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CNN NEWSROOM

Some In House GOP Float New Plan; White House Live Briefing; Shutdown Impact Compounding; White House On Aid To Egypt; White House Prefer Extending Debt Ceiling;

Aired October 9, 2013 - 13:00   ET

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


WOLF BLITZER, CNN ANCHOR: Meanwhile, a senior House Republican tells CNN that GOP members may be willing to back a short-term debt ceiling increase if the president agrees to negotiate during that time. As the stalemate drags on, the House Speaker John Boehner today turned his attention back to Obamacare, and he blasted the rollout of the program.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R), HOUSE SPEAKER: What a train wreck. How can we tax people for not buying a product from a Web site that doesn't work? How can you give big businesses a tax break and leave hardworking families out in the cold. This is why we need to sit down and have a conversation about the big challenges that face our country.

(END VIDEO CLIP)

BLITZER: The Senate majority leader, Harry Reid, had this message for the speaker.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D), MAJORITY LEADER: Basically, what we've been saying is the speaker and my Republican friends should take yes for an answer. We're ready to go to conference. We have a simple, simple request. Open our government. Let us pay our bills.

(END VIDEO CLIP)

BLITZER: Brianna Keilar is over at the White House. Dana Bash is up on Capitol Hill. Brianna, first to you. This meeting, the president has invited, what, all 200 members of the -- Democratic members of the House of Representatives. Is that right?

BRIANNA KEILAR, CNN SENIOR WHITE HOUSE CORREPONDENT: Yes, that's right, Wolf. And I'm told by a White House official not to read too much into this, that this is Congressional outreach and that you'll be House Republicans, Senate Republicans and Senate Democrats invited to the White House as well in the coming days. I'm told that this is not a meeting where any sort of specific plan is going to be laid out.

But right now, there's this idea out there that you're hearing about a short-term extension to reopen the government and increase the debt ceiling even if just for a small while. And I'm not sure if this is so much of a sign of a precursor to a breakthrough as it is, sort of, maybe commentary, I guess, on just how dug in both sides have been, that the idea that the president has been open to this and that House Republicans are not saying no to it, that that is seen as progress in this case.

But what we know, Wolf, is that all of these politicians are facing a tremendous amount of treasure. You're hearing about real life examples that I think cause a lot of outrage. Highest among them that death benefits for military families who have lost a loved one have now been stalled. So, you're talking about burial expenses, travel expenses to Dover Air Force base in order to see the dignified transfer for their loved ones' remains. That's not being paid.

And then, coming up here on November 1st, 10s of billions of dollars in payments due, Social Security, Medicare, Disability as well as to active duty military. There's a lot of pressure coming down right now and so we're waiting to see if, perhaps, this will budge House Republicans in the White House at least to do something short term.

BLITZER: Stand by for a moment. I want to go up to Capitol Hill. Dana is watching what is going on. A House Republican lawmaker, Dana, says that a new plan is being discussed among some House Republicans. What do we know about this?

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: That's right. Our Jake Tapper and our Congressional Producer, Deirdre Walsh, have been hearing about this moving around, particularly among some conservative Republicans, saying that they would perhaps like the idea of promising for -- that they would raise the debt ceiling. They would reopen the government in exchange for some kind of entitlement reform and a promise for tax reform. That's sort of the gist of it.

I'm told by senior Republican House source that that is definitely being discussed. But, at this point, one told -- one source told me that it was a pipe dream. Why? Because that might be something that they want to do but they don't -- the reality is that they don't think that they could get that from the president.

At this point, I'm told that, as Brianna was saying, that the most likely way out of this, still this is the thinking of some senior House Republicans, is that short-term debt ceiling -- lifting of the debt ceiling for the -- for a short term and then to use that time to negotiate. We're talking about maybe six weeks. This is something though that's new I just heard this morning, Wolf, and that is from again a senior House Republican source, that it is entirely possible, maybe even probable, that in order to do that, they would have -- they, Republicans, would have to agree to what is effectively a clean debt ceiling increase, what the president is demanding.

Why would they do that? Basically, it's because, as the source said to me, the debt ceiling scares people. They understand, for the most part -- not everybody, some people don't believe the debt ceiling is that big of a deal and it won't be the calamity economically that some people are predicting. But for the most part, House Republicans understand that it's not like the government shutdown. The debt ceiling is a really big deal. So, that's why it is entirely possible that they would agree to something that is really effectively clean as long as they had very specific parameters laid out for negotiations that would occur right after they passed it, dealing with entitlement reform, tax reform, anything that could deal with the debt and deficit long term. That would be the give that Republicans would get.

Now, I want to emphasize, everything I just said is coming from senior Republican sources who are talking amongst themselves trying to read tea leaves from what the president has said publicly because they are not talking privately. Except one meeting that we did find out about today here on Capitol Hill among the Democratic leadership in the House and Republican leadership in the House. Maybe Nancy Pelosi is going to be the go-between between House Republicans and the White House. They are not telling us what happened in that meeting.

BLITZER: Well, we'll soon find out presumably. Guys, stand by for a moment. Jay Carney is answering reporters' questions, specifically about veterans' right now and how they are being hurt by this government shutdown.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY (live): The V.A.'s ability to reduce the disability claims backlog is hampered without the increased productivity gained from over time for claims processors. As Secretary Shinseki told us today, we've already seen the backlog increase, reversing recent trends. This week, V.A. furloughed over 10,000 employees. These employees perform a number of critical activities from staffing education call centers to offering vocational counseling and helping veterans manage their finances. By the end of the month, the V.A. will run out of funding to pay veterans the benefits they earned. As the Secretary said, Disability compensation, pension, education, vocational rehabilitation and employment benefits will be suspended due to lack of funding.

Our nation's veterans have done their job for this country. It's time for Congress to do its job and pass a clean, continuing resolution to reopen the federal government and fund these benefits.

With that, I'll take your question. Julie?

JULIE: The rhetoric yesterday from both the White House and from Capitol Hill from the Republicans made it seem like everyone is pretty entrenched in their position. But I'm wondering if the White House sees any signs, whether it's the Paul Ryan op-ed, whether it's the meeting today between the House, Democratic and Republican leadership that gives you any confidence that there is movement happening behind the scenes?

CARNEY: The government remains shut down. It is entirely within the power of the speaker of the House and Republicans in the House to reverse that by allowing a vote on a clean C.R. to reopen the government and we hope they will. The consequences of the shutdown are many and they are compounding. Various economists have noted the impact of a prolonged shutdown on GDP growth and the specific impacts, including the ones I just mentioned, continue. And the consequences of, you know, real and resonate for millions of Americans. When it comes to raising the debt ceiling, you know, we are now days away from the point beyond which, as the secretary of treasury has said, we will no longer have borrowing authority. That puts us or would put us in uncharted territory. We would have crossed a line we have never crossed before. The consequences are unknowable in the specific but catastrophic in any case.

So, we hope that the reality of the consequences of shutdown and the consequences potentially of threatening default or allowing us to cross that line will compel members of Congress to do the simple thing, the least they could do, which is reopen the government and assure that we will pay our bills on times as we always have.

So, the president, I think yesterday from here, expressed his view that, in the end, he believes Congress will do the right thing. It's unfortunate that we have to go through these manufactured crises because there are costs even -- well, there are costs obviously because the Republicans shut the government down and there are costs even to waiting as long as we already have to raise the debt ceiling in a responsible way without drama or delay.

JULIE: Paul Ryan's op-ed in "The Wall Street Journal" today got a lot of attention. He doesn't mention Obama care in there and it was seen by people in Washington as sort of a more palatable approach.

CARNEY: Yes.

JULIE: Does the White House view that in the same way?

CARNEY: Well, look, I think that we believe that there is the possibility of finding common ground when we sit down, Republicans and Democrats, to reach a compromise on funding the government and funding our priorities in a way that allows the economy to continue to grow and to grow faster and stronger and allows for the investments we need for future economic growth and job creation and allows for continuing the work of reducing our deficit and addressing our longer term debt challenges. And I'm sure the chairman would be a part of that if it were to happen. But it cannot happen under threat of continued shut down and it cannot happen under threat of default. The president has been crystal clear about that. We will not engage in a situation where the Tea Party faction of the Republican Party is demanding that the American people pay ransom in return for Congress doing its job. That's just unacceptable for this president and unacceptable for the presidency. In other words, the successors to this president.

JULIE: And then just one more other topic. Has the president made a final decision yet on cutting off some of the aid to Egypt?

CARNEY: What I can tell you is that -- two things. One, reports that we are halting all military assistance to Egypt are false.

JULIE: (INAUDIBLE.)

CARNEY: No, I -- let me just make clear because maybe not everybody knows this but the reports that we are halting all military assistance to Egypt are false. And as the president said in his speech at the United Nations, our overriding interest throughout these past few years has been to encourage a government that legitimately reflects the will of the Egyptian people and recognizes true democracy as requiring a respect for minority rights, the rule of law, freedom of speech and assembly, and a strong civil society. That remains our interests today. We will continue to work with the interim government to promote our core interests and to support areas that benefit the Egyptian people.

The president was also clear and has been clear that we are not able to continue with business as usual. And, as you know, we have already announced that we are not proceeding with the delivery of certain military systems. Following on the results of the review directed by President Obama we will announce the future of our assistance relationship with Egypt once we have made the appropriate and diplomatic and Congressional notifications. We will continue to support a Democratic transition and oppose violence as a means of resolving differences in Egypt. And our relationship with the Egyptian government including U.S. assistance to Egypt will continue. But any announcement about the future of our assistance relationship will come after we've made the appropriate diplomatic and Congressional notifications.

JULIE: Just to close the loop on this. That makes it sounds like the president has made a decision and you just need to notify certain parties before you can notify that publicly? Is that what you're saying?

CARNEY: I think it's fair to say that we will have a decision to announce once we've made the appropriate notifications but I'm not going to get ahead of that process.

STEVE: Let me just follow.

CARNEY: OK.

STEVE: If some aid is going to be cut, then is that -- are you willing to --

CARNEY: I think we've made clear, Steve, that, you know, we're not going to continue with business as usual. That's been I think demonstrated by some of the decisions that have already been made when it comes to certain military systems. But for the results of this review that the president asked for, I would have to ask you wait for us to make that announcement pending the necessary notifications.

STEVE: OK. Going back to the debt ceiling. Some of the Republicans were left with the impression, after the news conference yesterday, that if the president would like to do -- or would agree to do this, if you negotiate a short-term C.R., then he would be willing to negotiate over the debt ceiling. Is this the case? What -- just -- what is he willing to do? What is he will -- not willing to do?

CARNEY: The president will not, you know, pay ransom in exchange for Congress doing its job and raising the debt ceiling and maintaining the full faith and credit of the United States. And that is true today and will be true anytime that Congress faces the mandated legal responsibility to raise the debt ceiling in order for the United States to continue to pay its bills on time. We prefer, because the issue here is certainty, that the debt limit, debt ceiling be extended for a longer duration. We support the bill that's in process in the Senate authored by Senate Democrats that would extend the debt ceiling for a year because that would add to the certainty that is so necessary in maintaining the full faith and credit of the United States.

But what the president was making clear is that he wants Congress to act responsibly to ensure that we pay our bills on time. And if Congress sends them a bill that does that without partisan strings attached, he'll sign it. But whenever that responsibility looms for Congress, the Republicans and the Tea Party caucus, they're not going to get anything in return for fulfilling their constitutional responsibility to ensure that the United States is not a deadbeat and that the United States pays its bills.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Attached, he'll sign it. But whenever that responsibility looms for Congress, the Republicans, the Tea Party caucus, they're not going to get anything in return for fulfilling their constitutional responsibility to ensure that the United States is not a deadbeat and that the United States pays its bills.

Jim.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Jay, I guess it's been the last couple of days folks have been wondering what is going to happen to the military spousal death benefits. Any update on that that you can --

CARNEY: I thank you for the question. The Department of Defense informed Congress that the department would be legally unable to pay death benefits were there to be a lapse in D.O.D. appropriations. In other words, informed Congress prior to the lapse that that would be the case if there were to be a lapse. Unfortunately, this issue was not explicitly addressed as part of the pay our military act. The president was very disturbed to learn of this problem and he directed the Department of Defense to work with the Office of Management and Budget, and his lawyers, to develop a possible solution. And he expects this - he expects, rather, the president expects this to be fixed today.

ACOSTA: Oh, so today?

CARNEY: Correct.

ACOSTA: This issue could be resolved and -

CARNEY: That's what the president expects.

ACOSTA: The president (INAUDIBLE). CARNEY: He was not pleased to learn of this problem. And he has directed the OMB and his lawyers to find a solution and he expects to have one today.

ACOSTA: And getting back to the debt ceiling, we know that October 17th is the sort of deadline that was set by the Treasury secretary and I'm just wondering, the last time we went through this exercise, we didn't even go into default and the nation's credit rating was downgraded. Is there a date before October 17th, are we entering sort of the red zone or the danger zone even now with respect to the debt ceiling in terms of not getting this resolved because of potential consequences that may come, whether or not we go over the edge?

CARNEY: What we've already seen, and I'm just reflecting what I've read in the financial press, there have already been signs of, you know, reaction to the possibility that Congress may fail to fulfill its responsibility here. And as we get closer, I think that reality would become more of an issue. You know, that's -- i think you accurately described what happened in 2011 because it became clear that Republicans in the House were serious about threatening default, there was an impact on our economy. There was an impact on the global markets and their perception of U.S. credit worthiness.

That, in turn, slowed economic growth here costing us jobs. That, in turn, those consequences in turn added to the deficit, added to unemployment. I mean this is one of the things that's so frustrating, I think, about the rationale behind the so - you know what I guess some have called the debt limit deniers, that, you know, in the name of fiscal probity, they are proposing that we engage in a process with unknowable consequences, except that they're all severe and negative, that in all cases would add to our deficits. If the cost of borrowing goes up for the United States, it hits families across the country. It also hits the United States. That adds to our deficits.

If economic growth slows or we go into a recession, revenues are down, unemployment goes up, more people depend on assistance, that adds to our deficits. You know, this is irresponsible and reckless and we should not even flirt with the prospect of default. Congress should do its job and fulfill its responsibility in the manner that, prior to 2011, it had always been fulfilled, which is raising the debt ceiling without the real threat of a default and without, you know, threatening default if you don't get the partisan demand that you ask for.

ACOSTA: But is there a feeling inside, though, in the White House that really needs to get done before the 17th, maybe this weekend, to sort of avoid the edge as much as possible?

CARNEY: I think -- look, this is the problem with unchartered territory. The sooner the better. We have been calling on Congress to act and raise the debt ceiling without drama or delay for weeks and months. They did it, remember, in early - early this year. And because there was no threat of default, because there weren't a lot of Republican congressman and senators talking about - blindly (ph) about the -- apparently positive benefits of this kind of scenario, we did not see any negative consequences. And, quite the contrary, the economy continued to grow and the economy continued to create jobs. More than a million at least so far this year.

You know, the opposite of that is what we're seeing now. And, you know, we -- the American people suffered too much during that terrible recession and have fought too hard recovering from it and are still recovering from it to then be thrown back into economic dire straits because a faction of one party, in one house, of one branch of government isn't getting what it wants, isn't getting what it couldn't get through the legislative process, isn't getting what it couldn't get through the ballot box, isn't getting what it couldn't get through the Supreme Court of the United States. That's why we're here.

And, you know, we hope, and the president hopes, that Congress will act responsibly in the very little time available to it to raise the debt ceiling, to turn on the lights, open the government, and then the president will be more than eager to sit down with lawmakers of both parties on talk about our budget priorities and how we can come together and compromise so that we grow our economy, protect the middle class, invest where we need to and continue the project of responsibly reducing our deficits and addressing our debt.

ACOSTA: And just to follow up on that. The president said yesterday towards the end of the news conference that he would be in - he would be OK with attaching something. He used that word "attach," to a clean CR, a clean debt ceiling, even if it's short term, to start some negotiations that --

CARNEY: No, I think you're mischaracterizing. The president believes Congress ought to act responsibly. What the president has said, and ought to raise the debt ceiling and reopen the government. What the president has always said is that when it comes to our budget priorities, he has always been willing to negotiate, just not under the threat of shutdown or continued shutdown.

If Congress opens the government, if Congress raises the debt ceiling, if Republicans allow that to happen, then, of course, he'd be willing to sit down and negotiate with lawmakers over our budget priorities. What he won't do is, in any scenario, pay ransom on behalf of the American people to the Tea Party in exchange for preventing default. Can't do that, because the consequences of many, as many have written --

ACOSTA: I don't mean (INAUDIBLE), I mean attach something that requires some discussions to occur. He said something like, well, if my word is not good enough, you can attach something that would require discussions -

CARNEY: Well, I mean that all - all he's saying is that he's made it abundantly clear, as he has all year long, including his many conversations with and meals with and coffees with and phone chats with Republican lawmakers over the course of this year, that he's willing to sit down and negotiate. And, you know, how Republicans and lawmakers --

ACOSTA: (INAUDIBLE) he's pledging --

CARNEY: If you -- if you've missed that, I don't know where you've been. Yes, he is pledging, as he has all year long, to sit down and negotiate with lawmakers over our budget priorities. What he won't do, because it is irresponsible on behalf of the behavior of other (ph) Republicans, is pay ransom in exchange for keeping the government open or in keeping us from defaulting. Congress ought to take care of those issues and then we can negotiate.

John.

JONATHAN KARL, ABC NEWS: Jay --

CARNEY: You have that skeptical look on your face, Jon.

KARL: Always a little skeptical, Jay. On this question of families of those who have lost loved ones in serving our country --

CARNEY: Uh-huh.

KARL: You said that the White House knew that this problem would be there in the event of the shutdown. That --

CARNEY: The Department of Defense informed Congress. So Congress knew about it, yes.

KARL: Warned Congress. Yes, when (ph) Congress knew about it, the White House knew about it. The president, as the commander in chief, is the chief executive - is there -- was there literally nothing that he could do to insure that these families were taken care of? I mean --

CARNEY: He's doing it today, Jon, because it was not addressed by Congress in the Pay Our Military Act. It was not -

KARL: Did he ask Congress to take care of it in the Pay Our Military Act?

CARNEY: Jon.

KARL: I mean were there any discussions there?

CARNEY: Jon, the Republicans shut the government down. None of this would be an issue if the government were open, OK? Two, the Department of Defense, as every agency did, warned Congress of the myriad of consequences of a shutdown. This is one of those consequences. And, unfortunately, it was not explicitly addressed in the Pay Our Military Act. I'm not assigning blame for that, but it wasn't. The president learned that it - this had not been addressed. He directed the OMB and his lawyers to find a solution. And they're working on that and we expect one today. So I don't think there's any disagreement that this is a matter that needs to be resolved, that it's unthinkable that these benefits would not be available, and, therefore, we're -- he's doing the right thing as commander in chief in making sure that it's resolved.

KARL: But what I don't understand is, is there - there's discretion clearly in deciding who's essential and who's non-essential, who is furloughed and who's not furloughed. You're here, these briefings are taking praise. I mean there's - clearly there's decisions made. How could there not have been a decision made that if there's anything that's essential, it would be taking care of those who lost loved ones in the field of battle?

CARNEY: And so the Department of Defense informed Congress that this would be a consequence, among many other consequences, and it wasn't -

KARL: (INAUDIBLE).

CARNEY: Well, Jon, look, I mean, again, if you want to editorialize -

KARL: (INAUDIBLE).

CARNEY: The commander in chief, when he found out that this was not addressed, he directed that a solution be found and we expect one today. I think that's --

KARL: So he didn't know that until - until yesterday that this did not get addressed?

CARNEY: Again, I think I've just been pretty clear about the process here. Congress was informed, as it was informed of all of the consequences of a shutdown, and, you know, they are many, as we see. And, you know, a solution to all of this is not the piecemeal reaction to them or, you know, Band-Aid approach to solving them, it's opening the government at funding levels Republicans set. Remember, if anybody thinks that Democrats in Congress are getting a concession by extending the government on a short-term continuing resolution at funding levels, sequester levels agreed to and celebrated by Republicans, they're sorely mistaken.

Leader Pelosi and Leader Reid deserve credit and Democrats in the Senate and the House deserve credit that they agreed that it was too important to not to, you know, shut the government down. They agreed to an extension at those levels. And, unfortunately, Republicans instead decided to launch a -- you know, a quixotic (ph) crusade against Obamacare, one that everyone knew was going to lead to nothing, and everyone across the country, who has even a tangential relationship with the government, is suffering its consequence.

KARL: (INAUDIBLE) this window that seemed to be opened yesterday of a short-term debt ceiling increase, short-term funding and some negotiations that could happen in the interim. Would the White House be open --

WOLF BLITZER, CNN ANCHOR: All right, we're going to break away from Jay Carney, the White House press secretary.

But the news that he released just a little while ago, the president was very upset when he discovered that these benefits, financial benefits to families of those killed in action, specifically in this particular case in Afghanistan, that they wouldn't be reimbursed a special funding to pay for funerals, to go to Dover to the U.S. military base in Dover, Delaware, to receive the bodies of those U.S. military personnel killed in action. When the president heard about this, he was upset. He reviewed the matter today with his lawyers, with the Office of Management and Budget, and he expects this to be resolved today, ending this particular irritant. And it's a deep, deep wound right now that, because of the government shutdown, family members, spouses of U.S. military personnel killed in action were not going to be reimbursed by the federal government. The White House press secretary says the president expects this to be resolved today.

We're going to have much more on this part of the story coming up. We're going to hear, by the way, later from the president himself during this 3:00 p.m. Eastern Hour, a little bit more than an hour and a half or so from now, the president will announce the new chair of the Federal Reserve, Janet Yellin. The president will make that announcement. He probably will speak out about the government shutdown. Also speak out about the raising of the debt ceiling.

This is a very, very historic and important announcement the president will make. The first woman, arguably maybe the most powerful woman in the United States, maybe in the world right now. Janet Yellin will be the next chair of the Federal Reserve if she's confirmed by the U.S. Senate. I'll be anchoring our special coverage that starts at 3:00 p.m. Eastern. Much more coming up here in the NEWSROOM right after this.

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