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THE SITUATION ROOM
Fiscal Fight; Syria's Civil War; Interview With Congressman Joaquin Castro
Aired January 4, 2013 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: Happening now: back to the brink on Capitol Hill. Lawmakers are drawing battle lines for the next fiscal fight.
Also, U.S. troops take up positions to stop Syria's bloody civil war from spreading to neighboring Turkey.
And Navy women breaking barriers underwater. We will talk to one who could become the first female nuclear submarine commander.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
All that coming up, but right now, a decision on a critical Cabinet opening for President Obama's second term, one source telling CNN the White House has told some senior members of Congress to expect the president to nominate Chuck Hagel as the new defense secretary, with another source calling the nomination -- and I'm quoting now -- "locked down."
Our chief political analyst, Gloria Borger, has got the news for us. She's been breaking the story for us over the past couple hours.
What are sources specifically telling you?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: To expect the nomination of Chuck Hagel as secretary of defense probably next week, maybe early next week.
This is something that we have been reporting has been out there. He's been at the top of the list since about mid-December. There were some people who believed that after the president withdrew the Rice nomination or she withdrew herself for the nomination as secretary of state, that there would be some concern about a fight over Chuck Hagel, who is a Republican, but also controversial because in the past, he has been against sanctions for Iran and for talking for Hamas.
The pro-Israel lobby is dead set against him. But in the end, I was told as you just said that some senior lawmakers have been told by the administration to get ready for this nomination to come up to the Hill.
BLITZER: A whole bunch of respected foreign policy folks just issued a joint statement in support of Chuck Hagel. He's got a lot of backers out there as well, but maybe most importantly the vice president, Joe Biden.
(CROSSTALK)
BORGER: Yes, Joe Biden is a very close friend of Chuck Hagel's. They served together in the Senate, as you well know. And I think he's been doing an awful lot of groundwork for Hagel on the Hill. I'm also told that the former senator has been talking to senators privately to pave the way for his own nomination.
So while people came out against him immediately when his name was floated, what you have seen occurring is kind of a back game. And they're going around and saying, you know what, there is a reason to nominate Chuck Hagel and you ought to be for him.
BLITZER: Leon Panetta has made it clear he wants to go back to California.
BORGER: That's right. He has made it clear that he needs to leave his post. And he has served in government an awfully long time over the years and is going to go back to California.
We have Secretary of State Hillary Clinton also leaving now. These are two high-profile jobs. I'm also told, by the way, that Jack Lew who currently serves as the chief of staff to the president, been very involved in these fiscal cliff negotiations, is likely to be nominated as the next treasury secretary.
He's got some Republican opponents on the Hill. And there's some concern in the business community that he doesn't have enough business and market expertise. But he is expected to be confirmed after nomination.
BLITZER: Chuck Hagel maybe to Defense, Jack Lew to treasury. Still got to do CIA. He's got some other jobs to do as well. But the president is still in Hawaii right now, and he's coming back over the weekend.
BORGER: Yes. And it's interesting when you talk about this president and talking to people who are familiar with his thought process. It's really about a comfort level for this president. He likes to nominate people he already knows, feels comfortable with in his inner circle.
We have seen that on the White House staff, for example. That's I think what we're seeing here in these nominations.
BLITZER: Obviously feels comfortable with John Kerry, who was nominated as secretary of state. I think he likes Chuck Hagel a lot. We will see despite the confirmation process how it unfolds.
(CROSSTALK)
BLITZER: Thanks very much, Gloria, for that.
BORGER: Sure.
BLITZER: A brief glimmer of bipartisanship is being replaced with new battle lines up on Capitol Hill.
Kate Bolduan is here with more on this part of the story -- Kate.
Surprise, surprise, Wolf, lawmakers are already digging in ahead of looming fights, including one over raising the debt ceiling, coming very soon, which is already prompting talk of a government shutdown, if you can even believe it.
CNN's national political correspondent, Jim Acosta, is here with the latest.
Jim, say it ain't so, but what is the latest you are hearing?
JIM ACOSTA, CNN CORRESPONDENT: It seems old habits die hard, especially up on Capitol Hill, Kate.
Remember all of those feelings of kumbaya as the 113th Congress was sworn in yesterday? Well, never mind.
(BEGIN VIDEOTAPE)
ACOSTA (voice-over): After surviving a failed coup led by his own members, beleaguered House Speaker John Boehner wants to take that same fractured party into battle. In a closed-door meeting of House Republicans, a source in the room tells CNN Boehner said he will demand budget cuts that are larger than any increase in the nation's debt limit.
"With the fiscal cliff behind us," Boehner told his members, "the focus turns to spending." That puts Republicans in Congress back on a collision course with the White House after the president insisted earlier this week he will not negotiate over the debt ceiling.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not have another debate with this Congress over whether or not they should pay the bills that they have already racked up through the laws that they passed.
ACOSTA: If the president won't come to the bargaining table, one top Republican in the Senate, John Cornyn, says in an op-ed in "The Houston Chronicle," "It may be necessary to partially shut down the government in order to secure the long-term fiscal well-being of our country."
UNIDENTIFIED FEMALE: On this vote, the yeas are 354, the nays are 67.
ACOSTA: A preview of that brinksmanship came in the House where 67 Republicans, including House Budget Chair Paul Ryan, voted against $9.7 billion in aid for victims of superstorm Sandy, despite the tongue-lashing they got from New Jersey Governor Chris Christie.
GOV. CHRIS CHRISTIE (R), NEW JERSEY: Shame on you. Shame on Congress.
ACOSTA: The fact that the rest of the storm relief is now up in the air until a vote later this month was a letdown for New York and New Jersey lawmakers, even the freshmen.
REP. SEAN PATRICK MALONEY (D), NEW YORK: I'm new here. I don't know all the rules of Washington, but it seems like the rule here is to put off until tomorrow what should be done today.
ACOSTA: It was a return to the reality of broken government in Washington, after all that goodwill on display when Vice President Joe Biden was swearing in members of the 113th Congress and hamming it up with their loved ones.
One day later, we asked the vice president if things have changed. His response off-Cameron, "We're back to certifying the election."
Biden was heading into the House to confirm the results of the presidential election, a ritual mandated in the Constitution and a reminder of the few things that can get done without a fight.
(END VIDEOTAPE)
ACOSTA: Asked whether the Congress is back to a pattern of brinkmanship, one top GOP aide said, yes, absolutely. The next few months, the aide added, will not be any fun -- Wolf and Kate.
BOLDUAN: And Speaker Boehner has been making that demand since the beginning of this fight, budget cuts equal to or greater than any debt ceiling increase. It looks like that has not changed, at least right now.
BLITZER: And election is official today, right?
ACOSTA: That's right.
BLITZER: They had the Electoral College decide it.
ACOSTA: That's right. And as somebody who covered the Romney campaign extensively, I'm looking at today as closure.
But one other thing that did come out earlier this afternoon, Chris Christie and the governor of New York, Andrew Cuomo, put out an e-mail saying, we expect this other $50 billion to get passed, because it was only the first $9.7 billion that got passed today. We expect this other $50 billion to get passed later on this next. That is not a sure thing. Has to get through the House, then go over to the Senate. Starts all over again.
BLITZER: Not a sure thing until it's done.
ACOSTA: That's right.
BLITZER: The president signs it into law.
ACOSTA: That's right.
BOLDUAN: You can be sure that legislators and lawmakers in New York and New Jersey will be making a stink if that second part doesn't get passed.
ACOSTA: Yes.
BOLDUAN: That's right. Jim Acosta, thank you.
BLITZER: At least 80 people died in civil war fighting in Syria today according to opposition groups, with bloodshed increasing in the suburbs around the capital, Damascus. The United Nations now puts the toll from almost two years of fighting at more than 60,000.
Meanwhile, U.S. troops have now arrived in Turkey to man Patriot missile defense batteries near the Syrian border.
CNN's Nick Paton Walsh has the latest from Istanbul.
(BEGIN VIDEOTAPE)
NICK PATON WALSH, CNN CORRESPONDENT: Wolf, Reports emerged yesterday, Turkish media, saying that 27 U.S. military personnel have flown into the southern city of Gaziantep and were staying at a hotel there about to begin site surveillance to where these Patriot missile batteries should go.
But the U.S. Embassy embellished today, Friday, saying they have begun the process now of flying in military personnel equipment into the Incirlik military base in the south of the country. That will continue in the weeks ahead. Dutch and German missile batteries and military personnel also joining them as NATO answers Turkey's request for extra defense along that very volatile border with Syria.
Remember, this all started because the Syrian regime had been accused of firing shells into Turkey, Turkey firing back and then going to NATO for help. What's really key here though now is this is such an incredibly dangerous part of the world, rebel forces in operation, a porous border, desperate regime troops many times on their back foot there and great concerns that the Bashar al-Assad regime will reach into its arsenal for the nastier weapons there, fears of chemical weapons and accusations from U.S. officials that Scud-type missiles have already been used.
The fear, of course, is that with the escalation of the conflict, we now have U.S. troops right on the doorstep of this civil war. They say they're purely to defend Turkey. But there are fears, of course, if this really gets out of hand, they could somehow be dragged in -- Wolf.
(END VIDEOTAPE)
BLITZER: Nick Paton Walsh on the ground for us in Turkey watching what is going on -- Kate.
BOLDUAN: Still ahead, a year-end snapshot of the economy, details of new unemployment numbers. Small business owners tell us what the numbers mean to them.
Also, a warehouse filled with critical police evidence is ravaged by Sandy's floodwaters. Now the fallout is landing in court.
(COMMERCIAL BREAK)
BLITZER: Days after the last House of Representatives ignited a huge political firestorm, refusing to vote on a $60 billion aid package for the thousands of superstorm Sandy victims, both chambers of the new Congress have approved a smaller $9.7 billion measure.
The remaining $51 billion will be considered later this month.
BOLDUAN: Now there's another problem involving the superstorm. Floodwaters damaged some critical police evidence and it's now impacting some trials.
CNN's Mary Snow is working the story for us.
Mary, how serious is this problem we're talking about?
MARY SNOW, CNN CORRESPONDENT: Kate, it's really unclear because the warehouses storing that evidence are still closed off to workers. Already, though, there are several trials that are going on where physical evidence isn't available.
(BEGIN VIDEOTAPE)
SNOW (voice-over): This flood damaged warehouse right on New York harbor could actually clog the city's overflowing criminal system for years to come. It sits in an area of Brooklyn devastated by superstorm Sandy. Inside it, there are thousands of pieces of police evidence ranging from DNA to narcotics to guns that right now can't be touched.
RAYMOND KELLY, POLICE COMMISSIONER, NYPD: Significant flooding has taken place. No question about it. We are still trying to sort through this and, you know, assess the total damage. It's a -- it's a big job.
SNOW: That was back in November. The police department says it still hasn't been able to get into this facility and a second one because sewage contamination has made them unsafe. But trials can't wait.
CNN legal contributor Paul Callan is a former prosecutor.
PAUL CALLAN, CNN LEGAL CONTRIBUTOR: It could be a major problem if evidence that has been damaged is critical to proving a case.
SNOW (on camera): The NYPD says so far, there have been six criminal cases where police have said there is evidence but it's not accessible.
(voice-over): Those cases have not been dismissed. In cases involving DNA and narcotics, prosecutors rely on results of tests done that are on smaller samples of the evidence. Police say the results are kept at a different facility that was not surprised by the storm. (on camera): What about cases where there is, let's say blood evidence, where the physical evidence is in that warehouse but test results are in a different location?
CALLAN: You would have the issue of if there is enough for the defense to fairly test the sample to determine whether it's the defendant's blood or not. So, I -- it wouldn't necessarily be fatal to a case but, you know, in criminal cases, beyond a reasonable doubt is a very, very high standard of proof. And if you eliminate the physical evidence, you can put a serious dent in the prosecutor's case.
SNOW (voice-over): The NYPD has consulted with its counterparts in New Orleans where evidence and records were destroyed following hurricane Katrina. The New Orleans Police Department says, one key difference is that flood waters remained at the courthouse for weeks where evidence was destroyed and they had the job of cataloging evidence that could be salvage.
DEPUTY CHIEF KIRK BOUYELAS, NEW ORLEANS POLICE: It took years. It is not something that can be easily done. And in New York you are looking at facilities that are much more vast than what we had here in New Orleans. So that compounds it even more.
(END VIDEOTAPE)
SNOW: Now, New York's police department says it expects to get into those warehouses in the coming weeks to assess the exact extent of this damage. But already the chief attorney for New York City's Legal Aid Society is bracing for serious repercussions. He notes there are more than 200,000 criminal cases in New York City every year -- Kate.
BOLDUAN: And, Mary, I'm a little surprised that these warehouses weren't better protected if they have such important evidence in there. What are you hearing about that?
SNOW: Yes, you are not the only one surprised. You take a look at that photograph and you see how vulnerable that warehouse is because it's sitting right there in the New York Harbor.
The police department said it did take some precautions, including raising some of that evidence that was on the ground floor. They raised it up. Obviously, this storm was so extensive. But it also said that in August of this year, it had been looking into moving all of its evidence into one location. Obviously, that is going to be stepped up now.
BOLDUAN: That is tough to hear, especially for anybody waiting for one of those trials to take place. Mary Snow, thank you so much.
BLITZER: Communities all across the oceanfront, if you will, are learning lessons from what happened.
(CROSSTALK)
BOLDUAN: My goodness.
BLITZER: Thank you.
A little boy's dream come true, a superhero in his own back yard. But the real surprise is who's behind the mask.
(COMMERCIAL BREAK)
(NEWS BREAK)
BLITZER: A rising star of the Democratic Party takes a seat in the House of Representatives. So, what's on his first-term agenda? I will ask Congressman Joaquin Castro of Texas.
(COMMERCIAL BREAK)
BLITZER: Happening now: an unemployment rate that won't seem to budge. We go inside the new jobless numbers with the former White House chief economist.
Democrats in the House pick a rising star at the president of their freshman class. Congressman Joaquin Castro of Texas, guess what? He's here in THE SITUATION ROOM.
And we will meet the officer who could become the first woman to command a nuclear submarine.
December's unemployment numbers are out. The Labor Department says 155,000 jobs were added to the economy last month. But the unemployment rate remains steady at 7.8 percent.
BOLDUAN: Business owners are taking the news a little differently.
CNN's White House correspondent, Dan Lothian, talked to some of those business owners in Hawaii, where he is traveling with the president.
Dan, what are you hearing from them?
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, one business owner told us that about a year ago, he felt the economy was headed in the right direction. Then the fiscal fight got under way and he put on the brakes. Now he's feeling a bit more optimistic about the future. But another business owner told us that he is packing up and starting over.
(BEGIN VIDEOTAPE)
LOTHIAN (voice-over): Byron Goo owns a tea business in Honolulu.
(on camera): Is this one of your original products or...
BYRON GOO, OWNER, THE TEA CHEST: This is. This is.
LOTHIAN (voice-over): Courtney Bareng owns a car alarm and stereo company just down the road. But these two men view the current U.S. economic climate and latest jobs report through two different lenses.
At the Tea Chest, Goo and his five full-time employees see a bright future, especially now that the fiscal cliff fight has been settled.
GOO: So it kind of put all of our bigger plans to invest, to hire new people, to buy new equipment on hold. And now that they have since reached an agreement and we know that, OK, there's some stability this year, we're willing to take a little bit more risk.
LOTHIAN: But Bareng is ready to move off the island. His small business, he says, is struggling. And the jobs numbers and optimistic forecasts don't mean a thing to him. So he's headed to Las Vegas at the end of the month.
COURTNEY BARENG, OWNER, ALARM AND STEREO COMPANY: We will be successful, have more loyal customers up there. I'm going to have to start all over. But I'm not scared of starting over.
LOTHIAN: The White House admits there's still a lot of pain across the country, but that the trend line is moving in the right direction.
Alan Krueger, the chairman of the president's Council of Economic Adviser, says -- quote -- "While more work remains to be done, today's employment report provide further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression."
Hawaii's unemployment is much lower than the national rate, 5.3 percent in November. But Bareng says it's tough for small businesses to make it here, to grow, to hire more people.
But at the Tea Chest:
(on camera): What happens in this area?
GOO: Well, we do some private label packing for several of our customers.
LOTHIAN (voice-over): Goo says he's ready to expand and isn't worried about future fiscal fights thousands of miles away in Washington.
GOO: As our business grows, we're going to need to manage it. And so we definitely are looking at either a couple of more part- timers or definitely one more full-time position.
(END VIDEOTAPE)
LOTHIAN: Now, the RNC says it's good news that the U.S. economy is adding jobs, but that the unemployment rate is still too high and that this is no time to celebrate after months of near 8 percent unemployment -- Wolf, Kate. BOLDUAN: Dan Lothian in Hawaii for us this evening. Thanks so much, Dan.
BLITZER: He's going to miss that assignment when he gets back to chilly Washington, D.C.
BOLDUAN: He sure is.
BLITZER: He's a standout among the new members of the 113th Congress, and his fellow Democrats have now picked him to lead their freshman caucus.
Talking about the newly elected representative Joaquin Castro of Texas, who is here in THE SITUATION ROOM.
Congressman, first of all, congratulations.
You're president of the freshman class.
REP. JOAQUIN CASTRO (D), TEXAS: Thank you. Yes, along with a few other colleagues. And so our class is a wonderful one, very diverse, the most diverse in the history of the United States, so very excited.
(CROSSTALK)
BLITZER: A lot of us remember the keynote address at the convention the brother gave. You introduced him.
CASTRO: True, yes.
BLITZER: So, you're here in Washington. What is your top legislative priority?
CASTRO: Well, for me, it's going to be education reform, making sure that we graduate more students from high school and that we get them on to college.
But I mean, for the nation, making sure that we get the country's finances in order, also taking up comprehensive immigration reform and later, as the president said, gun safety and gun control.
BLITZER: You're involved in all those issues. But education, how are you going to do that? Make sure more kids graduate from high school?
CASTRO: Well, you know, in Texas, I was vice chair of the higher education committee in the legislature, and I concentrated, really, on two areas that are overlooked.
First, reforming our college advising system. We rely on counselors now. It really is an anachronistic method. In Texas, for example, the ratio of counselors to students is 1 to 420. So a lot of people fall through the cracks.
The second one is developmental remedial ed. That really is the graveyard of higher education of making sure that we streamline the system so that more people get to the finish line.
BOLDUAN: May be a steep climb in this age of divided government.
CASTRO: True.
BOLDUAN: But a very good agenda to have on the top of your list. This is an exciting start of your term. You're just coming in, your first time in THE SITUATION ROOM. Welcome.
What does the president, when you look at the president, if we had you back maybe at the end of your first term, what do you want to make sure that the president has worked on with you to accomplish in your first term?
CASTRO: Sure.
BOLDUAN: Because he has been criticized in his own first term for not keeping some of his promises, like immigration reform.
CASTRO: Sure. Well, absolutely. I think that we've knocked out by the end of 2013 comprehensive immigration reform.
BOLDUAN: You think it will happen?
CASTRO: I believe it will. There's incredible momentum, particularly after the election, I think from both parties. I would be very surprised and disappointed if something has not happened on immigration by December 31, 2013.
BLITZER: It would be pretty amazing, when you think about that the former president, George W. Bush. He had the support not only of Ted Kennedy but John McCain, a lot of Democrats. He couldn't get it done.
So what makes you think that this president can get it done, given the divided Senate and House -- the Republicans -- the nature of a dysfunctional Washington, if you will?
CASTRO: Well, I think the results of the November 6 election. But also public statements by politicians in both parties, Democrats and Republicans. And also by the pundits. And by the American people. If you look at surveys, people want to finally take this issue on. The fact is, there are three or four or five major American industries that would not exist the way they do but for undocumented labor, and it's time we do something about it.
BOLDUAN: Let me ask you -- don't need to remind you. Democrats are in the minority again this session...
CASTRO: You don't need to remind me.
BOLDUAN: Exactly.
BLITZER: In the House of Representatives.
CASTRO: In the House, yes. BOLDUAN: With the president's comfortable win in his -- his presidential election, why do you think -- just look at the politics. Why do you think that your party couldn't take back the House?
CASTRO: Well, I think redistricting had a lot to do with it. You know, the changing the districts. For example, in Texas, Hispanics accounted for 66 percent of the new growth. Minorities accounted for 90 percent of the new growth. Yet we've got zero of the new seats in the way the legislature drew the map. So certainly redistricting.
And you know -- and also, I think, for the first time ever, you had just gazillions of dollars that were being spent by thirty-party groups in these races, often in concentrated areas in House races. So it made it difficult.
BOLDUAN: You think that was a primary reason?
CASTRO: Well, I think -- I think if you combine all those things, certainly. But I do think that we can have a pretty great 2014 and probably an even better 2016.
BLITZER: You're going to be on the armed services committee, as well?
CASTRO: Armed services and foreign affairs.
BLITZER: Foreign affairs, too. So those are very important issues. Is the U.S. spending too much on defense right now, just enough?
CASTRO: Well, you know, we've come out of a period where we were in two wars. And certainly when you were in that situation, your spending goes up. When you're out of the wars, your spending should go down. So you know, we do have to reassess where we are when, you know, as we're moving more towards peacetime, so to speak.
BLITZER: Because I'm looking ahead to the sequestration, as it's called, these mandatory Defense Department cuts. The U.S. spends, what, more on defense than the next 12 countries combined. Does the United States really need to spend all of that money?
CASTRO: I think we need to spend purposely and wisely. The problem with sequestration -- and I've got three military bases in San Antonio. We're Military City, USA. We're very proud about that.
BLITZER: You're worried about losing jobs if the cuts come?
CASTRO: Well, jobs, but also the way sequestration would happen. It's very careless. It really is taking a meat cleaver rather than using a scalpel. And so we -- I think, you know, there's room for improvement. There's room for efficiency. But we've got to do it wisely and not do it with just blunt force.
BLITZER: Are you sick and tired of all the stories about you and your identical brother and... BOLDUAN: That's so funny, because I was just going to ask you about that. Your -- your brother was the keynote speaker at the Democratic convention. You introduced him. But you're the one here in Washington. So who's winning here?
CASTRO: Well, I say I am. He says he is.
BOLDUAN: There's got to be some sibling rivalry going on.
CASTRO: We were very competitive growing up. Now we're big supporters of each other. But when I'm back home, they always call me the mayor, and when I'm out on the street. But when he's in Washington, I get sweet revenge, because they call him congressman.
BLITZER: He got the keynote address.
CASTRO: That's true.
BLITZER: I remember back in 2004, remember who had the keynote address at that Democratic convention?
CASTRO: The president. That's right.
BOLDUAN: A little-known politician.
BLITZER: A little-known Illinois politician, and four years later got the nomination.
BOLDUAN: A high bar is set.
CASTRO: Absolutely.
BLITZER: Congressman, thanks very much for coming in.
CASTRO: Thank you.
BLITZER: Good luck.
CASTRO: Thank you very much.
BLITZER: Don't leave yet.
BOLDUAN: We're not letting you go yet. Thank you so much.
BLITZER: Could it be the solution to the debt crisis? It's a $1 trillion -- yes, $1 trillion coin. It may sound ridiculous, but there's a growing call for the U.S. Treasury to mint it. We'll explain. Stand by. You want to see this.
(COMMERCIAL BREAK)
BLITZER: A magic coin capable of wiping out the U.S. debt and averting potentially another nasty political showdown over the debt ceiling.
BOLDUAN: Definitely sounds like magic. And it may sound too good to be true. But some people are seriously floating the idea of a $1 trillion coin as the solution to the country's next fiscal crisis.
BLITZER: Brian Todd is actually looking into this report. Sounds ridiculous. But what is going on here?
BRIAN TODD, CNN CORRESPONDENT: Sounds crazy, Wolf and Kate. But it is real. Crazy as that sounds, economists and legal scholars say it is legal and could be done with the president and Congress hurtling toward another showdown that could slam the economy. Something like what I'm holding in my hand could actually solve the debt ceiling crisis.
(BEGIN VIDEOTAPE)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want to welcome...
TODD (voice-over): The president says he won't negotiate with Congress over lifting the debt ceiling.
OBAMA: I will not play that game.
TODD: Republicans say...
SEN. MITCH MCCONNELL (R-KY), MAJORITY LEADER: The president may not want to have this debate, but it's the one he's going to have because the country needs it.
TODD: So while they debate over a debate and race headlong into the debt ceiling, is there a magic bullet to solve the crisis? Try a magic coin.
Some economists, legal scholars, and now even a congressman are suggesting a $1 trillion platinum coin could be minted, and the government could use that to pay the debt, avoid default and preempt the debt ceiling crisis.
Democratic Congressman Jerrold Nadler of New York says, "I'm being absolutely serious. It sounds silly, but it's absolutely legal."
I spoke to economist Joe Gagnon.
(on camera) Why do you think this it's a good idea right now?
JOE GAGNON, ECONOMIST: Well, it's better than a government shutdown. It's better than defaulting on the debt. I mean, it's better than the bad alternatives.
TODD: And technically, it does appear to be legal. Here's how. The U.S. government can print new money, but under law, there's a limit to how much paper money can be in circulation at any one time.
There are also rules that at least limit the denominations that gold, silver and copper coins can be. But there is no limit on platinum coins. The president can issue a platinum coin in any denomination. Treasury can mint it and then just print on it, $1 trillion. The president can then order that coin to be deposited at the Federal Reserve.
(voice-over) Then, says Gagnon...
GAGNON: And the Fed would credit the Treasury's account. So when the Treasury writes checks to pay people, the Fed will cash them.
TODD: And that money would never be in public circulation, so some believe it wouldn't cause inflation. But Gagnon says it could only temporarily pay America's bills, won't bring down its massive debt long-term. That's also some conservatives' argument against it.
STEPHEN MOORE, COLUMNIST, "WALL STREET JOURNAL": I think this is waving pixie dust over the debt and pretending that the debt is going to go away by this, what I view as just another one of these Washington gimmicks. Minting new coins isn't going to do anything about dealing with that fundamental problem.
TODD: And what if the coin got stolen? Remember this from Dr. Evil?
MIKE MYERS, ACTOR: If you want it back, you're going to have to pay me $1 million.
(END VIDEOTAPE)
TODD: Well, apparently then the government could just mint another one of these or maybe a few more. And by the way, none of this requires congressional consent. So that's why it's attractive to a lot of people.
We've tried to see if this is something the president would actually consider. The White House has not gotten back to us on this, Wolf.
BOLDUAN: Weren't these types of coins only meant to be commemorative, like...
TODD: Like this. This is really just a replica of a replica. Yes, they are meant to be commemorative by law. That section of the law was meant to allow for commemorative coins to be issued.
But the treasury secretary actually does have the authority to mint these things in any denomination he or she chooses. So if they wanted to mint this in $1 trillion, $2 trillion, and actually make it worth something, they could do it and put it in the federal reverse. It is nuts, but it is possible legally to do.
BLITZER: We're going to continue this conversation on this in a moment.
BOLDUAN: Guess what? Washington's nuts.
TODD: Yes.
BLITZER: Brian, thanks very much.
Let's get some more on the government's latest unemployment report.
BOLDUAN: The Labor Department says the unemployment rate held steady in December at 7.8 percent; 155,000 jobs were added to the economy. But 12.2 million people remain unemployed, and the number of long-term unemployed is almost at 5 million.
BLITZER: Let's go inside all of these numbers with the former White House chief economist, Austan Goolsbee, who's joining us now. Looking at the jobs numbers, been described as flat. I want to get to that in a moment. But your quick reaction to this $1 trillion coin. Is this real; is it baloney? You're an economist. Tell us what you think.
AUSTAN GOOLSBEE, WHITE HOUSE CHIEF ECONOMIST: I was wondering if I had that coin and I put that in the Coke machine, how would I get change back from that coin?
BLITZER: A lot of change you'd need. What do you think about all this? How ridiculous is this?
GOOLSBEE: I think it's borderline pretty ridiculous. That's just a different way of monetizing the debt. That is, the printing of money to pay off government bills. I think anybody who's actually advocating full monetization of the U.S. debt had better go look at other countries and what happened to inflation when you monetize the debt.
BLITZER: But is it technically feasible -- is it technically even possible?
GOOLSBEE: I don't know. There's a lot of different coins. We can't get people to adopt the Susan B. Anthony dollar. So I don't know if people are going to embrace the $1 trillion platinum coin. You know, why make it out of platinum? Why not make it out of plastic? Didn't sound like that was forbidden. I'm not a monetary legal scholar, but it seems a little farfetched to me.
BOLDUAN: Let's turn to things that seem a little more realistic, at least for the moment, Austan. The December jobs numbers. They've been described as flat, as Wolf was referencing earlier. How would you describe this report?
GOOLSBEE: I think it was about what was expected, which is OK, but not much better than OK, but not much worse than OK. We've seen actually a pretty startling consistency from the jobs numbers for the last several months, which is growing around 150,000. Unemployment is ticking up or ticking down a tenth or two-tenths. That's some progress, but it's not enough progress.
I think all that's reflecting is that the economy's been growing around 2 percent, not any great shakes. People were hoping that we could come out of this debate about the fiscal cliff, debate about the debt ceiling, maybe give some momentum to the private sector, and get the growth rate back up to 3 percent-plus so you could really start seeing some substantial improvements. I don't know that we really saw that.
You know, you saw in your report some small businesspeople saying they felt a little better. But a lot of the people I talk to are say, "Oh, no, now two months from now, we're going to have to do the same thing all over again." And so we've got a little "Groundhog Day" element there.
BLITZER: A lot of unemployed. A lot of under-employed. But you know what also concerns me, if you look deeper into the numbers, Austan, is the unemployment rate for minorities: 7.8 percent across the board. But for African-Americans, it went from 13.2 percent in November to 14 percent in December. Latino unemployment rate is at 9.6 percent.
Here's the question. Is enough being done to focus in on minorities in dealing with this problem?
GOOLSBEE: In a way, probably not, though you don't want to overreact, as we always say, Wolf, to any one month's numbers. And that's especially true if you start taking a smaller slice out of the numbers.
So the overall job growth was 155,000. And that's plus or minus 100,000 on a monthly basis. So it's -- keep that in mind. I'd say, among minorities and among young people as well as among high school, education, and less, those three groups have had very high unemployment. It's been very persistent. And that's really the weakest part of the job market. Is it long-term unemployed and high unemployment rates in those groups. And I think we've got to focus on that.
Now, I think the most important focus we have is start growing faster.
BLITZER: Well, if that could get the economy growing at 3 or 4, 5 percent, that would obviously create a lot of jobs across the board. Right now, it's about -- about 2 percent. That's not enough.
Let's talk a little bit about Erskine Bowles. I had him here in THE SITUATION ROOM yesterday. The Bowles-Simpson Commission that came out with a grand bargain, if you will, a grand scheme. Listen to what he said about that missed opportunity to jump on that, to accept what his commission recommended.
(BEGIN VIDEO CLIP)
ERSKINE BOWLES, BOWLES-SIMPSON COMMISSION: Well, look, I was disappointed at the time. But I came to understand that what he was doing was his goal was to use it as a framework for his discussions that he had with Speaker Boehner back in the -- gosh, almost two years ago now in his first effort to get a grand bargain. He felt that was the best way to be successful. If he'd been right, he would have proven to be a political genius. Unfortunately, he wasn't. They didn't get a deal done. And so I was very disappointed.
(END VIDEO CLIP)
BLITZER: You were in the White House then. How big of a blunder do you believe it was -- looking back with hindsight -- we're obviously all a lot smarter now -- to have missed that opportunity?
GOOLSBEE: Erskine is a friend of mine, and I respect him a lot. I don't think that that's quite the right characterization.
If you remember, the Simpson-Bowles proposal did not actually get enough votes on the fiscal commission itself to pass. And it was universally voted against by the House Republicans. It was clear when the Simpson-Bowles proposal came out that it was dead in the water, because the Republicans in the House were going to oppose it because it had a tax increase.
And the president had been elected saying he wouldn't raise taxes on the middle class. I think if the president had just stood up and said, "Let's do everything in Simpson-Bowles," rather than "Let's do the idea of Simpson-Bowles," Republicans would not have met him halfway and said, "Well, that's a very mature starting point, Mr. President. Why don't we compromise on it?"
I think they would have said, "See, the president lied. He's for raising taxes on the middle class."
So I don't know that there actually was the moment that -- that Erskine's describing. But before anybody writes it off, I think if you ask seven months from now, we had debt ceiling, we had this fiscal cliff fight. We're going to have one more fight about debt ceiling. We may end up with something in total that's pretty close to what Simpson-Bowles proposed. Some kind of a grand bargain.
BLITZER: If that happened, that would be good, I think, for the country. All right. Austan Goolsbee, thanks very much.
They stay submerged for months at a time in tight quarters without even seeing the sun. Serving on U.S. submarines is a new role for female sailors. We'll spend some time with one of them.
(COMMERCIAL BREAK)
BOLDUAN: Women in the military are definitely making strides under water. CNN's Pentagon correspondent Chris Lawrence talks to an officer who's on track to become the Navy's first female submarine commander.
(BEGIN VIDEOTAPE)
CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): It's a new frontier for female sailors. Submerged for months, no sun, no space, no sleep. Lieutenant Junior Grade Marquette Leveque is one of the first women to qualify for submarine duty.
(on camera) Is it everything you expected?
LT. JG MARQUETTE LEVEQUE, U.S. NAVY: I got a lot less sleep than I imagined I would.
LAWRENCE (voice-over): We met Leveque a few years ago when she went by her maiden name, Reed.
UNIDENTIFIED FEMALE: Marquette J. Reed.
LAWRENCE: She was a cadet at the naval academy when the Pentagon opened sub duty to women.
LEVEQUE: At the time I was flying. I was a pilot, selected to be a pilot after graduation.
LAWRENCE: Leveque decided her future was under the water, not soaring above it, and she wasn't afraid of breaking a barrier.
LEVEQUE: I see it being just like our military (UNINTELLIGIBLE). And I think that we'll be accepted the same way.
LAWRENCE: We reminded her of what she said then and read some of the reaction from fellow and former sailors. "Way to go, ladies. Welcome to the pride of the fleet. And wear those gold dolphins proudly."
But also "this is about giving feminists what they want. Glad I got my dolphins pinned on before the Navy went P.C." And "keep the eye candy upwardly mobile."
LEVEQUE: There's always going to be an aversion to change, and so the best way to deal with that is just go and do my job like any other officer would.
LAWRENCE: Male and female officers do not sleep in the same state room, but that's about it.
(on camera) I mean, I can't imagine there's very much room for separating men and women.
LEVEQUE: Honestly, I didn't even notice it.
LAWRENCE (voice-over): Since all officers share one bathroom, they use a sign to warn each other.
LEVEQUE: We just have a sign that we flip back and forth for either "occupied by male" or "occupied by female."
LAWRENCE: This month, Leveque earned her dolphin.
UNIDENTIFIED MALE: 2012.
LAWRENCE: A gold chest device that means she's mastered operations. UNIDENTIFIED MALE: Sign the book.
LAWRENCE: It took a year of nuclear training, three more months at submarine officer school.
LEVEQUE: I make it up 2-5-0 feet.
LAWRENCE: And then her first sea tour.
LEVEQUE: It's a huge honor to finally really feel like I'm a part of the submarine community.
LAWRENCE (on camera): In fact, Leveque is one of only three women to qualify as unrestricted line officers. That's big because it means down the road she would be eligible to one day assume command of a nuclear-powered sub. And it's pretty clear that, whenever a war is waged under water, women are going to be a part of that fight.
Chris Lawrence, CNN, the Pentagon.
(END VIDEOTAPE)
BLITZER: Very impressive. Let's check in with Erin Burnett to see what's coming up at the top of the hour. What are you working on, Erin?
ERIN BURNETT, CNN ANCHOR: You know what, Wolf? Who's going to be the next president? Will it be a woman or will it be another black man? That's the big question. One of our guests says that we are sure to have our second black president of the United States of American in 2016, naming names and talking about who else it might be. Interesting and controversial conversation.
Plus, Wolf, we had a chance to talk to McDreamy today. You know, McDreamy, Patrick Dempsey, the "Grey's Anatomy" star. It was a pretty exciting day, and "OUTFRONT," he's going to be on, talking about why he's going to be the CEO of a coffee company.
Top of the hour. Back to you.
BLITZER: We'll be watching. We look forward to it. Thank you.
Two teenage boys stranded on an icy pond for hours. We'll have details of the dramatic rescue next.
(COMMERCIAL BREAK)
BOLDUAN: Two teenaged boys are lucky to be alive after being stranded for hours on an icy pond. Here's CNN's Sandra Endo.
(BEGIN VIDEOTAPE)
SANDRA ENDO, CNN CORRESPONDENT (voice-over): A lesson of a lifetime for two boys, saved in dramatic rescue in Arizona. Fourteen- year-old Christian Van Aller and 15-year-old Alex Orten were crossing a partially frozen pond when the ice beneath them began to crack. They scrambled to a nearby dead tree rising out of the water but not before losing some of their shoes to the ice.
The teens waited for hours in frigid temperatures while Orten's younger brother used his cell phone to call for help. Firefighters outfitted in waterproof suits waded through the freezing water and got to the boys.
UNIDENTIFIED MALE: I'm just glad they're OK.
ENDO: The boys, now safe and dry, thanked the firefighting squad that rescued them in person, even writing an apology letter.
UNIDENTIFIED MALE: Dear firefighters, thank you so much for helping me and my friend to be able to get back safely to the ground. We're very sorry about making you all come out and do this. We shouldn't have even walked on the ice in the first place.
UNIDENTIFIED MALE: I regret my choices deeply and thank you all for sacrificing so much to save us. I think I can speak for the three of us we promise to never do it again.
ENDO: And the boys will pay a price.
UNIDENTIFIED FEMALE: They won't be getting their cell phones taken away, because that's the only reason that they got rescued.
UNIDENTIFIED FEMALE: Yes.
UNIDENTIFIED FEMALE: Xbox is probably going to be gone in our house.
UNIDENTIFIED FEMALE: Yes, I think Xbox, too.
ENDO: Sandra Endo, CNN, Washington.
(END VIDEOTAPE)
BLITZER: They learned their lesson indeed.
BOLDUAN: Yes, they did this time.
BLITZER: Have an excellent wonderful weekend.
BOLDUAN: Thank you. You, too.
BLITZER: That's it for us. "ERIN BURNETT OUTFRONT" starts right now.
