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Obama Draws Line in the Sand; House Passes Fiscal Cliff Deal; No House Vote on Sandy Relief Bill; Clinton's Close Call; Chavez's "Delicate Situation"; Prepare for a Smaller Paycheck; Pennsylvania Sues NCAA

Aired January 2, 2013 - 06:00   ET



UNIDENTIFIED MALE: On this vote, the yeas are 257, the nays are 167.


ZORAIDA SAMBOLIN, CNN ANCHOR: Makes you think, can I say, "Better late than never"?


SAMBOLIN: Congress finally comes together, passes a late-night fiscal cliff deal. This morning, we have the winners and the losers.

ROMANS: Delicate condition, that's the word on Hugo Chavez's health this morning. The Venezuelan people told to put off new year's and instead pray for their president.


UNIDENTIFIED MALE: With us making a tight circle around our property here, watching me from the air.


SAMBOLIN: This is just an incredible story. A man catch as thief trying to burglarize his home, all from 300 feet in the air. We're going to share the details of that story. Good morning to you. Welcome to EARLY START. Happy you're with us. I'm Zoraida Sambolin.

ROMANS: And I'm Christine Romans. It's 6:00 a.m. in the East. Let's get started.

Up first, back from the abyss, a huge relief for tens of millions of taxpayers and small business owners this morning. Late last night, the House passed a Senate bill that temporarily brings us back from the bottom of the fiscal cliff. The final vote: 257 for, 167 against. And you might be interested to know that House Speaker John Boehner voted yes.

Here's how the deal shakes out. Couples earning less than $450,000 a year are spared an income tax hike. Itemized deductions are capped for couples making over $300,000 a year. Unemployment benefits extended for a year for 2 million Americans. And that thorny alternative minimum tax gets a permanent adjustment for inflation.

SAMBOLIN: Paul Ryan voted yes as well, didn't he?

ROMANS: I thought he voted against it. Did he vote against it?

SAMBOLIN: OK, we're going to get to the bottom to the bottom of that and find out. He voted yes. I figured Brianna Keilar would probably know. I was going to ask her.

So here's what the bill doesn't address: Drastic government spending cuts -- that's been deferred for two months. And the next big battle could be over the $16.4 trillion debt ceiling.

We reached it this week and last night, the president made it clear he is in no mood for another ugly fight over raising it.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: I will not have another debate with this Congress over whether or not they should pay the bill that they've already racked up. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic, far worse than the impact of a fiscal cliff.


SAMBOLIN: White House correspondent Brianna Keilar is live from Washington. First, I want to start out with Paul Ryan, he did vote yes, didn't he?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: I should know that honestly, but I don't. I was asleep. Did he vote yes?

SAMBOLIN: I have the vote of 257 in favor and 167 against and Paul Ryan did indeed vote in favor of that. So let's move on here. I know you've been covering a lot so I'm sorry. I don't mean to catch you off guard here. So can you elaborate for us what are we getting in this deal? What got done? Very importantly, what did not get done?

KEILAR: The big things, the extension of the Bush era tax cuts for couples making up to $450,000, $400,000 for individuals. This is significant and it's permanent. So that makes it especially significant. What really didn't get done though is what the whole fiscal cliff was supposed to serve as an incentive to do, which was deficit reduction on a larger scale to deal with the long-term fiscal health of the country.

That's what we are going to see Congress tackling or at least trying to tackle here in the coming months. That would be entitlement reform. Trying to make sure Medicare and Social Security don't cost so much money over time. And also tax reform, trying to bring in some more revenue. Republicans, more a fan of entitlement reform obviously than Democrats and Democrats want to see it increased revenue through tax reform. Those are the big things, and spending cuts only dealt with avoiding "The Sequester" for a couple of months and the debt limit wasn't increased that is still looming and we'll see the fight here in the next couple of months.

SAMBOLIN: We sure will. So who are the winners and losers in the first fiscal cliff fight?

KEILAR: This is interesting because there are some obvious ones. And that would be people who make a lot of money. I mean, if you're that cut-off of $450,000, $400,000 for individuals. But also there is an itemized deduction cap. So if you do itemize, the cut-off for that is $300,000 for couples, $250,000 for individuals.

So if you are making more than that, you will see a phase in of the itemized deductions being capped. Some of the winners and some that you may not know about, milk, sugar and peanut producers, they get to hold on to a tax subsidy. The long-term unemployed will see their benefits extended.

Doctors got a doc fix so they will not see their Medicare payments reduced, and also I think just overall the middle class in terms much alternative minimum tax being extended permanently, Zoraida. They won't be hit with it.

So really the winners are folks who may not see a big change from before. But if they haven't been protected by what was done in this bill, they would have felt it in a bad way.

SAMBOLIN: You know, I was really happy to hear about the milk. They were predicting it would double or triple in price so I was very happy to hear that that got in there. Another big winner that a lot of people are talking is the vice president.

KEILAR: That's right. Joe Biden was seen, being called the closer. He sort of stepped in at the 11th hour, brokering this deal with Mitch McConnell, the Republican leader in the Senate.

So Joe Biden, I think he does sometimes gets criticized, but he really showed his mettle, why he works so well as a proxy for President Obama and it comes down to his institutional knowledge of Congress.

He spent decades in the Senate. He has really well-worn relationships with a lot of senators who matter, including Republicans, very good relationships and you could argue they definitely paid off here -- Zoraida.

SAMBOLIN: Yes, certainly in his almost element negotiating this deal. Brianna Keilar live in Washington for us. Thank you.

ROMANS: While everyone was focused on the fiscal cliff deal getting done, the 2-year-old payroll tax holiday, the holiday is over, America. Your taxes are still going up. The rate you pay out of your paycheck for payroll taxes to fund Social Security is going back up to 6.2 percent.

Here is how it affects your paycheck. If you're earning 30,000 a year, you are going to pay about $50 more a month in taxes. If you make say $113,000 a year, you are going to pay an additional $189 per month in payroll taxes.

So here is the truth. For almost everybody in America, your tax rates are not going up, but your paycheck will still be smaller. Plan accordingly. Let's bring in Chris Frates, a reporter from "The National Journal." He is in our Washington Bureau. Chris, you've been following behind the scenes action. How did this deal get done?

CHRIS FRATES, REPORTER, "NATIONAL JOURNAL": At the 11th hour, just like almost everything Congress does, right? The Senate Republican Leader, Mitch McConnell, was having some difficulty with Harry Reid. He wanted to do a deal. He was feeling like maybe the Democratic leader would string him along, trying to push him toward the cliff to increase his leverage.

So he called Joe Biden. As Brianna pointed out, they have a very good working relationship. They cut a deal last year to increase the debt limit for the government. They -- they increased or extended the payroll taxes you were talking about in 2010.

So he called his old friend, Joe and said, you know, I have this from some folks who were there. He went off the Senate floor into the cloak room and took Joe Biden's call and said, you know, a lot of guys here just don't understand how things work like you do, Joe, can we work together?

And Joe Biden said let me call you back. He did and put an offer on the table. The first one of many that got us to the deal that we see today.

ROMANS: Some interesting split, Speaker Boehner voted in favor of the bill, Eric Cantor did not. Paul Ryan from Wisconsin voted in favor of the bill, Marco Rubio from Florida did not. Are we seeing a fundamental split here in the Republican Party?

FRATES: Well, I think so. I think a lot of conservatives felt like there weren't the spending cuts that they needed. That there was revenue increase here without the spending cuts and they were just going to take a stand against that.

That's not unusual and kind of shows why the era of the big deal, the grand bargain just seems to be over in Washington and we've really come in to the showdown strategy of governing.

Where we're going to set up every, you know, few months some big to do where we are forced into some action because Congress can't solve all of these problems comprehensively.

ROMANS: It's because there is no middle, right? I mean, everyone has moved to there -- for a lot of different reasons, but Congress looks different today than it did a generation ago, am I right? FRATES: You are absolutely right. Only 15 to 18 House Republicans ran in seats that the president won. So you have a very small amount of the over 200 Republicans in a seat where they feel like a Democrat might beat them. Therefore, they are looking more over their right shoulder at a primary than they are worried they may look too conservative in the general election.

ROMANS: Meanwhile, John Boehner voted in favor of it. In a way, he's almost casting a vote in favor of the middle.

FRATES: Right. Well, he was casting the vote as leader and as the leader of the Republicans in a bipartisan deal that was struck with his -- his counterpart in the senate. He -- he kind of went with the Republicans and the big -- big partisan manner, while he allowed a lot of his conservatives to vote no.

Remember, this was a vote that the speaker allowed a number of Republicans, a majority of Republicans to vote no. That rarely happens today. Usually a speaker won't bring -- a Republican speaker won't bring a bill that doesn't have majority support among his caucus.

ROMANS: Fascinating. Meanwhile, we have liberals and conservatives angry over the deal. And the Tea Party Express, I'm extremely disgusted with what happened in the House last night. There will be consequences.

And Adam Greene with the "Progressive Change Campaign Committee" says the president remains clueless in how to use leverage in negotiation. Republicans publicly admitted they lost the tax debate and would be forced to cave, yet the president just kept giving stuff away.

FRATES: Well, I think so, but that's what compromise is. Nobody likes it on the extremes. You know, that was Harry Reid's position as well. I mean, he was not thrilled that Biden swooped in here at the last minute.

He felt like they had maximum leverage. That they should force Republicans to take a vote on raising taxes on people that make over $250,000 instead of the $450,000 limit we saw on the deal.

ROMANS: A lot is being made this morning about the fact that they basically reset the line for rich at $450,000 in America and the president said it was $250,000. Median income in America is $55,000. You think about what a big gap that is.

Henry Blodget of Business Insider is railing. He says that rich people got off pretty easily in this deal. There are some interesting analyses this morning about who won and who lost. Chris, thanks so much. It's nice to see you.

SAMBOLIN: And the television of rich, right? That's the big debate.

ROMANS: Yes, this really is.

SAMBOLIN: All right, it's 9 minutes past the hour here. New York area lawmakers are up in arms after the House failed to vote on funding for victims of Superstorm Sandy. Republican leaders wrapped up the session without acting on billions of dollars in aid for states that were ravaged by Sandy. That decision drew an angry response.


REP. CHARLIE RANGEL (D), NEW YORK: The leadership just walked away without saying they didn't have time to deal with the millions whose lives were affected. Maybe you should remind Americans that maybe they should call and ask the Congress, ask the speaker, please reconsider.


SAMBOLIN: New York Republican Congressman Peter King called it indefensible and a betrayal of trust. Last week, the Senate approved more than $60 billion in Sandy relief last week.

ROMANS: Now with the latest on Secretary of State Hillary Clinton's close call. Doctors say the blood clot could have been fatal, caused stroke or led to seizures or epilepsy. She is being treated with blood thinners and she should make a full recovery.

Former President Bill Clinton and daughter Chelsea both seen visiting her at New York Presbyterian Hospital yesterday. This blood clot was found in the vein between the brain and the skull. Chief medical correspondent and neurosurgeon Dr. Sanjay Gupta shows us where.


DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: We know that in Secretary Clinton's case, it is actually on the right side of her head somewhere in this area. It's called the right transverse sinus. Let me show you on the model. I'll show you the left side for sake of demonstration.

You can actually see where the veins are. You can see the blue area right there. That is the area that drains blood away from the brain and one of these veins in this area, that's where that clot actually has occurred.


SAMBOLIN: I just want to reiterate that she is expected to make a full recovery.

Three weeks after cancer surgery, Hugo Chavez' health is said to be in a delicate state. His vice president and successor Nicholas Maguro says he is battling complications from a respiratory infection and his recovery is slow going.

ROMANS: North Korean leader Kim Jong-Un makes a major policy statement and calls for an end to confrontation with South Korea. Kim also said he wants to overhaul the country's economy and he celebrated last month's controversial launch of a long-range rocket that irked the U.S., South Korea and other Asian allies. SAMBOLIN: No sign of leaking fuel yet from a barge that ran aground during a severe storm. This was off of Alaska's coast. The Coast Guard is saying there is no indication that the 266-foot long cullet was breached and there is no evidence of a spill.

The oil drilling rig was being towed back to its winter home in Seattle when a storm hit. The Coast Guard evacuated the rig's 18-man crew Saturday night. The barge is carrying 143,000 gallons of diesel fuel and 12,000 gallons of lube oil and hydraulic fuel.

ROMANS: If you anywhere as cold as New York this morning, can you even begin to imagine doing this?

Thousands of brave jumpers across the nation taking some icy plunges. We'll tell you why.


SAMBOLIN: Welcome back. Fifteen minutes past the hour.

A pilot could not believe his eyes as he did a fly by over his Florida home. David Vintner (ph) spotted a burglar, that guy right there, trying to break in. He watched as the would-be thief stole his trailer. He then followed the suspect from the air in his twin engine Cessna. The pilot eventually landed his plane, called 911, called police. They arrested the man some 40 miles away.

ROMANS: Crime didn't pay.

SAMBOLIN: How about that? Love it.

ROMANS: President Obama headed to Hawaii this morning to finish his family vacation. He left Washington late last night after the house approved legislation that keeps the nation from going over the fiscal cliff. The bill which passed in the Senate yesterday morning raises taxes on the wealthiest 2 percent of Americans but maintains tax cuts for most people.


OBAMA: Today's agreement enshrines, I think, a principle into the law that will remain in place as long as I am president. The deficit needs to be reduced in a way that's balanced. Everyone pays their fair share. Everyone does their part. That's how our economy works best. That's how we grow.


ROMANS: The president said the legislation will prevent the economy from slipping back into recession.

SAMBOLIN: And today, the governor of Pennsylvania will announce a lawsuit against the NCAA over the stiff sanctions it imposed on Penn State University in the wake of the Jerry Sandusky scandal. He is the former assistant football coach convicted of sexually abusing boys.

NCAA fined Penn State $60 million and stripped the football program of 14 seasons of victories under legendary late head coach, Joe Paterno.

ROMANS: A retreat for the Connecticut attorney who sought to sue the state for $100 million over the school massacre in Newtown, Connecticut. The outcry for the potential lawsuit was so strong, Irving Pinsky has withdrawn it.


IRVING PINSKY, WRONGFUL DEATH ATTORNEY: This is a horrible tragedy, and if I offended anyone, I deeply apologize.


ROMANS: Pinsky represents the parents of a 6-year-old student who survives the massacre. He may seek to file the suit at a later date. Pinsky will join us later this morning on STARTING POINT at 8:00 Eastern.

SAMBOLIN: Some rescuers found themselves in trouble in an icy lake right outside of Los Angeles.

Look at this -- a sledder slid out of control and into the water. So, several other people tried to pull them out. But many of them fell into the water as well as they needed to be rescued. Thankfully, everyone got out OK within about 10 minutes. The guy who got them out will be here in the next hour on STARTING POINT. A hero there.

ROMANS: And these people went in on purpose. Of course, this is almost as much of a part of New Year's Day as weight loss and money resolutions. About 800 people kicked off 2013 by jumping into Lake Minnetonka in Minnesota. Air temperature and wind chill was around 17 below. So, you can imagine the thrill the ice divers were feeling.

The 24th annual Polar Bear Plunge in Decatur, Alabama wasn't as chilly as Minnetonka. The air temperatures there in the low 50s. But the Tennessee river wasn't exactly a hot tub either. About 100 people jumped in there in Decatur.

SAMBOLIN: Every year, they do this in Chicago as well. Chicago polar bear plunge. You still have an opportunity, because the 13th annual plunge is Sunday, March 3rd. You can do it.

ROMANS: Oh, really?

SAMBOLIN: We should go to Chicago and do it together.


SAMBOLIN: No comment.

Nineteen minutes past the hour. A new club opening its doors in the Mile-High City. Denver's Club 64 is the first pot club in Colorado. It gets its name from Amendment 64 which made recreational use of marijuana legal. The club is private, open only to members who pay a $30 fee.


ROB CORRAY, CO-OWNER, CLUB 64: You can't buy marijuana from the club, but you can come in here, you can bring marijuana, you can share marijuana. This club is what voters in Colorado finally wanted. They wanted adults to be able to get together and exercise our freedoms, together.


SAMBOLIN: There will be another year before stores selling marijuana will be allowed to open in Colorado.

ROMANS: The early look appears positive. When we come back, a check on the first stock market reaction.

SAMBOLIN: You said two thumbs up.

ROMANS: Double thumbs up.


ROMANS: Look, stock futures are up 2.5 percent right now. So, I'm going to give you a real check of the global markets and what we expect in the U.S. That's next.


SAMBOLIN: We are minding your business.

World markets rallying after Congress hammered out that last minute deal on the fiscal cliff last night.

And Christine Romans has details and what we can expect from the U.S. markets today.

ROMANS: I think we expect a rally today, to be quite honest. You got stock futures up sharply here. Dow futures up 200 points right now. European markets and Asian markets, they are rallying. A good way to start 2013 after a strong 2012 for stocks.

Let me show you what last year looked like and what this rally would be adding to. The S&P 500 up 13.5 percent in 2012. That's best indicator for the stocks and for your 401(k). It's one of the 10 best years ever.

The Dow gained more than 7 percent. The tech-heavy NASDAQ, NASDAQ was up 16 percent. So, we're likely to see a rally again today on top of all those strong gains because of the resolution in the fiscal cliff.

Two big issues, though, not addressed in that bill yesterday. One, spending cuts, the sequester. That issue will be delayed two months.

Two, nothing done about the debt ceiling in that bill. The treasury secretary says we officially hit it, $16.394 trillion. So, they can move some money around in the near term. But they got another fight coming on that. And a lot of analysts are warning that the gridlock in Washington could cause the U.S. even more problems. A Citi FX analyst Steve Englander says the process was so chaotic, the outcome so unsatisfactory, that we are likely to see a further U.S. downgrade at some point.

Also worth mentioning, we don't -- we don't have a continuing budget resolution. That deadline is set for March 27th.

So, expect some political fights ahead. But let's put this all in perspective. Ned Riley, the CEO of Riley Asset Management, he's very positive for the year. Listen to what he said.


NED RILEY, CEO, RILEY ASSET MANAGEMENT: If I put this fiscal cliff in the context of say, all of the Godzillas of the world or the Armaggedons of the world that have been portrayed, I would have to put it in about the 13th position. Clearly, the financial crisis we had in 2009 and '10 was so far much bigger than what we have confronted with today in this fiscal cliff.


ROMANS: So, a little perspective from Ned Riley. Again, he's very positive on the market. You know, the consensus of money managers surveyed by CNN Money is you'll see another gain this year of maybe 4.5 percent. It won't be another barn burner like last year. But they're expecting gains overall.

Now, the one thing you need to know about your money today, for the vast majority of Americans, your taxes are not going up, but your paycheck will still be smaller. If you're making $30,000 a year, your monthly paychecks will be $50 less. If you're making $113,000 a year, you're going to take home $189 less a month.

It means you need to budget. You need to budget. You need to budget.

SAMBOLIN: I hate ending on a negative note.

ROMANS: Well, I don't think it's negative. I think it's really positive, because I think if people can sit down and look at their budget know that you're not going to have that little freebie, that freebie we've had for the past couple of years is going away. It's always meant to be temporary.

So, budget. Live 15 percent below your means. Save 10 percent of your paychecks, and you are going to be building wealth. That's what everyone --

SAMBOLIN: So, knowledge is power.

Here's another tidbit of information. There's a woman who came on earlier. She's a financial expert, Manisha Tukar (ph). And she said we could contribute $500 more now to our the 401(k).

ROMANS: That's right.

SAMBOLIN: So, that's a bit of good news.

ROMANS: So, the 401(k), yes, they are up. So, yes, take a look at all that, make sure you're maxing out your 401(k), make sure you're getting all the free money that's on the table.


ROMANS: Perfect time of the year to do it. Perfect tine of the year to do it.

SAMBOLIN: So, 26 minutes past the hour.

When public schools in Marlboro, New Jersey, open their doors this morning, there will be a major change there. They have armed security guards. We have that story coming up next.