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Effects of Shutdown; Warning From Business Leaders; Interview With Senator Tom Coburn of Oklahoma; U.S.To Cut Aid To Egypt; Body Found In S.F. Hospital

Aired October 9, 2013 - 08:00   ET


ANNOUNCER: This is NEW DAY with Chris Cuomo, Kate Bolduan, and Michaela Pereira.


KATE BOLDUAN, CNN ANCHOR: Good morning. And welcome back to NEW DAY, everyone. It is Wednesday, October 9th, 8:00 in the East.

The effects of the partial government shutdown becoming very real and very painful for every day Americans. But many are especially outraged as to how these political games are hurting military families, keeping them from the benefits that they need.

But could a new chance at negotiations put an end to the nightmare? We'll talk about it.

CHRIS CUOMO, CNN ANCHOR: And listen to this -- a New York City police detective has arrested and apparently seen on video pounding a Range Rover in that wild chase, beating between bikers and SUV driver. Now, six people in total are charged in the case. We're going to tell you why the police say they're still looking for more.

MICHAELA PEREIRA, CNN ANCHOR: This story makes us crazy. A middle school is not letting children play with balls during recess -- footballs, baseballs, soccer balls and even games of tags and cart wheels, those things need to be supervised.

Are they letting the PC police go too far? Or should more schools follow their lead? We will discuss it later.

CUOMO: First, how about a short term solution? How does that sound? The idea is picking up steam as a way to end with partial government shutdown and the threat of default at least for now. It's a bit of a double-edged sword. On the one hand, gets people back to work, could stabilize the markets. On the flip side, you could end up right back here in a few weeks going through all this all over again.

Brianna Keilar down at the White House.

You know you have trouble when kicking the can down the road sounds like a good idea.

BRIANNA KEILAR, CNN SENIOR WHITE HOUSE CORRESPONDENT: That's exactly it, Chris. Good morning to you. And also we should caution it's not even clear that this is really definitely a breakthrough. But it may be is opening to a short-term way to avoid a default and get the government back up and running.


KEILAR (voice-over): Day nine, the government shutdown is getting real. For families of troops killed in combat, they will not get automatic death benefits during the shutdown, $100,000 to help cover funeral costs and travel to Dover Air Force Base to witness the dignified transfer of their loved ones' remains.

In North Carolina, food assistance for poor women and children cut off.

And 27,000 furloughed government workers have signed up for unemployment as they go without pay. Just eight days until the United States could default, President Obama phoned house speaker John Boehner, both sides indicating the divide is as deep as ever.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You got to stop repeating this pattern.

KEILAR: But later, President Obama appeared in the White House briefing room, opening the door to negotiations if Republicans agree to a short-term solution to reopen the government and increase the debt ceiling.

OBAMA: If there's a way to solve this, it has to include reopening the government. And saying America's not going to default. It's going to pay our bills.

KEILAR: How long might a short-term measure last? Four to six weeks, one GOP source tells CNN. Republicans may agree if the president promises to negotiate.

But it's far from a breakthrough without some sort of concession like a cut in spending, a stopgap measure may not clear the House.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The long and short of it is, there's going to be a negotiation here. We can't raise the debt ceiling without doing something about what's driving us to borrow more money and to live beyond our means.

KEILAR: The House voted Tuesday to create a congressional committee on government spending and the death limit, as well as pay federal employees currently working without pay. But the Obama administration threatened vetoes. A stalemate still, and the clock is ticking louder and louder.


KEILAR: And if the debt ceiling is breached, not only is the U.S.'s credit rating at stake but very real effects for millions and millions of Americans come November 1st at jeopardy -- in jeopardy, I should say -- tens of billions of dollars in payments for Social Security, disability, Medicare as well as for active duty military. Something that so many people would feel, Chris.

CUOMO: That's right, Brianna. We don't have to wait for them. We can do it right now. Thank you for the reporting this morning.

Right now, military families are being denied death benefits because of the shutdown. Case in point: the families of four U.S. soldiers killed in Afghanistan have to pay their own way to Dover Air Force Base to meet the plane carrying their bodies when it arrives today. Twenty-four-year-old Corey Patterson, one of the fallen, you're looking at his face right now, an army ranger from Oregon. We just learned that Chuck Hagel will travel to Dover this morning for the dignified transfer ceremony.

But the situation exists -- every day, people are paying the cost and that is unacceptable, especially to the members of the fallen.

BOLDUAN: That is one example too many. But we're also seeing many other examples of hard-working Americans being hit by this.

So, today hard-working Americans and corporate CEOs they have something in common this morning. They're all being squeezed by the government shutdown. While your 401(k) is shrinking, corporate executives are sweating, calling on Congress now to stop with the irresponsibility and the dysfunction.

The host of CNN's "YOUR MONEY", Chris Romans, is here with more on this, this morning.

Interesting twist. So, what are they saying?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, it's so interesting. The economy is too fragile. They well remember these business leaders, the financial crisis of 2008, they do not want to see markets in disarray, consumers panicking. They know that the telltale signs of what could become another Great Recession.


ROMANS (voice-over): Stock markets are tumbling as the debt ceiling deadline looms and the government remains partially shutdown. And you may start feeling the repercussions. Lawmakers are talking to the country, but that isn't helping ease Wall Street's concerns.

OBAMA: The greatest nation on earth shouldn't have to get permission from a few irresponsible members of Congress every couple of months just to keep our government open or to prevent an economic catastrophe.

ROMANS: As the president spoke, the selling continued. The Dow dropping 159 points or 1 percent by Tuesday's close.

BOEHNER: We can't raise the debt ceiling without doing something about what's driving us to borrow more money and to live beyond our means.

ROMANS: Since the shutdown began, the Dow is down 2.3 percent and with no solution in sight, America's top CEOs are getting fed up.

LLOYD BLANKFEIN, CHAIRMAN AND CEO, GOLDMAN SACHS: We have the most important economy in the world, the reserve currency of the world. Payments have to go out to people. If money doesn't flow in, money doesn't flow out.

MUHTAR KENT, CHAIRMAN AND CEO, COCA-COLA: The way forward is not easy. It requires a lot of sacrifice. It requires a lot of flexibility. It requires a lot of compromise. We expect the same will happen with the political architecture.

ROMANS: Starbucks CEO Howard Schultz has written an open letter asking for an end to the gridlock saying, he's disappointed by the level of irresponsibility and dysfunction with our elected political leadership. The debt ceiling debate is the biggest threat to your investment like your 401(k), your mutual funds, and your portfolio.

WARREN BUFFETT, CHAIRMAN AND CEO, BERKSHIRE HATHAWAY: So, the debt ceiling doesn't make any sense. So, it ought to be banned as a weapon. It should be like nuclear bombs -- I mean, basically too horrible to use.

ROMANS: The result of the government's inaction could be catastrophic. While the world waits for a solution, your money hangs in the balance.


ROMANS: Now, despite that big loss yesterday, the major averages are still posting huge gains for the year. I mean, you can see -- wow, the Dow is up 12 percent, the NASDAQ up 22 percent, the S&P 500 is up 16 percent.

But, look, borrowing costs could be getting more expensive. People get more concerned that the government won't be able to pay its bills on time. That will be something that will filter in to mortgage rates and other borrowing cost that could increase for consumers.

We've never been here before, Chris Cuomo. We've never been here. So, a lot of people trying to figure out what that fallout is going to look like. And no one, no one in business certainly, wants to be on the other side of it -- Chris.

CUOMO: All right, Christine.

But (ph) everybody in Washington is not convinced that failing to raise the debt ceiling would mean economic catastrophe. One of those is Republican Senator Tom Coburn of Oklahoma, joining us now.

Doctor, thank you for having you on the show this morning. Appreciate you being here.

SEN. TOM COBURN (R), OKLAHOMA: Glad to be with you.

CUOMO: So, no surprise to you. My first question is about your take that the debt ceiling isn't that important, that we can still pay our bills. A lot of people say that that is nonsense.

Are you holding to that position?

COBURN: Well, who says it's nonsense? The fact is, is we're eventually going to make hard choices, Chris. And the debt ceiling has never not been raised. So, there is no debt ceiling.

And by having a debt ceiling and then raising it every time, it allows the politicians off the hook for making the hard choices.

You know, your kids and mine are going to suffer greatly because we failed to rein in spending that's not efficient, not effective and basically outside the bounds of the Constitution.

CUOMO: Agreed.

COBURN: We've not done what the president asked us to do. He offered $435 billion in mandatory spending changes in this last budget. That ought to be included in any debt ceiling increase.

In other words, we have to start making the transition to live responsibly. And we can't continue to get an increase limit on our credit card when we're not demonstrating any financial integrity in the way we run our government.

CUOMO: Totally agreed. Senator, I agree with everything that you say. It's a great platform. Few Americans if any would disagree.

However, where the disagreement comes is, if you do not recognize what's at risk, what is at risk with the politics you're playing right now in terms of what bills don't get paid by the government, what it could do to the credit markets, what it could do to the American consumer, that's dangerous.

I hear you on spending.

COBURN: What's dangerous is if we don't pay interest on our debt and we don't redeem bonds that are due. I agree with that. We won't do that. We won't --

CUOMO: It goes further.


CUOMO: It does.

COBURN: Well, tell me how it goes further.

CUOMO: OK, thank you for giving the opportunity.

Because you will have to then start prioritizing payments. You will not have the money to pay everything that comes in. You'll start to have to make choices. IOUs in effect that could negatively affect the credit markets once the financial markets move, the consumers also known as the American families pay the price. You can't fix it down in Washington. A lot of economists, a lot of big shots in business say you can put us right back into a recession. A bad domino effect.

COBURN: Here's the wrong -- the thing I disagree with you.

CUOMO: Please?

COBURN: Is we can fix it in Washington. We refuse to fix it.

So, the assumption in your process is that we won't fix it. We won't make hard choices. And what I'm saying is we're going to eventually make these hard choices.

Now, we may not make it this time. I may not win my battle for us to start making the hard choices now. But our country is going to eventually make the hard choices.

And all you're doing and all everybody else is doing is by putting off the choices, making them that much harder on the average American.

So, the question is, where's the leadership in our country, both at the presidential level and Republicans and Democrats in Congress, to recognize the reality of our situation? We have $126 trillion of unfunded liabilities. We have $17 trillion of debt. And if you add the entire net worth of our country up, we're worth $93 trillion. So we're in the hole $40 trillion.

CUOMO: Right.

COBURN: And that's called bankruptcy.

CUOMO: Absolutely.

COBURN: That's called bankruptcy.

CUOMO: Understood, understood.

COBURN: So, the question -- my point is this, is if not now, when will we start acting responsibly? And we're not.

CUOMO: Is it responsible to make it worse? Which is what you will do if you prioritize payments.

COBURN: Well, that's your opinion.

CUOMO: No, no, it's not my opinion. It couldn't be less my opinion. This is what everybody we talk to says.

You see all the big business people coming out now and saying don't mess with the credit markets. Don't mess with consumer interest rates. Pay your bills.

Hey, make your cuts. Please make your cuts for my kids, for your kids, for everybody's kids. Make your cuts. But don't jeopardize the credit markets and the understanding of the economy in the minds of the American consumer and the minds of the market makers just to gain political advantage.

COBURN: There is nothing about political advantage here. I'm the most apolitical person in the Senate. What mine (ph) is, is common sense.

You can't continue spending money that you don't have on things you don't absolutely need and Congress refuses to address that. The president refuses to address that.

And so, consequently, you're saying don't have this fight now. Have it down the road. And the problem is, is we continue to kick it down the road and pretty soon everything is going to continue as it is until it doesn't. And when it doesn't, that's when the catastrophe comes.

So, I'd rather have a managed catastrophe now which I don't think will be there.

You know, here's the thing that all the media does. They say it is default equals not raising the debt ceiling. That's not true. That is not true.

Those are two different and distinct things.

CUOMO: Well --

COBURN: I'm not saying we shouldn't pay our bills. What I'm saying is we should put ourselves in a position where we have to start making hard choices now.

CUOMO: That's fine. I do think you have to say the first part a little more clearly, otherwise, we won't be having this discussion.

If you were saying --

COBURN: I've said it every time I've been on.

CUOMO: -- raise the debt ceiling, pay your bills, don't do anything to compromise the markets. But then let's have a real negotiation and show real leadership. I'm a senator. I'm going to fight for these cuts because we need to make them.

I think that's great. But the way you're putting it now --

COBURN: My difference is, is I think you make the decisions before you raise the debt ceiling.

CUOMO: But if you blow through the deadline and you have resulting negative consequences on the economy, you wind up hurting the thing that you want to help, which is the U.S. family.

COBURN: We're going to have positive to pay consequences one way or another if we don't do this. That's where you and I differ. CUOMO: OK. Well, look, I appreciate you laying it out.

Let me ask you about something that is important you to before you go here this morning. Social Security, disability in particular -- you're investigating it. You found an example you believe of a common paradigm of fraud within how disability payments come about with a certain law firm in connections to a judge.

Do you believe that this is widespread fraud that you see with disability payments in Social Security?

COBURN: Well, probably not to the degree that we had. But we've had two hearings and two reports on this. One is, as we know -- and Social Security agrees with it about -- a quarter of all the cases that are decided, they are decided inappropriately at the judge level. That's number one.

Number two is you can't deny the fact that this trust fund is going to be out of money in about 18 to 24 months. If our program is really help those people who need disability, then we've got make sure we're not paying disability to those people who are not disabled.

And my contention is anywhere from a quarter to a third of the people that are collecting it today aren't truly disabled. And we have good data to back that up.

CUOMO: Because, you know, it's coming under some criticism -- the report that you're cherry picking here a little bit. That --

COBURN: No. You got to look at both reports. We did three other areas of country where we found 25 percent of the cases weren't right. And it's not -- and, by the way, Social Security agrees with us on this. So, it's not -- it's not our committee that -- and, by the way, this is a bipartisan committee with some very strong leaders in it. Senator Carl Levin, Senator Tom Carper, myself, Senator McCain and several others.

So this isn't taking a shot at the disability community. It's to preserve our disability payments by not paying disability to people who aren't disabled.

CUOMO: Well, that's obviously going to be what the important prospect is, right?

COBURN: That's right.

CUOMO: Because we want to make sure we protect the most vulnerable. That's what that program is all about.

COBURN: That's right.

CUOMO: All right. Senator, thank you so much. I know you have important business there. I wish that more of it was going on right now. But I appreciate you coming on NEW DAY. Look forward to seeing you again.

COBURN: You bet.

CUOMO: All right. Kate, over to you.

BOLDUAN: All right. Chris, thanks so much. New this morning, The Obama administration is preparing to suspend some of its military aid to Egypt. The country has been thrown into turmoil ever since the military coup that toppled President Mohamed Morsy back in July.

CNN's chief national security correspondent, Jim Sciutto, is following this development for us. He is live in Washington this morning. So, what are we hearing, Jim, because there's been talk about this for quite some time, but this is new?

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: Right. This is a significant decision affecting one of the most significant relationships for the U.S. and the Middle East. The White House says an announcement will be coming in the coming days and U.S. officials tell us that that announcement will include the reduction of military aid to Egypt. Not all of it will go.

Some things will remain like counterterror help, but still, a significant reduction. That is a significant move. The Egyptians aren't going to like it. It's our information that the U.S. is not officially notified Egypt yet either.

BOLDUAN: So why -- what you are hearing about why the decision to suspend the aid is coming now? Is there one event or one thing that finally triggered this move?

SCIUTTO: Well, it's something that the administration had been considering for some time really since the July coup that wasn't. You remember they didn't officially call it a coup, the White House, because there are illegal (ph) ramifications if they did, and then the violent crackdown that followed. At the time, administration officials told us that they didn't want to make any rash decisions about aid.

They've been thinking about it. We're also told that they pushed this decision back a couple times. So, my information is that it's the accumulation of events including the events in July that led to this decision now, but it also highlights how significant the decision this is, that it took some time to come to it.

BOLDUAN: Absolutely. And of course, along with that significant decision is the big question, what does this mean then for the relationship between the U.S. and Egypt going forward?

SCIUTTO: Well, it's going to be damaging. And you already have Egyptian officials on the record when this has come up before saying we don't need American aid. There are others who will fill in the void, and that's true. Some of the Gulf states, Saudi Arabia, et cetera, who are looking for greater influence there have offered to do just that.

So, it's going to be something that's going to have an effect. Now, to be clear, some of this -- a good portion of aid will remain. The U.S. gets about a billion and a half dollars a year, 500 of that is military. So, you still have nonmilitary assistance and so on. So, an aid relationship will continue. But still, the military aid a very important part of that.

BOLDUAN: And it sends a pretty big message, as you said.

SCIUTTO: No question.

BOLDUAN: Very significant decision. All right. Jim, this will be developing throughout the day. We'll be talking to you. Thank you so much.

We're watching lot of headlines this morning. Let's get straight to Michaela for the latest.

MICHAELA PEREIRA, CNN ANCHOR: All right, Kate. Here we go. There are signs of the government shutdown may have slowed the response to a salmonella outbreak on the west coast. The Centers for Disease Control says there was a delay getting information about the outbreak since scientists would track food-borne disease have been furloughed. Officials say the outbreak likely would have happened the other way since food inspectors remain on the job as essential employees.

Quite an ugly scene happening in Brazil. Protesters there clashing with riot police in Rio de Janeior and Sao Paulo. They ran sacked Rio city center, breaking into banks and setting a bus on fire. This violence followed a day of peaceful demonstrations with tens of thousands of people taking to the streets in solidarity with teachers seeking better pay and benefits.

Congressmen under arrest. Eight Democratic House members were among the 200 people arrested at an immigration rally in Washington Tuesday. Those protesters blocking a main street right near the capitol in an effort to get Republicans to vote on a stalled immigration reform bill. Among those charged with crowding and obstructing, Georgia congressman, John Lewis, and New York congressman, Charlie Rangel.

"South Park" once again courting controversy as it starts its 17th season daring (ph) an episode today about the Trayvon Martin-George Zimmerman case. They're calling it "World War Zimmerman." In it, cart man tracks down token, "South Park's" only black child. You know, of course, the show is no stranger to controversy having aired episodes about the NSA and scientology among many, many others.

So, told you about it. Some of you will watch it, and of course, tomorrow, the fallout.

CUOMO: And many of you will tweet about it. Let's get over to Indra Petersons keeping track of the latest forecast -- Indra.

INDRA PETERSONS, AMS METEOROLOGIST: Yes. We're definitely looking about chilly start again this morning and even some rain kind of being thrown into the mix. I mean, take a look at this right now in Pittsburgh, you're only currently into the 40s. So, 46 degrees right now. New York about 54, but D.C., 58 degrees. Right now, that's what you're feeling. Now, it doesn't look like you're not going to see much more warmth in that especially as we get in through tomorrow.

Now, today, you'll get to some low 60s. We're already throwing some rain in the mix there as the low makes its way up the coastline, but by tomorrow, the temperatures drop even more so that your highs will only be where you're currently starting off in the morning hours. So, tomorrow, D.C. high is just in the 50s. But yes, more rain in the mix.

So, where is that rain coming from? Well, a sustained low that's making its way up from the Carolinas from yesterday. Today, it's kind of making its way into the mid-Atlantic, and eventually, it's going to cruise all the way up even to the northeast to kind of start off our weekend here. So, New York looking forward about Friday and into Saturday.

So, kind of hanging on a little bit. Warmth, that's the middle of the country. You're seeing those temperatures are good. Fifteen degrees above normal right into the Midwest. And then, the Pacific Northwest, we're looking at a nice low out there, probably, our first rain maker for Southern California and even some snow. Yes, into Mammoth Lakes, which of course, I can't help but throw it out there, because snowboarding season is very key.

BOLDUAN: There you go. Embrace the snow. Embrace the snow. Thanks, Indra.

PETERSONS: That's right.

BOLDUAN: All right. Coming up next on NEW DAY, a woman vanishes from her hospital room. Weeks later, police make a terrifying discovery where they found her. We'll have details ahead.


BOLDUAN: Welcome back to NEW DAY. A disturbing discovery at a California hospital. Lynne Spalding vanished last month from her hospital room in San Francisco general. Well, this led her family and friends on a frantic search. Now, officials say they may have found her body. Dan Simon is live with more from San Francisco. Good morning, Dan.

DAN SIMON, CNN CORRESPONDENT: Good morning, Kate. The medical examiner's office still needs to officially identify the body, but a law enforcement source tells us there appears to be a match at this early stage of the investigation. How the woman wound up in an outdoor stairwell remains to be seen, but it seems that the hospital has some serious explaining to do.


SIMON (voice-over): This area of San Francisco General Hospital is being treated as a crime scene after a body is found outside on a fire escape. It's the same hospital where this woman, 57-year-old Lynne Spalding, went missing on September 21st. Ever since, the search had been on to find Spalding, a mother of two had been admitted for a serious infection. DAVID PERRY, FAMILY SPOKESMAN: No stone has been left unturned by her friends and family. And we asked SFPD (ph) to find her.

SIMON: David Perry is a friend and family spokesperson.

PERRY: We have a lot of questions as her, you know, family and friends. Did anyone see her leave the room? Did she leave alone? Is there videotape of Lynn leaving the hospital or wandering the halls?

SIMON: Authorities went to virtually every corner of the city to try and locate Spalding who some thought may have been dazed from powerful medication.

After she went missing, did the hospital conduct a thorough search of its own property to see if she might be found?

PERRY: I think that's a good question for San Francisco General and how one would define the word thorough. If, indeed, her body was found here on site at San Francisco General, I think using the word thorough would be a wild exaggeration.

SIMON: The hospital says an employee found the body, but it's unclear how it could have gone undetected for any length of time.

RACHEL KAGAN (PH), SF GENERAL HOSPITAL, SPOKESPERSON: That is all what is being investigated both by the sheriff with assistance from the police and then, of course, the medical examiner's examination will provide more information.


SIMON: Well, the hospital spokesperson also saying they're very distressed about all this. They said they did conduct a search of the campus but she says that that stairwell is rarely used. So, perhaps, that might explain why it took so long for anyone to discover the body. It could have been there for as long as three weeks. Chris and Kate, back to you.

BOLDUAN: Still a lot of explaining to to say the least. All right. Dan, thank you very much.

Coming up next on NEW DAY, serious illness at a California school. Teachers say recent construction and moldy classrooms are behind a rash of illnesses including cancer. Is the school safe? What's going on here?

CUOMO: Another school story for you, what do you suppose to do if you run a school and kids get hurt at recess when they're playing games? How about no more balls? That's the answer at one school on Long Island. Is this a case of child safety run amok?