of the state of Israel, indeed the entire Jewish people, don't take it from me. Just read their charters and all their inputs in their Web sites. They are considered as a terror organization.

BURNETT: But Egypt brokered it, right? They could have both sides sign through Egypt, right?

AYALON: Yes. You see, the U.S. Europeans, question not deal with Hamas because by law they are a terrorist organization, like you wouldn't deal with al Qaeda. The Egyptians, yes, they have special relations with them. I think the Egyptian involvement was very valuable. I think the leadership that was exercised by President Obama, Secretary Hillary Clinton was also tremendous.

And the formalities are of less consequences than the intentions and indeed the doing on the ground.

BURNETT: Right. I know. I mean, I understand that. But it also seems that sometimes those formalities, especially on this issue that is so intractable, they -- they're more than formalities. A little thing on the surface doesn't seem to matter is a sign of something so much deeper, which brings me to Egypt I wanted to ask you.

You've negotiated now, you know, using Egypt as an intermediary. It's an Islamist government. Their president, of course, has appeared at rallies where they talk about Jerusalem as the capital of the Arabs, where they've all said, where there's been chants of we are all Hamas.

But as you said, he stepped up and played a proactive role here. Are you setting a precedent where you're going to have to talk to Hamas? AYALON: Well, again, we will be very happy to talk to Hamas. We have been ready to talk to Hamas since they took over Gaza, actually in a coup against the PLO and against Abu Mazen. But first, they will have to recognize our right to exist. And secondly, they have to renounce terrorism.

If this is the case, then they are legitimate interlocutor -- as the PLO was before they refused to recognize Israel. It was also considered internationally as a terror organization. They have changed. Maybe we have a precedent here that Hamas can change as well.

BURNETT: Right.

AYALON: It's certainly within the interest of Hamas and people of Gaza and the Palestinian people in the region that they will change their ways.

BURNETT: Right.

Well, the Turkish foreign minister visited Gaza yesterday and it was -- you know, I mean, I'm sure you're aware of. The video went viral. He broke down after meeting a Palestinian father whose son was killed in an airstrike by Israel. He condemned the attack, demanded Israel stop immediately.

Jordan, another country that recognizes you condemned attack saying they were in violation of international and humanitarian law and a stark violation of the freedom of worship. I'm quoting them.

When you see that from the two of the three countries that recognize you, it seems fair to ask whether you think Hamas actually gained ground in the region in this conflict.

AYALON: Well, Erin, it's -- I would say that for us and I think for any democratically elected government, the priority is first of all keep your people safe. You know, we've had 4 million Israelis under fire, especially 1 million over southern -- the southern part of Israel where children could not really sleep at night, could not go to school safely.

We've had also our casualties, six Israelis were killed. Many, many injured and, of course, all the psychological damage, all this traumatic experience for many.

So I think that it will be useful for leaders in the region to look at both sides and also to see who starts the whole war here. Who is the interest to do it? And we have to remember, Hamas is still very much is being backed by Iran, by Hezbollah, by Assad of Syria, all these murderers and very evil forces in the region that support Hamas.

BURNETT: OK.

AYALON: It's not their interest of the countries in the region to support Hamas. Terrorism can spill over. We saw it in Egypt. How 16 --

BURNETT: OK.

AYALON: -- Egyptian soldiers were murdered because of the spillover of terrorism from Gaza, Hamas, to the Sinai.

BURNETT: All right. Minister Ayalon, thanks very much for coming on and talking about the Israeli side of this. We appreciate your time.

AYALON: Thank you.

BURNETT: I want now to get to the other side of the conflict and bring in Maen Rashid Areikat. He is the chief representative of the general delegation of the Palestine Liberation Organization to the United States.

Good to talk to you, Ambassador, and to talk to you again.

MAEN RASHID AREIKAT, CHIEF REP. OF THE PALESTINIAN LIBERATION ORGANIZATION TO THE U.S.: Thank you.

BURNETT: You know, the other day when you were on this program before the cease-fire and I asked you whether you supported Hamas, you said, "When it comes to our differences with Hamas, we have some differences practically. This is normal. But what is happening in the Gaza Strip, a direct attack on innocent civilians, we're witnessing a deliberate escalation on the part of the Israelis to cause as much possible civilian deaths."

Given that, given where we are today, do you think the cease-fire will last?

AREIKAT: Well, we hope that it will last. But it was interesting listening to the deputy foreign minister who today stirred controversy by making a statement with a local radio station in New York, WNYC, in which he said that all the civilians who were killed in the Gaza Strip deserved it. He said that in a show called "The Takeaway."

And you listen to them about the psychological impact of the children in southern Israel who could not sleep or go to school while forgetting at the same time that one-third of the civilian casualties in the Gaza Strip were children. So, of course, we are pleased that Egypt and other countries managed to reach this cease-fire. But this not the solution to the problem, Erin.

BURNETT: People in Gaza were celebrating in the streets after the cease-fire. Our Ben Wedeman was describing that just a few moments ago. Why do they think this is a win? Just on a purely practical level, people died. Children died. And the only thing you can really see has changed here is they have fewer rockets than they did eight days ago.

AREIKAT: Well, I think many people are happy that it is over. I am not sure they were in the streets to celebrate the, quote-unquote, "win or victory." They consider what happened last week and the way that people of Gaza sustained, endured this brutal military campaign by the largest military in the Middle East. And the fact it is over was a good relief for them.

So many are celebrating the fact that the war was over.

BURNETT: But what happens from here? I mean, that's -- I don't really understand. You say -- it doesn't really seem anybody won. Nothing has changed. Hamas still says Israel doesn't have a right to exist. Israel still says -- I mean, nothing's changed.

AREIKAT: You know, Israel has always used the excuse in the pretext of other factions or Palestinian organizations not recognizing them. And the PLO did recognize Israel in 1993. And we even deleted clauses in our charter that called for the destruction of Israel in 1996 and 1998.

Twenty years after we signed peace treaty with Israel, recognized Israel as a right to exist, Israel still occupied Palestinian lands, occupied the Palestinian people, and still determined not to allow the people to decide their own future.

So we are getting confused here. Israel is attacking those who are allegedly attacking them with rockets and missiles and attacking the other camp who want to make peace with them and want to sit down to resolve the conflict.

I don't think Israel is serious about making peace with the Palestinians. They want to preserve the status quo and keep their occupation of the Palestinians forever.

BURNETT: But let's talk about that bombing then in Tel Aviv today. You know, when the leader of Hamas was asked about it, not only did he not talk about whether Hamas was responsible, he actually praised the bombing.

AREIKAT: Well, I can not speak on behalf of Hamas. I didn't hear that particular leader. But our position on violence and counter violence is clear. The PLO does not condone the killing of civilians, be it Israelis or Palestinians.

But if you look, Erin, at the last week of this confrontation, you know very well that 140 Palestinians have been killed, 1,000 were wounded. It's very clear who paid the heavier price in this confrontation.

BURNETT: All right. So let's talk about some of the conditions of the cease-fire, one of them in terms of the weapons. One of the terms was there is no passage of weapons into Gaza. This is obviously significant, one bus alone last year, 50 tons of weapons were found being smuggled into the Gaza Strip. There were mortar shells, anti- ship missiles, ammunition for Kalashnikov assault rifles.

Is Hamas -- I mean, is there any way Hamas is going to stop smuggling weapons? That one sort of seems too hard to believe. AREIKAT: The only way to do that is to, one, end the blockade against the Gaza Strip confining 1.7 million people under a total Israeli siege. You keep hearing Israeli officers saying, we pulled out our troops. We pulled out our settlers in 2005. Technically, the Gaza Strip is still under Israeli military occupation.

Two, Israel needs to deal with the issue politically. As long as there is an Israeli military occupation of Palestine and the Palestinian people, there will be no peace and security for anybody in the region.

So the best way to prevent tension, to prevent hostilities from happening again is by ending this conflict once and for all, allowing the Palestinians to establish their independence, live side by side with all their neighbors.

BURNETT: All right. Thank you very much, Ambassador Areikat. Thanks for your time again.

Well, OUTFRONT next, despite the cease-fire, Israeli drones are still crisscrossing the skies over Gaza. We're going to take you on a behind-the-scenes look that the company that built these.

And in Congo, a group of rebels seized the city of Goma, now pushing on to the capital of Kinshasa. They say they plan to liberate the country. That could be bad for freedom.

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BURNETT: We are back with tonight's "Outer Circle", where we reach out to out sources around the world. And tonight, we go to the Congo, where a rebel group that captured the key city of Goma now says it plans to liberate the entire country.

A spokesman for the M23 fighters says that they want to push onto Kinshasa, the capital of the DRC. U.N. Security Council has backed a resolution calling for sanctions against the rebel leadership.

Earlier I asked David McKenzie who are the rebels and what do they want.

(BEGIN VIDEO CLIP)

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: Erin, the M23 rebel group split from the Congolese army earlier this year. Since then, they have been pushing towards Goma, the key strategic capital on the border of Rwanda. Along the way, they've been recruiting fighters, sometimes children, sometimes forcibly, to their cause.

The U.N. said the rebel group is supported by neighboring Rwanda, with arms and fighters. It's an accusation that Rwanda strongly denies, but the U.N. said M23 pushed onto the city using night-vision goggles and other sophisticated equipment. Goma in rebel hands, the worry is that this war will now extend beyond Goma and even pull in regional powers -- Erin.

(END VIDEO CLIP)

BURNETT: Thanks very much to David McKenzie. Regional powers including Rwanda.

Well, along with warplanes and rockets, drones have been, you know, crisscrossing the skies over Gaza for days.

CNN's Laurie Segall got an explosive tour of the company behind those drones that are actually still right now over Gaza tonight.

(BEGIN VIDEOTAPE)

LAURIE SEGALL, CNN MONEY TECH REPORTER (voice-over): Before the booms and the blasts, a hum -- drones run the air space over Gaza. And even after the cease-fire, they'll remain.

UNIDENTIFIED MALE: They're now ubiquitous. There's hundreds of them flying around.

SEGALL: Just days before the conflict between Israel and Hamas broke out, CNN Money was on the ground in Tel Aviv to get an inside look at the manufacturing of the drones. We visited the country's biggest defense manufacturer, Israel Aerospace Industry. Owned by the Israeli government, IAI does $3.5 billion in annual sales.

Of that, about a quarter goes to the Israeli ministry of defense. They make one of Israel's most valuable tools.

UNIDENTIFIED MALE: On the map, we can see the UAV position.

SEGALL: UAV or unmanned aerial vehicles are planes without pilots, and here, they're operated with the click of a mouse.

UNIDENTIFIED MALE: Sometimes, you just need to get footage. And this is something that is better to be done by an unmanned capability.

SEGALL: Some UAV service surveillance tools. Others can also carry weaponry. Here's how they work.

UNIDENTIFIED MALE: The flying is with trackball. And, I'm actually just commanding the direction and speed and altitude. And then, the UAV will follow my command.

When I want to land or to takeoff, I just need to click a button.

SEGALL: A short drive away, a valuable part of the drone is hand-crafted: high-tech cameras.

UNIDENTIFIED MALE: You see a very small ball, but inside, there is very, very much of high-tech technology, including electro-optics, electronics, stabilization and a lot of software.

SEGALL: And that allows the drones to see far away and function as a surveillance tool.

IGAL MEVORACH, ELECTRO-OPTICAL PAYLOADS, IAI: The main requirement nowadays is to see if you see a person a few kilometers away, and he's holding something, you want to know whether it's a gun or maybe he's just holding a stick.

SEGALL: And in the future, the drones could get smarter, even smaller.

CNN Money got an inside look at the latest set of yet to hit the market. A surveillance drone the size of a butterfly aimed to alert soldiers of danger ahead on the ground.

(END VIDEOTAPE)

BURNETT: Laurie is with me.

So, missiles are obviously, or the missiles have stopped at the cease-fires. But the drones are continuing. And they can hear them, right? What are they doing?

SEGALL: Sure. You know, they are still there. They were there before and they're going to be there after.

Number one, surveillance. You know, these high-tech capabilities and you saw in our piece, they've got these cameras and they said, Laurie, we can see your shoes from miles and miles away. We could see a license plate.

And what they are doing now is they are going to continue with the surveillance. Now, that being said, Erin, you know, this high- tech -- this high-tech stuff is changing quickly. They have the capabilities to really carry out targeted attacks.

So, you know, we might see that changing and, you know, in the next couple of years, we are going to see this more and more.

BURNETT: What about in terms of the money here? Because obviously, the United States, you know, is a huge supporter of Israel's defense and we provide a lot of it. What does the U.S. play?

SEGALL: You know, the U.S. gives $3.1 billion in military aid annually, Erin. So Israel can spend 25 percent of that to build up their own defense systems. So, you can see Israel -- America is really supporting Israel helping build these technologies that are going to protect them because if you look at the Israel aerospace industries, which they were building these drones and we feature them, they were responsible for building the Iron Domes. So, you know, they helped build parts of that.

So, you see this money is paying off. You heard Obama say today, that he's going to -- he is going to support this more and more.

BURNETT: Interesting that the U.S. spends more money on defense in Israel than Israel does.

SEGALL: Sure.

BURNETT: Listen there to learn. All right. Thanks very much. Appreciate the report.

SEGALL: Thanks, Erin.

BURNETT: And outrage over the location over Paris Hilton's new handbag store. It's been right all over the Internet this week. But you know what? We think the outrage does not add up.

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BURNETT: The Internet has been buzzing about Paris Hilton. There's been outrage she's opening a handbag store in the holy city of Mecca, Saudi Arabia. People were incensed the socialite will be purses on the way to pilgrimage. Paris was proud, though, and we dug a little deeper, and found she isn't opening a store in Mecca. She's opening in something called the Mecca Mall, about 20 minutes from the holy city, one of the three major shopping centers near Mecca. It's full of everything that you could ever possibly want, because, yes, people do some serious shopping there.

So, we've realized critics don't have a problem with the handbag store. They have a problem with Paris. And sure, you know, she's taken her share of deserved derision. In this case, though, she's got something smart going on. She is a savvy business woman.

Lingerie and handbags are massive in Saudi Arabia and the incredibly rich Gulf countries. In Saudi, you know, the women have to wear a black abaya by law. You cannot go in public without one. So handbags are a public sign of your style and your status. That's how you show you are sexy.

I'll always remember interviewing one woman whom we all put our stuff down to walk and talk in front of television cameras, she said, I want to hold my handbag on camera and have it be in the shot, that's my style.

Paris and her business team capitalized that. And get this, in addition to the new store in the Mecca Mall, she's got five other stores in Saudi and 40 in the Mideast. That's an American entrepreneur who's built up global brand and is making money. It's not easy.

So, you know what? Sure, we don't like her social life but tonight we celebrate her professional accomplishment.

Thanks for joining us.

Anderson starts now.