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JOHN KING, USA

No Jobs Created in August; Tropical Storm Lee Heading for New Orleans

Aired September 2, 2011 - 19:00   ET

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


CANDY CROWLEY, HOST: Thanks very much. I'm Candy Crowley John king is off tonight.

There is breaking news along the Gulf of Mexico. Residents of Mississippi and Louisiana got short notice warnings today. Get ready for tropical storm Lee to hit this weekend. It may not be as powerful as a hurricane, but it's moving as a crawl which means New Orleans canals and levees will be tested by a prolonged rain, up to 15 inches or more are expected, plus a storm surge. We'll get a live update on storm preparation in a few minutes.

But first, today's stunner from the Labor department. The country saw a net gain of no jobs in August. Plus no change in the unemployment rate, still 9.1 percent. It is the worst jobs report in a year. Wall Street craters the Dow industrials, the S&P 500 and Nasdaq all lost more than two percent today. President Obama didn't even try to put a positive spin on the news. No on camera statement, not even a written one. We did catch one glimpse of him today as he left for Camp David without even turning to wave good-bye.

With us now, the president's former economic adviser, Christina Romer, she's now an economics professor at the University of California. Professor Romer, thank you for being here. Let me ask you first off whether you saw any good news inside this report.

CHRISTINA ROMER, PROFESSOR, UNIVERSITY OF CALIFORNIA: You know it was pretty hard to find anything. I think the basic view is this is a pretty wretched jobs report. And I think if you look deeper, it becomes even worse. When we learn for example that hours went down a little bit, so not only did we not ad any jobs, but we were cutting back on hours. So that the total labor input went down. Or we discovered that another 400,000 people are working part-time for economic reasons. That's another sign of distress in the labor market. So I think it is very hard to put any kind of a positive spin on this report.

CROWLEY: And in fact Americans don't even try. We have a new CNN poll out today. CNN or Cpoll. We asked is the economy in a recession? Eighty two percent of Americans believe the economy is in a recession right now. Only 18 percent believe the economy is not in a recession. Convince them that this is not a recession.

ROMER: I think maybe we're too caught up in what the right term for this is. There is a technical definition of a recession that means the economy is literally falling and right now it seems to be happening that we're growing at a snail's pace. But this is an incredibly distressed economy I think that's what the poll respondents are saying. And of course they're right. This is a terribly distressed company. The unemployment rate is 9.1 percent. Whatever you call it, it is a tragedy and it's a situation that demands very bold action.

CROWLEY: Do, you think and I want to talk to you about that bold action what you think it should be, but do you that it's possible technically, because I know you're an economist, technically speaking, is it possible we could fall back into recession?

ROMER: You know when growth gets as lowest as it has been, when job creation is as weak as it is, like zero new jobs created in the month of August, of course the chances that you fall into a technical recession go up. It's simply it's not a very big line between no growth and actually losing jobs or seeing GDP fall again. So that's not my best guess of what's going to happen. I think like most forecasters, I think that growth is probably going to continue at sort of the snails pace that it's been going. But of course the risks of a recession have gone up.

CROWLEY: What does the president need to do? He's giving a big jobs speech coming up to talk to us about what he wants to do to help create more jobs. How does he do that?

ROMER: You know I think there's a lot riding on this speech next Thursday. The president I think not only the whole country, but I think the whole world is looking for leadership on, how do we get out of the mess that we're in?

You know I think what the president needs to give is what I would describe as a very bold two part strategy. It obviously has to have some very big, very significant measures, fiscal measures to try to create more jobs. And then it has to reassure everybody that we'll get our fiscal house in order over the long term. So it will have to talk about how we'll deal with a long run deficit. And that's a hard message, but it's the right message and it's the one the President needs to convey.

CROWLEY: So he needs to convince people that in the short term to kind jump-start the economy, we need to spend money and cut taxes. In the long term, we need to stop spending money and raise taxes. Is that what you're saying?

ROMER: That's exactly right. And, you know, it's easy to say that that sounds silly, but it's right. We have an immediate jobs problem to deal with that, certainly the federal reserved could be helping. But the other main tool we have is some kind of fiscal support. So more tax cuts, infrastructure spending, tax incentives for firms to do hiring, all of those things are what we know will create jobs in the short run. And then it's completely sensible to say you take the emergency measures you need to take now, but we're also fiscally responsible. We put on the table what revenues are we going to be raised over time? What spending are we willing to cut back? What are we going to do to entitlements? You spell that all out, but that you know, that can wait for five years, ten years before that has a big impact on the economy.

CROWLEY: You know try to put some meat on the idea that we need to spend more money here. Where do we need to spend to make a dent in that jobless rate and how much do we need to spend?

ROMER: I think that's exactly the right question. So you know I think the big sort of the picture is we're not going to do this with $1 billion or $2 billion programs, that with 14 million Americans unemployed, what we're talking about is something substantial. So you know we've heard coming out of the White House that they want to, for example, extend the payroll tax cut that they did last December. So that's about $110 billion for a year. But you certainly need something I think substantially bigger than that, something you know a new jobs tax credit that might be another $50 billion or even more, a big infrastructure program.

So you really are I think having to talk about some significant amounts of money if we're actually going to move the dial. There can be wonderful small programs that could be helpful, but they're not going to put millions of people back to work.

CROWLEY: So if I sort of add that up, you're kind of in the range of $300 billion in new spending. Is that about right?

ROMER: Of new spending and tax cuts, maybe somewhat above that. You know I'll give you an example. I've been talking about a bold two part plan. One of the deficit commissions, the one headed by Pete Domenici and Alice Rivlin actually had a $60 billion payroll tax cut in the first year and then $5 trillion of deficit reduction over the next ten.

Now, I don't think even I would go that far, but that's the kind of idea of a big bold plan. And we've seen very responsible fiscal conservatives put out that kind of a plan as what you do about jobs now and what you do about deficit over time.

CROWLEY: I want to ask you one last question. When you were in the government, you were part the report, the forecast in January of 2009. And we went back and looked at it and right now according to that forecast with the stimulus plan that was put into place unemployment should be at about 6.5. We clearly know it's not at 6.5. What went wrong and what do we learn from that so that the president can do something different next Wednesday?

ROMER: I think the most important thing is what went right, right? So in that report, we certainly made a prediction about what the recovery act would do. It would save or create some 3 million to 3 1/2 million jobs. Something I dearly wish the president would go on TV and say with all his heart is that recovery act worked. It absolutely -

CROWLEY: But not in the way you wanted it to work since you thought the unemployment rate would be at 6.5. And I don't want to relitigate (ph) you know what you wrote. I'm just saying is there something that you thought you know what; we should have done a lot more money in? ROMER: Absolutely it should have been bigger. If you ask, how did that forecast go wrong? It was all in the baseline. It was predicting where we were going without stimulus and we absolutely got that wrong. The economy and it wasn't just us. It was basically every forecaster didn't recognize how severe this recession would be. And so, certainly had we recognized that, you know as it was, I was pushing for a larger stimulus, but boy I'd have to laid down and tie even for much bigger because I think we know is that fiscal stimulus does work and study after study is confirming that. It's just that given where the economy was headed, what we did wasn't enough to turn it around as much as it needed to be. It was helpful. It helped to stop the leading. But we definitely needed more. And I think that's what the president has a chance to enunciate on Thursday, of, OK, we've now seen this play out, here is the more I'm going to do now to put people back to work.

CROWLEY: All right, Thanks to former Obama's Economic Advisor, Christina Romer. Thank you so much for joining us tonight.

ROMER: Great to be with you.

CROWLEY: Our next stop is New where they're proposing for a slow moving tropical storm and localized flooding. We'll see just how bad it could get.

(COMMERCIAL BREAK)

CROWLEY: People along the coast of Louisiana, Mississippi and Alabama are preparing to deal with a foot or more of rain. This afternoon, New Orleans' Mayor Mitch Landrieu joke that people in the city have been praying for rain this week to put out a swamp fire, but those prayers are being answered by a tropical storm forecast to come ashore this weekend and just hover.

CNN's Ed Lavandera is in New Orleans for us tonight. Ed, how bad is it supposed to get there? And what are they doing, already looks like it's there actually. So how much worse is it going to get and what are they doing to prepare?

ED LAVANDERA, CNN CORRESPONDENT: Well, it's interesting this is a really large storm, a tropical storm Lee. But from everything we're hearing hear is that people really expect this to be a rainmaker and a very constant rain maker throughout much of the weekend. This is a massive storm, Candy that is not only large, but moving incredibly slow, about two miles per hour. Most people walk faster than that, so this will take its time kind (inaudible) over the Louisiana Gulf coast, parts of the Mississippi Coast, and hopefully into Texas as well. But the concern throughout of this Gulf Region will be flooding. This is the beginnings of this. The heaviest and strongest winds are supposed to hit Louisiana coast tomorrow afternoon. So, we anticipate that but they are not expecting a lot wind damage, but they are expecting is a lot of flooding. In some places like here in New Orleans is expecting perhaps as 20 inches and 12 inches in other parts. So that flash flooding could be very much a big concern as you obviously saw with hurricane Irene along the northeast, that a big concern and this will be bringing a great deal of rain. Candy? CROWLEY: Obviously, Ed, the holding of those levees is vital it to the city of New Orleans. We know that if we know nothing else after hurricane Katrina. How confident are city officials that those levees are going to hold?

LAVANDERA: They were talking about that today and obviously, one they think they're doing is making sure that all of the pumping stations which move waters to the canals here and in the New Orleans area. The mayor said that all of those pumping stations are working properly, that the backup generators are working properly. So, as of now they feel confident that everything will hold.

I don't hear a lot of people talking about any kind of dangers to the levee system in terms of breaching levees. It would take a great deal of rainfall for that to happen. But obviously pumping this water out and getting it out of here is a big concern and that's why those pumping stations are so crucial. But as far as we know right now, all of that is working properly.

CROWLEY: CNN's Ed Lavandera in New Orleans for us tonight and probably the rest of the weekend. Thank, Ed.

Once it gets beyond the Louisiana and Mississippi coast, Tropical storm Lee may wash out Labor Day for much of the southeast. Meteorologist, Karen Maginnis in the CNN severe weather center now with me.

Karen, where is the storm headed? Obviously right for New Orleans and then where?

KAREN MAGINNIS, METEOROLOGIST: Well, this is forming so close to land, and Candy, it does not have typical characteristics of a tropical storm. Meaning we don't see kind of that concentric look, we don't have a clearly defined eye. But the computer models are still in very much disagreement as to where this is going to be headed.

Take a look at this. Some have it just kind of swirling around the coast. Some have it going off towards the southeast. There were even a few that had it going over towards Texas. I see in our latest run that it looks a little bit more defined as to where we anticipate making landfall. Perhaps sometime on Sunday, maybe the middle part of the day, but somewhere along the Louisiana coast. But I say that, but just to be a care, that this is a system that is not moving very far. Not moving very fast. Still at tropical storm intensity and yet some of these areas are going to get drenched. They need the rainfall. They don't need it all in 24 hours. That's going to be the same.

We'll see for tonight a couple inches of rain for New Orleans extending over towards Lake Charles, and Hammond, Meadville, Violet, all of these coastal communities because this moisture keeps getting pumped in and pumped in all along the coast. And some areas as I mentioned could see up to 20 inches of rainfall. The computer model is suggesting that.

Take a look at this. Where you see the white shaded area, that's where we're looking at the heaviest amounts. But all across the southeast, this is where we're anticipating some much needed rainfall. Three, four, five inches of rain even in northern sections of Georgia, maybe as ever as ten inches. But a lot much these areas have experienced severe drought. Over here in Texas, they needed rain, desperately. We were hoping this would be a benevolent weather system for Texas. It looks like the bulk of that precipitation more towards the northern Gulf of Mexico. But we'll keep you updated. Candy?

CROWLEY: Thank you so much Karen in the severe weather center. When is rain it pours, but apparently not the right places. Thank you so much.

New Jersey Governor Chris Christie has been dealing with his own hurricane disaster this week. Irene caused chronic flooding throughout the state, but this weekend, the governor will be personally helping the New Jersey coast economic recovery.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: I'm heeding my own call. We're at the beach for the weekend. Mary Pat and I and the kids will be down here. We'll be going to different spots around the shore and hoping that everybody follows the lead.

(END VIDEO CLIP)

CROWLEY: Coming up, will this be a jobless labor day and are there more fears of another recession?

(COMMERCIAL BREAK)

CROWLEY: As we head into Labor Day weekend, at least 14 million of our fellow country men and women don't have jobs. Nearly nine million more have only part-time jobs, either because of cut backs or because they can't find full-time work. Today's jobs report raises fears of a second recession and even more people being thrown out of work. Is there any end in sight to this?

With us now, Mark Zandi, the chief economist for Moody's Analytics and Global, editor at large, Chrystia Freeland. Thank you both for being here.

What a lousy August this has been for the markets. How did they end up now? I realize we're into September, but now they have the jobs report on top of it. How are the markets doing, Chrystia?

CHRYSTIA FREELAND, GLOBAL EDITOR-AT-LARGE, REUTERS: Well, August has been a rot ton month for the markets just as it has been for most Americans in terms of the economy. I think there had been a hope that the economy was going to recover. That the recovery had started and I think August really, you know, solidified the fear that a lot of people had that actually the economy was very weak even if not going into a double dip recession, the recovery was extremely weak. And that made people worry about the value of their companies and, therefore, the value of holding shares.

CROWLEY: And Mark, it does surprise me because often times I think we get bad news and the market goes up. Now the market seems to be acting more like a normal human being would.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Yes. Well, I think market have just kind a very weak economic growth but I don't think they are discounting a recession just yet. Because American companies are very profitable and aggregate and their balance sheets are very strong. I think investors are looking at individual stocks of companies. Like those stocks, they really don't want to sell them. So, I think that's the key reason why the stock market hasn't fallen more and these three keys reason why I think odds are still that the broader economy will avoid a recession.

CROWLEY: Well, and since you brought it up Mark, these companies are sitting on a lot of money. What is it that's going to induce them to hire?

ZANDI: They just have to feel more confident. And I think what has happened over the last month or two is that we've lost faith. That the spectacle in Washington over the debt ceiling, the S&P downgrade, some of the problems in Europe have eviscerated confidence. Businesses are shell shocked as are everyone else and they've frozen. They stopped hiring and expanding. So they need to get back that faith, that confidence. And I think the only way that will happen is if policymakers, the federal reserve board, congress, the administration, European policymakers step up , be aggressive and do roughly the right thing over the next few months because if they don't, we will be in recession.

CROWLEY: I want to ask you in a second about what you all believe the right thing to do is, but I want to talk about the jobs report for a minute Chrystia. We all know zero, absolutely zero job growth in the month of August is how what we're seeing. Is there anything else, that's bad enough, anything else in there that just sets your hair on fire?

FREELAND: Well, I'll give you some good news and some bad news. The good news is those numbers are actually a little bit better than they look because the horizon strike is reflected in those numbers and those people have gone back to work. So you know it's not quite as bad as it looks.

The bad news is wages also went down just a little bit. So that's what happens when there is a lot of unemployed people, it's hard to ask for a raise. And I think that this is significant because what it says is it's not just the people who are unemployed who are suffering although they're suffering the most, but there are a lot of people who are very insecure about hanging on to their job. And that insecurity is real. It's not just some neurosis. And think it's weighing on the economy overall. If you're worried about whether you're going to keep your job, you're unlikely to go out and spend. And as mark was saying, if you're the CEO of a company, that means that maybe you're going to hold back making big investments because you're not sure that the consumer demand is going to be there to support them.

CROWLEY: There's a bit of a feel of a chicken and an egg thing going on here Mark because consumers aren't buying things because they're worried they're going to lose their jobs and companies aren't hiring people because they're worried consumers won't buy.

ZANDI: Yes, good point. But this is the same chicken and egg problem we always have in the business cycle and it's broken by business people deciding, hey, I can't continue to grow my earning, maintain my stock price if I don't look for revenue opportunity, if I don't take that leap of faith, if I don't let those animal spirits run a little bit and take a chance and invest and hire people.

So we've gotten pretty close to that happening at different points in the last year, year and a half. Of course recent events have been a real problem for business companies. But assuming that we don't have any other missteps here, I think businesses will look at their balance sheet, they are going to look at their profit. They are going to look at all that cash and they are going to say you know what I got to take a chance. I'm going to start to hire. And that is going to create the income that will support the consumer spending that will get businesses to hire even more and we'll get into that self reinforcing business cycle that we always got into in the past.

CROWLEY: At the same time, though, we are looking in this report at a decline in the number of hours worked. Average number of hours worked, does that give you pause?

ZANDI: Yes, sure, that's a leading indicator of jobs. Businesses will cut hours before they actually cut workers. So that is a disconcerting sign. One positive sign, though, is that I think at least so far businesses have not increased layoffs. They've cut back on their hiring, they have hiring freezes in place and that's why we're not getting any job growth, but they're not increasing layoffs. And that would be what we need for a recession. So hopefully they won't do that and they'll gain traction and start hiring again.

CROWLEY: Chrystia, there are three hard hit places, government, manufacturing and construction. Just dissect those three and tell me why.

FREELAND: Well, government is pretty obvious. Governments are cutting spending and that's the opposite of what mark would counsel when he was talking about meeting concerted government action. So what you're having happen is the government is adding to the problem by laying more people off.

CROWLEY: Bas basically state governments, too, we're talking about here.

FREELAND: That's right. That's right. And you know that is not the classic response to a recession. Classically you've had the government be able to hire. But partly because of the deficit debate and partly because of I think this extreme ideological divide in America. The government is unable to do that.

Construction Candy, I think it self evidence. There was a huge construction bubble and there was a huge mortgage bubble. And that means that there are not a lot you know, there's an overhang of housing stock and not a lot of people are building new houses. People are having a hard time selling the houses they already have. The manufacturing number is the one that actually worries me the most because I think at the beginning of the recovery, we actually saw manufacturing picking up and you were able to say, wow, maybe this is a turn, a little bit of a turn around and maybe American manufacturing in particular is making a recovery in the global economy overall. So that was the figure that made me the most impressed.

CROWLEY: And let me wrap this up with the same question for both of you. Chrystia, I want to begin with you. Give me the top two things you think Washington should do? Not whether it will be able to do because of patrician should to get this economy out of idle essentially.

FREELAND: I would say spending on infrastructure and -

CROWLEY: Roads and bridges.

FREELAND: Yes, roads and bridges which put people to work and cut the payroll tax. And I would just make a final point which is we talk about this stuff as if it just numbers. But the thing that I think should worry us the most is, long term high in employment which is what America is now experiencing. And it's unusual for the United State that leaves generational scars. Some of those people will never have jobs. Kids are going into a labor market that is really, really tough and it could change America for the worst.

CROWLEY: Mark, let me get your comment on that because I do think that kids come in to an America that's very different from the one that I started in the job market. You about I also want to get your thoughts on the top two things the president and congress can do to help.

ZANDI: Only two, Candy. Can I have more, please?

CROWLEY: Sure.

ZANDI: I would second Chrystia's, too, and then I would also argue that we need corporate tax reform. We need to focus on broadening the tax base, getting rid of those loopholes, at least scaling them back, will generate enough revenue to help with deficit reduction and we could also lower those marginal tax rates for businesses to allow them to compete in a global economy. We need them to be able to export. That's where jobs will come in the future and that's where our kids and our grandkids will get their jobs from producing the things that the rest of the world will want from them and things that they produce.

CROWLEY: So, just because I'm a political junky, that sounds like the Huntsman plan at least as far as the corporate tax reform.

ZANDI: Well, actually, I think there's pretty broad support for that across the political spectrum -- the president, the Treasury, Republican Congress, Governor Huntsman. So that's why I mention it. I think there's real -- it's hard work because each tax deduction and credit has someone who's going to defend it, they're going to go to the mat for it, so it's politically hard to get done. But I think at the end of the day, it's something that economically makes sense and politically, it also makes sense.

CROWLEY: Mark Zandi, Chrystia Freeland, thank you so much.

FREELAND: Next up, new evidence of atrocities by members of Moammar Gadhafi's family, including an office with its own jail cell.

(COMMERCIAL BREAK)

CROWLEY: Welcome back. Here's the latest news you need to know right now.

Arizona will not throw a monkey wrench into the Republican Party's primary schedule. Governor Jan Brewer just announced she won't sign a bill that would have moved up her state's presidential primary to late January ahead of Iowa and New Hampshire. In return, the Republican presidential candidates will hold a debate in Arizona.

The government is suing 17 banks and financial institutions in an attempt to recover money lost to bad mortgages. Among the targets are Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase.

The head of liberal group MoveOn.org is blasting President Obama and threatening not to work for his re-election because of the president's decision to delay new clean air standards for ozone.

A federal judge today refused to throw out the perjury case against baseball star Roger Clemens and set a new trial for April. Clemens is accused of lying to Congress about using steroids.

The list of Gadhafi family's atrocities is long and as CNN's Dan Rivers found out, one son even had a jail cell in his office.

(BEGIN VIDEO CLIP)

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: Shweyga is slowly regaining her dignity, now being cared for in Tripoli's burn hospital. She is weak, but able to gesture a greeting to those who have helped her and express her profound gratitude.

SHWEYGA MULLAH, HANNIBAL GADHAFI'S NANNY (through translator): I want to say thank you very much because all the people have helped me. Thank you very, very much.

RIVERS: She's overcome with emotion, but these are tears of relief, not pain. Shweyga is Christian and her faith has been crucial in coming to terms with what's happened.

MULLAH: Thank you very much. I want God to heal me and return me back to my family.

RIVERS: The National Transitional Council's new health minister also visited her and summed up the horror of her ordeal.

DR. NAJI BARAKAT, LIBYAN HEALTH MINISTER: We'll ask the minister of justice to send someone who can document as well as forensic evidence it, to document it. And then we document everything and then after that, she has free waiver if she wants to stay in Libya. We would be happy to treat her. If she want to go, that would be great, as well.

RIVERS: This man who worked with Shweyga is too scared to reveal his identity but showed me another of Hannibal Gadhafi's properties, where he says more horrendous abuse was meet out to staff by Hannibal's wife, Aline.

UNIDENTIFIED MALE (through translator): Shweyga is not the only one. There's a Sudani man who Aline burned him twice. She boiled water and she burned him from here to down.

RIVERS: He says the foreign staff were targeted the most.

(on-camera): A picture is emerging of horrendous abuse of Hannibal Gadhafi's houses. I've been contacted by another nanny who described Aline Gadhafi as psychologically sick and a sadist. And this room would seem to bear out her testimony. What kind of family has their own private jail cell at one of their properties?

(voice-over): Shweyga is now facing months of recuperation and surgery. CNN is working with a number of organizations to ensure she gets the best care available, that she can get home to Ethiopia after her nightmare at the hands of the Gadhafi family.

Dan Rivers, CNN, Tripoli.

(END VIDEOTAPE)

CROWLEY: Coming up, a new round of WikiLeaks documents is released and the State Department is up in arms. Are U.S. lives being put at risk?

And later on this program, we'll update you on the storm expected to soak the Southeast this Labor Day weekend.

(COMMERCIAL BREAK)

C. CROWLEY: Tonight, more than a quarter million U.S. diplomatic cables that are supposed to be secret are available online, exposing scores of diplomatic sources and informants.

WikiLeaks, which is behind the document dump, boasted that it is shining a light on 45 years of U.S. diplomacy. The State Department calls the release irresponsible, reckless, dangerous and illegal.

Here to assess the damage, former State Department spokesman, P.J. Crowley, who teaches at Dickinson College, the U.S. Army War College and Penn State University.

Also with us, CNN national security contributor, Fran Townsend. She advised President George W. Bush but now is a member of the external advisor y boards for the CIA and Department of Homeland Security. Well, we're out of time, but thanks for coming.

Let me start with you first, Fran. These WikiLeaks, we're running up to 9/11, there's a lot of talk about being on the alert, no specific threats. Does anything in this worry you insofar as the immediate issue of homeland security?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: You know, Candy, it's hard to assess because after all, this is such a volume of documents, I don't think anybody has been entirely through it. So it's hard to know.

You worry about things like junior diplomats overseas being denied access to information, their inability to sort of put information in cables that can be shared. You worry about the informants, human rights activists, the sort of people who talk to embassies around the world and expect protection, being able to be targeted for retribution. But it's too soon to really understand because of the sheer volume of what's been put out there.

CROWLEY: Sure.

And, P.J., that really is -- there are diplomatic ramification surely, but let's talk first about the most important part that this really does expose some people to real life danger.

P.J. CROWLEY, FORMER STATE DEPT. SPOKESMAN: Sure. And in this latest group of cables put out in the past few days, some of those cables had identifiers as strictly protect. That meant that it was sensitive information or the sensitive nature of the individual who was talking to a U.S. diplomat somewhere in the world that put that person at risk and now with that exposure, he or she is put at additional risk.

C. CROWLEY: And, Fran, if you have the United States government's business, if you will, out there involving all of these people who have in some way tried to be helpful to the United States, does it not then sort of -- can we not extrapolate that we will get information that is not as good in the future for fear of these people being exposed?

TOWNSEND: I think that's absolutely right, Candy. And that's a difficult thing to measure. I mean, the critics will say, well, this is a good thing to transparency, but I think we have to assume that when people hear that their identities have been revealed, whether or not they're directly threatened, people in the future will be less likely to provide information and cooperate with the U.S. government. And that's always bad.

What you want policymakers in Washington to have is accurate and complete reporting from the field and around the world from our embassies.

CROWLEY: And, P.J., your former boss, Secretary of State Hillary Clinton, when one of the first document dumps came out from WikiLeaks sort of joke that had she should have a leather coat like she was on an apologize tour.

But joking aside, doesn't this make diplomacy difficult when some very sort of unvarnished views of allied leaders come out and they're all over the web?

P.J. CROWLEY: Oh, sure. And for a period of time, both prior and even today, I'm sure the secretary had the opportunity to talk again to leaders around the world and make sure that they understand that while there's reporting from the field, the policy is made in Washington, D.C. and these cables, you know, don't necessarily reflect U.S. policy. And she's done a yeoman's job over the past nine months of trying to make sure that the damage that is caused and the irritation that is created is temporary and not permanent.

But as Fran was saying, you know, we've had instances over the past few years where it was a tip from overseas that made the difference in detecting and then disrupting terrorism plots that are still being perpetrated against the United States. And if somebody all of a sudden withholds information, that can have a real effect. We'll maybe never know whether that makes a difference or not, but it is this aspect of bringing information together, connecting the dots, if you will, that has been the success of the last 10 years. And you don't want to have anything that interferes with ongoing international cooperation.

C. CROWLEY: So, let me ask you both as we wrap this up. First to you, Fran. What's a government to do? We're in a day and age when information can be hacked. People with knowledge of how to get into a government computer can pass it along and then it's out there for the world to see. A, how does government conduct its business, and B, is there anything realistic will that can be done to stop this kind of wholesale exposure of secret cables?

TOWNSEND: Candy, there's no guarantee with all the due diligence you can that will never happen. But you want to do is put process in place so that you can't pick a thumb drive and plug it into a classified computer system. And there's no excuse for that having been done frankly prior to this. The State Department had taken such measures and obviously the Defense Department hadn't. And so, there ought to be minimum standards that go a good distance in protecting sort of a massive kind of leak. There will always be spies and there will be insiders who go bad and take a document. What you want to prevent is wholesale leaks like this.

C. CROWLEY: P.J., if you were back in government and had to forward confidential information, how would you do that now?

P.J. CROWLEY: Well, that's the dilemma, is the next centric data base was set up by the State Department, with the cooperation of the Pentagon, to make sure that State Department information was broadly available across the government. Now, the aftermath of WikiLeaks, they've pull back on some of networks where that information was available. That has an impact.

Also, I think if you're an ambassador today writing a cable, you're going to think to yourself, is this going to end up on the front page of a major newspaper that might have a chilling effect. Now, the information will still come forward, but perhaps rather than the cable, it will be put in an e-mail, in a phone call. That means the reporting is still taking place. But as Fran was saying earlier, it means that we don't have all the information in one place at the same time to do what we need to do to evaluate threats to the United States, with a very subtle potential impact here, but nonetheless, this pushes us perhaps against the kind of need to share attitude that we've embraced since 9/11 back to a compartmentalization of information.

C. CROWLEY: From need to share to need to know.

Former State Department spokesman P.J. Crowley, thank you so much.

Our Fran Townsend, CNN national security contributor, thank you, too.

P.J. CROWLEY: Thanks, Candy.

TOWNSEND: Thank you.

C. CROWLEY: Coming up, we'll go back to the scene in weather center for the latest on the storm expected to soak the Gulf Coast this weekend. Plus, is that another hurricane zeroing in on the Irene-ravaged East Coast?

(COMMERCIAL BREAK)

CROWLEY: We want to go back to Karen Maginnis in CNN's weather center for the latest on tropical storm Lee hitting the Gulf Coast.

Hey, Karen.

KAREN MAGINNIS, AMS METEOROLOGIST: Hey, Candy.

And yes, we do have the latest information regarding tropical storm Lee, and from the National Hurricane Center. They're still keeping it at tropical storm intensity. Still winds around 45 miles an hour. Here's the key. It's going to be moving very, very slowly over the next 24, 48 hours. So, the bulk of that precipitation just kind of moving on in from about Lake Charles to New Orleans to Lake Pontchartrain. As a matter of fact, a wind gust there of around 36 miles per hour.

But even towards Mobile Bay and Biloxi and then towards Walton County -- lots of folks anticipated to go to the beaches for one last hurrah before the fall season really starts to kick in. But this is going to be a soaker. How much? Well, we're looking at 10 to 20 inches of rainfall. This is low lying ground, so flooding is going to be a big issue here because it's moving so slowly.

Computer models are a little more in agreement moving along the coast of Louisiana, but bringing some much-needed rainfall across the Southeast. This is an area that is very, very parched, in some cases rainfall deficits about a half a foot or more. So, the rainfall is going to be welcomed here, but for New Orleans it may be too much too fast at least in the short term.

But not just for New Orleans. All along the low-lying coast, this is where we'll be watching out for the potential for severe flooding. There are no mandatory evacuations. There are voluntary evacuations in coastal sections of Louisiana.

Candy, back to you.

CROWLEY: Karen Maginnis in the CNN's weather center -- thanks, Karen.

It has been almost a week since Hurricane Irene wreaked havoc on the East Coast. And the effects of the storm are still being felt.

North Carolina alone is estimating the damages at more than $400 million, and more than half a million people are still without power in a handful of states.

In hard-hit Vermont, where some of the worst flooding occurred, several towns are still struggling to get essential services up and running.

Vermont Governor Peter Shumlin joins us now on the phone from the state capital of Montpelier.

Governor, give me an overview if you will, focusing on what worries you most right now.

GOV. PETER SHUMLIN (D), VERMONT (via telephone): Really, what worries me most is just getting everybody the access they need to basic services, hospitals, grocery stores and getting them back work. And, you know, we just got absolutely whacked by the storm. We've had several communities where we've lost obviously hundreds and hundreds of houses, businesses have been whacked. We've lost untold miles of roads and bridges.

So, we're getting back on our feet. We got the power back on to almost all of Vermonters. So, that was a big accomplishment this week. But we got more work to do.

CROWLEY: We spoke with the Wyndham County sheriff earlier today, and he told at this point Wilmington is the area that he would consider in the most dire situation, that they still lack essential services.

Is that your understanding? And what do you to get them back up to speed?

SHUMLIN: Well, to be candid, I would say that we have many communities in that situation. We have the National Guard in here. President Obama has been extraordinary in getting us the aid as quickly as he has. And we're in there. We've got the National Guard in there, the Red Cross.

We're starting to open up roads. We have now at least what I call oak trails to every single community in Vermont so we can get vehicles in.

And, you know, we're resilient up here in Vermont. We're tough. We're self-sufficient. We stick together. We've got tight communities and we're pulling through.

CROWLEY: What is your level of concern, if any, about people planning to travel to Vermont over this Labor Day weekend? It's such a beautiful state. I know I don't have to convince you of that, and I ask because, again the sheriff said his biggest worry is people coming in to sort of look at the damage or coming in thinking that things are OK, and it just would sort of bleed some of the services that they're trying to give to residents.

Do you worry about tourists coming in?

SHUMLIN: No, we desperately want you here. If you want to give love and help to your friends in Vermont, one of the greatest states in the country, this is the time to come and not only visit but spend tourist dollars. Listen, we need all the help we can get up here.

The fact of the matter is much of Vermont, the entire north end was entirely untouched by the storm. So, while we have huge suffering in central and southern parts of the state, our interstate highways are open to the north. And we'd encourage you to come.

You know, this is leaf peak season up here, and I'm going to guarantee you that we're going to have the best season that Vermont has seen because our maple trees just got more water than they've got in the history of this great state. And water brings brilliant colors.

So, this is a time to come here, give us a hand, spend your dollars here, buy Vermont products. We need all the help we can get.

CROWLEY: And what do you suppose -- do you have a grip on how much this has cost the state, first, in damages, and second in economic losses?

SHUMLIN: Well, it's just -- it's not possible to measure yet. We're still counting destroyed houses. We're still counting up businesses that have been, you know, pushed under. So, we're just trying to get everyone back on their feet. But to go to numbers now would be about as reliable as heading it to Vegas.

CROWLEY: I understand.

How are your emergency responders doing? Do you need relief coming into the state? Are you able to bring in any time off? It's been a long time since that storm hit.

SHUMLIN: Well, you know, we have -- because of the president's extraordinary action, we have all the help that we need right now. And they're doing their job. And I just got to say, you know, the thing about Vermonters is, you know, we live on top of mountains and then valleys and we deal with huge storms. We are extraordinarily resilient. I've seen communities with acts of kindness and just bravery, people reaching neighbors who literally just lost their own homes -- the stories, the kind of community that's happening here in Vermont, it just really brings out the best in us. We've got all the outside, you know, professional help that we need. We're going to start to rebuild.

CROWLEY: That's great news. Vermont Governor Peter Shumlin, thank you so much for your time. We appreciate it. Good luck to you there.

That is all from us tonight. "ANDERSON COOPER 360" starts right now.