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Red Line, Red Ink; Hack Attack; The Score: Football is Back!
Aired August 31, 2013 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: I'm Christine Romans. This is YOUR MONEY.
The president has drawn a red line, the use of chemical weapons. His administration now says there is undeniable evidence that Syria has crossed that line.
But is that red line clouded by red ink? The U.S. is a nation that's tired, after 12 years of fighting, more than 8,000 coalition deaths in Iraq and Afghanistan, 50,000 wounded and the most expensive wars ever, $1.4 trillion spent, and the biggest bills have not yet come due.
A Harvard study finds the final price tag will be $4 trillion to $6 trillion, and that's after long-term medical and economic costs at home are taken into account.
Jessica Yellin is CNN's chief White House correspondent.
Jessica, so much blood and treasure spilled in Iraq and Afghanistan, how does the shadow of those wars cloud the president's decision to act in Syria?
JESSICA YELLIN, CNN DOMESTIC AFFAIRS CORRESPONDENT: Well, Christine, it certainly informs it's hesitancy to act up to this point. I think it will inform, if he does decide to strike, a decision to take precision, limited strikes. And beyond that it will inform his choice as they have made clear to make sure that this is a narrow and contained action, and not something that goes beyond that into a larger conflict in the Middle East.
Remember, he was elected on a promise to get out of the wars in the Middle East. He does not want to see this come something bigger.
ROMANS: And he won a Nobel Peace Prize early in his presidency, which is also an interesting twist on this. You know, here's what we heard in the run-up to the Iraq war. Listen.
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, FORMER DEFENSE SECRETARY: The Office of Management and Budget just come up with a number with something under $50 billion for the cost.
PAUL WOLFOWITZ, FMR. DEPUTY DEFENSE SECRETARY: The oil revenues of that country could bring between $50 billion and $100 billion over the next two or three years, and we are dealing with a country that can really finance its own reconstruction. (END VIDEO CLIP)
ROMANS: We know that's not how it went and, obviously, Syria is a different case. It is not Iraq, but do those miss calculations fresh in the minds of Americans, do they color Americans' distrust of doing something here?
YELLIN: Absolutely. If that is the flawed intelligence, and it's the bad taste of the experience after Iraq and Afghanistan that makes Americans incredibly conflicted about getting involved and it's part of the reason that the administration has not been involved despite the atrocities there to date.
So, a big reason you are going to see extreme caution even if the president does decide to act.
ROMANS: All right. Jessica Yellin, you'd be watching it all for us from Washington -- thanks, Jessica.
So, the 2011 Budget Control Act cut $487 billion from the Defense Department's projected budget over the next 10 years. The question, can the U.S. afford to act? On top of that, automatic across the board cuts known as the sequester, that's going to cut an additional $500 billion in projected defense spending over the next decade.
Defense Secretary Chuck Hagel says the United States is ready to go if the president orders a strike in Syria. But here's what he said just one month ago.
(BEGIN VIDEO CLIP)
CHUCK HAGEL, DEFENSE SECRETARY: The only way to implement an additional, abrupt, 10 percent reduction in the Defense Department is to make senseless, nonstrategic cuts, that damage military readiness, disrupt operations, and erode our technological edge.
(END VIDEO CLIP)
ROMANS: So, are we ready or at risk?
Lawrence Korb is a former assistant secretary of defense, a senior fellow now with the Center for American Progress.
Thank you for joining us.
We are looking for your perspective here, because -- what would you say to those -- what do you say to those who argue that this belt- tightening will ultimately hurt the U.S. military's ability to fight and win future wars?
LAWRENCE KORB, CENTER FOR AMERICAN PROGRESS: I think they are way overreacting. As your chart pointed out, the $487 billion more and projected increases and if you have the whole $500 billion over years, you will bring the defense spending where it was, even controlling for inflation in 2007. So, you got plenty of money. Now, sequester is dumb, because you have to cut everything equally. But you could -- you know, with $500 billion, which is what you'd have after sequesters, that's exclusive of the war, and you got to add another $100 billion continuing the wars in Afghanistan. That's more than we spent on average, even controlling for inflation during the cold war.
ROMANS: So, let's say fighting 50 cruise missiles into Syria cost probably about $1 billion, can the U.S. afford prolong conflict? In this age of sequester, what if it's more than a billion dollars and a bunch of cruise missiles, it turns into something bigger?
KORB: Well, then, you do what you did with Iraq and Afghanistan, you get a war funding budget. Now, I think the best model probably is the First Gulf War. You may remember in the first Persian Gulf War in 1991, we fired 43 Patriot missiles and after the war they went back -- they asked for 100, but they wept back to get those funded over and above.
And I suspect that if in fact you do fire a lot of them, you can go back and ask for some more. But really in terms of -- you know, we have already paid for what we will probably use, and those destroyers out there cost us about $1.8 billion. Each of the missiles is about $1.5 million. That's in a $500 billion budget.
And another good model is Libya. The Libyan invasion which lasted, you know, about 70 days, cost us only $1 billion over and above what we had in the regular budget.
ROMANS: Here is the interesting thing about red line and red ink. You know, if you don't get your debt deficits under control in the near term, this kind of situation, a generation from now is something you can't react to, because you don't have room in the budget because you are paying all the interest. But right now, right now, there is plenty of room for the U.S. to do what it wants to do?
KORB: Well, right now there is. Now, if over 10 years you do sequester, the problem is cutting everything equally, and you exempt military personally, which means your other accounts as Chuck Hagel was talking about, your training and things like that, they could hurt us because if you stop training in a couple years the forces will not be able to do what they need, or if you can't buy the ships in the numbers that you'd like because you have to cut ships, planes and tanks. Well, let's say you don't want tanks, you want ships, no, you have to cut them all the same.
ROMANS: Yes, and those are all jobs, by the way. Those are people making those ships and tanks, we're just cutting unilaterally. As you said, it just doesn't make sense.
All right. Thank you so much, Lawrence Korb. Thank you so much.
KORB: Thank you for having me.
ROMANS: You're welcome. You think the U.S. is safe from retaliation in the event of a conflict with Russia? Think again. It may not be the fear of an enemy storming America shores, but hackers promise to launch more attacks like the one that shut down "The New York Times" this week, if the U.S. strikes Syria. I'm going to tell you what else they are targeting. That's next.
ROMANS: A war half a world away is coming to a server near you. The Syrian Electronic Army is threatening to retaliate against U.S. military strikes by attacking systems that support the U.S. economy and infrastructure.
Brian Todd has our story.
BRIAN TODD, CNN CORRESPONDENT (voice-over): "Server not found," a screen designation that many "New York Times" Web site customers had to deal with for about 20 hours. The Web site of one of the nation's largest newspapers taken down.
A group called the Syrian Electronic Army claimed responsibility. Who are they?
MARC MAIFFRET, CHIEF TECHNOLOGY OFFICER, BEYOND TRUST: The Syrian Electronic Army is a pro-Assad hacking group. It appears to be a loose collective of a few individuals. There's been some information put out on the Internet that it could be even as young as 19-year- olds.
TODD: Marc Maiffret, a former hacker now with the cyber-security firm called Beyond Trust, has followed this group's attacks.
This spring the Syrian Electronic Army hacked the Associated Press Twitter feed, put in fake message saying, "Breaking: Two explosions in the White House and Barack Obama is injured."
A U.S. official tells us this is a murky underground group that makes its name plastering pro-regime propaganda on popular Web sites, but Maiffret says the method these hackers used this time was an escalation.
(on camera): Previously experts say the Syrian Electronic Army would go after the direct managers of the Web sites they were hacking, using a phishing e-mail like this one to try to trick them into giving up their login credentials.
Well, this time, the hackers went after the larger connection chain. It's called the domain name system. That's what connects you, when you type in a Web site like CNN.com or NYTimes.com, to the specific computer addresses where that content is found. Well, this time the hackers went after the managers of those connections, in this case a firm that works with a company called Melbourne IT. They tricked them into giving up their passwords. (voice-over): As a result some people trying to go to "The Times" Web site were steered instead to servers controlled by the Syrian Electronic Army. Then --
MAIFFRET: You could basically have your computer attacked.
TODD: If the U.S. conducts military strikes on Syria, will the hacks get worse? As the Pentagon once warned a cyber-Pearl Harbor?
Homeland security expert Frank Cilluffo says the Syrian hackers will likely strike again.
PROF. FRANK CILLUFFO, GEORGE WASHINGTON UNIVERSITY: If they did work with some of their allies, with Iran, if they were to get some support from China and Russia, then, yes, the game changes quickly. It escalates in terms of capability.
TODD: The targets for cyber enemies, the U.S. electrical grid, government computer systems.
Experts say the Syrian Electronic Army isn't sophisticated enough to do a lot of damage to those systems right now. But with Iran's help, certainly with China's or Russia's, they could get there.
Brian Todd, CNN, Washington.
ROMANS: Just the threat of U.S. strikes in Syria is already affecting your money, the worst day for the Dow since June as investors rushed out of stocks into the perceived safety of gold and government bonds. Oil prices up 15 percent over the last three months, thanks to instability in Egypt, surging to an 18-month high.
Now, Syria isn't a major oil producer, and international sanctions have already reduced that country's oil exports. But traders worry that the violence could spread, disrupting supply. Syria has political, economic and military links to Iran, Hezbollah and Russia.
Now, the threat of an unintended chain reaction resulting in wider regional instability could push your gas prices higher. Just a 1 cent increase at the pump takes $4 million out of the pockets of American consumers every day.
(BEGIN VIDEO CLIP)
MOHAMED EL-ERIAN, CEO, PIMCO: So the last thing the global economy needs to do is another head wind that would slow what is already a very sluggish recovery.
(END VIDEO CLIP)
ROMANS: All of this as Congress and the president gear up of a battle of a different kind, another budget battle.
Greg Valliere is the chief political strategist for Potomac Research Group. He joins me today.
Greg, could military action in Syria jumpstart calls to replace the automatic budget cuts as pat of debt ceiling deal this fall?
GREG VALLIERE, CHIEF POLITICAL STRATEGIST, POTOMAC RESEARCH GROUP: It's not out of the question, Christine. Nice to see you.
I think that if this is protracted, if this lasts for more than a day or two, and the Mideast really heats up, it's going to once again focus attention on what a stupid idea sequester is.
ROMANS: And you and I for months have been saying for months have been saying the sequester was a stupid idea. But here's something that's interesting -- the most dire predictions about sequester, you know, they're not here, right? The Pentagon furloughed civilian workers, what, just six days, not the 22 that had been advertised.
The Dow is up 3,000 points since the last debt ceiling debacle. So, you know, have calls to end the sequester become the boy who cried wolf?
VALLIERE: Probably, although you have to say that it is a head wind for the overall economy. There are many people, especially in the Washington, D.C. region, who've been laid off, fired, furloughed, whatever, and on individual, personal level, it has affected a lot of people.
The problem, Christine, is that in all likelihood, without a deal, which is looking pretty unlikely, we are going to have sequester for still another year.
ROMANS: Still another year. And here we are, possibly on the verge of a possible attack on Syria, yet Congress and the president will be fighting over whether we should pay our bills. Just doesn't it make us look petty in the eyes of the world?
VALLIERE: You would think so. It's going to be a very rocky fall in my opinion for the markets. You've got instability in the Middle East, and the whole side issue of Iran may be getting angry if it's ally is attacked and not having talks on its nuclear program. You've got the Federal Reserve maybe changing its policy in a very significant way, and you've got a potential debacle on the debt ceiling.
I think late October is going to be a very crucial time for the markets because I don't see a deal right now.
ROMANS: And you have stock fund managers who are still up 14 percent. It was an awful August for stock investors, down 3 percent and 4 percent each. You know, why not (INAUDIBLE) profit in the stock market, with all of these risk that you've talked about?
VALLIERE: Yes. And, you know, the government is not going to shut down. We probably will not have a default crisis, but it is headline risk, and I do think there are an awful lot of people in both parties who bizarrely are itching for a fight right now. The Democrats seem to think a fight could help them in the fall of 2014, and that's how people think in this town. The Republicans are thinking it could help them with their constituents who wouldn't mind seeing the government shutdown.
So it's sort of like a train wreck with the adults not having a very big role right now.
ROMANS: A train wreck without the adults having a very big role. Greg Valliere, I'll leave it at that. Thank you. Have a great weekend.
VALLIERE: All right.
ROMANS: Up next, $765 million -- that's how much the NLF is agreeing to put towards concussion research and compensating retired players. But former NFL running back, Clinton Portis says the money isn't most important.
(BEGIN VIDEO CLIP)
CLINTON PORTIS, FORMER NFL RUNNING BACK: I don't think it was about the numbers or money going out. I think -- I think the league was making the stride to further the study of this case, and that's what's warranted.
(END VIDEO CLIP)
ROMANS: It's not a done deal yet. We'll tell you why, next.
ROMANS: Big money for concussion research. One small suspension, and nightmare prediction for Super Bowl Sunday. Football is back.
Here is the score: the NFL has reached an agreement with 4,500 former players on concussions. The league will contribute $765 million for medical exams, concussion related expenses, and a research program. Critics say that's not even close to enough for a multibillion dollar league that just keeps growing.
The deal was reached through a court appointed arbitrator. A judge still must approve that deal.
In the college game, Heisman trophy winner Johnny Manziel's autograph scandal is over for now. The NCAA says it found no evidence the quarter took money for signing his name on memorabilia but a less serious violation would cost him a suspension, one half of one football game.
Finally, this season's Super Bowl is at MetLife Stadium in beautiful New Jersey, in February. No roof. No dome. No heat. Did I mention it's in February.
The latest farmer's almanac shows the first intense storm of the area will hit that area the week of the Super Bowl, so much for a sunny Super Bowl in Miami. New Jersey Governor Chris Christie says, bring it on. He told "Boomer and Cart in the Morning", "A blinding snow storm during the game would be, quote, "amazing" and he'll have the flows ready.
Have you drafted your fantasy football team yet? The NFL season starts next week and fantasy nuts are getting excited.
If you don't play, here's how it works: you're the team opener. You draft position players from different teams, and you get points based on player performance. Twenty-seven million Americans are going to manage a team this year, and the business behind it is thriving.
ROMANS (voice-over): Fantasy has become reality for millions of sports fans.
The fantasy sports industry says it will bring in an estimated $1.2 billion this year. The most popular game by far, football -- 72 percent of all fantasy players manage an NFL roster online paying the associated fees.
RACHEL NICHOLS, CNN SPORTS ANCHOR: People in this country really like watching the NFL, and people in this country really like talking to their friends, especially online, going back and forth, giving a little boast here, a little bit of trash talk there. It lets them do both of those things simultaneously.
ROMANS: And don't expect this fantasy to go away anytime soon. IBISWorld, the market research firm, forecasted a 7.6 percent jump of annual growth over the next five year. It's a crowded playing field, 273 companies host fantasy league. Yahoo! Sports is the leader. ESPN and CBS Sports are close behind, drawing traffic from their TV audience.
MATT BEAN, MANAGING EDITOR, SI.COM: I think for a lot of companies, fantasy has meant one thing, and that is revenue. Fans are so interested in getting at that edge against the other players that they're willing to pay for it.
ROMANS (on camera): It seems the sites benefit from the competition. OK, consider this -- 7 percent of users look at just one site for their research. Look at this, 44 percent, they look at four or five different sites to research their teams, and 30 percent look at six sites or more. All those eyeballs mean more advertising revenue.
(voice-over): So who is playing fantasy football? The average team owner is a 41-year-old white male, makes 92,750 bucks, is married, owns a home, and he spends $467 per year playing fantasy sports. ESPN is playing right into that audience.
UNIDENTIFIED MALE: Tom, you're in the league.
UNIDENTIFIED MALE: Bill, you're insane.
ROMANS: Watch out, guys, the ladies are signing up as well, and the NFL knows it.
UNIDENTIFIED MALE: Touchdown, Matt Ryan.
UNIDENTIFIED FEMALE: Right, straight to Julio.
NICHOLS: Women are becoming increasingly an audience with the NFL. The numbers on that are really impressive. And it's a way for women who do like the NFL who genuinely like football to get involved in the game without having to know or be familiar with some of the more arcane things which we traditionally associate with men.
ROMANS: So, the women in your league may not know the running back for the '78 Dolphins, but they probably know who to play at running back on Sunday.
ROMANS: Obviously, people manage their teams at work. If employees spend one hour a week managing on the job, it costs $6.5 billion a year in lost productivity, but it recommends companies embrace fantasy football which could boost employees' sentiment and loyalty.
All right. Coming up, move over Miley, she wasn't the first to shock at the video music awards. Remember Madonna and that kiss with Britney Spears? Her last album flopped, but guess what? The material girl is laughing all the way to the bank, next.
ROMANS: For more stories that matter to your money, give me 60 seconds on the clock. It's "Money Time."
ROMANS (voice-over): No more of that if you pay a little extra. Scoot Airlines, a low cost carrier based in Singapore, is the latest to offer a no-kid zone on its airplane.
Miley may be twerking, but Madonna is working. The material girl is the highest earning celebrity bringing in an estimated $125 million in the past year. Her latest album flopped, but fans flock to her concerts to hear her old hits.
Walmart is extending its health benefits to same-sex partners. The company will cover married couples and domestic partners starting next year.
Self-driving cars closer than you think. Nissan says it will start offering the technology in its vehicles by 2020. Now it's a race to market with several automakers and Google also working on self-driving cars.
After sitting on the bench this year, GM is revving up for the 2014 Super Bowl. It will advertise new Chevy models during the game. The company previously said the price tag just too steep.
Billabong wiped out. The sportswear company posted a huge loss and labeled the brand essentially worthless.
ROMANS: All right. Coming up on a brand new YOUR MONEY, brand new at 2:00 p.m. Eastern --
(BEGIN VIDEO CLIP)
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Protests like this in New York City happening not just here but across the country in 60 cities. Fast food workers asking to be paid more because what they're getting right now, they say, isn't enough to live on.
UNIDENTIFIED FEMALE: We have to sacrifice. Either my husband eats today and I eat tomorrow or, you know, just make sure my kids eat at least three times a day.
(END VIDEO CLIP)
ROMANS: What happens when the people who serve us food can't afford food themselves. Find out on a brand new YOUR MONEY today at 2:00 p.m. Eastern.
And up next on CNN "NEWSROOM" as the world waits for the U.S. decision on striking Syria, some lawmakers argue the president is boxing them out. Brianna Keilar and Victor Blackwell talk to Congressman Scott Rigell and Eliot Engel about what course they would like to see the U.S. military take.
CNN "NEWSROOM" starts right now.