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ERIN BURNETT OUTFRONT

Russia Fires Intercontinental Ballistic Missile; Dangerous Standoff In Crimea; Interview with Congressman Brad Sherman

Aired March 4, 2014 - 19:00   ET

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


ERIN BURNETT, CNN HOST: Next, Putin test an intercontinental ballistic missile and new details of the president's tense phone call with Vladimir Putin out at this hour. We have a live report from the White House and Crimea with the breaking news ahead.

Plus President Obama takes on the 1 percent again, but is Wall Street just too much for the president to handle. And a witness breaks down on the stand at the Oscar Pistorius murder trial. What she says she heard the night the "Blade Runner" killed his girlfriend. Let's go OUTFRONT.

And good evening, everyone. I'm Erin Burnett. I want to extend a welcome to our viewers in the United States and around the world tonight.

We begin OUTFRONT with the breaking news. Vladimir Putin tests an intercontinental ballistic missile. American officials telling CNN the next couple days will be crucial for President Vladimir Putin whether he will decide to move more troops into Crimea or possibly even in the Eastern Ukraine, the crucial decision point.

Another huge day of fast moving developments in the crisis. All eyes on what the Russian president is going to do. Now tensions rose today. Russia fired that ICMB I mentioned. The launch happened just a couple hours ago. U.S. officials say they were aware it was going to happen. The missile test still rattled nerves though as Russian President Vladimir Putin left the door open to using military force in Ukraine.

The delicate situation summed up by a dramatic face-off today between Ukrainian and Russian soldiers outside a Crimean air base. It was all caught on camera and I want to play it for you. This exchange as Russian troops fire their weapons into the air.

Kind of amazing it when you see that, it makes you realize how real it is. U.S. Secretary of State John Kerry was in Kiev today. He slammed Vladimir Putin for saying that his government is trying to protect ethnic Russian in Crimea.

(BEGIN VIDEO CLIP)

JOHN KERRY, U.S. SECRETARY OF STATE: They would have you believe that ethnic Russians and Russian bases are threatened. They'd have you believe that Kiev is trying to destabilize Crimea or that Russian actions are legal or legitimate because Crimean leaders invited intervention. And as everybody knows, the soldiers in Crimea at the instruction of their government have stood their ground but never fired a shot. Never issued one provocation.

(END VIDEO CLIP)

BURNETT: Vladimir Putin says he's acting on behalf of the will of the people. President Obama though says there's a quote/unquote, "strong belief Russia has violated international law." There are serious questions on both sides though. At this hour, we are now learning new details about a tense phone call between President Obama and President Putin on Saturday. It was reportedly 90 minutes.

Our White House correspondent, Jim Acosta, literally just walked out of a White House briefing. Jim, what more have you found out about the crucial call, which you know, I think is fair to say went a pretty long time.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: It did, Erin. It's not often we get a lot of details about a 90-minute phone call between the president and any leader of any country. We talked with some senior administration officials here at the White House about the situation in Ukraine, and about that 90-minute phone call.

According to the senior administration official, the president spent much of that time, and this goes to perhaps the whole reason why this crisis is unfolding, the president spent most of the time on this phone call basically challenging Vladimir Putin on his facts that Vladimir Putin was basically saying that he's stepping in or that Russia has a right to defend the interests of ethnic Russians in Ukraine.

And that the president spent much of that the phone call basically disagreeing with Vladimir Putin. So I think that that goes to what we've been hearing over the last several days from administration officials that there's just sort of a fundamental disagreement over the facts on the ground as they stand now in Ukraine and why Putin is doing what he's doing.

What's interesting is that the senior administration official sort of challenged the notion that Putin is unhinged or acting irrationally. They belief at this point and they reiterated this to us during this briefing that they believe he is, you know, acting consistently, that this has been going on since the invasion of Georgia back in 2008.

And that Putin, according to administration officials, just feels threatened when there are popular uprisings against governments that are aligned with him. That was the motivating factor for what happened in Crimea. And what may be happening in the rest of Ukraine.

And one thing that we also picked up on during this meeting is that the president did speak with Angela Merkel, the German chancellor earlier today. She has been sort of acting as a go-between, between President Obama and President Putin that this administration official said she has a long-standing history, the Germans have a long-standing history with the Russians.

And that she was sort of laying out the contours of a potential framework of potential off-ramp is the term we've been hearing to get Russia out of Crimea. That is also something we are told by senior administration officials that came up during the phone conversation between the president and Putin.

The president talked about this potential off-ramp and that is bringing in international observers to take the place of Russian soldiers and look out for the interests of ethnic Russians. But at this point, Putin is just not buying that at this point as an off-ramp out of the crisis.

BURNETT: All right, thank you very much. Appreciate it. Jim Acosta reporting there just getting briefed by White House officials about that call.

I want to go to Crimea now where Ben Wedeman is following the developments. Ben, pretty amazing just to see that footage of the standoff between the soldiers in the Crimea. I think that image and seeing that said 1,000 words. What can you tell us tonight?

BEN WEDEMAN, CNN CORRESPONDENT: This incident underscores how close you can come here in Crimea with on the one hand, Ukrainian forces holed up in their bases and with these so-called men in green, presumably Russian forces surrounding them. They haven't fired a shot that resulted in any blood shed yet, but these shots fired today really set off alarms around the peninsula about how close it's coming to an actual sort of armed conflict.

In the case of this video that you ran earlier, the Ukrainian soldiers were unarmed. There were about 250 perhaps 300 of them who walked to the positions of the men in green. And it's really become something of an online sensation. Ukrainian TV running it almost incessantly. The video being shared.

Certainly this is the first instance where we've seen the Ukrainians, Ukrainian forces in Crimea really sort of standing up in a sense to the Russians. And I think it's galvanized the opinion of many of the ethnic Ukrainians in the Crimea that now is the time to make their presence felt rather than to stay holed up in their basis -- Erin.

BURNETT: All right, Ben, thank you very much.

Democratic Senator Dick Durbin is on the Foreign Relations Committee. He is OUTFRONT tonight. Senator, great to have you with us. Obviously, this is front and center for the president of the United States right now as he's been meeting with people talking about this, saying the next few days will be crucial. If Vladimir Putin sends more troops into Crimea and Eastern Ukraine, what will the United States do?

SEN. DICK DURBIN (D), ILLINOIS: There's a growing sense of resolve in Europe and around the world against any aggression by Putin in the Crimea or beyond. And I think that it will be met with negative reaction. Certainly at the political level, but beyond that, it could include sanctions, as well. BURNETT: And what about the issue of sanctions? You know, Senator Harry Reid said he doesn't think the United States should act alone basically saying if U.S. allies express any kind of hesitation, there would be a big problem. Some people criticized him and said that was a weak thing to say. But honestly, it's just a fact of things to say, 13 of the top 15 buyers of Russia's oil and gas are European. Without them, sanctions are meaningless. Are they really on board?

DURBIN: Well, I think at this point, the administration has reached out to the leaders in Europe. I met with the president and Senator Reid this afternoon. I know that the conversations are under way. But they're waiting to see now what Putin's press conference was all about. It appeared he hit the pause button. I don't want to over read what he had to say.

I hope that he is trying to take into consideration what happened to his stock market the first day when he started this effort in Crimea. And it was reduced by some 10 percent in value. I don't think that Mr. Putin likes to see that happen, nor does he want to see sanctions that would restrict the movement of people in Russia.

BURNETT: What about how Putin's been justifying his actions. Senator, as you know, he's been saying, look, the new government in Ukraine came to power through a coup just last week, and I mean, he has an interesting point. Here's Vladimir Putin today from that press conference you referenced.

(BEGIN VIDEO CLIP)

PRESIDENT VLADIMIR PUTIN, RUSSIA (through translator): The acting president, of course, is not legitimate. The legitimate president is only Yanukovych.

(END VIDEO CLIP)

BURNETT: I mean, Senator, he has a point. Yanukovych was elected. The U.S. has treated him as legitimate. As you know, Joe Biden's been meeting with him as early as 2009. He's spoken to him nine times in the past three months. He may not be a man anybody wants to be in power, but he is the elected leader of that country.

DURBIN: Yanukovych wasn't remove by a mob. He was removed by a parliament. The parliament met and made a decision, constitutional decision that there would be different leadership and an election, another election called. So I don't know that the specifics of Ukrainian constitution or law, but this was not a mob coming in and forcing Yanukovych out the backdoor. It was a decision made by the parliament in addition to several other decisions such as --

BURNETT: I mean, it was though forced by crowds on the street who then went to his residence and forced him to flee. I mean, are we just having a semantics conversation?

DURBIN: No. I don't think we are. There's no question there was political pressure, but what I'm saying is, it isn't as if people drawing guns walked through the front door and forced him out. It was done through the parliamentary process and through open voting. There's a call for an election soon, May 25th. And that's an indication in my mind that the parliament has said let the Ukrainian people speak as to their leader.

BURNETT: You met with the president today. There have been those who have been critical how he's handled this so far. John McCain among them. Here is that senator.

(BEGIN VIDEO CLIP)

SENATOR JOHN MCCAIN (R) ARIZONA: This president does not understand Vladimir Putin. He does not understand his ambitions. He does not understand that Vladimir Putin is an old KGB colonel bent on restoration of the Soviet of the Russian empire.

(END VIDEO CLIP)

BURNETT: Senator Lindsey Graham who obviously is often on these issues on the same page as John McCain tweeted "Putin basically came to the conclusion after Benghazi, Syria, Egypt, everything Obama has been engaged in, he's a weak indecisive leader. These are harsh and aggressive words. Do you think the president's message to Putin has been strong enough when he said there will be consequences? Pretty vague but certainly include halting visas and doing sanctions.

DURBIN: Listen, my friends, Lindsey Graham and John McCain have a point of view from the other side of the aisle. It's usually critical of the president, not always, but usually and they always want him to be more forceful, more confrontational, consider more military options. Frankly, we followed that course of action into Iraq and Afghanistan.

We are now coming home from those wars and the notion of a new war is not exactly appealing to the American people. If we can achieve a containment of Putin and reduce his aggression by concerted action with other European countries and sanctions, let's do it that way. I think that's better to bring more peace to this world and have fewer military confrontations.

BURNETT: Interesting point. Very few Americans would probably be willing to go to war to stop Putin from getting back some of the iron curtain. Thank you very much, Senator. Appreciate your time as always.

DURBIN: Thanks, Erin.

OUTFRONT next more breaking news coverage, tonight, a detailed look at Putin's military forces. An OUTFRONT investigation of how much a threat they really are.

Plus inside the mind of Vladimir Putin, John McCain, why he knew what was happening there. We're going to ask a man who has met Putin more than a dozen times what Putin is really thinking.

And a witness breaks down at the Oscar Pistorius trial.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Before the shots.

(END VIDEO CLIP)

BURNETT: Does her testimony add up?

(COMMERCIAL BREAK)

BURNETT: More on our top breaking news story tonight in Ukraine.

Tonight, the Americans and its allies are waiting for Vladimir Putin's next move. Now, Russian forces are tightening their hold on the Crimean peninsula. American officials say these next few days are going to be crucial. The question is, what will Putin do and a big part of that answer is what the Russian military really has. We wanted to find out.

Barbara Starr took a look in this OUTFRONT investigation.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): U.S. officials believe Vladimir Putin will decide in the next two to three days whether to send more troops and weapons into Crimea and possibly into eastern Ukraine. Putin always the ex-KGB spy master is not showing his hand yet.

VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): About the use of military, there is no need for this so far. But there is such a possibility.

STARR: But if Russia were to expand operations, just how strong is its military?

BRIG. GEN. KEVIN RYAN (RET.) HARVARD UNIVERSITY: When people say Russian military might today, what they're largely referring to is their army, their ground forces. This it is always historically and traditionally been the foundation for the Russian military and continues to be so.

STARR: Russia has more than 770,000 troops, another two million in reserves. Ukraine, 139,000 with just under one million in reserves. If Russia continues its soviet era style of reliance on troops to hold territory, it's got more than double the number of armor vehicle as Ukraine as in artillery pieces which give Russia the ability to fire at long ranges, also nearly twice as many as Ukraine. Even if Russian troops just stay put in Crimea and don't advance noose eastern Ukraine, they have a critical edge.

RYAN: They know the territory. They know the air space and the waters around. That's a huge advantage for the Russian military.

STARR: The Russians have also improved key capabilities since their 2008 military incursion into the republic of Georgia when their troops had some trouble communicating. The former president of Georgia told OUTFRONT, he thinks a demonstration of force against Moscow might be need.

MIKHEIL SAAKASHVILI, FORMER PRESIDENT OF GEORGIA: Putin also stop at the entrance of our capital not only by resistance of Georgians but huge unity that we showed but intervention common is outcry but George Bush sent six fleet.

STARR: So far the Obama administration is relying on pure diplomacy to keep the Russian military giant at bay.

For OUTFRONT, Barbara Starr.

(END VIDEOTAPE)

BURNETT: All right, joining me now is the former NATO supreme allied commander, General Wesley Clark.

All right, it is great to have you with us. And I'm so glad you're here with me so we can look at the maps together. I mean, you are looking at really sense of the old iron curtain, right? But U.S. officials are saying as many as 6,000 troops in Crimea now that are Russian. Ukrainian just saying is up to 16,000. The numbers are, you know, it's very unclear, right? The big question is, Vladimir Putin has a decision to make, all in or step it back. What's he going to do?

GEN. WESLEY CLARK, FORMER NATO SUPREME ALLIED COMMANDER: He's got to play it long right now. He has got options. And he's still playing those options out. On the diplomatic, think of it as two different chess boards, one laid over the top of the other. On the top, there's the diplomatic piece. If the government in Ukraine collapses, then President Yanukovych comes back in with Russia's support. If NATO and the European Union aren't unified, nothing happens. He holds on to what he has.

Below that is the military piece. He's got his military force anchored in Crimea. He's got other forces available. He is using a certain amount of electronic warfare and information warfare and he is probably trying to undercut the morale, cohesion and loyalty of the Ukrainian military. You know, only 20 years ago, it was all one military. So a lot of the senior officers.

BURNETT: Defections could be a very serious issue.

CLARK: Right. And a lot of the senior officers were educated in Moscow. So they've got friends who are in the Russian armed forces. They've got family that may live in Moscow. So it's a very complicated situation. And he's probably playing two dimensions there.

BURNETT: You know, one thing I always think, you know, as a layperson is to try to put yourself in someone else's shoes. It's not easy to do in the case of Vladimir Putin. He's a strange guy, an enigmatic guy. But the Russian base in Crimea. Let's just take a look at the Crimea itself. I mean, it's hugely strategically important. We talked about this last night. It's the only year round ice Freeport Russia has, which was once a great world power. If America had a base in a neighboring country that used to be part of the United States and there was a threat, the government in that country was toppled, wouldn't the United States be in there if that was our only ice- Freeport?

CLARK: No, I don't think we invade that country like that, no. I think we, you know, use all the means of persuasion and we would be trying to charm them and offering them basing agreements, all that was done.

This is entirely different. There was no reason for him to launch out with those forces. The idea that the Russian citizens were in danger, that was a pretext. It was an excuse.

BURNETT: Right.

CLARK: This is in the military we call it a probing attack.

BURNETT: But is it an invasion? You know, John Brennan, the LA Times" reporting, John Brennan said there's a treaty between Ukraine and Russia that treaty allows 25,000 troops on Crimea that are Russian. By all measures, the amount is lower than that right now. So maybe Vladimir Putin, is it possible he's got a legal argument? To say I'm not invading. I'm within my limits.

CLARK: We've heard a different argument. We've heard the argument that the government and --

BURNETT: Is protecting people.

CLARK: Ukraine is not legitimate. We've heard the argument that Russian individuals are in danger. Vladimir Putin himself hasn't cited a treaty because there's another treaty from 1994 that guarantees the territorial sovereignty of Ukraine between the United States, Russia and Ukraine, which is what they signed when they gave up their nuclear weapons. He's not going there.

BURNETT: Now, what about this issue? We also have a map here of the ethnic breakdown of Ukraine which is important. Because as you point out, you know, just 20 years ago, this was part of Russia. You know, Chernobyl is well within halfway across Ukraine.

But when you think about it this way, Crimea is ethnically Russian. There are some none, but mostly that is what it is, vast majority. If the elected government in Kiev, the capital, is toppled by a coup and Crimea would vote, if given a chance, to be part of Russia, is there not a democratic argument to be made that they should be allowed to vote and be part of Russia?

CLARK: Well, the basic principle we've had and tried to enforce in Europe since the second World War is stop changing borders. All through Europe, people are mixed up. There are always minorities who are in a different country. They own the property of their country. Used to be part of another country and so.

BURNETT: You dealt with this in the Balkans. CLARK: Yes. You never get to the bottom of this if you do this. The point is, these people were guaranteed their democratic rights. They had the right to peacefully leave Ukraine if they didn't want to be there. And they chose to stay there. They knew they were part of Ukraine and they vote in Ukraine. So what's the problem?

BURNETT: All right. Well, thank you very much. I appreciate it.

Look, I try to put on Putin foot. You answered it. All right, thank you very much.

Appreciate it, General Clark. Always good to see you.

And still to come, more of our breaking news coverage of the conflict in Ukraine.

Up next, a look inside it the mind of Vladimir Putin. You heard our Jim Acosta reporting. The White House tonight is saying they do believe he knows exactly what's going on but he is being -- he's not unhinged and that he's not acting irrationally. But others say he's delusional and dangerous.

Plus, President Obama plans to close the most hated loophole in America. At least on this program it is, but will Wall Street shut him down?

(COMMERCIAL BREAK)

BURNETT: Vladimir Putin, so everybody seems to have an opinion about what the Russian president is going to do in the Ukraine, and why.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There have been some reports that president Putin is pausing for a moment and reflecting on what's happened.

UNIDENTIFIED FEMALE: He's living in some other world.

MICHAEL MCFAUL, FORMER U.S. AMBASSADOR TO UKRAINE: Putin's first implies is to just strike back and say I am here and you're going to have to deal with me.

SEN. JOHN MCCAIN (R), ARIZONA: I think he loves to strut on the world stage.

(END VIDEO CLIP)

BURNETT: You probably have your own opinion who Vladimir Putin is. But it's probably based largely on the images we so often see, you know, well, killing a tiger, not wearing a shirt with a horse. Rescuing 10,000-year-old urns from beneath the ocean. Joining me now is Ariel Cohen, a senior research for the Heritage Foundation. He is now with Putin close to a dozen times. He was born in Crimean region. And you know, off the air, we show those pictures and we do with the wink-wink-nod-nod-smile and it is easy forget that this guy is an incredibly a powerful man that obviously can wreck a lot of havoc. I mean, what makes Vladimir Putin tick? You probably met him and talk to him more than anybody else in this country.

ARIEL COHEN, SENIOR RESEARCH FELLOW, HERITAGE FOUNDATION: Well, I'm sure there are other people who met with him and talked to him more than I did. But what makes him tick is what he said publicly. That the collapse of the Soviet Union was the greatest geopolitical catastrophe of the 20th century, and then what follows from that is that putting together something that resembles the Soviet Union would be the greatest achievement of the 21st century.

I tend to disagree but I think Mr. Putin's policy in the creation of what he calls the customs union in which Ukraine was supposed to be dragged into the Eurasian union that includes Belarus, Kazakhstan, eventually Armenia and possibly Ukraine if Ukraine agrees and it doesn't.

BURNETT: Right.

COHEN: That would be the Soviet Union light or the Russian Empire light.

And this is a legacy.

BURNETT: Right.

COHEN: Don't forget, Putin is 62. He got all he could dream of. He became the leader of the second nuclear power and the largest country on earth.

BURNETT: Yes.

COHEN: He has more oil and gas in the ground in Russia than the king of Saudi Arabia.

So, why do we get did the boy who has everything? An empire.

BURNETT: Well, certainly, in terms of production, maybe not his reserves. But what about, though, the question you talk about him being 62 years old. And you know what? When you see strong men around the world, when they hit a certain age, they start to look bizarrely young.

OK, I'm going to put him in that category, right? There's no wrinkles on his face. He does what he needs to do to look young, a virile -- the shirtless thing, all of these stunts that he pulls.

What does this about? I mean, you know, again, all jokes aside -- why does he do this?

COHEN: Well, I think he believes that Russia, a country where the average life expectancy for men is, drum beat, 62, he needs to look young so that he can get re-elected. And he already dropped more than a hint that he's running again in 2018.

Probably the majority of the population of Russia support this invasion of the Crimea, and the Crimea is a part of a different country of a neighboring country. And all this historic stuff about who it belonged to before is irrelevant to the fact that this is a violation of international law. And Mr. Putin is a lawyer by his training, not just the KGB officer.

BURNETT: All right.

COHEN: So he recognizes what he's doing, is but as a KGB professional, as an intelligence professional that dealt with human assets, he took a stock of people he's playing against.

BURNETT: All right.

COHEN: He took stock of Obama, of Angela Merkel and he said, I can win. Again, these people, I'm going to grab the Crimea and possibly grab eastern Ukraine.

BURNETT: All right. Thank you very much, Ariel. We appreciate it. Pretty fascinating there when you hear about the life expectancy.

Still to come, dramatic testimony during the so-called Blade Runner trial. Oscar Pistorius' neighbor describes what she heard the night he killed his girlfriend.

Plus, President Obama today said he's going to get rid of the most outrageous tax loophole in America. Will he actually do it this year?

And Jeanne Moos shows us the latest workout trend.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Nice job, nice job.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BURNETT: President Obama takes on Wall Street again. So today, he sent his 2015 budget to Congress and the president said how he plans to do it.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Closing tax loopholes that right now only benefit the well-off and the well-connected.

(END VIDEO CLIP)

BURNETT: Tax loopholes that only benefit the well-off. Now, we've heard this from President Obama before. One loophole in particular concerns him called carried interest. He promised to close it in his first campaign. In fact, the idea of closing this loophole has appeared in the president's budget again and again and again.

But it never makes it to the final draft. They're always willing to compromise and throw it out. So, those of you who regularly watch the program know how we feel about carried interest, it is one of the note of ridiculous tax loopholes in the United States. It's netted billions of dollars for a very, very select few of America's billionaires. It is the loophole that gives loopholes a bad name, and makes argument of special treatment add up.

So, let me explain how it works. Let's just say a rich guy invests money with a private equity money manager and that manager does a good job. So, the rich guy's investment goes up by $5 million. That's a huge profit, right?

Well, the way it works is that the money manager gets a cut of that the profit, 20 percent. So, in this case, his cut of the total profits is a million bucks.

Now, the government wants to encourage people to invest in new businesses and private equity does that. So, if you invest in new businesses via private equity, the government taxes your gain at a lower rate, 20 percent.

The thing is, with this loophole, the money manager also gets to pay the lower rate on his cut of the profits. So he pays 20 percent. It's not his money he's putting at risk. It's other people's money -- in this case, the rich investor.

The bottom line, the money manager in this case would pay $200,000 in taxes. If he were paying the regular income rate since that he's paid to do every day, right, manage that money, he would be paying $400,000. That is a huge tax savings. It means a bunch of billionaires pay half the amount in taxes as the rest of us, especially the billionaires who run the private equity firms, the ones who manage the money.

Guys like this guy, Henry Kravis from KKR. He's worth $5 billion. His take home pay according to "The Wall Street Journal" was $161.4 million. His actual salary was a meager, comparatively at least, $300,000. In carried interest alone though, his cut of other people's money, $43.3 million in one year.

So, while the $300,000 was taxed near 40 percent at the regular income rate, the $43 million was taxed at ding, ding, ding, 20 percent.

How does this happen? There's one word: lobbyists.

Joining me now is Democratic Congressman Brad Sherman. He sits on the House Financial Services Committee. He's also a certified public accountant.

So you can take issue with anything I described if you don't like it. Let me ask you, you say lobbyists are to blame for this. The president said he was going to get rid of it in his campaign. I hear Democrats want to get rid of it. Republicans now want to get rid of it.

Yet, every year they lose out to lobbyists. How come?

REP. BRAD SHERMAN (D-CA), FINANCIAL SERVICES COMMITTEE: Well, I think the lobbyists for the carried interest exclusion are pretty successful. But there's also a certain inertia here in Washington. We haven't plugged a tax loophole in 10, 15 years.

There's also a wing of the Republican Party that is an opposed to anything that increases taxes on anybody, including any provision that just plugs a tax loophole that's being exploited.

BURNETT: So what do the lobbyists do on that part, on their side of things, to keep winning this battle? I mean, what are the tactics they use?

Because I see the press relations they put out and they say, look, the private equity industry invests in new companies, in hundreds of billion dollars of new companies. OK, that's true. But it doesn't solve the problem or have anything to do with this loophole.

So, what are the lobbyists doing to keep this loophole open?

SHERMAN: Well, they can -- first, they start with as a given a questionable proposition. That is money made by money should be taxed at a lower rate than money made through hard work.

Then, they conflate the two and say the entire hedge fund is investing in business. Therefore, not only those who invest in the hedge fund but those who manage the hedge fund should get the benefit.

Finally --

BURNETT: That's where you lose me. I don't understand why anybody who manages the money, that's their job every day.

SHERMAN: It is, indeed. And then they bank on the two very powerful things in this town. One is inertia and the tendency of us not to get things done, and the other is an ideology in a big wing of the Republican Party, not Dave Camp who's chair of the Ways and Means Committee, but others.

BURNETT: He wants to close it, yes.

SHERMAN: Yes. He wants to close part of this. He wants to close about a third of it as much as Obama.

BURNETT: OK.

SHERMAN: But there's a big chunk of the Republican Party that if they said, that is an egregious tax loophole, they still wouldn't want to close it.

BURNETT: All right. I hear you on that. But it's not just that wing of the Republican Party, although you're right. The president is part of this. He's been beating his drum on this since before he took office. I mean, I want to play for our viewers the promise he made on the campaign trail back on September 18th, 2007.

(BEGIN VIDEO CLIP) OBAMA: We will also turn the page on an approach that gives repeated tax cuts to the wealthiest 1 percent of Americans even though they don't need them and did not ask for them. We've lost the balance between work and wealth. I will close the carried interest loophole.

(END VIDEO CLIP)

BURNETT: All right. If that was (AUDIO GAP), you know, he hasn't done it. He puts it in his budget but he's willing to compromise and not close it every single year, too. I mean, that's guilty too, isn't it?

SHERMAN: Well, there is no compromise in the sense there's no piece of legislation that has to pass. We have to keep the government open, compromises were made on that. We have to pay our bills and avoid blowing the debt limit. We've made the compromises.

The House of Representatives has not passed a major piece of tax legislation. So, it's not like the president gives in on this be provision and agrees to go with a provision. There's no provision. It's not -- if there's no deal, then the loophole remains.

So, the president has no pressure point. It's not like he can wake up and say, well, number one thing on my list is closing this. Therefore it has to be closed. Tax legislation has to start in the House.

BURNETT: All right. Well, Congressman, thank you very much. We appreciate your taking the time.

Now, maybe we're at it when we close it this year. Let's just say it happened. How about back taxes?

Still to come, a look inside the courtroom during the Blade Runner trial. What made Oscar Pistorius' neighbor break out in tears on the stand today?

And a baby teaches us how to work. Jeanne Moos has a very strange but compelling new workout later in the show.

(COMMERCIAL BREAK)

BURNETT: Now, let's check with Anderson. He's got a look what's coming up on "AC360."

Hi, Anderson.

ANDERSON COOPER, CNN ANCHOR: Tonight on "AC360," we're live from Kiev on the edge of Independence Square where protesters even at this late hour are camped out. You can see maybe some of them there trying to warm themselves in a frigid night air by a fire. All the barricades from the weeks long protest against the former regime here, they are still up. All these barricades behind me are in part still defensive and also still a shrine where thousands it of people come each day to pay their respects to those who died here.

We'll have complete coverage confident crisis in Ukraine from here in Kiev. Also on the ground from correspondents in Crimea. All that at the top of the hour -- Erin.

BURNETT: All right. Anderson, looking forward to seeing you in just a few minutes.

COOPER: Well, emotion dominating day two of the murder trial involving Oscar Pistorius. At times the testimony proved too much for the one-time Olympic athlete but a star witness.

Robyn Curnow is OUTFRONT in Pretoria, South Africa.

(BEGIN VIDEOTAPE)

WITNESS: It was awful to hear the shouts before the shots.

ROBYN CURNOW, CNN INTERNATIONAL CORRESPONDENT (voice-over): A key witness breaking down on the second day of Oscar Pistorius' murder trial. The Olympic runner's neighbor testified she heard blood curdling screams the night Reeva was killed followed by four gunshots. The defense tried to poke holes in the neighbor's story.

BARRY ROUX, DEFENSE LAWYER: The question was not that difficult. Shall I repeat it again? Please listen carefully. Just listen to the question please.

CURNOW: The defense went on to question the neighbor's credibility.

ROUX: You heard that out of a closed toilet and a half, 177 meters away?

CURNOW: Then in graphic detail, the defense explained Steenkamp would not have been able to scream after the fourth and fatal shot.

ROUX: With the head shot, she would have dropped down immediately. When you say, when you talk about the screaming, whatever interpretation, after the last bullet, it cannot be.

MICHELLE BURGER, WITNESS: My lady, as I stated yesterday, I heard her voice just after the last shot faded away.

CURNOW: The defense claiming the screams that night were from Pistorius. They say high-pitched yells occurred after the double amputee realized he'd accidentally shot his girlfriend of three months and not the intruder.

But prosecutors alleged Pistorius killed his girlfriend in a fit of rage. They called two more neighbors as witnesses to prove it.

CHARL JOHNSON, WITNESS: The intensity and the fear in her voice escalated. And it was clear that this person's life was in danger.

CURNOW: Pistorius appeared to cover his ears as a prosecutor described how bullets hit Steenkamp in the head.

Outside the courtroom, Steenkamp's mother told NBC's "Today" show she's prepared to forgive Pistorius. JUNE STEENKAMP, REEVA'S MOM: It's actually important to forgive him, for me, because I don't want to live with the bitterness in my life. We just want the truth. We want the truth of what happened. Only she and Oscar were there. And she's not here anymore.

CURNOW: Robyn Curnow, CNN, Pretoria.

(END VIDEOTAPE)

BURNETT: CNN legal analyst Danny Cevallos is OUTFRONT.

Danny, you hear Robyn's reporting. I mean, compelling testimony from three witnesses. They all say they heard a woman's screams from the home. How does the defense explain that?

DANNY CEVALLOS, CNN LEGAL ANALYST: Well, what we're talking about here is ear witnesses and there are a lot of different things to affect ear witness testimony and they all are present here. You have a tremendous amount of distance. Somewhere in the neighborhood of you can do the conversion and most of us can't of 200 yards. I had to look it up.

But you're also talking about sound traveling through a closed door in an apartment and allegedly coming all the way out some several hundred meters away in a different accent. Remember, the witness Burger speaks another language, Afrikaans, and all of those factors, study show, can affect an ear witness's perception.

So, the defense is absolutely exploiting that and they have to, to dispel this to the judge because, remember, no jury in this case.

BURNETT: No jury, right. It will be a judge. And I know the conviction rate is very high, up around 80 percent in South Africa. So, they have to really prove that -- prove their case here because the witnesses as you know are all saying they heard a male and female voice that night, which would imply right, there was an altercation, there was a fight, and then they're saying that they heard the woman's voice during the shots.

Here's the question. The defense is saying, oh no, no, no. That was just a very high pitched Pistorius. He was in such distressed when he realized he had killed her, that his screams appeared to be that of a woman. Do they have any shot of that defense working?

CEVALLOS: I think -- I think they might. Certainly when you're listening to the cross-examination, one of the things the defense brought out with the witness Burger was the unlikeliness or uncertainty she had about certain facts. And of course, it's understandable, if she's calling the police as she said -- I'm not paying attention to what I'm listening to talking to the police and it's chaotic situation and the defense attorney has to exploit that fact that there was stress, there was distance and they aren't familiar with these people who are speaking so that they would know who would have a high pitched voice and who would not.

BURNETT: Right. CEVALLOS: Again, these are all factors that affect ear witness testimony and the defense so far begun to exploit it and done a pretty good job exploiting it.

BURNETT: All right. Danny, thank you so much.

The other problem is these things come to trial, this was a year ago it happened. We said in the U.S. all the time, how do you really remember what you remembered or what versus what you thought you thought you remembered.

Still to come, meet the 6-month-old baby who's taking the Internet by storm with a workout video. She's going to be rich before she's even a year. Jeanne Moos reports.

(COMMERCIAL BREAK)

BURNETT: So, a 6-month-old baby is teaching us all a thing or two about working out. Jeanne Moos has the story.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): So long, Richard Simmons.

Fond as we are on the Jane Fonda workout -- it's time to inhale this.

MICHAEL STANSBURY, LILY ANN'S FATHER: Today, you do the Lily Ann workout.

MOOS: Even if Lily Ann the instructor --

STANSBURY: Yes. Whoa. Yes. Oh, this is hard.

MOOS: -- is only 6 going on 7 months.

STANSBURY: Oh.

MOOS: This Tennessee baby's workout has over half a million reps on YouTube.

STANSBURY: Superman, superman. Feet up? All right. Feet up.

She does them all the time. You put her on the ground and she is up and then down and she's making the little sweet noises and we just love it.

MOOS: Michael Stansbury and his wife have four kids but the youngest is burning up the Internet with her exercise routine.

Call them push-ups or planks or yoga cobras -- whatever you call them, Lily Ann does eight of them.

STANSBURY: Come on. Get up. Nice job. Nice job. OK. Yep. Yep. Oh, oh. Do the swim? Do the swim?

MOOS: Staring into the iPad that's recording them.

STANSBURY: All right. Oh!

MOOS: So dad can mimic his daughter.

(on camera): Already fans raving about the results they have gotten from the Lily Ann workout.

(voice-over): I lost 10 pounds just watching this.

STANSBURY: I cannot verify that.

MOOS: If nothing else, this baby inspired workout will strengthen your ah muscles.

STANSBURY: Superman, superman, superman. On the ground. To the left. To the right. This way. I love you.

MOOS: Followed by a touch and then, a tickle.

(on camera): Can we see her biceps? Does she have biceps?

STANSBURY: Yes, you can see her biceps. Look at those things.

MOOS (voice-over): With muscles like those, almost 7 months, next thing you know she'll be weightlifting.

Though Lily Ann's workout is over in a mere minute and a half. Never fear.

(on camera): Coming soon, the workout two.

STANSBURY: This time, you know, it's going to be a little bit tougher.

MOOS (voice-over): Just think, a workout instructor before she's learned --

(MUSIC)

MOOS: She's doing the locomotion with daddy.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BURNETT: That's pretty awesome. I was looking at the 3-month-old this morning. I can't do it, Tim, to show you the pictures. There he is. I can. I'm so sorry, Nyle.

Three months old, he's got the neck up, his legs up. I find that position hard to hold but he's got it down pat.

All right. Thanks so much to all of you.

Our coverage of the Ukraine crisis continues with Anderson Cooper in Kiev, next.