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Housing Crisis; Downgrade Risk; Viewing Moammar Gadhafi; Michael Jackson Trial; Interview With Congressman Steve King

Aired October 24, 2011 - 19:00   ET


ERIN BURNETT, HOST: We're on the "Front Line" in Iowa with Rick Perry pushing a flat tax. How will voters respond? He's hunting for votes. And the president like you've never seen him before -- oh, we promise -- we cannot resist showing you the new Barack Obama. And the "Bottom Line" on America's housing crisis. Will the president's newest plan get it done?

Let's go OUTFRONT.

I'm Erin Burnett. It's Monday and OUTFRONT tonight ground zero for the global economy, housing in America. If we don't fix it more downgrades of our economy are coming. The president rolling out some changes to his tenth housing plan today in one of America's hardest hit cities, Las Vegas.


BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: If you meet certain requirements you will have the chance to refinance at lower rates which could save you hundreds of dollars a month and thousands of dollars a year on mortgage payments.


BURNETT: In a nutshell the plan increases the number of home owners eligible to refinance. Now the administration says it would allow more of the five to seven million underwater home owners who are still current on their mortgage payments to refinance. The administration is pushing for a rate of about four percent for those refis.

But we had two key questions. One, will the plan increase housing prices? Well the chief economist of real estate Web site Zillow told us that even if the plan is fully implemented and everything is perfect prices for homes may not rise. That was not the answer we were hoping for. Two, will it work overall?

Well Ken Rosen (ph) is an economist who actually helped write the original so-called HARP housing plan. He told us he is very skeptical it will be implemented successfully because it only helps mortgages backed by Fannie Mae and Freddie Mac. Tony Crescendo (ph) of PIMCO says we don't have enough people in the mortgage industry anymore to handle this many refis because unemployment has plunged 55 percent since the crisis. That was pretty ironic. The bottom line is this though. Even though there are questions about this plan we have a very big hole to dig out of on housing which at its peak was about 20 percent of the entire American economy. Meantime we have more self-inflicted wounds like a Congress that can't promise to make a deal to avoid more downgrades of America's debt which will cause interest rates for all Americans to rise.

Will Cain is a contributor here at CNN, contributor to the Tim Punke is a former Clinton economic adviser, former chief international trade counsel to the Senate Finance Committee. And Bill Roedy is former CEO and chairman of MTV International and author of "What Makes Business Rock". All right, thanks to all of you for being with us.

I guess let's start with you, Tim, since you're coming here from the Democratic side. Do you think that this plan can get it done? I mean obviously the president has been trying all these various options in part because Congress hasn't been able to step up and do more.

TIM PUNKE, FORMER CLINTON ECONOMIC ADVISER: That's right. First of all I think it's important to remember that the housing economy is about 18 to 19 percent of our economy so the one thing that everybody agrees on is we can't do nothing. What I think the president was saying today is pretty simple. Where we can facilitate homeowners who are in their homes and who can make payments but at a lower interest rate.

Let's do that if that means keeping these homeowners in their homes. But the key part of the president's message I think is probably getting a little bit lost in the coverage today is what the president also said is that our housing problem is really an unemployment problem. Foreclosure is largely a result of people being unemployed and that's why the president is out there pushing his jobs plan, which economists say will create about 1.9 million jobs. You're going to see the president continuing to push that because I think that is the most important part of the housing program.

BURNETT: Well obviously housing and jobs are linked. I mean it's a chicken and egg sort of an issue, a cycle. Will, what do you think though? I mean just in terms of the politics of whether this sort of a thing can get done? And by the way, deals like this part of the reason they haven't worked is because well it's not just getting the borrower and the bank onboard. There are a whole lot of other people who own those mortgages and it gets very complicated.

WILL CAIN, GOP STRATEGIST: Right. You know Tim talked about President Obama's message (INAUDIBLE). I say it's part of the way he's selling it. He's selling it with the tag we can't wait, which sounds nice but in a government where we have separation of powers, three branches of government, checks and balances, it sounds a little bit dictatorial to say we can't wait. We just have to do something.

On the actual substance of this program, the economics of this program I have to say I'm pessimistic. It seems like tinkering around the edges. The core problem in housing is we have people in homes they cannot afford. That is not about their interest rate. That's about their principal. Until we solve that, housing will continue to be a problem.

BURNETT: Adds to the whole principle of reduction issue, which people have backed off it, because that is so politically --

UNIDENTIFIED MALE: Right -- right.

BURNETT: I mean there are a lot of people can take the hit, taxpayers, banks.


BURNETT: Bill, what do you think though? I mean is our problem here that we just need to accept that it's going to take a long time for asset prices and for most people that's their most valuable asset their home? They still have to fall. We can't stop it.

BILL ROEDY, FMR. CEO, MTV INTERNATIONAL: Yes. There are some parts of what Will just said I agree with, but you know on the other hand every little bit helps. I mean although this is a little bit, but you know I think I would go for anything that helps and I think that's what he's doing. You know I think you're right.

It is going to take a long time to sort this out and there are much worse problems by the way when it comes to housing. I just came from Britain and I think there is a terrible problem there. Of course Greece, which we can talk about and Europe but it's just going to take a long time to sort this out, but every little bit helps.

BURNETT: I want to talk about the other big issue in Washington but also Europe and since you brought it up, I mean obviously the biggest trading partner for the United States, this is not just a peripheral issue everyone. This is front and center to whether America can get out of our crisis. Angela Merkel and Nicolas Sarkozy an odd couple indeed, there they are and they're angry at each other and that's humorous I suppose, but it's also dead serious. You spent a whole career over there. Are they going to get out of this or are they going to send us into another recession?

ROEDY: Well you know I -- we designed a business that was based on country specific so anything that goes across different nationalities and languages I think --

BURNETT: I.e., 17 of them?

ROEDY: Well have you ever heard 17 people agree on anything, especially if they speak different languages and they come from different cultures. You know the real tragedy here is Sarkozy had to not be there for the birth because he had to meet yet again with Merkel. And you know, just think of the endless hours the policymakers have been spending on this, the bureaucracy. And we discovered a long time ago you have to -- all politics is local.

People ultimately care about their own country. And you know think about the poor Greeks. I mean you know yes, the stereotype is the beauty, beautician who had a pension at age 50 but you know I asked a taxi driver -- I was there last month because they always know the true story -- a Greek taxi driver what do you think? You know they said, gosh. I don't know. You know my pension is going down.

My taxes are going up. My benefits are going down. The Germans hate us and the EU won't give us any respect and the brand has been ruined forever, the Greek, their brand. And he said to me, you know, you have a phrase for us. I said what's that -- it's all Greek to me.

CAIN: And I got to admit, Bill and I were talking back stage. And you're telling me that thousands of years of separate traditions, cultures and languages didn't cohesively melt into a single entity in the euro zone? That doesn't end until it breaks up or it becomes a singly political unity. The interesting thing is it's not that different than housing.


CAIN: This doesn't end until we liquidate housing or have principal reduction. Tinkering in the middle isn't going to get it done.

BURNETT: Right -- right and I think you raise a fair point, which is the U.S. needs to be prepared for Europe to break up. It has to be -- I know people want to say oh it shouldn't happen, whatever -- they've got to be prepared for it which brings us to Congress and how Congress isn't getting anything done.

And Tim, let me ask you whether Congress in your view is actually going to do something that will shock the world, create confidence, and get our economy back on track and that is do a deal with the super committee, a grand bargain?

PUNKE: I think they'll certainly do a deal. I think the question is how big that deal is going to be. I think that most people look at the super committee and think that they're going to make some changes in terms of spending cuts, spending reductions, but I think that giant kind of tax and spending grand bargain is going to be elusive probably until next year.

One thing is that people don't realize is that the sequestration, the cuts that are automatically triggered don't actually take place for a year so the thing that everybody knows has to happen, tax increases, cuts to spending, entitlement spending, discretionary spending, everybody knows the formula for this, but the real pressure is not going to be until after this year.

BURNETT: Well that is not going -- we can't afford from a market perspective -- (INAUDIBLE) people get this -- we can't afford this to be a countdown again and we can't afford to go into this, automatic cuts whether they happen next year or not. It's just bad for the country.

CAIN: You know Tim and I are going to have to agree on this. I'm pessimistic about this. Any credible long-term plans that require tax increases, tax revenue increases, entitlement cuts, Congress has shown no propensity to do either of those things.

ROEDY: I do a lot of work in countries around the world. And you know it used to be we had the best system. The question no one is asking right now is this really the best system? I mean should we be like a Brit? Should we be a parliamentary system? Clearly it is dysfunctional. Nothing is happening. And this is -- it's destroying -- and you said it earlier -- confidence. The whole economic situation is probably based on confidence.


ROEDY: And I live in Britain. I thought that Brits were pretty bad on themselves. I've never seen this country in such a funk. There is no confidence. There is no X factor.


ROEDY: And I think you've got to get X factor back --


CAIN: (INAUDIBLE) not the best model right now.

ROEDY: Well --


BURNETT: We're going to --


ROEDY: I don't know. When you point one finger three come back. You know I think right now nothing is working here.

BURNETT: Well thanks to all three of you. We're going to leave it there. But viewers let us know what you think, whether we should dry a different system, just a macro system --


BURNETT: Because we can't afford -- we can't afford this thing to be a countdown again.


BURNETT: They got to step up. Maybe courage, courage in Congress could lead to confidence.


BURNETT: All right. Still OUTFRONT Moammar Gadhafi's body has been in a Libyan meat locker for five days, the latest from the Michael Jackson death trial, and what the defense must do to save Conrad Murray and oh, we can't resist. A much younger Barack Obama than we're used to especially because you know the job of president ages you. Oh, but we can't resist showing you the new president. (COMMERCIAL BREAK)

BURNETT: The number tonight, zero. That's how many ribs are in a McRib sandwich. The (INAUDIBLE) favorite is going to be returning to McDonald's nationwide but only through November 14th. To promote the return of the McRib McDonald's has also launched a game called "The Quest for the Golden McRib". OK, so just what is in a McRib sandwich since it is not a rib?

A boneless pork patty that includes barbecue sauce, sliced onions and pickles, but it is not for those on a diet, 500 calories, 26 grams of fat, 40 percent of the daily recommended fat intake. Oh, McDonald's, all right.

In Libya, word tonight from a military spokesman in Tripoli that it is highly likely the body of Moammar Gadhafi will be buried at a secret location tomorrow. This comes after men lined up for days to see the decaying remains of Gadhafi who was shot in the head last Thursday. His body has been laid out in a meat locker four or five days.

The line of people parading through to look at him frankly it's barbaric. It's a sign that in Libya home to the world's largest light sweet crude oil reserves there is still a real struggle for anyone to take charge. CNN's Dan Rivers has spent days reporting on the bizarre scene. He joined us just moments ago from Tripoli.


DAN RIVERS, CNN INTERNATIONAL CORRESPONDENT: Extraordinary, yes. I don't know how it's allowed to happen frankly. It's dragged on for, as you say, getting on for five days now. And we think now there is a possibility that he will be buried either tonight or tomorrow local time here, but this has been a really embarrassing episode I think for this new government here.

It's marred the declaration of liberation for this country. There's still lots of questions about how he died and just questions about the ethics and morality of treating a body like this no matter who it is. You know, he's a human being and they said they'd treat his body with dignity. They said he would be buried in accordance with Muslim traditions and so far they haven't stuck to that.

Now they have carried out an autopsy, yes, but we still don't know the full results of that. All we know is that he was shot in the head, but we don't know at what range and so it's, you know, these questions about whether he was executed rather than killed in a cross fire continue and from the U.N. downward people want answers to these questions.

BURNETT: And they do. It certainly will say a lot as to whether the National Transitional Council can govern even if it has the will. Does it have the ability? I wanted to ask you, Dan, about Moammar Gadhafi's son, Saif, his heir apparent, who according to officials in Libya is now potentially on the border trying to escape Tunisia or somewhere else. What can you tell us about that? RIVERS: Well, I think we have to be a little skeptical about claims concerning any of the Gadhafi family especially Saif al-Islam. He's according to them been captured or hospitalized or surrounded or involved in a gun battle. We've had a different rumor every day almost in the last week but the latest that we were hearing from one source as well is that he is down south somewhere attempting presumably to flee over the border. But frankly until we actually have some conclusive proof I think we have to be pretty careful about putting too much credence in that.

BURNETT: All right. Well we shall see. Thanks so much, Dan.



BURNETT: All right. Well we looked into what ongoing civil war in Libya could mean for oil prices given that there are 140 tribes and a clear concern now over who is in charge. John Kilduff of Again Capital, an expert oil analyst ran the numbers for us. He says that if there is fighting prices for oil could go back above their Arab Spring highs to as much as $125 a barrel.

Now here in the United States that translates into $4.50 per gallon of gas. What happens in Libya sure matters here, and if you think Libya matters, it's really nothing compared to Saudi Arabia. The kingdom of Saudi Arabia is the most important country in the world for stable oil and gasoline prices and tonight there are serious succession questions for its monarchy. With the Crown Prince of Saudi dying on Friday night the next in line to the Saudi throne is Prince Nayef, the conservative chief of Saudi's feared secret police.

Now he is about 78 years old. He is tightly allied with the religious clerics in Saudi Arabia, Wahhabis. He is known for opposing allowing women to drive or other rights for women. Now King Abdullah is a much more liberal force. He's at least 87 years old and has spent a lot of time recently in hospitals in Morocco and New York. Now the fact that we do not know their exact ages is indicative of how new the Saudi monarchy is.

Their father was the first king and succession passes from son to son, so when this octogenarian generation dies there are thousands of princes who could rule. Experts hope the succession will be smooth but if it is not the country's instability would rock the world. Again, we asked John Kilduff to run the numbers. If King Abdullah dies and the West becomes comfortable with Prince Nayef oil would still go up five to $10 a barrel.

If Prince Nayef emphasizes his allegiance to radical clerics oil could jump as much as $20 a barrel. And if Saudi has either unrest or a disorderly transition to the next generation oil could go -- and get this -- $200 a barrel. That would send prices here in the U.S. as high as $8 a gallon. Succession in Saudi Arabia is a big story around the world.

The prosecution wrapped up the state's case today against Dr. Conrad Murray. Now his defense team has a turn to try to poke holes in the state's theory that Murray's reckless use of the drug Propofol which was used to help Michael Jackson sleep, makes the doctor criminally responsible for the star's death.

Ted Rowlands was in the courtroom for us today -- good to see you as always, Ted. So the defense now has the floor. What are the holes that they can try to exploit?

TED ROWLANDS, CNN CORRESPONDENT: Well, one thing the prosecution's theory dictates is that Michael Jackson died from an I.V. drip and the problem they have is that at the scene at Jackson's house they didn't find that I.V. cord anywhere. That's something I think the defense will try to work through and get that message across to the jury. The other thing they have to do is try to rehabilitate Murray's reputation somehow through character witnesses.

BURNETT: All right, so I know a lot of defense witnesses did take the stand today after the state rested. Is anyone going to be the star for them?

ROWLANDS: Absolutely. Paul White (ph), he's an anesthesiologist and he is basically the other side to what the prosecution put up. And he does have qualifications. The key will be whether White's (ph) theory of what could have happened will resonate with this jury because the prosecution's expert witnesses surely it seems did. The jury was really locked into their testimony.

BURNETT: All right, Ted. Thanks. Talk to you soon.

And OUTFRONT next new developments in the baby Lisa case. Police spotted something unusual on security camera footage. We're going to tell you about that. And the latest from Iowa, Rick Perry pushing a flat tax, will it be enough to win over that state's voters because wow they carry a lot of weight.

And a story we can't resist. Barack Obama like you have never and really I can say that there are only one or two people on the planet who may have seen him like this before.


BURNETT: And now a story we can't resist. A collectible company called Ashton-Drake Galleries has released a new Barack Obama doll. Now that's not that unusual. We have seen dolls honoring presidents in the past. There was George Washington. There was Teddy Roosevelt, Eisenhower, GI JFK, and of course this is a little strange, 2008's Cabbage Patch candidates. But it's not even the first time this particular company has reproduced famous people.

They've made dolls of Lucille Ball and Kate Middleton has a doll now. In fact they've even made one of the president's wife, Michelle, yes, see, like she is now. But now what makes this new doll so unusual is that it's depicting President Obama as a life like baby. The President Barack Obama commemorative baby doll is made of collector quality vinyl, dressed in blue shorts, white booties and a t-shirt that reads "the birth of hope", priced to move at $150. Reviews have been mixed at best with some reviewers on Amazon calling it horrible, over priced, and some scary. Now speaking of scary dolls this gives us an excuse to play a clip from the 1998 killer doll movie "Bride of Chucky".








BURNETT: OK, it wasn't that scary but still. Oh we just couldn't resist.

Still OUTFRONT the "OutFront 5" a big idea.


BURNETT: In Washington everybody hates each other and it's hurting America. How do you fix it, Elmo?


BURNETT: Hunting for votes.


UNIDENTIFIED MALE: I want to make the tax code so simple that even Timothy Geithner can get his taxes in on time.


BURNETT: A disturbing theory.


UNIDENTIFIED FEMALE: He had the baby in his arms and he had the baby's head kind of like this.


BURNETT: Where is baby Lisa?


UNIDENTIFIED FEMALE: It's kind of frightening actually.

(END VIDEO CLIP) BURNETT: All of this OUTFRONT in our second half.


BURNETT: We start the second half of our show with stories we care about where we focus on our own reporting, did the work and find the "OutFront 5". First up housing; the president in Las Vegas today announcing changes to his latest housing plan. In a nutshell the plan would increase a number of people eligible to refinance. The administration says it would allow more of the five to seven million underwater home owners who are still current on their mortgages to refi at a rate that the Obama administration hopes will be four percent.

Now Ken Rosen (ph) is an economist who helped write the original housing plan, told us he is pretty skeptical it's going to be implemented successfully because it only helps mortgages backed by Fannie and Freddie. Number two: Hurricane season not over yet. Rina rapidly intensifying into a hurricane in the western Caribbean heading toward Mexico's Yucatan Peninsula, CNN Severe Weather team told us Rina will likely hit near Cozumel later this week as a major category three and then make a sharp turn toward Cuba this weekend.

Number three: Netflix announcing today its revenue hit a record high in the third quarter, $822 million.

Now not all the numbers were good though. We did the math. We found out that Netflix lost 800,000 American subscribers in the quarter.

The company also projects it will lose as many as a million streaming subscribers and 25 percent of its DVD subscribers in the U.S. That all sounds pretty bad. The stock is down more than 25 percent at this hour in after hours trading.

Number four: the official Steve Jobs biography went on sale today. OUTFRONT contacted Amazon. They said the book tops both its e-book and hard copy bestseller list.

A spokeswoman added that the book is turning out to be the top selling book for Amazon for the entire year. Obviously, the book comes out just under three weeks after Steve Jobs died.

And number five: it has been 80 days since the U.S. lost its top credit rating. What are we doing to get it back?

Well, the debt super committee holds a public hearing Wednesday. They have 30 days to make a big move. And as we've been saying, this is not one to play chicken with.

Well, his endorsement is one the most sought after in the Republican Party and GOP candidates are courting Representative Steve King and his Iowa voters.

Just before the show, Representative King came OUTFRONT with his thoughts on the GOP field and pheasant shooting -- yes, yes, yes, with Governor Rick Perry.


REP. STEVE KING (R), IOWA: We did have great shooting all the time that we were there. So, I would just count it as a really good day out in the field. And whenever you can go out and pick up a shotgun and have a day like that, that builds a memory that you don't forget for a lifetime.

BURNETT: I'm sure.

Now, how did Governor Perry do? He as good with a shotgun as he says he is?

KING: You know, if I had to say, there were a couple times that I had to back him up, but there were a couple times he had to back me up. All in all, he held his own very well and there is no exaggeration on his part the way he characterized it. He is a good shooter and you can tell by the way he handles himself.

BURNETT: All right. Well, you had endorsed Fred Thompson in 2007, which by all accounts was very important for Mr. Thompson in Iowa. It gave him a strong third place, showing ahead of John McCain.

So, what's your feeling after spending time with Governor Perry? What did you talk about? What sense of the man did you get?

KING: You know, it's pretty hard to get very deeply into that when you've got all of that action that we had. And the action was so good that I'm reluctant to tell you how good.

I'll just say that my view on this, he is very comfortable out there in the field. He's comfortable around people. He has a good job of engaging with all the new faces that I saw him introduced to.

He made it a point to repeat their name back to them and I saw that he remembered some of those names. I'm impressed by that. It's one of the things that I struggle with. But I think he is a good listener.

I think that, you know, his instincts on the Tenth Amendment are very good. He wants to reduce the power of the federal government and evolve those powers back to the states. That's part of his over all philosophy.

BURNETT: So, are you ready to endorse anyone? In particular, what is your sense of the economic plans? Obviously, Governor Perry going to be putting forth that flat tax. You've got Mr. Cain with a flat/sales tax.

KING: Well, I have been for a lifetime a fair taxer. I spent my career pushing the fair tax. I understand it. I devised it long before I ever heard that anybody else was thinking about it. And, of course, I didn't devise the bill but I devised the strategy.

And so, that's one of those economic components that I don't see out here in the field right now. I'm not going to get everything I want and nobody in America is going to get everything they want in an individual candidate probably.

But the economic proposals that are out here, the 9-9-9 versus the flat tax, look at these pieces. I think what's really missing is a presidential candidate that can paint that vision, that dream for America -- at least one of the candidates needs to convince us that they not only see where America needs to go but they can articulate a way to take us there. Those two components I don't think have been put together correctly yet by the presidential candidates.

BURNETT: All right. Well, thanks very much. Appreciate you for taking the time, Representative King.

KING: Thank you very much, Erin.


BURNETT: All right. Jennifer Jacobs is the chief political reporter with the "Des Moines Register." She spent the weekend with the GOP candidates. John Avlon is senior columnist with "Newsweek" and Daily beast, and a contributor.

All right. Good to have both of you with us.

Jennifer, you just heard Representative King say not ready to endorse anybody. How did the candidates do with Iowa voters? Who do you think won this weekend?

JENNIFER JACOBS, CHIEF POLITICAL REPORTER, DES MOINES REGISTER: Well, there was a Christian conservative forum and at that forum in Des Moines, it seemed like the conservatives there really swooned for Newt Gingrich. I don't think they disliked any of the candidates but Gingrich just got the biggest raves afterward. But they did, they said they are still as confused as all along. They just don't know who they're going to pick yet.

BURNETT: What did a Newt Gingrich do to get all of those standing ovations? I'm curious.

JACOBS: Yes. He got two standing ovations and quite a bit of applause throughout his speech.

The conservatives I talked to afterwards said they appreciated how detailed he was. He just seemed so confident that he could fix the economy. He said it's just really not that difficult to fix the economy. We can do this.

And he just -- he pretty steadily keeps up a drum beat of opposition against Barack Obama and Iowans who like to keep that Republican on Republican infighting to a minimum really appreciated that he kept the focus on Barack Obama.

BURNETT: What's your take from this weekend? I mean, they were all out. You know, shot guns and everything. Everybody is out in their elements this weekend. JOHN ALVON, CNN CONTRIBUTOR: This was Faith and Freedom weekend.

But here's what is extraordinary about this aspect of the field right now. New poll gave a snap shot just before this weekend. Normally, the folks who are in Iowa are the people who appeal to social conservatives and who spent a lot of time on the ground.

What the polls are showing right now is it's Herman Cain and Mitt Romney, the two candidates who arguably spent the least time in Iowa who are leading the polls overwhelmingly and Gingrich, Santorum, Bachmann, Perry -- they are all clustered under to 20 percent if you add them together. So, this is really a bit different.

I mean, at the end of the day, it's usually social conservatives who determine the winner of the Iowa caucus. Huckabee was able to add the fair tax to that coalition and pulled out a big upset over Mitt Romney last time.

BURNETT: The economy matters this time.

AVLON: Absolutely.

BURNETT: All right. What about this whole issue then of taxes, right? People care. You got the flat tax rolling out tomorrow with Rick Perry. You've got Herman Cain with his tax plan.

AVLON: Well, you heard Steve King say he is looking for the fair tax advocate like Huckabee was last time.


AVLON: But I think the fact that Perry is weighing in with a specific plan tomorrow will help his candidacy enormously. And one of the things about his speech this weekend, he was hitting abortion, abortion, abortion -- thought there was a weakness on Herman Cain because of an answer he gave on CNN where he seemed to philosophically endorse the right of individual freedom -- freedom of choice.

But that economic plan is going to help Perry's candidacy. It should. We're going to have a good debate about the best way to approach tax simplification. So, it's part of an ongoing debate that will play with primary voters.

BURNETT: Jennifer, what's your sense in Iowa of how much voters are going to focus not just on the economy over all with the candidates, but on these tax plans some of which are rather bold, rather radical specifically?

JACOBS: I think that's exactly what they're looking for. Rick Perry has been in a slump here but I think that he could rally here if he can really convey to Iowans that he is the best person to really turn around this economy. That's what they're looking for.

And that's exactly right. They are telegraphing in the polls with their appreciation for Herman Cain and Mitt Romney that they really are driven by their wallets this cycle. BURNETT: How much time does Rick Perry have? I mean, at some point, right, he came in, that was his peak. He's dropped.

So, how much time does he have, John, before he's out?

AVLON: Look, John Kerry was able to overwhelm Howard Dean in the last weeks before the primary in 2004. So, this is a situation where it's malleable until the last couple weeks. But Rick Perry came in with a bang. Remember?

Michele Bachmann won the straw poll. Rick Perry sucked up all the oxygen. Now, he is stuck in low single digits. So, he's got a lot of ground to make up.

And so, it's always later than you think in politics, especially with a presidential primary breathing down your back. So, he's got a couple weeks to start getting momentum back on his side, no more.

BURNETT: And, Jennifer, what's your take in Iowa?

JACOBS: Yes. He's really bringing it into Iowa. He has been working -- the campaign has been working quietly to really rally Iowa captains, county captains and precinct leaders. They're reportedly going up on the air in Iowa with some television advertising that's really going to focus on jobs in the economy and his flat tax.

So, I think you're going to see a surge of activity from all the campaigns, but from Perry for sure.

BURNETT: Do you think, John, that Herman Cain is going to put more time into Iowa or no? Because this has not been his -- I mean --

AVLON: He should. The guy is polling at 37 percent right now. Barack Obama and John Kerry won with 38 percent. It is absurd to me especially given the media attention if he got us this far ahead, he should invest some time and effort in Iowa.

BURNETT: And you don't think he should count on that, remaining that way?

AVLON: Absolutely not. We are a long way out, and Iowans will make up their mind in their due time.

BURNETT: And they have the position to say court us or else, right, Jennifer?

JACOBS: Yes. And I think they're getting itchy to rally behind someone. There is a growing awareness that if they split amongst anybody but Romney crowd, that they're just going to hand the nomination to Romney. They're starting to realize that. So they want to be excited, they want to be in love with one candidate, so they can really get behind somebody and kind of put an end to this kind of question mark that they're feeling right now. They want to pick somebody.

And, yes, time is running out. Just 10 weeks away from the caucuses.

BURNETT: All right. Well, thanks so much to both of you.

Now, we know why they all fight to move the date up. Everybody wants to be the one romanced.

OK. All right. Let's check in with Anderson Cooper with a look at what is coming up on "A.C. 360."

Hello, Anderson.

ANDERSON COOPER, HOST, "A.C. 360": Hey, Erin. How's it going?

Keeping them honest tonight on "360" -- Mitt Romney, the presidential candidate, under attack for the policies of Mitt Romney the governor. The opponent says the governor of Massachusetts, Romney -- opponents say that Romney designed a health care plan that covered illegal immigrants. The Republican front runner's campaign defended his record today.

Who is telling the truth and who is playing fast and loose with the facts? We'll find out tonight. We're keeping them honest.

Also, tonight, new video, the first moments when Moammar Gadhafi was pulled from a drainage ditch. I know you've seen a lot of these videos. This one, though, answers a lot of questions about what happened.

Plus, a report from Libya on the autopsy results of what's being done with Gadhafi's body. We'll also have the latest on reports one of his sons is still alive and maybe trying to escape the country using a fake passport.

Also on "Crime and Punishment" tonight, the grainy video could help find 11-month-old Lisa Irwin missing for weeks from her Kansas City home. We'll speak with the private investigator in the case about what the video may show.

Those stories and tonight's "Ridiculist," Erin, at the top of the hour.

BURNETT: All right. Anderson, see you then.

And OUTFRONT next, the "Outer Circle" -- an oil well burning in Texas. We're going to talk about the real estate in danger.

And then the latest from Kansas City -- 20 days since she went missing, the authorities are now doing something new to find baby Lisa.

And we've got new details from Turkey in the earthquake there. It was devastating. We'll go there live.


BURNETT: Same time every night we do this, our "Outer Circle" -- we reach out to our sources around the world.

And we begin tonight in Turkey where rescue workers are scrambling to find survivors. There was a deadly 7.2 magnitude earthquake which struck the eastern part of the country near Van.

International correspondent Diana Magnay is in Van, Turkey, tonight.

And, Diana, are rescuers having success finding people alive under the collapsed buildings?


DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Erin, they are having some success. And that is why they are continuing to dig at various sites in these two affected towns.

And, for example, here at this site behind me in Van, the head of the search and rescue team says he does have indications that there may be two people down there in the rubble still alive. The most poignant part of that process is when they stop for a moment of silence basically to listen to see if anybody is knocking or calling and obviously if they hear something then they don't stop until they found them. Erin.


BURNETT: All right. Thank you very much.

I don't know, I haven't been there. It doesn't so many like any of the buildings would have been built to earthquake code.

Next to Tunisia where there was a big turnout in the first national election since the uprising which overthrew the long-time dictator.

International correspondent Ivan Watson is in Tunis.

And, Ivan, how many people actually went to the polls? And when are we going to know the winner?


IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Erin, Tunisia's top election commissioner called the turnout in Sunday's historic vote "fabulous." He said that more than 80 percent of the 4.1 million voters who registered to vote showed up to cast their ballots. Final results are expected to come out Tuesday afternoon, though so far, preliminary indicators suggest that a moderate Islamist political party won first place, but not enough for a clear majority. It will have to form a coalition with at least one secular political party to form Tunisia's first post-dictatorial government -- Erin.


BURNETT: All right. Thank you very much. And now to Texas. Officials are trying to get a fire from a blown oil well under control. Ed Lavandera is in Dallas tonight.

And, Ed, how long is it going to take to get the fire stopped? And is it threatening homes nearby?


ED LAVANDERA, CNN CORRESPONDENT: There are some 500 to 600 homes in the area where this oil rig explosion happened, but there are no evacuations under way at this point. All of this happened in Milam County, Texas, which is just northeast of Austin, Texas. And they've been bringing in specialized crews to put out this fire.

All of this happened over the weekend where these oil drilling crews got much more than what they bargained for as they were drilling for oil and special crews are being brought in and we're told it could take up to a week to put out this fire -- Erin.


BURNETT: All right. Thank you, Ed.

And there are new developments in the case of missing baby Lisa Irwin tonight.

Twenty days after her parents say she disappeared in the middle of the night from her crib, a surveillance video from a BP gas station less than two miles from her home shows a person dressed in white. You can see there with the arrow, that kind of a blob there moving. Walking away from a wooded area about two hours before Lisa was reported missing.

Now, police and the FBI are not commenting on the tape or the investigation, but it does raise new questions.

Pat Brown is a criminal profiler who has been following the case. She's OUTFRONT tonight.

Pat, thanks for being with us.

Ands when you look at that surveillance tape, what do you see?

PAT BROWN, CRIMINAL PROFILER: I see a guy going to take a leak in the woods. I'm sorry, Erin. But that's all I see.

We've got -- you know, this has probably absolutely nothing to do with baby Lisa. I mean, could it be? Absolutely, and the police have to take that into account. You don't want to have tunnel vision.

But let's face it. What you're talking about that time of night near a gas station, you got guys going out for cigarettes, guys picking up some food, guys getting some beer.


BROWN: You know?

BURNETT: True. And I appreciate the cynicism, but there have been at least three witnesses who saw a man walking with a baby in the area that night.

So, does that -- would that put any more weight on it? Does that help at all if you're investigating the case?

BROWN: Well, again, you have to take it into consideration but let's take a look at what we're really looking at. There are three witnesses with two other supposed sightings. First of all, they need to be polygraphed because we don't know how accurate they are.

They say -- two of them saw a guy with a baby. The guy at the gas station doesn't have a baby with him. So, either he dumped the baby on that or he's not related. Two guys with the supposed baby are carrying along a baby with just diapers on.

Now, Deborah Bradley says she put her child down dressed. No kidnapper goes into a house and undresses a child to carry it away.

So, if the police are actually taking this seriously, the baby -- one of those baby sightings with a man in a white shirt with a baby --


BROWN: -- they might be looking at somebody taking away a dead baby. So, it doesn't mean that is a kidnapper. It may be somebody removing a body.

So, are the police looking at it? Absolutely. But to get overly excited about this video at the gas station I think is kind of -- you know, probably not that exciting.

BURNETT: So, family attorney Cyndy Short spoke to CNN just a short while ago -- had this to say about the investigation. Here she is.


CYNDY SHORT, FAMILY ATTORNEY: This family has cooperated in every way they possibly could cooperate. I think we have calculated that over time, she has actually spent approximately 40 hours talking with investigators.


BURNETT: All right. That may be true but, obviously, there's been questions about the family's cooperation. Let me just ask you this. The cadaver dog smelling the scent of a decaying body in the mother's bedroom.

We haven't heard much more about that. I guess that could have been left by a diaper.

SHORT: No. I mean, this is something again the defense attorneys are pointing out, that there's 10 different things, especially this diaper that's being left there.

This is a decaying body the dog is looking for. Not a diaper with some -- that a baby was wearing.

And take a look at -- just think about this: if that were true that the dog is finding diapers, why is the dog only finding the diaper by the bed? I mean, in all of those ten months, did Deborah Bradley only change the baby's diaper on the floor by the bed. Did she have that child stapled down by the bed? I don't think so.

So, the dog should be hitting the house finding all kind of diaper areas. So, that's just absolutely ridiculous. The dog is specifically looking for decomposition of a human body, and that's why the police are taking this very seriously.

BURNETT: All right. Well, a lot of people very curious to see what happens. And, obviously, the outcome is obviously not looking very good in terms of whether the baby is still alive. Thank you.

BROWN: Thanks, Erin.

BURNETT: All right. Well, we have a very special guest coming up. This is somebody who claims to have all the answers to solve the crisis in Washington.


ELMO: I'm just going to fix Washington. So, don't change the channel.



BURNETT: And now, Elmo time. We love Elmo even though his voice -- you know, I love it for a certain amount of time.

But Elmo is a sensation that has changed kids' lives for 26 years. And now, there's a new documentary, "Being Elmo: A Puppeteer's Journey." The film traces the story of Kevin Clash, the puppeteer who truly is Elmo's alter-ego.




UNIDENTIFIED MALE: He's been so unbelievably huge.

ELMO: Hi, everybody!


BURNETT: Well, Elmo is unbelievably huge and the man behind him amazing. The film's already won the special jury prize at Sundance, five other awards as well. I spoke to Kevin Clash earlier and asked him what makes Elmo so beloved.


KEVIN CLASH, PUPPETEER FOR ELMO: Well, mainly for kids, it's a mirror image. I mean, Elmo is laughter and love and just wanting a hug and kiss and be validated. That's what kids are like, you know, so his age group, almost 3 1/2. And so, his -- the kids that watch him, they can definitely gravitate to him and connect with him because he's them.

BURNETT: In all of his ways.

CLASH: Yes, but also adults -- adults, they watch the show. They grew up watching the show.


CLASH: And they turn into a 3 1/2 or 4-year-old when they're talking to Elmo also.

BURNETT: That's true. He's been around since 1985 is his born date.

CLASH: 1985, '86, yes.

BURNETT: Now, you were saying that you like Elmos to be well, like the people that they are, right? That means a little grungy (ph) and raggedy.

CLASH: When first built, they look like dolls. So, the main thing I do is when I get a new Elmo, I take him out to schools and travel around so they can get all of that love from the kids on them and make the fur a little more rattier.

BURNETT: You were 9, right? You knew you wanted to be a puppeteer?

CLASH: I was 9 and 10. I was watching Kukla, Fran and Ollie, and Captain Kangaroo. And, of course, "Sesame Street" came on. I was glued to not only enjoying the show but wanting to figure how the puppets, or I should say, the muppets were built.

BURNETT: Right. Well, here's something from the movie when I guess you had your first inspirations -- one of your inspirations with your dad. Here it is.


CLASH: I saw my dad's trench coat inside there was this black fur. I thought, wow, that would make a great monkey. I cut it up and I made this puppet called Moandy (ph). I put the puppet in my mom and dad's dresser.


BURNETT: And did they say, our child is a prodigy or did they say you just cut up your dad's coat?

CLASH: Listen, I'm here. I lived to tell the tale.

No, he actually, he got it. He asked me to come to him. I came to him shaking like a leaf. And he said, what's his name? And I said, Moandy. And he said, next time ask.

BURNETT: All right. Well, Kevin, thank you very much.

CLASH: Well, thank you for having me.

BURNETT: Now we're going to bring in.


BURNETT: The hairy guy, yes.

CLASH: Well, he would be really mad if you didn't.

BURNETT: We're not going to exclude him. Let's get him in to get his take.


BURNETT: All right. And guess who is here? The monster himself.

Hey, Elmo! How are you?

ELMO: Hello. How are you?

BURNETT: Well, I'm good. Your hair and makeup look very nice.

ELMO: Well, thank you. Elmo doesn't have hair. Elmo has fur.


ELMO: Fur.

BURNETT: Nice soft fur.

Elmo, why do you think that everybody likes you so much?

ELMO: Because Elmo loves them too.

BURNETT: Is that why?

ELMO: Yes.

BURNETT: OK. Well, I guess I can see that. You like little kids?

ELMO: Elmo loves everybody. BURNETT: Big kids, grown-ups?

ELMO: I'm so happy to see you, too.

BURNETT: I can't believe I'm meeting you. I'm a little intimidated by you.

ELMO: Intimidated? That's a big word. Elmo doesn't know what that means.

BURNETT: Hey, Elmo, because everyone loves you so much and you're on a show a lot of people watching a news show right now.

ELMO: I'm not on a show. I live on "Sesame Street."

BURNETT: Elmo, you could solve a problem right now?

ELMO: Really? How?

BURNETT: So, in Washington, everybody hates each other. Nobody will do anything together and it's hurting America. How do you fix it, Elmo?

ELMO: Play dates.

BURNETT: Play dates?

ELMO: Yes. Everybody has play dates.

BURNETT: Like put a Republican and Democrat play dates?

ELMO: Play dates. And everybody brings their own food.


ELMO: And then they sing songs.

BURNETT: I think that might solve it. Better than anything we've tried so far, Elmo.

Well, Elmo, it's really nice to meet you. Thank you so much for coming on.

ELMO: Nice to meet you, too. You need to come to "Sesame Street."

BURNETT: You will shake my hand?

ELMO: No, but I can kiss it.

BURNETT: Thank you.

ELMO: Thank you.


BURNETT: Do you ever get sick of it?

CLASH: No, because what's so wonderful about "Sesame Street" is we go with whatever's happening in that year. Everything is always topical on "Sesame Street." I mean, when "Desperate Housewives:" came out, we did desperate houseplants, you know?

You know, we do spoofs. We bring on the musical artists that everybody is listening to at the time. And so, we keep it topical. We do the same thing with the characters.

So, they keep it evolving. Nothing is stagnant. Nothing stays the same, you know, as far as the love and respect that the characters have and the cast have for each other.

BURNETT: All right. Thanks for watching.

"ANDERSON COOPER 360" starts right now.