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Queen Meets Sniper; Beating The Fiscal Cliff Deadline; McCain Says Give Rice A Chance; Egyptians Protest President Power Grab; Egyptians Protest Pres. Power Grab; The Demise of Hostess

Aired November 26, 2012 - 13:00   ET


SUZANNE MALVEAUX, CNN ANCHOR: -- for the royals, and this is one of our favorites of the day.

In Japan celebrities unveil a stack of 600 million yen, that is $7.3 million. Tickets for Japan's year-end jumbo lottery went on sale today. All winners are going to get a lump sum without taxes.

And in Tokyo, a shopping center lit up like an ocean of blue lights. They're going to be on display for the next 28 days until Christmas.

I'm Suzanne Malveaux. This hour in the CNN NEWSROOM, we are focusing on two big stories. A whole lot of clicking going on for cyber Monday. Americans have spent one billion shopping on-line already, but is it going to help the sluggish economy? We want to take a look at that.

And the Senate back from the holidays to try to pullback from the fiscal cliff. Some Republicans, they are now abandoning their new higher taxes pledge. So, let's get to it.

Just an hour or so, the Senate is going to reconvene after taking a break for Thanksgiving. It's the lame-duck session, as we know, but lawmakers, they got plenty to do, not much time to do it. Congress and the White House have just 36 days to reach a budget deal to prevent falling off the so-called fiscal cliff. If not, it would trigger more than $500 billion in automatic spending cuts and tax hikes.

So, are they close to a deal? Here's Athena Jones.


ATHENA JONES, CNN CORRESPONDENT (voice-over): Members of Congress expressed optimism Sunday about the prospects for reaching a deal to avoid the fiscal cliff. A series of tax increases and spending cuts next year that could do serious damage to the economy. They also sounded warnings.

SEN. JOHN MCCAIN (R), ARIZONA: We can and must get an agreement, otherwise, I think, first of all, the markets are going to start reacting.

SEN. JOE LIEBERMAN (I), CONNECTICUT: It's not a done deal and it's not a certainty. If Congress does nothing, which Congress has gotten pretty good at doing these days, we'll go over the fiscal cliff.

JONES: Staffers have been working behind the scenes to find common ground to prevent across-the-board cuts lawmakers say should concern everyone.

SEN. CARL LEVIN (D), MICHIGAN: I think you should be worried if you have a defense (ph) job, but we all ought to be worried whether we are dependent upon other aspects of the federal budget, whether we're worried about the regulation of our food safety, whether we're worried about our borders being secure, or whether we're worried about an FBI being supported.

JONES: A key sticking point is what to do about taxes? Democrats and the president want to raise tax rates for the wealthy, Republicans don't. Though more are now breaking (ph) with anti-tax crusader Grover Norquist who have gotten the majority of lawmakers to pledge not to support any effort to raise taxes.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I am willing to generate revenue, and it's fair to ask my party to put revenue on the table. We're below historic averages. I will not raise tax rates to do it. I will cap deductions. I will violate the pledge, long story short, for the good of the country only if Democrats will do entitlement reform.

JONES: It's not yet clear when lawmakers and the president will meet next, and a final deal could still be a long way off.

JENNIFER LIBERTO, SENIOR WRITER, CNNMONEY.COM: We rarely see the Hill and the White House make decisions early. I would be pleasantly surprised to see a deal emerge earlier than the end of the year but we'll see.

JONES: This week just might bring the parties one step closer.


MALVEAUX: I want to bring in our White House Correspondent Dan Lothian. Hi, Dan, good to see you.


MALVEAUX: Over the weekend -- pretty good, it was like watching an alternate universe. I mean, you have these very proud (ph) Republicans jumping ship, reversing themselves on a pledge that was very strong. I mean, Grover Norquist saying there's no tax pledge.

So, here's a little bit about what we got. A taste of this weekend. Listen.


SEN. GROVER NORQUIST, (R), GEORGIA: Times have changed significantly and I care more about this country than I do about a 20-year-old pledge. I think we owe the debt, and we to figure out a way to pay it. REP. PETER KING (R), NEW YORK: So, I agree entirely with Saxby Chambliss. A pledge you signed 20 years ago, 18 years ago, is for that Congress. For instance, if I were in Congress in 1941, I would have signed -- as for (ph) a declaration of war against Japan. I'm not going to attack Japan today. The world has changed and the economic situation is different.

REP. ERIC CANTOR (R), MAJORITY LEADER: There's a lot that has been said about this pledge, and I will tell you when I go to the constituents that have elected -- re-elected me, it is not about that pledge. It really is about trying to solve problems.


MALVEAUX: All right, Dan. So, you got all these Republicans who are basically reversing themselves. What does the White House think about all of this, the president? Does he feel like now it strengthens his hand going into these negotiations, the next phase?

LOTHIAN: Well, you know, the White House would certainly be encouraged by this, because, as you know, the Republicans for so long have been holding very fast on this line of, you know, spending cuts, spending cuts, spending cuts and no tax increases, and now you have these key Republicans saying that they'll break from this pledge made back in the 1980s. You now have Eric Cantor, Saxby Chambliss, --


LOTHIAN: -- Peter King, Lindsey Graham and Bob Corker all saying, to some degree or another, that they'd be willing to step back from it. So, certainly encouraging but as you saw in that piece from a while ago from Athena, there is still some distance between --


LOTHIAN: -- both sides as the clock winds down.

MALVEAUX: And, Dan, there was -- folks who came from those meetings with the president last week and they say that he, in those meetings, spoke very generally about the possibility of reforming these entitlement programs, big programs like Medicare, Medicaid, that type of thing. Is the White House willing to put on the table specifics regarding the kinds of reforms in those big, big entitlement programs?

LOTHIAN: If so, you know, this is something that's happening behind closed doors and they're not saying so publically. But, you know, as you point out, Republicans have been looking at the health care reform law since the election time now, during the campaign, to try to roll it back, to have it repealed and many attempts there. And they were hoping that if they had won the election, that they could have also repealed it then and now, of course, the president wins. The question is whether this will be on the table.

You know, some see this more of a negotiation stance by Republicans. They have to sort of set their line, and then Democrats say, you know, our line is that we want -- we want the wealthy to pay more in taxes. We want those -- the middle class, those under $250,000 to not see their taxes go up. So, that's sort of the starting point for both sides, and then they work back from there.

MALVEAUX: One of the things that we heard from speaker Boehner was that he still wants Obama care to be on the table here because he still believes that it should be repealed. Does the president see that as a -- as a nonstarter, because that was really the major accomplishment of his first administration?

LOTHIAN: Right. You know, some would say that that is really a nonstarter in these negotiations. Again, this is just something that -- some believe that, you know, you have the speaker sort of setting his position where he wants to start for -- from in negotiations. He believes that this is something, the health care law, that the country can't afford, that it's just too expensive to keep it intact, so he sees that as an area to sort of pull in some revenue.

Again, you know, both sides still seem to be far apart, but after that last meeting, just before the president went to Asia, they came out of that meeting saying that they felt confident that they could find areas of agreement, that they could get this done before the end of the year. We'll wait and see.

MALVEAUX: All right, 36 days. Dan, 36 days. We're counting down. Thank you, Dan.

LOTHIAN: Thank you.

MALVEAUX: Grover Norquist not going to go away quietly. He is defending his organization's no tax pledge. He says despite what we've just heard from those Republicans, nobody is backing down. Here's Norquist this morning on CNN's "STARTING POINT."


NORDQUIST: No pledge taker has voted for a tax increase. They've had some people discussing impure thoughts on national television. However, even Lindsey Graham, if you listen to him, he would support higher taxes if it was used to pay down the debt, of course, it won't. It would be spent.


MALVEAUX: One familiar billionaire is, again, calling for the rich to pay just a little more. In an op ed column, today's "New York times" investor Warren Buffett advocates a minimum tax on what he calls the ultra rich. He says it will not wreck the economy. Quote, "The ultra rich, including me, will forever pursue investment opportunities."

Republican Senator John McCain says that he is open to changing his mind on Susan Rice. Now, if she's nominated to become the next secretary of state, McCain, he now says -- he has, of course, been critical of her. She's the current U.S. ambassador to the U.N., and she is under fire from Republicans for initially saying that it was protesters, not terrorists, who launched the deadly attack on the U.S. consulate in Benghazi, Libya. But Rice says she went with the information that the intelligence community gave her at the time. McCain now says he's not going to block her nomination. He is going to give her a chance to explain. So, here's how he explains that.


MCCAIN: I give everyone the benefit of explaining their position and the actions that they took. And I'll be glad to have the opportunity to discuss these issues with her.


MALVEAUX: All right. I want to bring in our Foreign Affairs Correspondent Jill Dougherty. The president, Jill, we know he threw down the gauntlet at a press conference just a couple weeks ago. Here's what -- here's what he said.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As I've said before, she made an appearance at the request of the White House in which she gave her best understanding of the intelligence that had been provided to her. If Senator McCain and Senator graham and others want to go after somebody, they should go after me.


MALVEAUX: So, Jill, do you think it was that warning that motivated Senator McCain to change his mind? What does he get out of it?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: You know, I think it's hard to say at this point. Obviously, the president is indicating that were she to be the nominee, his nominee for replacing the secretary of state, then he would stick with her. But they're not saying that yet, and, you know, I think on this fight about Benghazi right now, a lot of officials from this administration have now come forward, the latest the DNI, explaining that the talking points, as they're called, were changed, if that reference to Al Qaeda was taken out, and for a number of reasons. One of them being an intelligence issue.

So, I think what's happening is there is no final answer yet on everything that is concerned with Benghazi until those investigations are completed, and those investigations, of course, are the FBI investigation and then also the State Department's own investigation. So, at this point. it's not -- I don't think it's really getting a lot of traction. There's not a lot of change. You have ambassador Rice coming out and said -- and saying that she read the points that were presented to her by the intelligence community.

And -- but there -- then there was one senator who said, well, she should have gone further. She should have investigated or questioned those. So, those are all legitimate questions, but I don't think that they are going to be totally resolved. I think the questions are going to continue until there might be some type of resolution, you know, when the whole very sad and tragic affair is understood.

MALVEAUX: All right. Jill, we're going have to leave it at that. I will have some more questions for you in a little bit.

Here's what we are working on also for this hour.

(voice-over): The Thanksgiving turkey is gone but cyber Monday is in full swing. Retailers are hoping your on-line shopping cart is overflowing. We'll tell you how your gift-buying is helping the overall economy.

Hostess, the maker of Twinkies, is history. The bankruptcy means thousands of employees could lose their jobs. I'll talk to the CEO.

And actor Morgan Freeman lends his distinctive voice to same-sex marriage.


MALVEAUX: Protesters sit on the streets of Cairo for a fourth straight day. So, the battle lines have drawn nearly -- newly, rather, empowered Islamists versus remnants of the Mubarak regime and the country's deeply divided liberals. They are going at it over the president's new powers. Today, Egyptian President Mohamed Morsi, he is meeting with the country's top judges to explain the extraordinary powers that he granted himself on Thursday. Among the decrees, judges cannot overturn any decision he makes or law he imposes until a new constitution is finalized. Mr. Morsi extended the time to write the new constitution and he dismissed the country's attorney general.

Fawaz Gerges, he is joining us from London. He's the author of "Obama and the Middle East: The End of America's Moment."

Thank you for joining us.

First of all, you know, people are just kind of paying attention again. Thursday everybody's sitting down for turkey dinner. Mohamed Morsi, at the time, being viewed as a peacemaker in this cease-fire between Israel and Hamas. Well, now, this truce, the dust isn't even settled. The truce now, Morsi is now taking all this power and saying that he ultimately is in charge of many, many different aspects of the country. Almost like a dictator. How significant do you think this is?

FAWAZ GERGES, LONDON SCHOOL OF ECONOMICS: Well, hello, Suzanne. Very, very significant. I mean he anointed himself as supreme leader with absolute powers. In many ways, what Mohamed Morsi has tried to do is to recreate the imperial presidency. There is no authority, according to the new decree by Mohamed Morsi, there is no authority in Egypt that can override any decision by him. This tells you a great deal about the -- how important what he did.

But the reality is that he has succeeded in unifying the opposition from the ultra left to the ultra right. The opposition that was fragmented and fractured and, you know, now is basically united in a position to what Mohamed Morsi did.

I think, Suzanne, that he miscalculated a great deal. I don't think he appreciated the response of ordinary Egyptians who feel very outraged by the sweeping powers that he basically -- he invested the powers in himself, which is very, very ironic.

MALVEAUX: Yes, it's very much like Mubarak. So what do they do? I mean you've got protesters on the streets now. This looks very reminiscent of what we saw before Mubarak was ousted. Can they get rid of him?

GERGES: Well, I mean, Suzanne, no, they cannot get rid of Mohamed Morsi because he was elected --


GERGES: By a majority of Egyptians. I think what -- what he --

MALVEAUX: What kind of recourse do they have?

GERGES: Well, what he has done is to throw Egypt into a constitutional and political crisis. What you have now is that people are back on the streets. People are challenging the sweeping powers that Mohamed Morsi basically invested in himself.

The judiciary is standing up to Mohamed Morsi. You have now (INAUDIBLE), a critical segments of Egyptian people, who are basically challenging Mohamed Morsi.

This is healthy. Let's not lose sight of the fact that you have tens of thousands of Egyptians are back on the streets in order to protect democracy. Because they realize, even Mohamed Morsi might mean well. I mean he's not -- as he says, he really does not want to recreate the Mubarak presidency.


GERGES: But people are terrified. What Mohamed Morsi is trying to do is to undermine the democratic process. The separation of powers. The rule of law and accountability. And that's why you have people on the streets in the last few days.

MALVEAUX: Sure. So you see these people on the streets. I mean, are these folks -- are they looking for help? Are they looking for guidance from the United States, from other allies, or is this something that should be left for the Egyptians to sort out and figure out themselves?

GERGES: I believe that the Egyptians will be able to meet the challenge. I believe that, in fact, the challenge facing Mohamed Morsi now is how to climb down. How to stand down without losing face. You're going to see in the next few days a formula. He and the judiciary will find a formula for him to step down -- to stand down because basically he -- the situation cannot go on.

Remember, Suzanne, what he has done now, he basically now exacerbated social and political tensions. The Egyptians thought (ph) lost almost 10 percent of its value in the last few days. Egypt has a major social and economic crisis. And Morsi has proven to be a pragmatist overall. I think he's looking for a way out -- for a way out. But, of course, he wanted to save face.

MALVEAUX: All right. Fawaz Gerges, thank you so much. We appreciate your insights, as always.

It's an American institution, the Twinkie, right? Now its parent company, though, is bankrupt. Thousands of people stand to lose their jobs. I'm going to talk to the head of Hostess.


MALVEAUX: All right, Twinkies, Ho Hos, Wonder Bread and union busting. We are talking about the demise of the Hostess brand. Last week a bankruptcy judge gave the OK for Hostess to shut down. That is after a last ditch effort at a deal regarding pay and benefits between the bakers union and the company. So now more than 18,000 workers could be unemployed. Who is to blame? Both sides seem to be pointing fingers at the other. The union says corporate execs created business plans that were failures. Hostess says striking workers dealt a death blow to the company, which was too financially unstable to survive this strike. Joining us, the CEO of Hostess Brands, Gregory Rayburn.

Good to see you. Glad you could be here with us.

First of all, explain to us why was it that Hostess and the union could not come up with some sort of agreement, a deal, to save these people's jobs?

GREGORY F. RAYBURN, CEO, HOSTESS BRANDS: I wish I knew the answer to that, Suzanne. I mean, I think that the reality is that we actually had deals with our largest union, the teamsters. It was really the bakers union, our second largest, that rejected the deal. We had 12 unions in total. We had several other unions accept the concessions. So I don't understand the logic behind the bakers simply rejecting the contract and striking and forcing the liquidation.

But I would also say that --

MALVEAUX: Well, I mean, you're the CEO. I mean, certainly, wasn't there any wiggle room on the company's side?

RAYBURN: Well, in effect, the easy answer to that is no because they were presented with the same package that everyone else was going to accept. So, you know -- but the hard part of that is that they really weren't making demands in terms of anything additional. They simply rejected the contract and then went on strike.

But I would say that there's a bad history, I think, here. I came in, in March, but I think there were poor management decisions. I think the company was over levered, didn't make capital investments. So there's plenty of blame to go around.

MALVEAUX: Could the company have -- the management, you say, it was basically bankrupt when you got there. How did they fail their employees? I mean could they have put better business practices into play here so this never got to this point?

RAYBURN: Well, I think it's a combination of the two, right? I mean, I think that the company did not have the funds for capital investment on the one hand. On the other hand, the company had really unworkable union work rules where one person could only handle cake, one person could only handle bread. Those made no sense and it drove the cost structure up. And at the end of the day, the multi-employer pension plans, the union plans that were so sort of toxic to outside investment really precluded somebody to come in and put more money in to make those capital investments.

MALVEAUX: I want to read these -- a couple of authors here who noted the deal here. They'd been following it. John Nichols of "The Nation" writes, "the workers did not ask for more pay. They did not ask for more benefits. They made wage and benefit concessions to keep the company viable."

And then you've got Jake Blumgart at "Salon." He says that the former CEO of Hostess got a 300 percent pay raise while his employees took a 30 percent pay cut.

So how is it that blame on the unions is -- I mean how do you blame the unions for this?

RAYBURN: Well, again, I'll go back. So the decision over a year ago to increase management pay was a terrible decision. When I learned about that decision after coming on board this year as CEO, I reduced the compensation of those executives that were still remaining to $1 a year. And a couple of those stuck it out and formed the backbone of the reorganization plan. But was it a bad decision? Absolutely. It was a terrible decision over a year ago.

You know, the bakers union -- the teamsters voted to accept the concessions. Other unions voted to accept the concessions. The bakers union voted not to accept, but they made no other demands and, in fact, they went sort of radio silent.

MALVEAUX: OK. OK. And so I want to move beyond minutia here. You have asked for $2 million in bonuses for executives. Is that part of the problem here? I mean you've got a lot of people who potentially could lose their jobs.

RAYBURN: You must be talking about sort of the liquidation wind-down plan.


RAYBURN: What we're engaged -- what we're engaged in now is we're trying to maximize the value of the brands and sales of the brands. We have a lot of interest in those, primarily because they are now uncoupled from the union contracts and uncoupled from some of our antiquated plants. The incentive and retention plans are put in place to keep employees on hand until we get done winding the company down. So, in effect, what you're saying to those employees is, I want you to stay and work yourself out of a job, either three months from now or six months from now or 12 months from now. And the only way you do that in the real world is you give them some reason to stay, besides just their regular pay.

MALVEAUX: All right. Sorry, we've got to leave it there. We're running out of time. Gregory Rayburn, thank you for joining us. And we do want to note, as well, that there are other companies that are vying for the brands, Twinkie and Hostess -- you know, the cakes and all that kind of thing. So the Twinkie could survive after all. But we are, you know, sorry you guys couldn't work out a deal with the employees.

Thank you very much. Appreciate your time.

RAYBURN: Thank you.

MALVEAUX: Shoppers already spent a record $1 billion. That was on Black Friday. Well, so would we see another record-breaking day today on Cyber Monday? We're going to actually take a look at the numbers and what it means for the economy.


MALVEAUX: All right, there's the rich and then there's the Powerball rich. The jackpot now $425 million. The cash payout is almost $279 million. Those are both records and they are just the current estimates before the next drawing Wednesday night. Millions more likely to buy tickets to boost the payout as well. I think I might pick up a ticket or two.