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Iran Claims U.S. Drone "Captured"; GOP Makes Fiscal Cliff Proposal; Relentless Rain In Northern California; Chemical Weapons Fears In Syria; Zimmerman Defense Releases Bloody Photo; Royal Baby On The Way!; Wall Street CEOs and Fiscal Cliff

Aired December 4, 2012 - 06:00   ET



ZORAIDA SAMBOLIN, CNN ANCHOR (voice-over): New this morning, Iran says they have captured an unmanned American drone after they say it came into restricted airspace, but U.S. officials say they have accounted for all of their drones. We're live in the Middle East straight ahead.

CHRISTINE ROMANS, CNN ANCHOR (voice-over): In 28 days, your paycheck will get smaller. In 28 days, your taxes will go up. Coming up, a new proposal from Republicans to keep us from plunging over that fiscal cliff.

SAMBOLIN: So, four storms in one week. The west coast is getting hammered by rain. A live report is just minutes away. And there is more rain headed your way if you're on the west coast.


ROMANS (on-camera): Good morning. Welcome to EARLY START. If you're on the east coast, if you're on the west coast, hey, maybe go to bed. Welcome to EARLY START. I'm Christine Romans in for John Berman.

SAMBOLIN (on-camera): And I'm Zoraida Sambolin. It is Tuesday, December 4th. It is 6:00 a.m. in the East.

ROMANS: All right. We begin this morning with developing news from the Middle East. Iran telling the world that it has captured a U.S. drone. Take a look at this video from state TV in Tehran. It shows two revolutionary guard commanders examining what appears to be an intact American ScanEagle drone.

But a U.S. defense official is telling CNN this morning the U.S. navy has fully accounted for all unmanned air vehicles operating in the Middle East region.

Reza Sayah is following these developments for us. He is joining us live from Cairo. Reza, a U.S. source saying that if the Iranians do have something it's not an actively operating U.S. Navy drone. So what could this be? What could this mean?

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: Well, at this point, really tough to verify exactly what happened. Because we're getting all sorts of different accounts coming from Washington and Tehran. Washington is not confirming that Iran has captured a drone.

They say all their drones were accounted for in the Persian Gulf region and if Iran has a drone it wasn't one that was operating in the Navy. Tehran has a different story. They say they captured a U.S. drone and you can be sure they're going to use this report to push forward their position that they continue to make big winds, big intelligence wins over Washington.

The report came a few hours ago according to Iranian state media. Iran's revolutionary guard capturing a small U.S. drone flying in the northern Persian Gulf region, this is a region that's near Iran's only nuclear power plant in Bushehr.

Iran is suggesting that this U.S. drone was spying over that particular region and they captured it allegedly once it flew over Iranian air space. Of course, Christine, the U.S. denies this part of this information war going back and forth, has been going back and forth over the past few years.

ROMANS: All right, Reza Sayah, we know you'll continue to follow it for us the information war. Thanks.

SAMBOLIN: The fiscal cliff debate hitting a new low for futility. In 28 days, crippling tax hikes and spending cuts will create a lot of pain for nearly every American if a deal does not get done. Republicans offering up a counterproposal to the president that calls for $2.2 trillion in deficit savings over the next decade.

So it includes $800 billion from tax reforms, $600 billion for Medicare reforms and $600 billion in spending cuts, but it does not contain tax hikes for the wealthiest Americans. So the president immediately dismissed it.

And if you want to know just how far apart the two parties are, this should clear it up for you.


SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I think we're going over the cliff.

REP. JOHN BOEHNER (R-OH), HOUSE SPEAKER: It's unfortunate that the White House has spent three weeks doing basically nothing.

TIMOTHY GEITHNER, TREASURY SECRETARY: What we can't do is sit here trying to figure out what works for them.

BOEHNER: The president's idea of a negotiation is roll over and do what I ask.

GRAHAM: It's pretty clear to me they've made a political calculation.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: If their ideas are different from ours, we can't guess what they are.

GEITHNER: They should lay out to us. CARNEY: We look forward to the time when they are specific.

SEN. RICHARD BLUMENTHAL (D), CONNECTICUT: They need to be more specific.

CARNEY: Some specificity.

BLUMENTHAL: Some of their specifics.

BOEHNER: He can't be serious.

SEN. BOB CORKER (R), TENNESSEE: Haven't even begun to be serious.

BOEHNER: We need to get serious.

GRAHAM: I don't think they're serious.

BOEHNER: I would say we're nowhere, period. We're nowhere.


SAMBOLIN: I would say we're frustrated. Brianna Keilar is live in Washington. All right, so we know it's not in the plan. No repeal of the Bush tax cuts. But what is in this plan and how is it different from the White House proposal?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Let's look at the headlines here from Speaker Boehner's counteroffer, $800 billion in tax reform savings. So this is the tax revenue, this would be the new taxes. This would be done by closing loopholes, limiting deductions, not, obviously, by increasing income tax rates for the wealthy

A $600 billion in health savings, that's the entitlement reform. That's Medicare cuts, cuts to other entitlements. Compare this to the White House, $1.6 trillion in new taxes, so that's two times the amount in Speaker Boehner's counteroffer and $400 billion in cuts to Medicare and entitlements.

So that's $200 billion less than Speaker Boehner's. Also something in here that the White House has proposed as a nonstarter for House Republicans was having Congress give up their debt limit vote.

So the White House is calling, Zoraids, Speaker Boehner's counteroffer not serious. They're saying there needs to be specifics. But I will tell you that Democratic leadership made in a moment of I guess you could say truth, that it does pass the last test.

Obviously, Democrats don't like it, but it certainly could have more things in it that they don't like. So maybe it's not, as far as a starting point, they actual ply were surprised that Republicans --

SAMBOLIN: So they are not saying on this one, is he crazy?

KEILAR: Maybe saying that a little.

SAMBOLIN: All right, so so far both plans have proposed entitlement cuts, but neither has given any specifics. The GOP plan does call for an increase in tax revenue, but no specifics on where that will come from. How much of this is a real negotiation and how much of it is just politics as usual?

KEILAR: Right now, a lot of this is politics and posturing, and sort of opening offers, publicly putting offers out there. That are sort of the starting point. The White House says it's not going to talk specifics on entitlement reform with Republicans until they capitulate on this income tax rates, letting them go up for the wealthy.

They say they're not even going to talk about it until Republicans will cave on that. Here's why they think that they have the upper hand on that. When you poll people and you say how do you increase tax revenue? Twenty one percent say reduce deductions. That's what Republicans are proposing.

And 29 percent say increase tax rates, 39 percent say both. So you've got 7 out of 10 people who are saying increase in tax rates, which is what Democrats want to do, what the White House wants to do, that that should be part of it.

And also why are you not hearing from specifics on entitlement reform? Well, here's why. When you say to people what should you not cut spending on? Seventy seven percent say Social Security, 80 percent say Medicare. So it's really tough to propose specifics on spending cuts to Medicare. You can see why.

SAMBOLIN: So that's a whopping number. And yes, everybody feels very strongly about that. Brianna Keilar live in Washington for us, thank you.

ROMANS: All right, the rain, the flooding are just relentless in Northern California. Four storms in less than a week, at least one death attributed to these storms. Meteorologist Rob Marciano is following it for us from the CNN weather center in Atlanta. They're just been hammered -- Rob.

ROB MARCIANO, AMS METEOROLOGIST: Yes, this is probably the strongest storms they've seen in two years. So it's significant for sure. The good news is that it comes on the heels of a pretty dry year. So, a lot of this rain, even though we've had a tremendous amount of flooding in many spots, it was fairly well absorbed relative to how much rain fall we got when I talk about rainfall.

When we talk about Mount Shasta, we normally talk about snow, right? This measure is rain, 23 inches of it at Mount Shasta in Northern California. Other spots over 20 inches. Over a foot across much of Northern California, and the hits just keep on coming.

Medford, Oregon saw over 7 inches. San Francisco proper saw four inches in six days and that is significant for San Francisco. Not raining in 'Frisco right now, but in Sacramento you're about to get some. This is just light stuff. It's going to begin to increase.

Because the heavy stuff right now is in Seattle and Portland. This will begin to slide down to the south as our next punch of moisture comes through later on today and tonight. But an inch or two is all we expect. Maybe a little bit more in the mountains.

Again it's pretty high snow levels here, so we're not really storing a lot of that snow like we'd like to. Speaking of snow, not a whole lot of it in places like Chicago, the Rocky Mountains, as well and it's been warm across much of the east coast.

You get a bit of a cool down over the next few days, but temperatures today could be record breaking across the eastern quarter of the country once again.

SAMBOLIN: Record breaking.

ROMANS: It was beautiful. Yesterday, it was 60 something in New York and Washington, D.C. All right, thanks, Rob.

MARCIANO: I guess.

SAMBOLIN: It's 7 minutes past the hour. New this morning, the head of NATO says if Syrian President Bashar Al Assad were to use chemical weapons against his own people, it would provoke an international response. President Obama has also warned there would be consequences.

Last night on "OUTFRONT," Peter Brooks, a former Deputy Assistant Secretary of State spoke about the dangers of the Assad regime.


PETER BROOKES, FORMER DEPUTY ASSISTANT SECRETARY OF STATE: This regime is a real problem for us. It aligns with Iran, its possession of chemical weapon, weapon of mass destruction, its human rights record, its support of terrorism. You know, this is a regime we'd like to get out of the way. But we don't want to see it replaced with people we don't support, either.


SAMBOLIN: The Syrian foreign ministry denies they have plans to use chemical weapons.

ROMANS: New evidence coming to light in the Trayvon Martin investigation. A picture of suspect George Zimmerman released by his attorney reportedly taken by a police officer the night Zimmerman shot and killed Martin. The bloody picture itself isn't new, but the fact that it's a high revolution color photo is. Zimmerman's attorney says it gives the case more context.


MARK O'MARA, GEORGE ZIMMERMAN'S ATTORNEY (via telephone): Is it devastating? No, but it's just one piece of evidence that shows what George was going through that night, and why he reacted the way he did.


ROMANS: Zimmerman faces a second degree murder charge for killing Martin back in February. Prosecutors say Zimmerman's profile and pursued Trayvon Martin.

SAMBOLIN: Jovan Belcher's family is speaking for the first time since the Kansas City Chiefs' linebacker fatally shot his girlfriend before turning the gun on himself. Belcher's sister and uncle joined his aunt as she spoke outside the home where the football star lived with 22-year-old Kasandra Perkins and their 3-month-old daughter.


MARY KIMBLE, BELCHER'S AUNT: We will cherish the wonderful memories we have of Jovan. And pray that those memories will bring us peace as we grapple to understand the unpredictable and tragic ending of his life and the life of Kasandra Perkins.


SAMBOLIN: Belcher's mother has been given temporary custody of the couple's daughter, Zoe.

ROMANS: Lightning may force the removal of more than 4 million pounds of explosives that remain in a small town in Western Louisiana. They say they'll stop if lightning is spotted within five miles of the explosives site.

The company is accused of improperly storing a total of about 6 million pounds of explosive material. The town of Doyline remains evacuated. By the way, some scenes from the show "True Blood" are filmed there, believe it or not.

All right, let the speculation begin, Will and Catherine are expecting a baby, but what happens if they have twins? This woman is 15 seconds pregnant and the world is just consumed with the talk. What happens if it's a boy and a girl? We'll talk succession coming up.


ROMANS: A royal baby is on the way in Britain. Buckingham Palace has confirmed that Prince William's wife, Catherine --

SAMBOLIN: You should see your face right now.

ROMANS: -- the Duchess of Cambridge is pregnant. They married in a lavish ceremony last year and Britons have been waiting ever since for the announcement the dazzling young couple would become parents.

Royal correspondent Max Foster is in London. Good morning, Max. You know, Max, we know the duchess is not yet 12 weeks pregnant. The royal family forced to announce the news early because she was taken to the hospital for acute morning sickness. What's the latest on her condition, Max?

MAX FOSTER, CNN ROYAL CORRESPONDENT: Well, they were aware they couldn't keep this story quiet once they were in the hospital. They wanted to be as open as possible. They had to announce it to the public at the same time they did to the queen and Prince Charles and that just gives a sense of how this story was rushed yesterday.

You wouldn't normally announce a pregnancy of the royal family before twelve weeks. There was also concern as she was taken to hospital. She's been in overnight. We're not getting an update. I've spoken to the palace today. A source has told me they do expect Prince William to arrive today to check in on his wife, and we may get an update after that. Also, some suggestion that the Middletons are on their way up from Bucklebury today.

So we're expecting some comings and goings, and possibly an update at some point. But so far, no update on how she's feeling. She's going to be in a few days, we know that.

ROMANS: Well, Max, it sure sets you up for a very long bump watch if she's not even 12 weeks pregnant yet. This will be a very big story for some time to come. The baby, of course, is in line to be either queen or king, after Prince Charles, and then Prince William.

And there's about to be a change in the rules, right? A succession in terms of whether the baby is a boy or a girl. Explain to me the details on the succession changes.

FOSTER: OK. Well, it's very, very complicated. I'm told to keep it very simple and break it down. It's basically the case, if at the moment -- I mean, actually, if she has a boy, and then the other successors die, that boy will become king and if it's a girl, her younger brother will still become king. And that's a succession inherent in the law and they do want to change it.

There is agreement in government and in governments across the commonwealth, they do want to change it. But it's very, very complicated. They don't even know which laws going back hundreds of years to change at this point and there hasn't been given time in Parliament to do this. So, it's not a done deal yet but they do want to change it.

There's a lot of speculation, I have to say, today about whether or not she has twins and what that means. This is "The Daily Telegraph", a very well-regarded reporter writing this article talking about twins. What does happen if she has twins? Well, if the first twin comes out that will be in direct line if it's a boy.

But if it's cesarean what happens? Well, I'll tell you, it's basically up to the surgeon. However he picks out first will become next in line. So a surgeon --


FOSTER: -- will be picking the next monarch for 16 countries. But he'll do it in medical reasons, I'm told.

ROMANS: Dr. Kingmaker or Queenmaker. Oh, wow, you would, you have so much to talk about for the next oh, 32 to 30 -- 30 to 32 weeks. Max Foster -- thanks, Max.

Coming up in the 7:00 hour of "STARTING POINT", Soledad O'Brien talks to former British Prime Minister Tony Blair.

SAMBOLIN: That doctor carriers a lot of power. That is incredible! Can you imagine? Can you look first and then yank the girl?

ROMANS: You can't even believe --

SAMBOLIN: All right. Seventeen minutes past the hour. It's time for your "Early Reads" -- how your local newspapers are reporting on the national headlines.

So we're going to start with "The Kansas City Star", with new information on the murder/suicide involving Chiefs' star Jovan Belcher. So the newspaper reports the team was trying to help Belcher as his domestic issues worsened at home -- the Chiefs providing counseling to him and his girlfriend Kasandra Perkins.

And seconds after the fatal shooting, the newspaper reports, that Belcher actually leaned over Perkins' body, kissed her forehead, and said that he was sorry. His mother was looking on at the time. Belcher then kissed his mother and his 3-month-old daughter Zoe and drove his Bentley to the Chiefs' facility where he committed suicide in front of coaches, and in front of the general manager there.

ROMANS: Just a tragic --

SAMBOLIN: Horrible.

ROMANS: "The Newark Star Ledger" in New Jersey reporting that Governor Chris Christie is going to ask the federal government to reimburse the state for 100 percent of the cost of rebuilding from Superstorm Sandy. Christie heads to Washington on Thursday to meet with federal officials. You know, parts of the New Jersey coastline, complete devastated by this powerful storm. You know, Governor Christie estimates that Sandy caused upwards of $20 billion of damages.

SAMBOLIN: And "The Atlanta Journal-Constitution" with more information about dozens of children and adults that were sickened by carbon monoxide poisoning at the local school there. At least 49 people were sent to the hospital yesterday.

Take a look at this. Fire officials believe the heating system failed there. Finch Elementary had no carbon monoxide detectors, either, which, I guess, they're not required in Georgia. And many parents complained they were left in the lurch because of poor communication as well.

On "STARTING POINT", in the 8:00 a.m. hour, Soledad O'Brien will talk to a student, a parent and also a school official. So, we'll get lots of sides there.

ROMANS: We hope they're all well this morning.

All right. Coming up, amazement and dismay. That's how FedEx's CEO is describing the fiscal cliff crisis. I sat down with Fred Smith. Hear what he has to say about he and other CEOs are responding. (COMMERCIAL BREAK)

SAMBOLIN: Welcome back to EARLY START. Twenty-three minutes past the hour.

We are finding your business this morning. U.S. stock futures are up slightly as of now, but there's a lot of volatility in the markets because of the gridlock in Washington over the fiscal cliff.

So, Christine, you interviewed the CEO of FedEx yesterday. What did he have to say?

ROMANS: You know, I asked Fred Smith. And he's somebody who started his own company, you know, in 1971, and he has watched Washington through all of these iterations over the past 20 or 30 years. And, you know, I just said, what are company executives doing when they watch how Washington is running our business? Could you run your business that way?

CEOs say, of course, we could never run our business this way. We need some clarity on corporate taxes. We need clarity on personal income taxes. We need clarity from all of these different -- you know, we need to know what's happening with the government's budget.

Listen to a little bit of our exchange.


ROMANS: As a CEO, when you're watching the fiscal cliff, I mean, how do you make decisions? Is it irrelevant to your business if we go over the fiscal cliff? I mean how, how does a CEO look at what's happening in Washington and decide for next year?

FRED SMITH, CEO, FEDEX: Well, I think most of the CEOs look at the situation in Washington with complete amazement and dismay, to be frank about it. The problem is that the ideological pinnings on both sides of this argument are so difficult to bridge that it's going to be hard for them to get a deal.


ROMANS: I asked him if you know, they should raise taxes on the wealthiest Americans, if that would be an important first step in getting a deal done. He said, Christine, they're fighting about the wrong thing. We should be talking about lowering taxes on corporations and getting big companies the incentive to start hiring again. And "gazelles", as he calls them, these emerging companies that have a chance to hire a lot of people, the focus should be there. It shouldn't be in the fight over taxes for the very rich.

So, fiscal cliff is amazement and dismay. I mean, I've heard it again and again.

SAMBOLIN: Those are the two words I focused on, amazement and dismay, and my question becomes, you know, is he making any changes for FedEx based on the fact that this is looming? ROMANS: Companies need clarity. And even in the third quarter GDP report you can see that companies holding back on computer purchases, on equipment purchases, because they don't know what's going to happen next year, if there's going to be a recession or not.

Can I tell you, not to know whether you're going to have a recession is such an uncertainty for American our families, for your household budget? I mean, Christmas spending -- how do you do holiday spending if you don't know what kind of tax refund you're going to get?

So, Congress is in a sticky spot here. The mood was pretty grim in Washington yesterday when I was there for that interview. I'll tell you that a lot of folks were saying they're not making plans for the holidays, Washington insiders, because they think that they're going to be doing this down to the very last minute.

SAMBOLIN: I know you were dismayed saying that typically behind the scenes, at least, they're cutting some deals, and you felt that watching here and what you're talking about is exactly what's happening.

ROMANS: People who are in on the discussion Zoraida told me yesterday that what we're seeing play out is what's playing out. There's no back channel negotiation. There's no -- we're seeing it play out in real time and that's -- that's actually a little bit frightening.

And because of this, there's something else that's happening I want to tell you about. Oracle is the latest company that says it's going to pay out dividends to its shareholders early to avoid higher investment taxes next year. This means a payday early for investors. Mom and pop investors, too. You're going to get a dividend before the end of the year. Dividends currently are taxed at 15 percent.

In 2013, if we fall off the fiscal cliff, dividends will be taxed at ordinary income rates. So your rate on your investments is going to go up depending on your tax bracket, that means 15 percent, 28 percent, 31 percent, 36 percent or 39.6 percent. So the rate on your investment income could be more than double what it is right now for middle and high income earners.

Other companies, Zoraida, that have paid out their dividends early, Wal-Mart, Costco, department store Dillard's, apparel company Hot Topic.

SAMBOLIN: So they are preparing for this?

ROMANS: Oh, yes. They're getting the money out early so that their investors don't pay higher taxes on it.

SAMBOLIN: What is the one thing we need to know about our money today?

ROMANS: Ho, ho, ho, December has been the best month for stocks, the best month over the past 30 years. December has been the Santa Claus rally they call it. When investors square their portfolios, they close out their positions, could the fiscal cliff talks in Washington kill Santa Claus? Another reason to be mad at your policymakers.

December should be a good month. It historically is. We'll see if it is.

SAMBOLIN: All right. Thank you.

ROMANS: You're welcome.

SAMBOLIN: Twenty-seven minutes past the hour.

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