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CNN NEWSROOM

One Day Until Spending Cuts Take Place; Obama Says Cuts Are A Tumble Not A Cliff; Bob Woodward's Spat With White House; Dow Closes In On Record; Transgender Child's Parents Sue School; NFL Prospect Asked If He Likes Girls; Eastwood For Same-Sex Marriage

Aired February 28, 2013 - 13:00   ET

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


SUZANNE MALVEAUX, CNN ANCHOR: In less than 24 hours, the forced spending cuts go into place. Will Congress and the White House make a deal by the deadline?

And we are now watching the markets. The DOW hovering just below the last record high of 14,164.

This is CNN NEWSROOM, and I'm Suzanne Malveaux. Here we are again, so it seems, just hours away from another financial crisis, potentially. Talking about the forced spending cuts set to kick in tomorrow. Cuts total $85 billion over the next seven months.

We want to bring in Ali Velshi, Jake Tapper, who's the anchor of "LEAD" and Chief Washington Correspondent. Ali, I want to start off with you here. So, for days, right, you and I, weeks even, we've been hearing these dire scenarios from the --

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Right.

MALVEAUX: -- Obama administration. Now, the president, as of yesterday, seems to be softening his tone. Here's what he said last night.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is not a cliff, but it is a tumble downward. You know, it's conceivable that in the first week, the first two weeks, first three weeks, first month, a lot of people may not notice the full impact of this sequester.

(END VIDEO CLIP)

OK, Ali. What is it? Is the sky falling or not?

VELSHI: The sky's not falling. I think when we thought we had to have something done by a deadline, then proponents on both sides tell you about how serious things are. Now, I think it's pretty clear that barring something unusual, and Jake would know more about this than I would, unless something unusual happens we're going to hit the sequester and we're going to wake up Saturday morning and nobody will really feel any different. Largely because when it comes to most of these cuts, most are in labor and staff, most of these workers need at least one month's notice before things start to happen. You'll definitely start to feel it in April.

And it's -- there's no argument that it's going to have some negative effect on the economy in the short term. The question is, will there be good effect in the long term? But, you know, part of our problem, Suzanne, is nothing gets done unless it does feel like a crisis mode, unless your back is against the wall. So, everybody always says it is and the minute we find out that it's not a crisis, well, now we -- and we don't even do when there is a crisis. So, when there's not a crisis, why would -- why would anybody arrive at a deal?

MALVEAUX: So, Jake, why the change in tone -- the change of tone from the White House here? Is this -- is this a matter of looking at the polls here? Is this a matter of recalculating the message here? Because clearly, the president and many of his cabinet members were out for the last two weeks portraying a very dire situation.

JAKE TAPPER, CNN CHIEF WASHINGTON CORRESPONDENT: Well, that's exactly right, Suzanne. And now, what's going to happen is there isn't going to be this tremendous catastrophe on sat -- on Friday morning or Saturday morning, and so the president, I believe, feels as though he needs to set expectations accordingly, especially since there has been so much alarmist rhetoric in the previous weeks. He has credibility at stake here.

If, after all these dire warnings from his administration, people wake up and they don't feel the effect of the cuts. And, as the president said, a lot of people won't feel them in the first few weeks, then people are going to start to wonder about whether or not all those warnings he was issuing were accurate. So, I think that's one of the reasons he's doing this. He's setting expectations lower than they've been set in the previous weeks.

MALVEAUX: Ali, I want to ask you this because we did hear from the president and we heard from a lot of different officials there. They were saying kids in Head Start, they're not going to be able to go -- you know, take their classes, people who have mental illnesses won't get their medications, that the planes are going to be delayed, all of these things. Is anybody, anybody going to feel these effects right away? Like, starting tomorrow or over the weekend. Anybody here?

VELSHI: Well, here's an interesting observation, Suzanne. Not everybody knows where they connect with the federal government. So, you live in a place where there's a federal base or like I where I am here in, you know, in D.C., northern Virginia, Maryland, where you really feel the effect of the federal government because have you a business or you work for somebody who has contract for the government. Where you don't feel it is in major cities, for instance, where you don't realize they rely on transfer payments from the government some of which will be cut. So, you know, let me just explain it to you this way.

At some point last year in 2012, we thought the economy was growing at a rate of two and a half percent. Now, we find out it was growing at one-tenth of one percent. It's unclear that nine out of 10 people on the street will actually know that that's the case. So, you could have a big swing in economic growth and unless it's affecting you, you won't know it. But there are definitely going to be people -- 750,000 jobs over the course of this thing may be lost as a result of it. So, you'll see it, you'll feel it. It just depends on how much of the rest of the economy is going fast enough to offset the damage and that is a big unknown right now.

MALVEAUX: And, Jake, real quickly here. The point of the meeting tomorrow between the president and those in Congress?

TAPPER: To try to come up with solutions, $85 billion in deficit reduction, whether that's through spending cuts or tax increases or some combination of both. And I think the White House is hoping that the added pressure of meeting on the day the cuts start taking effect will force Republicans to compromise. I don't necessarily think that's going to happen, though.

MALVEAUX: All right. Jake, Ali, thank you very much. We'll be watching closely.

TAPPER: Thank you.

MALVEAUX: The sky not going to fall tomorrow.

Reporter Bob Woodward says that the White House -- a White House official threatened him over his reporting of the forced budget cuts. Listen.

(BEGIN VIDEOTAPE)

BOB WOODWARD, REPORTER, "WASHINGTON POST": They're not happy at all. And some people kind of, you know, said, look, we don't see eye to eye on this. They never really said, though -- afterwards they said this is factually wrong and they -- and it was said to me in an e-mail by a top --

UNIDENTIFIED MALE: What was his --

WOLF BLITZER, CNN SENIOR WHITE HOUSE CORRESPONDENT: What was said?

WOODWARD: It was -- it was said very clearly, you will regret doing this.

BLITZER: Who sent that e-mail to you?

WOODWARD: Well, I'm not going to say.

BLITZER: Was it a senior person at the White House?

WOODWARD: A very senior person.

(END VIDEOTAPE)

MALVEAUX: According to the (INAUDIBLE), they are aware of the situation, the top economic aide for the president, Gene Sperling, is the one who warned Woodward that he would regret his reporting. Now, the White House has responded saying, of course no threat was intended as Mr. Woodward noted, the e-mail from the aide was sent to apologize for voices being raised in their previous conversation. The note suggested that Mr. Woodward would regret the observation he made regarding the sequester because that observation was inaccurate, nothing more. The White House says Woodward responded to the e-mail in a friendly manner.

Well, history now in the making. We're watching this closely. The DOW flirting with a new high, hovering below the last record high of 14,164. We're now looking at 14,091. That last record set October 9, 2007.

Alison Kosik joining us. Tell us what this means as we keep a close eye on this?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: What does it mean? You know what, Suzanne, it means that investors are feeling optimistic. You know, the way the market has been since the beginning of January, it has kind of been this moving freight train. And a lot of investors, they haven't been wanting to miss this train, especially since you look at the Dow, it's up already seven percent just since the beginning of January. We're not even out of February yet. So, a lot of investors are saying, you know what? Let's jump on this train before we miss it. So, that is really kind of creating the snowball effect. It's creating this momentum. Even if it doesn't seem justified, you know, because you look at the big economic report that came out today, GDP, economic growth from the last three months of last year, it was revised higher but barely.

You know, it's really nothing to celebrate. It went from negative .1 percent to positive .1 percent. That shows an economy that's barely growing. You know, the good news about that -- the GDP reading, though, it does show that the private sector side of the economy was good because there was business investment. There was consumer spending. It hung in there. But you look at government spending, that's really what took a huge bite out of economic growth in the last three months of 2012. And so, you know, it's just -- the GDP number is just not enough to have an impact on the labor market and that's what you want to see. You want to see unemployment go down. And the only way -- or one big way that many economists say you're going to see unemployment come down is you need to see GDP or economic growth grow to three percent per year just to bring down unemployment one percent. And remember, unemployment right now is sitting at 7.9 percent -- Suzanne.

MALVEAUX: All right. Thank you, Alison.

The parents of a transgender six year old say a Colorado school is discriminating against their child. Coy Mathis was born a male but identifies and dresses as a girl and wants to use the girl's bathroom. At first, the school was OK with that but now it has had a change of heart. And Coy's father, Jeremy Mathis, says the school is breaking the law.

(BEGIN VIDEO CLIP)

JEREMY MATHIS: I believe that the wording of the law is very solid and I believe that they are in direct violation of it. They are, in fact, discriminating, which the law itself is called the Antidiscrimination Act. And I know that they state that they have been accommodating but what they are doing is discriminating.

(END VIDEO CLIP)

MALVEAUX: Our Jim Spellman, he has more from Denver.

(BEGIN VIDEOTAPE)

JIM SPELLMAN, CNN CORRESPONDENT: Like many six-year-old girls, Coy Mathis loves pig tails and barrettes, prefers Barbies over G.I. Joes. But Coy is transgender, born medically male but identifying and presenting herself as female.

KATHRYN MATHIS (voice-over): We started noticing when she was 18 months old, as soon as she could express herself, that she was really expressing that she was a girl.

SPELLMAN: At her Fountain, Colorado school she has been treated like a girl and, until December, she was allowed to use the girl's restroom. Then the school changed course, requiring her to use either the boy's room, single user bathrooms for adults or the restroom in the nurse's office.

KATHRYN MATHIS (on camera): That really just was not a safe environment for her. That set her up for a lot of issues at school for bullying and harassment.

SPELLMAN: The family pulled Coy from school and filed a civil rights complaint. Attorneys for the Fountain-Fort Carson school district in a letter says that their decision takes into account not only Coy but other students in the building, their parents and the future impact of boy with male genitals using a girl's bathroom would have as Coy grew older. It adds, at least some parents are students are likely to become uncomfortable with the continued use of the girls restroom and that it would be far more psychologically damaging and disruptive for the issue to arise at an age when students deal with lots of social issues. But Coy's family says the only damage comes from Coy not being able to live as her genuine self.

KATHRYN MATHIS: She wasn't happy as a boy and when she was able to be a girl, she blossomed and flourished and she was just so happy.

SPELLMAN (on camera): In a statement to CNN, the school district declined to comment further saying they'll set the process run its course. They have until mid-March to decide what to do. If the family's not happy with the outcome, they could sue. Jim Spellman, CNN, Denver.

(END VIDEOTAPE)

MALVEAUX: Here's what's coming up this hour. The U.S. spends $190 billion a year treat obesity-related health conditions like diabetes, of course. We'll hear why first lady Michelle Obama says we could start spending less by investing more in our health.

Then a college football star says NFL teams asked him if he likes girls.

(BEGIN VIDEO CLIP)

NICK KASA: Do you have a girlfriend? Are you married? Do you like girls? Those kinds of things and it was just kind of weird, but, you know, they would ask you with a straight face. And it's pretty weird. A weird experience all together.

(END VIDEO CLIP)

MALVEAUX: How these comments have kicked off an NFL investigation.

And actor Clint Eastwood, of course, making a slash at the Republican National Convention. You remember that. Well, now, he is making another political move.

This is CNN NEWSROOM happening now.

(COMMERCIAL BREAK)

MALVEAUX: Actor Clint Eastwood is the latest Republican to support same-sex marriage. Eastwood signed a legal brief asking the Supreme Court to rule in favor of same-sex couples. This is according to a person who is familiar with the document.

Next month, the high court is actually going to hear arguments on challenges to Prop 8, the voter-approved same-sex marriage ban in California, as well as DOMA, that's the Federal Defense of Marriage Act, which says marriage is defined as between being with a man and a woman only.

Now, we're just days away from -- a day away, actually, from a huge government spending cuts taking effect. They're going to kick in at 11:59 tomorrow night if the president and Republican lawmakers don't reach a deal to actually stop it. Right now, House members are headed out the door. Dana Bash on Capitol Hill. Dana, the House is leaving, is that right? They're heading home?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: The House is gone, Suzanne. You know, if people are sort of questioning what time it really is, they're not wrong. They are looking at their watch seeing it's only 1:15 eastern.

MALVEAUX: A little after lunch time.

BASH: A little after lunch time. And the House this their first and only vote of the day before lunch time. So, I went outside, as House members were leaving, talked to several of them, Republicans and Democrats. But Republicans, of course, run the House, so I want to give you a little sense of what some of them were saying about why they were leaving town as these cuts are going to be kicking in.

(BEGIN VIDEO CLIP)

BASH: This is your last vote of the day. Is there concern you are going to leave town while these cuts kick in and you won't even be here?

REP. TIM GRIFFIN, (R ) ALABAMA: The Speaker and the leadership will be here and I'm -- I'm a quick flight away. I go home every weekend and see my family.

BASH: Thanks, Congressman.

UNIDENTIFIED MALE: They call me back, I'll be back.

BASH: What do you think about the idea that Congress and you all won't even be here when these cuts kick in?

UNIDENTIFIED MALE: (INAUDIBLE)

BASH: But it going home to your constituents, being home, not in Washington, the day these cuts kick in, is that a good thing?

REP. RICHARD HUDSON, (R ) NORTH CAROLINA: Well, I think it's actually better when we're home working because the work we do there, in my opinion, is more important than the work we do here, especially if we're going to keep spending money.

BASH: Do you think the cuts should kick in?

HUDSON: I think it's the wrong way to cut. But what's worse than these cuts is to not cut at all. We've got to cut spending. We've got to rein it in.

(END VIDEO CLIP)

BASH: Now, the House Speaker will, of course, be in town tomorrow, even though the House won't be effectively in session. He will be joining other leaders in both parties, both sides of Congress to meet with the president to have a discussion. But, again, the anticipation is that that will be just a discussion that they won't get far enough to have any kind of real deal to stop these cuts from going into place because that will happen just hours later.

MALVEAUX: I thought that was interesting that the last person you spoke with said, we'll get more done over there than in Washington. You know, the job being in D.C. What about the Senate, are they taking the same approach?

BASH: They actually are going to be home. They won't be here tomorrow, the day these cuts kick in. But today there will be some action on the Senate floor. I call it action because I don't think it's probably the best way to -- probably the best way to describe it because it won't be progress. What you're going to see are votes for Senate Democratic bill, a Senate Republican bill, very different approaches. Republicans are going to say in their legislation that the president should have flexibility in how these cuts go down, which of course we know the White House has rejected. Democrats, their approach is what we've heard the president talk about time and time again, Democrats as well, which would be to replace these forced cuts with about half tax increases, half other spending cuts. We expect neither of them to pass. They both need 60 votes. That is not going to happen. So probably what we're going to see is more along the lines of what they call around here, message bills. Not anything that is going to go forward. And then they're going to leave town and we're not going to see them here tomorrow either.

MALVEAUX: All right. Dana, it will be a lonely place in Washington for you tomorrow. We'll see how all this shakes out. Dana, thank you very much. Appreciate it.

Michelle Obama, first lady, making a big push for physical education in schools today. We're going to explain how up next.

(COMMERCIAL BREAK)

MALVEAUX: We've been seeing an awful lot of First Lady Michelle Obama. She appeared with Big Bird in a new ad pushing kid nutrition and fitness, she showed off her dance moves, yep we saw her busting a move there, "Late Night with Jimmy Fallon." The First Lady even made a surprise visit to the Oscars, the appearance there announcing the best picture award from the White House, and with a 70 percent approval rating, she is on a roll.

Today, she's touting her progress in her fight to end childhood obesity in an op-ed online edition of "Wall Street Journal." She writes, "It's clear that we are moving in the right direction. But we also know that the problem is nowhere near being solved. I stand ready to work with business leaders who are serious about taking meaningful steps to forge a healthier future."

Just a short time ago, Mrs. Obama returned to her hometown Chicago to push forward her physical fitness program.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Our kids spend about half their waking hours in school, but today due to budget cuts and limited resources, many schools simply can't afford the activities we all took for granted when we were growing up. And I know that with each passing year, it feels like it's just getting harder to find the time and the money and the will to help our kids be active. But just because it's hard doesn't mean we should stop trying.

(END VIDEO CLIP)

MALVEAUX: Later today, she is on Dr. Oz. Listen to what she told him about how she deals with criticism.

(BEGIN VIDEO CLIP)

M. OBAMA: What I do worry about is not what it does to me, because as I said, I'm an adult. But I worry about when anybody makes comments about physical beauty, what does it do to our young girls? Because they're hearing that and they're -- and that affects them.

(END VIDEO CLIP)

MALVEAUX: We'll talk more about the first lady's "Let's Move" campaign and fitness in the United States later with TV star fitness guru Jillian Michaels.

Plus, we'll also look at why women are doing less housework.

And a college football player says NFL teams asked him if he likes girls. How it has kicked off an NFL investigation.

(COMMERCIAL BREAK)

MALVEAUX: Bradley Manning took the stand today, pleaded guilty to 10 of the 22 charges he stole and shared classified military information. Now, he's the army private charged with leaking sensitive videos and documents to the website Wikileaks. The government calls it the most damaging leak in U.S. history. Manning testified in court today for just the second time since his arrest back in 2010. He did not plead guilty to the biggest charge against him. That of aiding the enemy. That charge, if convicted, carries a life sentence. Manning was serving as an intelligence analyst in Iraq when he was arrested. Now, his court-martial is scheduled to start in June.

Other U.S. military news now that's going to affect thousands and thousands of U.S. troops all over the world. It is going to be what happens tomorrow if those across-the-board forced spending cuts begin. Huge part of the cuts will hit military operations. What does it mean? It means planes won't fly. Trains are going to suffer, troops will feel the belt tightening in all branches of the service.

Barbara Starr is at the Pentagon to break this down for us. Do we believe this is going to be a very different situation for the military when we se these cuts start to take effect?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: That is what commanders say, the joint chiefs of staff say, Suzanne. Defense Secretary Chuck Hagel, his second day on the job, and it may be tomorrow that may be the most defining for his tenure.

In fact, Hagel now set to meet tomorrow with the joint chiefs of staff in the tank here at the Pentagon. That highly secure meeting room to talk about all of this, to get the full rundown on what it will mean for U.S. military readiness if these cuts, as expected, go into effect - $46 billion has to come out of defense spending by the end of September.

We have a bit of a look-ahead at what to expect tomorrow. Some of it, I think, people will have expected the military to cut. Things like, you know, the Blue Angels, the military aerial demonstration teams, some of the commercials for recruiting, congressional junkets on military aircraft that very rapidly it gets into what they believe is the meat of the U.S. military. The Navy, the Air Force may have to begin to shut down, the Navy as much as five Navy air wings. The Marines and the Army cutting field training. That could mean troops already in Afghanistan will see longer deployments and future deployments will be longer because there won't be the trained troops coming up behind them ready to go.

And, perhaps, one of the ones that will -- one of the cuts that will really give you pause, at Arlington National Cemetery where the nation buries its war dead, that cemetery, the managers are already preparing for cutbacks in funerals, perhaps as many as 160 less funerals every month for some of the elderly veterans passing away. Those from World War II and Korea. They promise to keep going on those, sadly, who will be killed in action in the coming weeks and months.

But the elderly veterans, their turns, their families may have to wait much longer for funerals to be scheduled at Arlington -- Suzanne?

MALVEAUX: Oh, that is just painful to even hear.

Barbara, thank you. Really appreciate it.