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LEGAL VIEW WITH ASHLEIGH BANFIELD

U.S. Federal Government Partial Shutdown Continues; Debt Ceiling Looms; Interview with Rep Diane Black; Day 14 of the Partial Government Shutdown

Aired October 14, 2013 - 11:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


POPPY HARLOW, CNN HOST: Have you seen this man? If anyone has, it might be the big break in the Madeleine McCann case -- a major move today to find the British girl who disappeared without a trace more than six years ago..

Another infamous child mystery, this one more than 20-years-old. Look like it could be solved. "baby Hope," you know that name, her tiny body left in an ice chest discarded by the roadside. Today, New York police say they know her real name and they know who killed her.

Also this hour, the cameras rolling as a crowd heading into a ferry goes crashing into the water below. Somehow everyone got out alive. We're going to show you the frantic rescue.

Hi there, everyone. Happy Monday, I'm Poppy Harlow in the chair for Ashleigh Banfield today. It is Monday, October 14th. Welcome to LEGAL VIEW.

Well, at least in public, some powerful voices in the debt ceiling debate standoff are optimistic that the government will avoid a historic default.

We are now less than 61 hours away from that. You can see the seconds ticking down on the clock right there on your screen.

But there is no agreement, not yet, not in the Senate, where talks are focused right now, not in the House, which is pretty much out of the loop until something comes up for a vote.

And I have not even yet mentioned the federal government shutdown that we are all feeling. We're in day 14 of that.

So let's dig into all of it with our Dana Bash on Capitol Hill. Also, Richard Quest, following the global fallout from an economic standpoint, he's here with us in New York.

Dana, let's start with you. I mean, really new developments in the last 20 minutes. We've been frantically e-mailing about this.

Democratic Senator Joe Manchin, he's one of those sounding sort of cautiously hopeful this morning. Here's what he said this morning on CNN's "NEW DAY."

(BEGIN VIDEO CLIP) SENATOR JOE MANCHIN (D), WEST VIRGINIA: I think we're 70, 80 percent there, putting the extra 20 percent, 25 percent to it, Chris, is OK.

When should the c.r. come due? When should the debt ceiling come due? And does that give that time for the budget conference, the budget committees, to sit down and work through this?

So those are the details that have to be worked out.

(END VIDEO CLIP)

HARLOW: OK. So, Dana, I mean, better than what we've heard pretty much all weekend in a long time.

What are you hearing about this plan, this bipartisan plan, how it's being received right now?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Certainly what Manchin said is true, that sort of the big picture, it does seem as though the two sides are closer than we were before.

Let's just put up on the screen what Joe Manchin and Susan Collins have been talking about and met about this morning.

They're talking about funding the government for six months, extending the debt limit until January 31st, 2014, delaying a medical device tax, and so on going on with various parts of the ObamaCare law that they want to change.

Now I'm putting this up on the screen because this is certainly the parameters that they're talking about. Now I'm going to tell you the "but." These are important "buts."

These are according to senior Democratic sources. The big issues that they're talking about behind closed doors, and when I say "they," I'm talking about the Democratic and Republican leader, are the length of the debt limit and the length of the bill to re-open the government, to fund the government.

And so what this bipartisan discussion is all about, certainly is about those things, but there are a lot of things. If you want to put it back on the screen, there some things in here that the Democrats just say, they're non-starters.

For example, they don't, at least in the short-term, want to talk about extending the government for six months. Why is that? Because they, the Democrats, are very concerned about extending the government, keeping the government open through January.

Because what happens in January? The next level of those forced spending cuts kick in, and Democrats do not want to do anything that locks those into place.

And I think if you're looking at what the discussions are right now, that, I think, is what I'm told from Democratic and Republican sources, that is sort of the nub and the crux of where things stand right now.

Not so much about whether to do the debt ceiling or fund the government, it's that particular issue that they're focused on.

HARLOW: Well, and so Harry Reid said over the weekend about this plan, quote, "It's not going to go anyplace at this stage."

But then we here that hopeful optimism from Manchin. Given the complex rules of the Senate, do you think it's even possible, looking at the time table right now, do you think it's eve possible to pass a deal, perhaps this deal, perhaps something different, by that Thursday deadline?

BASH: Sure, it's entirely possible.

Let me just also take a step back and tell you where I'm told this morning the state of play is.

As we just heard, a lot of discussion among these bipartisan senators, but while that's going on, there are also talks going on among the leaders, the Democratic and Republican leader.

And my understanding, according to a senior Democratic source, is that things are not as grim as they appeared just yesterday, just over the weekend.

They are closer than it appears because it seems as though the discussions are about the length of the bill to fund the government and those sequester levels, which are not unimportant.

Those are key. But it seems to be the discussions and differences have narrowed to that point.

And I'm also told that it wouldn't be surprising, that at least in the Senate, those leaders could come up with a deal in the next 24 hours.

Now we've seen these things twist and turn, and we've seen so many predictions that have change.

But I just also want to quickly let you listen to Senator Bob Corker. He, actually, is sort of backing up the idea that, while these bipartisan talks are very important because any of bipartisan talks right now are kind of unusual and key, the issue is going to be what Harry Reid and Mitch McConnell work out.

Listen to what Bob Corker told CNN exclusively this morning.

(BEGIN VIDEO CLIP)

SENATOR BOB CORKER (R), TENNESSEE: I think at the end of the day the culmination needs to be something between McConnell and Reid. And I think that all of the side talks have occurred have helped create an environment for that to happen.

So, you know, I think Mitch and -- I know Mitch and Harry are talking, and I think we're about to get to a place where, you know, again, we can move something hopefully off the Senate floor that's widely bipartisan.

I think it's going to take that to have something move productively on the House side.

(END VIDEO CLIP)

BASH: So we're watching very closely to see if there's a deal in the Senate, but as you well know, Poppy, to answer your question of whether we can do anything by the clock striking midnight on Wednesday night, that's again going to be up to the Republican-led House.

HARLOW: Yeah, but amazing that we take it to the brink once again.

It was two years ago that the credit of this country got downgraded because of partisan brinkmanship like this, so we'll watching closely.

Dana, I appreciate the reporting. Thank you.

All right, it so happens that central bankers and top financial officials from literally around the world, from almost 200 countries, they spent the weekend in Washington for a meeting of the IMF, the International Monetary Fund.

The chief of the IMF, Christine Lagarde, told our Richard Quest that America's problems are certainly not just America's problems.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: They're all concerned because the U.S. is the biggest economy in the world, because it trades with all of them, because it has massive financial consequences for them as well.

So it's an international concern that was expressed.

(END VIDEO CLIP)

HARLOW: Let's bring in Richard Quest here in New York.

Richard, you had a fascinating interview with Christine Lagarde this weekend. She talked about just how careful we have to be and how dire the situation could be.

And when you look at the numbers, you have China and Japan that own $2.4 trillion of our debt between them, and then there was an interesting op-ed that the Chinese official news agency put out, and they talked about their concerns, and they put it much more bluntly.

They called America's debt standoff a, quote, "pernicious impasse," and they went on to say that it warrants a de-Americanized world.

When you look at the reserve currency of the world being the U.S. dollar, hearing our biggest debt holder say that incredibly strong language, what do you make of that in terms of global repercussions, Richard? RICHARD QUEST, CNN INTERNATIONAL'S "QUEST MEANS BUSINESS": Oh, and they also put the boot in by saying that the United States was being hypocritical because of the way it lectures other countries for not putting its fiscal house in order, but has singly failed to do so itself.

And indeed that was very much, perhaps in a less strident and more diplomatic tone, what any finance minister from any other part of the world will happily tell you privately behind closed doors, that the United States for the last several years has boasted about the changes that have been made in the U.S. and berated others for not doing them.

When in reality, yes, certain major changes were taken, but the core fiscal changes necessary in the United States have not been addressed, and the deficit may be falling, but that is because of renewed economic growth, it is because of draconian measures like sequester rather than any carefully tailored and properly structured debt reduction.

Now one of the things it's really crucial to understand. There is no midnight deadline for this debt ceiling.

I know we've got a clock ticking down, and this creates the urgency. But I assure you it is not like the budget where, bong, come midnight, you know, the U.S. will default.

What happens on Thursday is that the wiggle room of the Treasury runs out, the ability to rob Peter to pay Paul, to shift the money around, to do the extraordinary measures, that comes to an end and hard choices have to be made.

HARLOW: Right. And there is a cushion there. Some economists are saying a week-long cushion from the Treasury, so maybe we're looking more October 24th, 25th.

But, regardless, this is something that we have never faced and don't want to face.

Appreciate it, Richard Quest. Thanks for joining us.

Well, as we mentioned, it has been two weeks since the government shutdown started, and still, both sides are just talking. They need to act.

We're -- coming up, we're going to ask Republican Congresswoman Diane Black what she thinks needs to be on the table in order to finally get a deal.

We'll be right back.

(COMMERCIAL BREAK)

HARLOW: Well, the U.S. House of Representatives reconvenes in 50 minutes as the debt ceiling clock on your screen, you see it right there, clearly shows Congress has less than 61 hours before the U.S. government could slip into its first default in history. And the partial shutdown of the federal government is already two weeks old. We've been dealing with this for fourteen days.

So let's talk about it with one of the people elected to deal with this in Washington, joining us from Nashville, Republican Congresswoman Diane Black from Tennessee, a member of the tea party caucus.

Appreciate you being with us. Thank you.

REPRESENTATIVE DIANE BLACK (R), WAYS & MEANS COMMITTEE: You're very welcome. Thank you for having me this morning.

HARLOW: So we just heard from our Dana Bash about this bipartisan proposal from Susan Collins and Joe Manchin, this plan to fund the government, raise the debt ceiling, a temporary plan, but something.

Is that something that you would vote for? Because, frankly, one of the bills that you put forth is included in that in terms of verification under ObamaCare.

BLACK: I certainly like that part of it. That's the no subsidies without verification, and that just holds the administration accountable for what was in the Affordable Care Act, and that's the fact that you have to verify someone's income before you give them a government subsidiary, which is the hard-earned taxpayer dollars ultimately, and so that is a part of that.

HARLOW: But looking at the plan as a whole, as it stands now, is that something that you think you would back?

BLACK: I need to look at all of the plan because what's so important as your previous guest has said is that we have got to deal with our deficit spending and ultimately our debt.

And that means structural changes to our entitlement programs. And so I really need to make sure that that's a part of it because we cannot continue to spend the way we are. We're hitting the debt ceiling, it's $17 trillion, and this is not good for our country. As a matter of fact, Poppy, what will happen, is if we don't do something about this, eventually there won't be a solution and we will be downgraded, absolutely. So we must do something sooner than later.

HARLOW: I want to talk about that in one moment. This is a short-term plan. This extends the debt limit until the end of January 2014. This funds the government at the annual rate of $986 billion for six months. Looking at this short-term plan, we're literally like 60 hours away. Is this something that you would back as you understand it now?

BLACK: I would like to see a little more in there. And the piece that I would like to see in there is more leverage from our side making sure we're dealing with the deficit spending and ultimately our debt. And a part of that would be tax reform. I would like to see those things added to it. I certainly don't want to say yes or no that I would vote for any plan until it's front of me. They change minute by minute.

HARLOW: You talked about downgrading the credit of this country. That's something we saw happen a very historic thing, a very painful thing for this country back in 2011 when we saw the same fighting over raising the debt ceiling and S&P. I mean I have their explainer right here about why they downgraded our credit, and part of it was frankly because Washington couldn't get along and couldn't get a long-term deal. And now we don't have one.

So much is at risk. The credit rating of this country, jobs in this country. So many people not working right now because of it. Are you concerned looking at this from where you sit that your party isn't going to be able to recover from this? There was this NBC / "Wall Street Journal" that poll that recently came out. And by a 22 point margin, more people surveyed blamed the GOP in Congress than the White House for the partial shutdown. How concerned are you about how the American people are reading this for your party?

BLACK: Listen, there's plenty of blame to go around. There's blame for us, there is blame for Harry Reid and blame for the president, who is supposed to be the leader of this country. We started on September 20th sending plans to Harry Reid and the Democrats. Four different plans they received and yet they were unwilling to come to the table and negotiate.

And we're back at that same place we were a number of years ago where the Democrats don't want to deal with the spending issue. Because you have to go in and deal with the entitlements. It's tough. We were downgraded because there was not a long-term solution. We have got to deal with that. One way other another, this country is going to deal with it. And the longer we wait to deal with it, the harder it is to deal with it. We were ready on September 20th. We've been sending plan after plan, and it's the Democrats who shut down the government. Not the Republicans. We need to get the message out there, the truth of the matter of who shut down this government.

HARLOW: Do you think there's going to be some sort of deal reached in the next 60 hours, in the next three days? Do you feel that from where you're sitting?

BLACK: We have never in the House wanted the government to be shut down. We certainly want to get the debt taken care of. We want to get all of these things moving forward. This is --

(CROSSTALK)

HARLOW: That's what happened by not passing a continuing resolution. That's what happened. We knew without passing a budget that's would happen.

BLACK: We sent that continuing resolution over to Harry Reid. They're not the only ones that have to say what's going to happen in this country. We need to come together. That's the way our Constitution is written, that the House and the Senate will negotiate with one another and that we would negotiate with the president. They are the ones who refuse to come to the table and we're not going to write a blank check to the president.

And so there has got to be conversation between all these three of these entities in order to get this done. We've been working on doing that since September 20th. Where are they? They're just now coming to the table. And by the way, the president said he would be willing to have a short-term debt ceiling increase. And we went over to talk to him at the White House, and nothing came of that.

That's because he wants his way or the highway. This is not good for the American people. We've got to gather people around the table as we've been asking them since September 20th to sit down and talk about this. We never want to shut the government down and we want to move forward. But we're not going to give the president a blank check.

HARLOW: Representative Diane Black, thank you for joining us. Appreciate it. I hope that both parties can come to an agreement soon. Thank you for your time.

BLACK: I certainly do too. Thank you, Poppy, for having me.

HARLOW: Will we see a deal ahead of the debt ceiling deadline? And if not, what is that going to mean for the state of the U.S. economy? What's it going to mean for you? Keep watching and we'll have that next.

(COMMERCIAL BREAK)

HARLOW: We're coming up on 60 hours until the U.S. -- until a day, frankly, that the U.S. Treasury hoped never to see a potentially unbridgeable gap between cash on hand and payments that we, this government owe.

And speaking of gaps, Congress is taking its time on raising the debt ceiling and on re-opening the government. All of this brings me to my friend and colleague Wolf Blitzer, who is for - with us in Washington.

Wolf, late last week the House and the president seemed to be talking. There was progress. The market skyrocketed. That collapsed. Then a bipartisan Senate deal seemed to be taking shape. Harry Reid has said not a done deal on that at all. But it hasn't gone away. What are people in Washington, what are your sources telling you about whether a deal will get done by Thursday?

WOLF BLITZER, CNN ANCHOR: Well, I think everybody seems to think they have to do it by Thursday. That's when the October 17th, deadline to raise the nation's debt ceiling expires, if it you will, if you believe the Treasury Secretary Jack Lew and other economists. They say it's got to be done by Thursday.

So, there's nothing like that kind of deadline pressure on Republicans and Democrats to come up and reach some sort of compromise and a deal. My suspicion is they'll work something out between now and Thursday. Might be at midnight. Might be the last possible minute. It may slip a little bit into Thursday. But they've got to work something out because the stakes really are enormous. I'm relatively confident they'll do it. Having said that, I was relatively confident that there or would be no government shutdown either. I thought he would reach a deal on that front. Who knows. Let's hope they make a deal.

HARLOW: Do you think if they do reach a deal, it's going to look at least somewhat similar to the Collins-Manchin plan?

BLITZER: Yes. I do. I think it will be along those lines. I think they'll work out something that both Harry Reid and Mitch McConnell, the Democratic and Republican leaders in the Senate, can support. It'll pass the senate, it'll then go to the House. It'll be enormous pressure on the Speaker John Boehner to let it come up for a vote.

There you see some of the outlines. I don't know if it's going to be all of that. It will be some of that. It will be enormous pressure on Boehner to go ahead and let it come up for a clean vote. You need 217. Given there's two or three vacancies in the House right now to pass it. I think they'll get that easily. There will be 40 or 50 conservative Tea Party supporters who will reject it. There'll be a few liberals that might reject it, although I suspect only a handful if that. But in the end, I suspect it will pass.

HARLOW: I want to get to something that John McCain referred to yesterday, talking about a key player in past budget fights, who's been pretty much invisible in this one. Listen.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R ) ARIZONA: So I'm hopeful that we will get negotiations. I hope the president will become engaged. Maybe we need to get Joe Biden out of the witness protection program because he has good relationships with --

BOB SCHIEFFER, CBS HOST: We haven't heard very much from him.

(END VIDEO CLIP)

HARLOW: No Biden, Wolf? Is that part of the problem?

BLITZER: He's been involved, but he hasn't been very visible, to be sure. In part, because some Democrats, including Harry Reid weren't happy with the mediatory role he took the last time around whey they did avoid that fiscal cliff and they got through a deal. But some Democrats thought he made too many concessions at the time. So he hasn't been very visible. But I know behind the scenes he's been participating in the president's meetings whenever they invite Democratic and Republicans members over to the White House, he's there. But you're right, he hasn't been very visible this particular time. Not because the Republicans don't want him involved. I think there are some Democrats, like Harry Reid, who didn't want him involved.

HARLOW: All right, Wolf, appreciate it. See you later on "THE SITUATION ROOM," but before that, we'll see you at 1:00 p.m. eastern here with CNN NEWSROOM. Thanks Wolf.

It has been 14 days since the government shutdown. And the side effects are being felt across this country. We're going to take a look at the five states that arguably are being hit hardest by the partial government shutdown. That's straight ahead.

(COMMERCIAL BREAK)

HARLOW: Welcome back to LEGAL VIEW. I'm Poppy Harlow in for Ashleigh Banfield. The clock is ticking and the stakes are rising as the country comes closer to what some economists warn could potentially be a catastrophic default on our nation's debt. With the partial government shutdown now hitting day 14, all eyes are focused on the Senate, which reconvenes in just about two and a half hours. That's not a moment too soon. The government could soon run out of cash to pay its bills if the debt ceiling is not raised.

Democrat Senator Joe Manchin tells CNN a deal, a deal that he has put forth with Republican Susan Collins is 70-80 percent done.