<Show: NIGHTLY BUSINESS REPORT> <Date: March 12, 2013> <Time: 18:30:00> <Tran: 031201cb.

118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for March 12, 2013, PBS> <Sect: News; International> <Byline: Susie Gharib, Tyler Mathisen, Hampton Pearson, Jon Fortt, Sharon Epperson, Phil LeBeau, Scott Cohn> <Guest: Steven Brill, Howard Dean> <Spec: Budget; Congress; Government; Politics; Business; Dow Jones Industrial Average; Economy; Stock Markets; Aviation; Consumers; Policies> <Time: 18:30:00>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib. TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Battle of the budgets. First up, House Republicans say their plan saves nearly $5 trillion. The White House says the math doesn`t add up. SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Another record barely. The Dow inches higher to another all-time high. But the S&P 500 snapped a seven-day winning streak. MATHISEN: And the unfriendly skies. How frequent flier programs are changing. Fasten your seat belts and make sure you`re locked in and upright for this news. Good evening and welcome to our public television viewers. Susie, after days of having the focus Wall Street, today it shifts to Washington. GHARIB: It sure did, Tyler. There`s an escalating budget battle waging in the nation`s capital after House Republicans unveiled their latest federal budget proposal today with plans to slash the country`s massive deficit and get government spending under control, all without raising taxes.

As Senate Democrats prepare their own budget plan, can Congress and the president reach a bipartisan budget compromise any time soon? Hampton Pearson takes a look. (BEGIN VIDEOTAPE) HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): House Republicans unveiled the blueprint they say balances the federal budget in the next decade, with just spending cuts and no new tax hikes. At the top of the GOP list of what`s needed to achieve $4.6 trillion in spending cuts over the next decade is to repeal Obamacare, cut domestic programs from Medicaid to college grants and require future Medicare patients to bear more of the program`s cost. GOP budget point man Paul Ryan once again throwing down the gauntlet to Democrats. REP. PAUL RYAN (R-WI), BUDGET COMMITTEE CHAIRMAN: We don`t think it`s fair to let critical programs like Medicare go bankrupt. We don`t think it`s fair to take more from hardworking family to spend more on Washington. PEARSON: The Obama White House wasted little time criticizing the House Republican budget, saying when it comes to reducing the deficit, the math doesn`t add up, and the middle class will pay the price. JAY CARNEY, WHITE HOUSE PRESS SECRETARY: This is the alternative to balance. It results in unfair tax hikes on middle-class Americans and it results in undue burden on middle-class Americans. PEARSON: This afternoon, the president met with senators from his own party, just as details of the Senate Democrats` budget plan surfaced. That plan will call for $1.85 trillion in deficit reduction, evenly split from tax increases from closing loopholes and spending cuts. The White House says the contrasting budget plans and the president`s blueprint which will be released in early April with negotiations to follow are a return to what Washington calls regular order. (on camera): While both budget plans are dead on arrival in their opposing houses, tomorrow, President Obama will return here to Capitol Hill to meet with House Republicans, in what the White House calls an effort to engage lawmakers in the budget process.

It`s also being dubbed his charm offensive. For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington. (END VIDEOTAPE) GHARIB: As Hampton pointed out, health care costs were a big focus in that House proposal. So, coming up, we`ll talk to former Vermont Governor Howard Dean and journalist Steven Brill about controlling costs. On Wall Street today, the Dow`s winning streak extended to an eighth session in a row. A last minute push by investors sent the blue chip average up nearly three points, closing at 14,450. That`s another all-time high. The NASDAQ lost 10 points. The S&P down almost four points, ending seven straight days of gains. MATHISEN: BlackBerry was the most heavily traded company on the NASDAQ today. More than 80 million shares changed hands while above the average daily volume there. Shares were off nearly 3 percent, this on a day when pre-orders for the company`s new Z10 smartphone began. Some are looking that this product as a potential make-or-break item for that smartphone pioneer. Jon Fortt explains. (BEGIN VIDEOTAPE) JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The BlackBerry, it used to be shorthand for coolest phone in the world. Wall Street types were obsessed with them. Government workers, too. Less than four years ago, "Fortune" named it the fastest-growing company. (on camera): Now, BlackBerry is on the ropes with the hopes pinned on this phone, the Z10, which customers can pre-order online and come pick up at these AT&T (NYSE:T) stores on March 22nd. AD NARRATOR: New iPhone 3G. FORTT (voice-over): What happened? Mainly the iPhone. When it came out six years ago, the iPhone started small, unlike the BlackBerry and every other smartphone, it had a big touchscreen and one button in front.

Now, the iPhone is the best-selling model in the country and every other popular phone looks a lot more like this than like this. The names to beat in today`s phone game are Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) who together took more than 90 percent of the global smartphone market last holiday season. BlackBerry managed just over 3 percent. The company hopes the Z10 gets it back in the game, but there are bigger challenges. The new phones won`t bring in the same highly profitable services revenue investors have come to expect and it`s not yet clear whether BlackBerry will be able to sell new phones fast enough to make up the ground the old phones are losing. PETER MISEK, JEFFERIES & COMPANY: We don`t deny that internationally this has been a successful device. It sold out in the Mideast. It`s sold out in Asia. Doing very, very well in Europe. It`s surprising a lot of critics. We don`t expect the same response in the U.S. But overall, a better-than-expected launch. FORTT (on camera): Have you ever had a BlackBerry? JULIUS CALICA, AT&T (NYSE:T) CUSTOMER: No. FORTT: Did you ever thought you were going to get a BlackBerry? CALICA: No. FORTT: Why not? What do you think a BlackBerry is for? CALICA: I -- nothing negative. I just -- I just wanted something unique. FORTT (voice-over): BlackBerry hopes that`s what this phone will deliver with its corporate friendly security features and new software for sharing photos, videos and apps. (on camera): By next month, T-Mobile and Verizon (NYSE:VZ) will be offering the Z10, too. And then we`ll see whether BlackBerry can regain its cool. For NIGHTLY BUSINESS REPORT, I`m Jon Fortt. (END VIDEOTAPE) MATHISEN: A research group said shipments of Apple (NASDAQ:AAPL)

iPads will fall behind the growing variety of tablets running Google (NASDAQ:GOOG)`s Android platform for the first time this year as smaller sized devices catch on. IPads are expected to account for 46 percent of the pad market, while devices running Android are expected to grow their share to 49 percent. Apple (NASDAQ:AAPL) shares down more than 2 percent again today. GHARIB: Big box retailers are at the top of tonight`s "Market Focus". Walmart`s chief financial officer saying it hasn`t seen any drop in spending related to the payroll tax increase, though higher taxes are showing up as a concern in customer surveys. Shares rose fractionally today and they`re up about 8 percent year to date. Strong earnings from Costco (NASDAQ:COST) up 39 percent and that`s thanks to an increase in quarterly profits and helped by increasing sales and higher membership fees and gained market share during the quarter. Shares rose more than 1 percent to more than $103 a share. MATHISEN: Two Dow component pharma stocks heading in opposite directions today. Merck (NYSE:MRK) got the OK to continue the trial assessing the safety and effectiveness of Vytorin as its blockbuster cholesterol treatment. Meanwhile, the FDA warned that azithromycin made by Pfizer (NYSE:PFE) can cause fatal irregular heart rhythm. Merck (NYSE:MRK) gained 3 percent on the day, while Pfizer (NYSE:PFE) lost ground. GHARIB: President Obama`s nominee to chair the Securities and Exchange Commission says she`ll be an investor advocate. Mary Jo White questioned by senators at her confirmation hearing this morning said that if confirmed, the American public would be her client and that she would not back off if there was any evidence of wrongdoing at major institutions. (BEGIN VIDEO CLIP) MARY JO WHITE, SEC CHAIR NOMINEE: Assuming you found wrongdoing, I think you`d proceed quite vigorously against effectively anyone that you find evidence of wrongdoing on, but certainly financial institutions. At the SEC, which, of course, doesn`t have the criminal powers, those collateral consequences are not taken into account before charging decisions are made so that the SEC, there`s no institution too big to charge. (END VIDEO CLIP) GHARIB: White is expected to get the OK for that SEC job especially after Republican Senator Tom Coburn of Oklahoma announced he would, quote,

"aggressively support her nomination." MATHISEN: Well, there`s not a lot of support by contrast to the folks at tax prep service, H&R Block (NYSE:HRB) today after a software snag has delayed the returns for a lot of Americans who have already filed their 2012 taxes. Sharon Epperson joins us now with more. What went wrong here, Sharon? SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, a lot of folks are disappointed that they`re not going get their tax refunds as quickly as they had anticipated. What H&R block is telling us is that between February 14th and February 22nd, a number of filers that were applying for certain education tax credits were, in fact, unable to do so because of the way that they answered certain "yes" and "no" questions on the form. These are folks that were claiming the American Opportunity Lifetime Learning Credits and about 10 percent of the total returns claiming these credits were impacted according to the IRS. Now, H&R Block (NYSE:HRB) tells us this afternoon that any problems that occurred with the form, the Form 8863 had been fixed and their clients had no immediate action to take. And if they wanted to find out when they could get their refund, they can do so at "Where is My Refund?" on IRS.gov. But now, the IRS says that typically the review process for a situation like this can take up to eight weeks and this means that they may need as much as four to six weeks in order to process the refund. So a lot of folks are going to be -GHARIB: That`s terrible news because a lot of people count on these refunds, especially students to pay their bills. I mean, they`re waiting for that refund check. EPPERSON: They`re waiting for it to pay their bills and a lot of students and potential students who are waiting to get financial aid are also waiting to apply for financial aid until they get those returns done. And so, now, that is causing problems for them. They should actually just go ahead and apply for that financial aid. MATHISEN: Sharon Epperson, thank you very much.

EPPERSON: Thank you. MATHISEN: And meanwhile, coming up, how airlines are making it harder for you to cash in on those frequent flier miles. We`ll tell you what you need to know. Now, let`s take a look at how the markets around the globe closed this day. (MUSIC) GHARIB: It`s report card time for the nation`s 16 largest airlines. Regulators say average on-time arrivals during January fell slightly and there were more complaints about mishandled luggage. But on the bright side, as there were fewer canceled flights and only five reports of tarmac delays that lasted more than three hours. The high marks went to Virgin American and American -- Hawaiian (NASDAQ:HA) Airlines, rather. But regional carriers like Frontier, Express (NYSE:EXPR) Jet and Pinnacle airlines were often at the bottom of the list. Meanwhile, if you`re the kind of traveler who racks up airline frequent flier miles, not so far, some big changes are coming and they may make the perks that you get a lot less frequent when you fly. Phil LeBeau has more. (BEGIN VIDEOTAPE) PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For frequent fliers change is in the air. It`s quickly taking more flights and more money to achieve higher status with certain airlines. And increasingly, cashing in your miles for an upgrade or a free ticket is becoming tougher. RANDY PETERSEN, INDERFLYER.COM: Gone will be the days when you`re measured by how many miles you fly. Hello to the days when you`re measured by how much money you spend. LEBEAU: Right now, Virgin America, JetBlue and Southwest award frequent flier miles based on how much you spend on a ticket and not how far you fly. It`s a move Delta will also be making next year. So, Delta frequent flyers who achieve different levels of status after flying just 25,000 miles will eventually need to not only fly that far, but

also spend at least their 2,500 with the airline. To reach the highest level of loyalty, diamond status, you`ll need to fly 125,000 miles and spend at least $12,500 in a year. CHRIS LOPINTO, EXPERTFLYER.COM: Now, you can`t earn based on models flown on cheaper tickets. It`s going to take more expensive tickets to earn the higher levels required for elite status. LEBEAU: Why are airlines making it tougher to become an elite flyer or to cash in your miles? Blame it on carriers having fewer seats and a growing number of frequent fliers. PETERSON: You`re competing not just with other frequent fliers, but for frequent buyers and that makes it really, really difficult for anybody to be called an airline`s best customer. LEBEAU: Meanwhile, as airlines cut their capacity by eliminating flights or using smaller regional jets, there are fewer seats open for award redemption. Remember, airlines are trying to maximize profits from every seat on every flight. So, getting an upgrade or free ticket with your miles or status will be tougher. LOPINTO: For the average person, even though they`ve been trying to save up miles for the low redemption awards, they`ll probably have to plan enough to redeem at the medium or the higher level of redemption rewards. LEBEAU (on camera): With frequent flyers holding more than 9.7 trillion unused miles, there are plenty of people with plenty of miles. In fact, it`s estimated 307,000 frequent flyers have at least 1 million miles in their account. Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago. (END VIDEOTAPE) MATHISEN: Flying those friendly skies. Well, earlier in the program, we reported on Congressman Paul Ryan`s GOP budget proposal which takes aim at health care spending. Journalist Steve __ spent seven months putting U.S. hospital bills under the microscope to find out why health care American style costs so much. His findings are in the March 4th issue of "Time" magazine.

Former Vermont Governor Howard Dean is a physician who during his six terms in office expanded his state`s universal health care program and kept costs in check. Gentlemen, welcome. I look forward to this conversation. STEVEN BRILL, JOURNALIST: Thank you. MATHISEN: Steven, you spent 21,000 words, longest article in "Time`s" history. It was an amazing piece with some amazing reporting in it. But I`m going to ask you to boil those 21,000 words down to about 20 and tell me why you think principally American health care costs as much as it does. BRILL: I think I can blow it down to four words. The price is too high. And the reason the price is too high is that there isn`t a free marketplace. The typical health care consumer whether it`s the person who is uninsured or even the largest of the insurance companies doesn`t have the leverage in the marketplace. We live in a world, you know, where we think this is a free market. We like everything to be a free market in this country. But there is no free market when you go to the emergency room. There is no free market when you have to buy a cancer drug. And I`m sure that Governor Dean will testify to that from his experience. GHARIB: Governor Dean, let me ask you that question in a different sort of way. In so many industries, we`ve seen costs trend down over time. We`ve certainly seen in technology where the price that we used to pay for a flat screen TV or for a cell phone, those prices are a fraction of what they used to be, but not so in health care. Why is health care different? HOWARD DEAN (D), FORMER VERMONT GOVERNOR: In medicine, the more facility you had to deliver, the more it has to be filled, and therefore the higher the price goes. The problem is that the fee for service system that we have encourages us to spend as much as we possibly can. We only get paid -- we, I`m a physician -- get paid when someone is sick and we don`t get paid to keep them well.

And in order to fix this problem, you`ve got to completely do away with the current way we pay providers and pay them by the patient, not by the procedure. And until that happens, it really doesn`t matter what kind of supposed health care cost control you have, it`s not going to work. MATHISEN: You know, Mr. Brill, I would like you to pick up on what the governor just said, but also address one of the things I found fascinating in your article. You know, a lot of the political conversation lately has been about raising the eligibility age for Medicare. You argue conversely that if we really wanted to reduce overall cost -- though not the part the government pays -- you would lower the eligibility age for Medicare. Explain why and what you think the effect would be? BRILL: Well, it would actually reduce the cost that the government is going pay under Obamacare, too. The reason is simple, the only efficient buyer of health care is Medicare and if you moved more people into Medicare and away from either not having insurance or using the insurance companies that they have, they would be paying a premium to Medicare that would be much less because Medicare`s costs are a fraction of what everyone else is forced to pay. The reason being that Medicare alone has the market leverage to buy health care at a reasonable price. So, it`s not really a matter of moving people away from the fee for service. It`s a matter of controlling the prices and the way you do that is either you have a balanced market, which we don`t have or you have to intervene in some way in that market. GHARIB: You know, Governor, Steven keeps talking about market forces here. So let`s talk a little bit about the market and the role that consumers, the American people can play in all of this. Do you see that the health care industry is going to bring the consumer along or are consumers going to be pushing for the changes whether it`s on price or any other innovation? DEAN: Well, first of all, I don`t agree with Steve about putting people in Medicare. I do think it`s a good idea for putting people in the lower age because it is true that they are a lower cost provider and they are more efficient. The problem is their costs are out of control, too. So, again, you cannot -- as long as you pay us to do procedures, we`re going to do a lot of procedures and that is the fundamental problem.

So, I think it`s great if you put people over 55 into Medicare instead of 65. It`s cheaper for the insurance companies and the government pays 4 percent, instead of 20 percent overhead, but that is not going to be the ultimate solution. The ultimate solution is get away from fee for service medicine. It does not work because you simply pay us to do as much as we possibly can. As long as you have a system that does that, it doesn`t matter what kind of consumer pressure is on. You want consumer pressure, if they can buy insurance well, they can`t buy health care well. BRILL: Well, the fact is, though, you`re talking about one aspect -what the doctors do. If you talk about the cost of drugs, the cost of durable medical equipment, the cost of so many other things, just to stay in the hospital room, you really have to get away from a situation where it`s a seller`s market and a seller`s market only. I think you have to do both, but I think you have to start by looking at the prices which is what I did with this article. The simple fact is that we live in two economies in this country. All of us lived in one economy, which has had a lot of trouble over the last decade. And then there is the medical economy which has been booming, just going hog wild booming. And the reason, there is no control on the profits and the prices. And I don`t come from -- you know, from, you know, I`m a left-wing perspective or anything else. I just look at it from the standpoint of the consumer, which is they have no leverage under the marketplace. MATHISEN: Gentlemen -DEAN: Actually, what will happen is -- under the Obamacare, there`s actually some hope for this, because the accountable care organizations are going to big enough to deliver health care at a unit price. I think the hospitals and the physicians all have to be paid by the patient. And if you don`t do that, costs continue to go up. MATHISEN: All right. Gentlemen, we`ll have to leave it there. I`m not sure we solved it, but we made a valiant effort. I highly recommend Steve Brill`s piece. It is one of the best things I`ve read on the health care cost spiral in this country in years. Thanks. BRILL: Thank you.

MATHISEN: Court TV founder, Steve Brill, and former Governor Howard Dean. DEAN: Thank you. GHARIB: And coming up, Catholics around the world waiting for a new pope. Why it would be beneficial for him to be a man of God with a head for business. But, first, let`s take a look at how treasuries, currencies and commodities fared today. (MUSIC) GHARIB: On the radar for tomorrow, we`ll learn how retailers coped in February, given higher gas prices and higher taxes, eating into consumers` wallets and the weather. "The Business Roundtable" releases its CEO survey of expectations for the economy. And we`ll get a report from Speaker Boehner about the president`s lunch date with House Republicans. MATHISEN: Looking forward to that one. All right. The market for high end art forgery is a $5 billion a year illegal business. With that kind of money at stake, a recent crackdown on selling phony works of art has come up with some surprising results. Scott Cohn has more on the art of the steal. (BEGIN VIDEOTAPE) UNIDENTIFIED MALE: But the Bible tells us to be gracious in our speech. SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): What is a Miami pastor with his own YouTube channel doing in a Manhattan courthouse charged with a temped grand larceny for trying to pass off half a million in counterfeit art? (on camera): How does a pastor get into the art-selling business?

(voice-over): Forty-five-year-old Kevin Sutherland wouldn`t say and his lawyer says there`s a logical explanation. SANFORD TALKIN, DEFENSE ATTORNEY: The truth will come out and we are confident in our position. COHN: Sutherland pleaded not guilty to charges he tried to pass off these paintings by British artist Damien Hirst to Sotheby`s in New York, even though he knew they were fake. Sutherland closed the deal at this hotel not knowing the person across the table was an undercover New York City detective. Manhattan district attorney Cyrus Vance who prosecuted art fraud cases as a young assistant is cracking down. CYRUS VANCE, JR., MANHATTAN DISTRICT ATTORNEY: The same art`s being stolen I think the same way as it has been stolen for generations. Now, our tools to build cases are more sophisticated than they were 30 and 40 years ago. COHN: Robert Wittman, who founded the FBI`s art crime team and now works for private collectors, says even with modern technology, these cases are tougher than they seem. ROBERT WITTMAN, ART SECURITY CONSULTANT: You have to prove knowledge that this person knew the material was fake, and that he meant for it to be sold and he was trying to pull the wool over somebody`s eyes. COHN (on camera): These are some of the Damien Hirst paintings that Sutherland allegedly tried to pass off even after prosecutors say Sotheby`s specifically told him in an email that one of these spin paintings was not authentic. Sutherland allegedly told investigators he didn`t really read the email. He`s due back in court next month. I`m Scott Cohn for the NIGHTLY BUSINESS REPORT. (END VIDEOTAPE) GHARIB: And one of, if not, the greatest art collections belongs to the Vatican. Today, amidst the magnificent frescos done centuries by Michelangelo, the cardinals cast their votes for a new pontiff. But with black smoke from the Sistine Chapel is signaled no pope was

selected. Earlier today, the cardinals filed into the chapel singing for the saints to help them make their decision. There can be as many as four votes in a day. When one cardinal receives two-thirds of the vote, Tyler, he becomes the new pope. And you know what`s interesting about all of this, it`s not just like they`re looking for a spiritual leader, this is almost like a CEO search and, you know, the Vatican has this vast empire and it has a lot of the same issues as any other vast empire -- financial transparency, budget issues, deficits -- all those things we talk about all the time. MATHISEN: They`ve got real estate, billions and billions served as customers every week around the country. It`s really an economy unto itself I think if you looked at it that time that way. In fact, we have little fact lets here that we`ll point out just what we`re talking about there, $7.5 billion in assets at the Vatican bank alone, 33,000 account in 100 countries. It doesn`t rank among the largest banks in the world, but it certainly has global sweep, as does the Catholic Church. GHARIB: They also have a mini hedge fund, a mini hedge fund that is very conservatively invested, which means they might have missed out on some of the stock market rallies. MATHISEN: I suspect maybe they have. GHARIB: Well, that`s it for us NIGHTLY BUSINESS REPORT for tonight. And we want to remind you that this is the time of year your public television station seeks your support -- support that makes NIGHTLY BUSINESS REPORT possible. MATHISEN: Absolutely it does. And on behalf of your public television station -- thank you for your support. Good night, everyone. We hope to see you right back here tomorrow night. END Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2013 CNBC, Inc.

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