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ERIN BURNETT OUTFRONT

Egypt's President Stands By Power Decree; Egypt On The Edge; How Far Will GOP Go To Avoid Fiscal Cliff?

Aired November 26, 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, the standoff in Egypt after negotiations break down between President Morsi and judicial officials. And people are taking to the streets.

Lawmakers back to work in the U.S. Priority number one, avoiding the fiscal cliff, the left and right are talking compromise. What does it mean? Republican Senator Mike Lee, is it just talk? He is OUTFRONT.

And the U.S. ambassador to the U.N., Susan Rice, headed to Capitol Hill to meet with her most outspoken critics including Senator John McCain, answer questions about what happened in Benghazi. Let's go OUTFRONT.

Good evening, everyone. I'm Erin Burnett. OUTFRONT tonight, Egypt on edge. Is a new dictatorship on the horizon? Tonight, President Mohamed Morsi clarified, but really largely stood by his decision to grant himself sweeping powers.

Including freedom from judicial review for what he's calling presidential decisions. The announcement was made today after President Morsi met with members of Egypt's judicial body, which has obviously been very critical of his decision.

And U.S. officials who just days ago were heaping praise on the new Egyptian leader for his role in negotiating a ceasefire between Israel and Hamas, well, now when he took all these powers away from judges and said his word reigned supreme, they're in a tough spot.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: We have some concerns about the decisions and declarations announced on November 22nd. Democracy depends on strong institutions and the important checks and balances that provide accountability.

(END VIDEO CLIP)

BURNETT: So, today, there were nationwide protests continuing in Egypt and a million-person march of anti-Morsi protesters is scheduled for tomorrow in and around the central square in Cairo, Tahrir Square, the very spot, of course, where the revolution that cleared the way for Morsi's presidency was born. Now, there was a planned counter-protest that was supporting Morsi that was supposed to happen tomorrow. People thought that the two happening at the same time could cause serious violence, but that protest was canceled. And now, Morsi said to say his rule and word is more important than judges is just temporary and necessary to push through reforms.

But not everyone is buying that. The cover of the "Egypt Daily News" web site today proclaimed "Egypt's New Pharaoh." The headline from Egypt's Ahramonline, "Morsi's rule: A chip off the old Mubarak block."

And here in the United States, a similar question from the "Atlantic," Mohammed Morsi: Abe Lincoln in Disguise or Another Mubarak." Talk about two different choices.

And the stock market in Cairo obviously didn't think this was a good move either. It plunged 10 percent on its first trading day since Morsi's announcement. Stocks opened down today and barely moved up by the end of the day.

So is this new president in Egypt in which the United States has placed so much hope, starting to look a little bit too much like the dictator he replaced and is he the leader of an Islamist government that will become more and more extreme, threatening America?

On the phone with us tonight, Amh Hamzawy, the founder of Egypt's Freedom Party, also a former member of parliament in Egypt and Ed Husain also joins me here in New York from the Council in Foreign Relations.

Ed, I want to start with you. You know, Mohamed Morsi obviously was credited with brokering that ceasefire between Israel and Hamas. It seems that within hours, all of a sudden, he swept away with all these powers, saying his word will ride over judges. Was he emboldened taking advantage of his success?

ED HUSAIN, COUNCIL ON FOREIGN RELATIONS: Without doubt, he knew he had enough political capital to make this move and don't forget, just before he'd brokered peace, he had also signed a deal with the IMF for a $4 billion loan program.

So with all those developments in the international scene, he thought he had enough credibility now to go after the judges that it was rumored would somehow control his own powers on December 2nd.

What he undermined and failed to understand that this is a new Egypt in which nobody with get away with that level of control of power around them without the street rising to be the check and balance we've seen happen over the last three days.

BURNETT: What is your point of view on this? Is this something people in Egypt will accept?

AMR HAMZAWY, FOUNDER, EGYPT FREEDOM PARTY (via telephone): Definitely not. At least a broad segment of our population is not accepting it and is not accepting it for good reasons and key reasons.

One, we have lived for 60 years under presidential sweeping powers and we have suffered from them. Secondly, we elect democratically our presidents who acquire authorities, which are more than enough for him to be an active president in shaping Egyptian politics, domestic politics and he does not need additional prerogative and authorities.

Thirdly, Egyptians have always held the judicial branch of government in high regards and these are not like any lack of autonomy or independence of the judicial branch of government to be part of what our new reality after the revolution is all about.

BURNETT: Amr, could this be something that's good for you though? As a former member of parliament, the judges needed to dissolve parliament, putting you out of your job and now that Morsi's trying to seize power from the judges, I mean, is this something that could end up being good?

HAMZAWY: No, let me tell you right away. I'm here speaking as a political scientist as well. Countries which make it to success and transition to democracy after the democratic revolutions have always managed to build institutions and to respect the checks and balances.

What Morsi does is basically to freeze checks and balances. And I'm not aware of any dictatorship, which had been a dictatorship for two months or three months and countries have managed -- who suffered from a temporary -- so-called temporary dictatorship, which managed to transition to democracy.

If we freeze checks and balances, if we suspend the independence of the judicial branch of government, I guess, we will not make it and it's not going to be healthy to restore back a family that chamber of the parliament, which I was a member of and was dissolved by a ruling of the supreme constitution in court.

We will not be a (inaudible) transition by bringing back an assembly where we do have constitutional doubt about its legality.

BURNETT: And interesting he uses the word dictatorship. You don't just normal see a dictatorship for a couple of months and he is not alone, people who are characterizing what Morsi has done here as a dictatorship.

The "Wall Street Journal" editorial page today said, "Egypt's Islamist coup, the Muslim Brotherhood's man claims more power than even Mubarak had." What's the risk to the United States if Morsi becomes an Islamist dictator?

HUSAIN: I think we should hold our horses. Morsi is many thing, but he's not yet an Islamist dictator. The fact that Professor Hamzawy can speak in free terms from Cairo now to us as an indication that freedom of speech is still very much alive in Egypt.'

And it's also an indication that Mubarak is no longer in power and you know, Morsi is dependent on the U.S. for aid, dependent on the IMF for signing off that program, dependent on the European Union. International opinion will not allow for Mubarak, for Morsi to go ahead and consolidate power around him.

BURNETT: You said Mubarak.

HUSAIN: It was sort of prudent slip but --

BURNETT: Right. Amr, what do you think about that? Is Morsi a long way away from being an Islamist dictator?

HAMZAWY: Well, let me first of all, highlight the fact that in terms of freedom of expression, I could speak to you three and four years ago from Cairo and freely as I have done just right now and I did speak several times to CNN.

Criticizing measures and policies took and put forward back then by the default president and his government. So in terms of freedom of expression, it's not a huge leap, which we had before.

But let me remind you as well of the fact that at least one TV channel was closed in the last weeks in a step, which we considered in Egypt to be negatively imposing a democratic limit once again on different TV channels, which are typical of the president.

However, the crucial point is if we suspend checks and balances, if we do not get safeguard independence of the judicial branch of government in the moments in which do not have a legislative branch of government until we have our new constitution.

And Morsi is the president who has sweeping executive, sweeping legislative and once again puts himself above the judicial branch of government. That is a very dangerous mix, which can only lead to the dictatorship.

And once again, we will not accept to have a dictatorship for a few weeks or a few months and regardless of Morsi's legitimation that constitution situation needs to be brought down.

BURNETT: All right, well, thanks very much to both of you. We're all going to be watching very closely for those demonstrations of the million-man march, which protesters against Morsi say they will be carrying out tomorrow in Central Cairo.

OUTFRONT next, Congress returns to work after Thanksgiving and the most important item still on their plate, it is a cold, nasty leftover, guys. It's been a leftover for a couple of years, but now, you got to actually eat it, the fiscal cliff.

There's been talk of a compromise but no action. Republican Senator Mike Lee point-blank asked next. Will we get a deal done?

And on Thursday, the U.N. is going to vote on whether to recognize Palestine as a state. It's a move opposed by Israel and the United States. Can Israel survive as a country if there aren't two states? And without power for weeks because of Sandy, Long Island residents were shocked when they got their electric bills. They add up.

(COMMERCIAL BREAK)

BURNETT: Our second story, legislative leftovers, Congress returning to work with a lot on their plate. We're not talking about turkey. We're talking about something much more rancid, the fiscal cliff.

One of the urgent matters this lame duck Congress needs to address before the end of the year and even though the painful, across the board spending cuts and tax increases are going to take effect in 36 days, there's still only talk of a compromise.

So can Congress actually walk the walk or are we going to go off this cliff? It is a very real risk, everyone. OUTFRONT tonight, Mike Lee, Republican Tea Party senator of Utah.

Good to see you, Senator, really appreciate you taking the time. So you wrote an op-ed in the "Washington Times" and it said, I'll quote you, "Delaying significant fiscal restraint for yet another year will send the wrong signal to financial markets and may serve as tipping point that could lead to disastrous consequences for our economy."

So you're fear is that interest rates could surge. And just to be fair, we've had this disastrous situation for a couple of years and you know, interest rates have kept falling in spite of all worries that there would be a disaster.

SENATOR MIKE LEE (R), UTAH: That's right. That's one of the things that distinguishes the fiscal cliff, which we're coming up against right now from what I described yesterday in my editorial in the "Washington Times," as the fiscal avalanche.

But we can see when the fiscal cliff is about to hit. We can't tell exactly when the avalanche is going to happen. The avalanche occurs when people stop buying U.S. treasury instruments and we have to start raising the interest rate.

Eventually, we get to the point where we can't afford anything other than interest on our national debt and that's what I'm concerned about.

BURNETT: So, let me talk about the solution here because you and I talked back in May about this. As you know, we've all been talking about this for a long time. Now we're finally here at the deadline, right.

You talked at the time about wanting a simpler tax system and you were open at that time in our interview to some people paying more and you said some people in the Republican Tea Party would be OK with that. Here's you on this program back in May.

(BEGIN VIDEO CLIP) LEE: I'd make it a point never to speak for my colleagues or counterparts in the House, but I'm not aware of anyone who would say that if one American might end up paying a little bit more that would necessarily count them out.

(END VIDEO CLIP)

BURNETT: So, I want to understand exactly what you mean. Are you open to a compromise in which if you closed loopholes, some Americans would pay more?

LEE: Yes, look, the point is, we need comprehensive tax reform. Anytime you reform the tax code, you're going to want to do it in a way that stabilizes the tax base. You're hopefully lowering rates, collapsing loopholes and creating a more reliable, sustainable base.

That might mean that some Americans pay more, but that doesn't necessarily amount to a tax increase in the aggregate. What you're trying to do here is to stabilize the revenue stream.

BURNETT: When you say though, it doesn't amount to a tax increase in the aggregate, that obviously is the center of this whole issue, especially when it comes to the pledge that I know you signed with Grover Norquist, right?

He said I'm OK with closing loopholes, but it has to be revenue neutral. But I think everyone knows to get a deal done, it can't be revenue neutral. I mean, are you open to a deal where you cut a lot of spending and you raise some taxes and it is not revenue neutral?

In fact, you take in more tax revenue when you're done than you did when you start it, are you open to that?

LEE: What I'm open to is the idea of acknowledging the fact that we can bring in on average 18.5 percent of GDP through our revenue stream. That's what our tax system is capable of doing in the United States. That remains a constant.

Whether our top rate is at 35 percent as it is now or at 70 percent as it was back in the early 1980s. That's a relative concept. What I want is for us to produce a steady stream of 18.5 percent rather than having these peaks and valleys.

Last year, we had a valley of about 14.5 percent of GDP. Other years, we've had something closer to 20 percent. We want a steady, even, 18.5 percent.

BURNETT: But to get from 14.5 to 18.5 right now is not revenue neutral.

LEE: Well, to get to there is not revenue neutral in the immediate sense, but what I'm saying is that if it produces on average 18 percent of GDP and that's going to keep us constant, that is arguably revenue neutral.

In the long run, I think everyone would benefit. In the long run, it would be revenue positive. Not every tax increase brings about more revenue. In fact, sometimes you need to lower rates in order to bring in more revenue.

BURNETT: All right, but -- just to understand where you stand on this, because, you know, it sounds to me like you're saying go against Grover Norquist pledge, but you don't really want to directly say it.

But a lot of your colleagues are saying it, Bob Corker has said it. Lindsey Graham has said it. They've said that they'll allow for more revenue via taxes. However you do it, close loopholes, however you do it, that isn't revenue neutral.

I mean, you're saying you agree with that, at least now, but not in the long-term, correct?

LEE: Yes, look, I'm saying there are a lot of ways to skin a cat and we do need comprehensive tax reform. You have to look at something carefully to decide whether or not you think it is an aggregate tax increase.

So it's very difficult to define in the abstract what is or what is not a tax increase. I am against tax increases, but I am in favor of stabilizing our revenue stream.

BURNETT: OK, but do you have frustration with Grover Norquist in such an absolutist definition of revenue neutral? Right, because if over time, revenue neutral could mean you never raise any more revenue than you're raising before, but the economy is growing.

So by definition, taxes would be going up. That's not revenue neutral, right? I mean, he's put you in a very absolutist position, does it frustrate you?

LEE: No. Look, my pledge wasn't to any one individual. The pledge that I made was to my constituents, the voters in Utah who elected me, who found it very important and found it very significant that I was willing to say tax increases are not the answer.

The answer is that government has got to control spending because we don't have a revenue problem so much as we have a spending problem in Washington.

BURNETT: All right, thank you very much, Senator. We appreciate you taking the time to joins us tonight.

It sounds like, I mean, bit by bit, everyone is moving a little bit, still some rhetorical issues as you can hear, but closer and closer to a possible solution here.

OUTFRONT next, as you just heard, a number of Republicans say that well, they'll abandon their no tax pledge although as you can see, it's hard for them to really do it, but to avoid the cliff. But that is only one side of the compromise.

We were talking about taxes. The Democrats have to do something pretty big to get a deal done, too. That's next. And the American ambassador to the U.N., Susan Rice finally answering her critics face to face on Capitol Hill. What Senator John McCain and others are demanding she answer.

(COMMERCIAL BREAK)

BURNETT: Our third story OUTFRONT, time for Democrats to step up. As we've been talking, Republicans have been debating whether it's time to abandon their pledge to never raise taxes. They're having serious, heart to heart, you know, soul searching moments.

You heard Mike Lee have one right on this show. So, Democrats, you've been a little mum about what you're going to give up and so we're not going to allow it. Bipartisan deal entitlement reform has to be on the table.

The untouchable third rail of politics, John Avlon has been looking into what specifics have been put on the table by Democrats and there have been some at least in the past where they put some proposals on the table, right?

JOHN AVLON, CNN CONTRIBUTOR: That's right. And this is what's important. You heard Lindsey Graham, a Republican say, look I'm willing to give up the pledge if Democrats put entitlement reform on the table. Well, look, as you know, we've been here before, Bowles- Simpson, Gang of Six, superfail committee, the grand bargain.

There have been negotiations and some really interesting. Bob Woodward right after the election got a leaked document showing the negotiations in the grand bargain and it showed the White House willing to make some pretty significant concessions on entitlement reform.

Let's just look at one of them. Medicare to start with, there's a line in the document, talks about alteration and the eligibility age for Medicare. Now, this is budget talk. There's not a lot of numbers.

But one of the things that has been negotiated in the Gang of Six and Bowles-Simpson is gradually increasing the Medicare eligibility age to 67. That would save around $250 billion over 10 years, Erin, so that's a pretty significant concession.

BURNETT: Significant although gradually is a problem. I mean, this is like you know, the French. They take 10 years. You've got to do it right away.

AVLON: There's that and there's the political reality. But you know the old Washington joke. A billion here, a billion there, pretty soon you're talking real money.

BURNETT: What about Social Security?

AVLON: Social Security, now this gets more complex. We're looking at Bowles-Simpson Commission talked about and also Gang of Six. Let's talk about the changing the benefit formula. Change CPI, consumer price index.

Basically, what folks say is this could be a more accurate measure of inflation and if you put that in place, you could save $223 billion. If you raise the retirement age to 69 by 2075 --

BURNETT: Come on, 2075?

AVLON: This was a big negotiation in Bowles-Simpson, Erin, it would affect toddlers today, no one else, but that could save $120 billion.

BURNETT: You know what, toddlers, I'm going to move it to 59 today.

AVLON: But this is Democrats willing to take on their own special interests. Unions objected his intensely. It's a sense of where the argument could go in the weeks ahead defining where that common ground might meet because both sides are going to have to give up a lot and take on their own special interest.

BURNETT: And neither Democrats nor Republicans want to be the ones to say they are raising these ages although I think we can all say the truth. They're going to have to do it more quickly than they want to.

All right, OUTFRONT next, as the United Nations prepares to vote on Palestinian statehood, the question remains, can Israel survive as a country if there is not a two-state solution?

And that debate boils down to Israeli versus (inaudible) -- they're OUTFRONT.

And is it a ballpoint pen or something much more dangerous? An exclusive look at the covert weapons allegedly found on a North Korean spy. This is something out of a James Bond movie. It's exclusive, it's next.

(COMMERCIAL BREAK)

BURNETT: Welcome back to the second half of OUTFRONT. We start with stories we care about where we focus on our reporting from the frontlines.

Last week was Black Friday. Today is Cyber Monday. These are what the retail industry needs these days. It's when I'm excited about them. But, look, things are off to a solid start for the holiday. Online sales were up 26 percent from Cyber Monday from a year ago. That was numbers from a year ago. That was numbers from earlier this afternoon. They're going to go up.

Research firm ComScore expects Americans to spend $1.5 billion online today. That would be an increase of 20 percent from last year.

Scott Durchslag, president of Bestbuy.com, says he's expecting big returns today after breaking records on Thanksgiving and Black Friday. They're selling best sellers right now, Windows 8, Apple products, flat panel TVs and tablets.

I do want to note, though. Just because you get really good sales the first few days after Thanksgiving, that might be just cannibalizing sales from later on in the holiday season. Still very unclear if this will continue.

Well, today, New York Governor Andrew Cuomo said superstorm Sandy caused $42 billion in damage in New York state. In New York City alone, Mayor Michael Bloomberg estimated total public and private losses to be nearly $20 billion and some residents are still feeling pain, particularly in the form of electric bills.

Customers of the Long Island Power Authority are receiving bills that reflect their typical monthly electric usage despite the fact they went weeks without any power. Shocking. They are outraged.

A spokeswoman tells CNN their coming bills will reflect the amount of electricity customers have used since their previous actual meter reading and the charges will be automatically adjusted. Interesting, though, LIPA. This makes us wonder about how you normally do billing. Do you check the meters every month or do you bill on average? I mean, just wondering how deep this question goes.

Well, we have a new satellite image of North Korea's west sea satellite launch station taken on November 23rd. Now, according to analysis from Digital Globe, a satellite imagery firm, there is increase activity at this site, more trucks and more people and also numerous portable fuel tanks.

Military sources tell our Barbara Starr they have seen more activity in the area, but they don't see an evidence of an imminent launch yet.

Well, the U.S. ambassador to the U.N., Susan Rice, she's going to go back to Capitol Hill to discuss the attack on the American consulate in Benghazi. Acting CIA director Morell will be with her for those meetings and one person they're going to meet is Republican Senator John McCain. He, of course, has been one of Susan Rice's most outspoken critics. He has said she's not qualified enough to be secretary of state, a job she's rumored to be up for.

In our latest CNN/ORC poll, we asked those surveyed for their opinion of Susan Rice, 35 percent had a favorable opinion, 26 percent, unfavorable. But the vast majority of Americans, despite all the coverage of the Benghazi snafu are unsure.

It's been 480 days since the U.S. lost its top credit rating. What are we doing to get it back?

Well, the fiscal cliff. More dire warnings there. The White House releasing a report saying if Congress doesn't prevent fiscal cliff tax hikes, it could hurt consumer confidence and retailers and they could be forced to cut jobs. That, of course, is a case that would undermine any tax increases at all.

And now our fourth story OUTFRONT: Palestine, a country?

Thursday, the United Nations will vote on a resolution to upgrade the Palestinian authority status to nonmember observer state. Now, that is a move which recognizes essentially Palestinian statehood. It's also a move opposed by the United States and Israel.

Now, here's the headline from an op-ed "The New York Times", "Support Palestinian Statehood." That op-ed was not written by a Palestinian, but by an Israeli -- Yossi Beilin, a former deputy foreign minister of Israel and architect of the Oslo Accords, to be exact.

This debate over Palestinian statehood is raging inside Israel -- Israeli versus Israeli. And the question remains, the Israel survive as a Jewish state if it does not agree to a two-state solution, specifically one that partitions Jerusalem, a holy city, to both Muslims and Jews?

Jeremy Ben-Ami is J Street executive director, joins me, along with Morton Klein, president of the Zionist Organization of America.

I appreciate you both of you taking the time.

And, Morton, let me start with you. I want to read more from that op-ed in "The New York Times" today. And Yossi Beilin continued to write, "Because Mr. Abbas of the PLO has committed to the principles of nonviolence, diplomatic means like the statehood bid, are his only way of putting Palestinians back on the global agenda.

In retaliation, the Israeli foreign ministry is threatening to nullify the Oslo Accords, if the world recognizes a Palestinian. This is preposterous."

What's your response?

MORTON KLEIN, PRESIDENT, ZIONIST ORGANIZATION OF AMERICA: Well, I wish that were true. We all would like a peaceful entity state next to Israel. But in fact, for 19 years now, Arafat and now, Mahmoud Abbas promotes hatred and violence against Jews in every aspect to their culture, in their schools, their media, speeches, sermons. They promote that Jews are an AIDS virus, that you must fight the Jews. They honor terrorists regularly when they die.

So we don't want another Hamas state next to Israel. We want a true civilized state. So we need to make it clear they have to show they're stopping promoting hatred and violence, they'll truly accept a Jewish state.

They don't have emblems like this. I'm showing you, this is an emblem the Fatah, the Palestinian Authority, put together a year or two ago showing all of Israel with an Arab kefiyyeh over it, a picture of Arafat and a Kalashnikov rifle.

This is not an emblem of peace. So the Palestinian Authority is not serious about peace. They say in speech after speech, if the Arabs want war against Israel, we will join them. These are not the words of a peaceful entity. And Israel has to wait until that changes before statehood can be confirmed.

BURNETT: Jeremy, to Morton's point, you know, when I was in Israel just few months ago and went into the Palestinian territories in the West Bank and I was with a bunch of children, little boys, and I asked them what they wanted to be when they grow up, and the first thing they all said, I want to fight Israel, then they said dentist or whatever else their dreams might have been. It was pretty sobering moment.

Does Morton have a point?

JEREMY BEN-AMI, J STREET EXECUTIVE DIRECTOR: Well, there's a conflict here. There are two peoples that have been at war for over 100 years and we're going to make peace with our enemies, not with our friends. And the only solution to this fight, which is a fight between two people over one piece of land is to figure out how to share the land or else we're going keep on killing each other, not only in this generation but in all the generations to come.

So the two-state solution is the only way for Israel to have long-term and short-term security and also to preserve its Jewish and its democratic character over the coming generations.

BURNETT: Morton, don't you have to do a two-state solution and do it soon? The rights of these people who live in the Palestinian territories. They just don't have them.

KLEIN: Yes, but we don't want another Hamas type entity in the West Bank that can hit Israel's main airport, that can hit Israel's main population centers very easily. And Israel's looking at how the Arabs have treated the gays and Christians in their territories.

Bethlehem used to be 90 percent Christian. It's now 10 percent Christian because the Christians have left because their lives have been made miserable by Arab Muslims. They see gays have been leaving the Palestinian Authority in droves because they're treated so horribly, they're prosecuted.

So as bad as it is, it would be even worse with a Hamas-like entity in the Palestinian Authority territories and, by the way, Abbas in a "New York Times" op-ed, you mentioned op-eds, one year ago himself wrote, as soon as we get state hood, the first thing we do is go to the International Criminal Court and try to get Jewish Israeli leaders to be tried as war criminals.

Is that the words of a peaceful entity that wants to live in peace with a Jewish state? Hardly. It's a prescription for more war.

And if they do this, the United States may be forced to stop almost a billion dollars in aid to give to the Palestinian Authority because it would be violating the Oslo agreements.

BURNETT: OK.

Jeremy, do you think anyone in Israel has committed war crimes just to put this question on the table?

BEN-AMI: Well, I don't think that's the e question on the table. I think it's whether or not a two-state solution with the Palestinian Authority led by Mahmoud Abbas is a formula for Hamas has done, as Morton is saying, and I think that the surest way to ensure that you will get more radical, more extreme, more violent people leading the Palestinian movement is to oppose peaceful efforts to achieve a two- state solution.

President Shimon Peres of Israeli, former Prime Minister Ehud Olmert, many other leaders of Israel have been very clear. Contrary to Mort Klein's remarks, that Mahmoud Abbas, the Palestinian Authority, the Fatah party, are partners for Israel for peace and they have spoken out long and often about the need for a two-state solution for the Palestinian perspective and even recently on Israeli TV went on to talk about ways of solving the most difficult issue, which is the right of return.

BURNETT: All right. Thank you very much to both of you. We appreciate you taking the time.

Everyone, please let us know online what you think about that, the two-state solution but also I'm also personally curious about the war crimes question.

Well, they sound like gadgets used by James Bond. On the surface, this looks like a ballpoint pen and a flashlight. But the covert weapons allegedly belonged to a North Korean spy who was planning on using them to kill a political activist from South Korea. These are 007 type instruments and they actually have never been seen by the public until now.

Our Paula Hancocks has this exclusive report.

(BEGIN VIDEOTAPE)

PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT (voice-over): An assassination attempt foiled. A North Korean spy is arrested on the streets of Seoul. This was a year ago. And this is the first time South Korean intelligence officials are showcasing the weapons, exclusively to CNN.

(on camera): So how does this work?

UNIDENTIFIED MALE (through translator): This poison needle was made to look like a pack of ballpoint pen. There is a tube inside here. In order to activate it, we have to twist it towards the right three to four times and then press the top part like this.

HANCOCKS: If you're shot by this pen, what happens to you?

UNIDENTIFIED MALE (through translator): It would cause muscle paralysis very quickly, which would lead to suffocation and death.

HANCOCKS (voice-over): The second pen shoots a poison-filled bullet, which penetrates the skin. The powdered poison is then released.

(on camera): These pens look like they belong in a James Bond movie. Is it -- is it new technology? UNIDENTIFIED MALE (through translator): These pen weapons are not new. But this flashlight is new. I've never seen this weapon before. If you look at the front, there are three holes. There was a bullet in each hole and here is the trigger.

HANCOCKS (voice-over): Forensics experts fired one bullet to test the gun disguised as a flashlight. It was accurate and deadly and almost impossible to identify as a weapon.

When police arrested the would-be assassin, he was carrying all three weapons, none had been fired.

This man was his target, defector and anti-Pyongyang activist, Park Sang-Hak, renowned in South Korea for sending anti-regime propaganda leaflets across the border in balloons.

He was due to meet the would-be assassin who claimed he wanted to fund his activism. South Korean intelligence agents stopped him at the last minute.

PARK SANG-HAK, NORTH KOREAN DEFECTOR AND ACTIVIST (through translator): I didn't believe they would try and kill me on the crowded streets of Seoul. I thought the national intelligence service was overreacting.

HANCOCKS: We showed Park the weapons intended to kill him. He hadn't seen them before in such detail and seemed shocked.

PARK (through translator): You would notice the gun, but these weapons are so innocuous, you could easily kill someone. I would have been killed instantly.

HANCOCKS: Park knows he's at the top of North Korea's hit list and has around the clock police protection. Having seen the weapons intended to kill him, he says he knows there will be more assassination attempts, but he will not stop his activism.

Paula Hancocks, CNN, Seoul.

(END VIDEOTAPE)

BURNETT: OUTFRONT next, at least four top Republicans say they're going to break their promise to never vote for higher taxes if it means avoiding the fiscal cliff. Will they buck the pledge if it costs them their jobs? Carville and Frum, OUTFRONT.

And a devastating fire at a garment factory highlights the need for unions.

(COMMERCIAL BREAK)

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

And tonight, we go to Syria where opposition activists say 10 children were playing in a Damascus area playground when they were killed by shelling. Images are coming in of the attack. We want to warn that they are disturbing and graphic. The opposition believes the government used warplanes to carry out what is known as a cluster bomb attack.

Nick Paton Walsh is in Beirut and I asked him why the children might have been targeted.

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NICK PATON WALSH, CNN INTERNATIONAL CORRESPONDENT: Erin, these disturbing images show what activists say happened when a powerful munitions hits refugees who don't really have the option of good, solid buildings to shelter in. Rebels often suggest that when they score a major military success against the regime, this happened in a nearby air base to where the bomb hit, the regime (INAUDIBLE) anger upon the local population.

Now, Damascus has always denied even possessing cluster munitions, of course, saying they wouldn't have used them in something like this. But many Syrians, when they see this, which in their eyes is yet another outrage, will be asking themselves what else does the outside world have to see happening in Syria to be spurred into action -- Erin.

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BURNETT: Thanks to Nick.

And now, our fifth story OUTFRONT: Bucking the pledge. At least four top Republicans say they're willing to break their pledge to never vote for higher taxes. But could it cost them their jobs?

Republican Senators Lindsey Graham, Saxby Chambliss, and Bob Corker, as well as Mike Lee earlier on this program, and Representative Peter King, they've all said they're willing to compromise and consider revenue increases to avoid the fiscal cliff.

Their shift in position has anti-tax activist Grover Norquist vowing to help unseat any Republican who breaks his taxpayer protection pledge. The question tonight is whether this is a larger trend or whether Republicans are just testing the waters. And two men who know about testing the waters, politicking and actually meaning what you say or not join me now.

David Frum, senior adviser to George W. Bush, and James Carville, Democratic strategist.

You all have been on every side of this. Let me start with you though, David.

Republicans talking about raising revenue by closing loopholes, as opposed to raising tax rates. Now, you can get a heck of a lot of revenue that way. But is this smart negotiation point for them or not?

DAVID FRUM, CNN CONTRIBUTOR: Well, Republicans are going to be yielding grown, but they have to avoid seeming to yield under pressure. The president has a strong hand. But there are some important principles at stake for Republicans and they have to keep their party together.

Frankly, I think loopholes are the -- so-called loopholes, meaning deductions for home mortgage, at this point, the wrong place to look for new revenue. The place is look is with different kinds of tax sources. Carbon tax, value-added tax, not by making it more difficult for people to work save and invest.

BURNETT: Wow, you're adding even more taxes. What -- did you switch parties? I'm just teasing you.

FRUM: If your goal is to keep the top rate low, I think a top rate of 35 is already quite high. If your goal is to keep a top rate low, you have to look at other kinds of sources other than the income tax.

BURNETT: James, I guess the question is here, would the Democrats even accept a deal that was either additional sources or closing loopholes, right, as opposed to this marginal rate has to go up as well? I mean, is that a do or die line for Democrats?

JAMES CARVILLE, CNN CONTRIBUTOR: Well, I don't know if it's a do or die line, but it was 39.6 under Clinton. As I recall, we did pretty well. So, I think it's fine.

But at any rate, there's going to be some kind of give somewhere on revenue. That's obvious. I think the Democrats have a stronger hand as a result of the election, and the fact that by the way during the election, it wasn't clear about much, people say about the very big issues. One issue was really big and that was raising taxes on wealthy people, and people knew that's exactly what President Obama wanted to do. They knew that Mitt Romney didn't want to do it and they voted for President Obama.

So, he has the authority of the election behind him, and so, I think that does give him a pretty good hand here.

BURNETT: David, let me ask you about Grover Norquist, obviously the man who authored the pledge that so many Republicans have signed. And, you know, Mike Lee from Utah was the latest on this show earlier on the program to say there's a lot of ways to skin a cat and back off that pledge. Grover spoke to Soledad this morning here on CNN and said, look, if you break my pledge, you're going to have to deal with voters.

Here was his comment.

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GROVER NORQUIST, AMERICANS FOR TAX REFORM: If you want to go to your voters and say, I promised you this, and I'm breaking my promise, you can have that conversation with them. But you don't have an argument with me. You've made a commitment to your voters.

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BURNETT: And he says he's going to try to unseat people who go against the pledge? Is this a real risk, David Frum, that a Saxby Chambliss, Lindsey Graham, or people like them end up being up for re- election could lose their jobs over this or no?

FRUM: It is a real risk. Of course, it is. And it's not just Grover Norquist. Don't personalize it. It's the Club for Growth. It's other entities that will do that.

But understand what direction these people leading the party in. They concede the Republican Party is a fundamental congressional force, fundamentally an oppositional force. I mean, the whole point of the pledge is to say someone else is acting, and here you are laying down in advance how you react.

But there's no plan you're going to be acting, you're going to be leading. If the Republican Party is ever going to be a presidential party again and it's lost the majority of the vote in five of the six past presidential elections, it has to think in an entirely different way about how you make commitments to entirely different groups of voters that these people concentrated in conservative congressional districts.

BURNETT: And what about on cuts, James?

This is an interesting comment. You know, Dick Durbin has been on this show and he's been -- he's such a rational person that seems so open to compromise. He was open for example to closing loopholes but not raising rates. He looks for cuts. You know, he's a rational man on many ways, and he said yesterday that Democrats should not be talking about cutting Social Security.

Here he is.

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SEN. DICK DURBIN (D-IL), FOREIGN RELATIONS COMMITTEE: Social Security does not add one penny to our debt, not a penny. It's a separate funded operation.

Medicare is another story. Only 12 years of solvency lie ahead if we do nothing. So those who say don't touch it or change it are ignoring the obvious.

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BURNETT: James, will Democrats have the courage to make serious cuts to Medicare, and not cuts of raising the eligibility age by two years over 10 years?

CARVILLE: Well, first of all, I think raising eligibility is a serious cut, a very serious cut, and a lot of people that say that people would defer it.

BURNETT: No, I'm not implying it's not a serious cut. I'm sorry. I just meant you had to do it over a smaller period of time.

CARVILLE: Right. I understand.

But I want to go back to Senator Durbin's point. If you want to do something Social Security, do it. But leave Social Security in the debt aside for the moment, because it doesn't drive debt. I think Senator Durbin is right on that.

They're going to have to negotiate something on Medicare. There's no doubt about that. Remember, the person doesn't get the Medicare payment. The hospital or doctor, the pharmaceutical, whoever it is gets that. So, that's going to affect a lot of different things.

It's going to be really sort of tough going here, but it's obvious that there are going to be some kind of, quote, "entitlement cuts" that come out of this. I don't know how wise that is, but it's going to happen. I don't think there's much doubt about that.

BURNETT: All right. Thanks to both of you. We appreciate it.

FRUM: Thank you.

BURNETT: It's tough for everyone.

And still OUTFRONT: a devastating fire kills more than 100 people, and there is a solution on why and how this could never happen again.

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BURNETT: On Saturday a fire at a garment factory in Bangladesh killed more than 100 people, after flames spread rapidly on the floor, trapping those on higher floors of what was a nine-story building. There are no exterior fire escapes and a lot of people died from jumping.

The factory has made product for companies including IKEA and Wal-Mart. Now, Bangladesh gets 80 percent of its export revenue from textiles. This business is Bangladesh, and Bangladesh is home to about 4,000 garment factories and a lot of them are like this one. They lack proper safety measures.

When I read this, it reminded me about another fire, the one in the Triangle Shirtwaist factory in New York City, remember that? 1911. It was and remains the deadliest industrial accident in the history of New York City -- 146 garment workers died in that fire, and most of them were women, just like in that fire in Bangladesh.

And just like in Bangladesh the death toll would have been much lower if there was appropriate emergency exits. In that case, you may remember, you know, a lot of doors had literally been locked, and now there are reports that could have been the case with locked or stuck doors in Bangladesh now in 2012.

The New York City fire eventually helped to spur the growth of the International Ladies Garment Workers Union, which fought for better working conditions for sweatshop workers. We have every hope that the very sad events of this weekend will do the same for Bangladesh, because when it comes to sweatshops, like the ones in Bangladesh, it's not as simple as saying don't buy foreign-made clothes, buy made in the USA, because, look, these women need the jobs and work.

Bangladesh is one of the poorest companies in the world. Per capita income in that country is $848 a person. The garment industry represents, you know, it's huge for the country. It's also not as easy as saying pay a little more and the extra goes to labor standards, because in the absence of international monitoring, that is not easy. You can't do it.

So, what do you do? Unions. Yes, unions. Despite what you might think about them, they could make a big difference for these women and save lives. Just something to think about.

Thanks as always for watching. "A.C. 360"" starts now with Wolf Blitzer, in for Anderson.