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Obama Says Economy Has Improved But Republican Nominee Promises To Dismantle Measures Responsible; Battle For Fallujah Continues; Shooter Identified In Los Angeles Murder-Suicide; Summer Olympians To Fight For Gold In Garbage?; Nba Rematch Has Lebron And Steph Meeting Again. Aired 10:30-11:00a

Aired June 02, 2016 - 10:30   ET

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

[10:30:50]

CAROL COSTELLO, CNN HOST: And good morning I'm Carol Costello. Thank you so much for joining me. President Obama has a new message for Republicans; stop pushing economic myths. Seven years after visiting Elkhart, Indiana amid a crumbling economy, the President returned on Wednesday and sounded a very different tune.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT, UNITED STATES OF AMERICA: By almost every economic measure, America's better off than when I came here at the beginning of my presidency.

The Republican nominee for President has already said he'd dismantle all these rules that we passed. That is crazy. Have we really forgotten what just happened eight years ago?

(END VIDEO CLIP)

COSTELLO: Let's bring in CNN's Chief Business Correspondent, Christine Romans. So Obama's painting a very rosy picture but a lot of Americans don't see that rosy picture.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: No you're right and that's why the outsider candidates have done so well this election season. Because they feel wages haven't grown. They feel what happened eight years ago and they're afraid it's going to happen again.

First before I tick through some of those measures the President was talking about, that he said show that things are better. I want you to listen to what the President said on that stage in 2009.

(BEGIN VIDEO CLIP)

OBAMA: The situation we face could not be more serious. We have inherited an economic crisis as deep and as dire as any since the great depression. Economists from across the spectrum have warned that if we don't act immediately millions of more jobs will be lost.

(END VIDEO CLIP) ROMANS: You can see how grim those faces are for a reason. Do you remember February, 2009? At that time, right there in Elkhart, Indiana, a 19.4 percent unemployment rate. The U.S. economy was contracting at a 5 percent plus rate. That means people were losing their jobs, factories were closing, businesses were stalling. And the DOW that month fell almost 12 percent.

Now flash forward to today. The President's victory lap comes as the jobless rate in Elkhart, Indiana is 4.3 percent. The U.S. GDP in the second quarter, the Atlanta Fed thinks it could be about 2.5 percent. The DOW, Carol, is up 10,000 points since the President, with darker hair, was standing there on that podium.

So he's trying to make this case that you live in an economy that's better off today than when he took office. And he's talking about Republican policies. He's talking about Dodd-Frank banking regulation which Donald Trump has said he would like to dismantle. He's talking about new overtime rules and protections to raise wages. He's talking about other labor market rules they have changed to try to raise wages for the lowest-earning Americans. Student loan reform, a lot of things that they've put in over the past few years that they say make things better for the middle class and the GOP policies will not.

But again, Carol, in those exit polls, we know that people feel flat wages, household income back to 1995 levels, they don't feel flush. They don't feel a 10,000 point advance in the DOW Jones Industrial Average. And that's what makes it interesting and critical, I think, for the Democrats to try to take a victory lap without sounding tone- deaf.

COSTELLO: Absolutely. Christine Romans, thanks so much. With me now I want to bring in Austan Goulsbee. He's the former Chairman of the Council of Economic Advisors. Welcome, sir.

AUSTAN GOULSBEE, FORMER CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS: Thank you.

COSTELLO: Thanks for being here. Before we jump into the economy, President Obama said yesterday in Indiana, that he will explode onto the scene once the Primaries are over. How will he do that, do you think?

GOULSBEE: I imagine he'll probably just start saying more about Donald Trump or the Republicans, or the race, when he's going around doing his events. You're showing that Elkhart clip, it was giving me hot flashes, going back to 2009. I mean it -- let us not, let us not understate how bad it was at that moment. That was a really scary moment in the country.

COSTELLO: Oh, I remember, I was frightened. And I was trying -- should I pull, you know, pull my money out of the stock market ...

GOULSBEE: Yes, seriously.

COSTELLO: I mean I, really it was a scary time. You're quite right about that. Mister Obama says though, the economy is rebounding. Yet if you go to any Trump or Sanders rally, you'll see hundreds of people who do not see an -- a rosy economic picture. Why do you think that is?

GOULSBEE: Well, a: it's a big country, you know? You've got 320 million people, you're going to find tens of millions of people who support any view. I think it's usual that as you come out of recessions, particularly deep ones and financial crises, it takes a pretty long lag. People want to be sure that things are getting better and that it's not some false dawn. Green shoots that never grow into plants.

And you have seen in the polling, kind of an interesting dynamic. Where they ask them, "how do you think the economy is doing?" They answer, "terrible." But if they ask, "how are you doing, and are you optimistic for next year?" You've seen that actually start turning up a bit. So that -- I'm hopeful that people are going to come around to the view that it's at least getting better.

COSTELLO: I, well, a weekend Gallup poll showed one in five Americans are concerned about the economy. And I would think wages is one of the reasons why. I have Christine Romans here because I don't have the figures off the top of my head. But wages certainly have stagnated, right?

[10:36:05]

ROMANS: They have stagnated. But we just heard from one of the federal reserve banks this week, frankly that they're seeing signs of tight labor markets pushing up wages a little bit. They need to be stronger than they are right here, right now. But there is a sense that at some point wages could start rising. And then people will feel like they have a little bit more money in their pocket. And then they'll start to feel better, I think, Carol, about the economy. We haven't seen it yet, though.

COSTELLO: So Austan, why haven't we seen that yet? Why can't anyone really address that problem?

GOULSBEE: Well you know there's -- there are a lot of deep forces going on in the economy. If you ask why haven't wages gone up. But I think one of the principle reasons in the short-run we haven't seen wages go up, as opposed to these long-run trends, is the economy's been growing, but it's been growing modestly.

So it just hasn't been as tight of a labor market as you need to get wages rising. I think there is a certain irony or problem or something about the way the Fed views this. That now you finally start seeing wages beginning to rise, which in my world and in the world of Elkhart, that's great, finally. After a decade or two decades. But then the Fed says, "oh, no, wages are starting to rise, we better raise the interest rate to prevent wages from rising too much." I think we could get on a vicious treadmill if we start down that road.

COSTELLO: So you don't think the Fed should do anything? GOULSBEE: It's been my view, the Fed should not do something unless and until we have sustained growth in this country. And we're quite sure that there's not going to be a financial crisis coming out of either China or Europe. But you know, I've said that publicly, it's clear the Fed is of a different mindset.

COSTELLO: And I just want to ask you one more question about disenfranchised, white, middle-class voters, right? They see their traditional economic life disappearing. It's not really about numbers to them, it's about their way of life. So how do you explain that away?

GOULSBEE: Well I don't know that you explain it away. I mean we've had three decades, almost four decades now of manufacturing sector and blue-collar worker wage stagnation. The manufacturing employment shrinking over that time. So there are a lot of adjustments that are taking place in the economy and have been for a long time.

That -- I'm not, I'm not disputing that they're tough to deal with. They clearly are. I think you've seen some states recover better than other states. And still you see this gnawing whatever it is that -- it's driving kind of a support for outsider candidates like Trump. So I'm not 100 percent convinced that it's all economic. Because as I say, in some places where the economy has recovered faster, you still see the same dynamic taking place.

COSTELLO: Austan Goulsbee, thanks so much for stopping by. Still to come in the Newsroom ...

GOULSBEE: Thank you.

COSTELLO: ... Iraqi forces surround Fallujah as they brace for a battle with ISIS inside the site, to free that key Iraqi city.

(COMMERCIAL BREAK)

[10:43:40]

COSTELLO: In Fallujah a battle to free the city from ISIS facing new challenges. Iraqi forces comprised of army, police, and counter- terrorism units and others, surrounding Fallujah and preparing to enter it. The concerns about the civilians reportedly trapped inside the city are weighing heavily on their actions. Joining me now live in Baghdad is our Senior International Correspondent, Ben Wedeman. Hi Ben.

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, hi Carol. Well it does seem that the situation in Fallujah for civilians, which was already extremely difficult, is becoming even more so. We've just a little while ago seen some amateur video of people managing to escape the city. They're waving a white flag, clearly quite traumatized, one of the men shot in this video is shouting that ISIS has deprived us for months, of food and medicine. And that they're just desperate, they were desperate to get out. Now very happy to get out. But of course there's still as many as 50,000 civilians still left

inside the city where supplies of food have almost run out. It appears that ISIS is hoarding whatever there is for themselves so people are basically eating dusty, old dates. Sometimes mixing their food, the dates, with animal feed, according to some U.N. officials.

Now the Iraqi army's trying to penetrate that city but they're running into a fair amount of difficulty given the level of resistance by ISIS. Of course they've been in control of that city for two-and-a- half years. And so they've been able to put up defenses, build tunnels, and a network of trenches as well.

Now the Iraqi army is reporting as well this afternoon, they were able to cut the highway between Fallujah and Saqlawiyah to the Northwest of the city. That was really the last route of escape for ISIS. So that may make it even more difficult for ISIS, but I think this battle, Carol, is going to go on for several more weeks to come.

COSTELLO: All right, Ben Wedeman reporting live in Baghdad this morning. And this just in to CNN, Los Angeles police have now identified Mainak Sarkar as the gunman in a murder/suicide that left a professor dead. They don't have any other details about the shooter, including a motive. The professor, William Klug was shot in an office inside the engineering building. School officials say they will review security procedures.

Still to come in the Newsroom, less than two months to opening ceremonies and garbage is floating in Rio. Will the water be safe?

[10:46:15]

(COMMERCIAL BREAK)

[10:50:10]

COSTELLO: They're some of the best athletes from around the world, and now in just over two months it seems some 2016 Olympians will be fighting for gold in garbage. More now from CNN's Ivan Watson.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Athletes training for peak performance. Members of the German Olympic sailing team preparing for what will be the first Olympic female competition in this class of sailboat.

On the surface, the deal off the coast of the Olympic coast city, Rio de Janeiro, pretty spectacular. But the sailors are trying hard to stay out of the water.

UNIDENTIFIED WOMAN: We don't want to swim in it.

WATSON ((voice-over): They say the bay here is terribly polluted.

WATSON: You've hit garbage out here?

UNIDENTIFIED WOMEN: Yes.

WATSON: What kind of garbage, what do you ...

UNIDENTIFIED WOMAN: A lot of plastic bags, and training partners have also hit a chair or ...

UNIDENTIFIED WOMAN: Some worse.

WATSON: Furniture?

UNIDENTIFIED WOMAN: Yes.

WATSON (voice-over): This is the kind of stuff they're talking about.

WATSON: Look at this trail of garbage. Flip-flops, tennis shoes, blocks of wood on the surface of Guanabara Bay, very close to where the sailors and athletes are training.

WATSON (voice-over): Rio has been struggling with its notoriously polluted waters for decades. We caught up with the city's Mayor at the opening of a brand new sewage treatment plant. It's aimed at providing modern services to hundreds of thousands of residents of Rio for the very first time.

WATSON: Do you think the water's going to be safe for the Olympic athletes?

EDUARDO PAES, MAYOR, RIO DE JANEIRO: Yes. I mean we have -- first thing because where in Guanabara Bay, the sailing's going to happen, it's the cleanest area of Guanabara Bay, it's the entrance of Guanabara Bay.

WATSON (voice-over): But people who make a living in Rio's waters disagree with the Mayor. We don't get far in fisherman Philippe Fernandez's boat before his motor stalls. The propellor tangled in a plastic bag. Travel a little further and we find this.

WATSON: It smells awful here and not just like mud at low tide, but something far more toxic. And the fisherman we're with says that this is basically raw sewage that has washed down out of the city.

WATSON (voice-over): The untreated waste of millions of Rio's residents who do not have modern sanitation. It all drains into canals like this. Where local fishermen moor their boats.

WATSON: How's the fishing?

WATSON (voice-over): "We don't fish here," he says.

WATSON: Impossible?

WATSON (voice-over): "Look at Rio now," he tells me. "We will host the Olympics but we don't even have a basic sewage system." The pollution here one of the sad realities facing residents, and now athletes at these upcoming Olympics. But these German sailors say they're willing to risk these dirty waters for their shot at Olympic glory. Ivan Watson, CNN, Rio de Janeiro.

(END VIDEOTAPE)

COSTELLO: LeBron versus Stephan part two. Basketball's biggest stars clash again on the NBA's biggest stage. We'll have it for you next.

(COMMERCIAL BREAK)

[10:57:40]

COSTELLO: It is NBA deja vu in the best possible way for Basketball's biggest game of the year kick-off tonight. And it's a rematch from last year's final. CNN's Coy Wire has a preview, good morning.

COY WIRE, CNN SPORTS ANCHOR AND CORRESPONDENT: Hey, good morning to you, Carol. A lot of great storylines in this matchup. Can the Warriors repeat? Can the Cavs bring Cleveland its first pro sports championship in over half a century? But perhaps the most captivating, two of the greatest players on the planet going toe-to- toe on the biggest stage of them all again.

A year and a half ago LeBron was, hands down, the best player in the game. But all the talk lately has been about the Warriors, about Steph Curry, and rightfully so. Defending champs, best regular season in NBA history, back-to-back MVPs for Curry. Shattering his own 3- point record, but Curry says he doesn't care about any individual accolades or titles.

(BEGIN VIDEO CLIP)

STEPHEN CURRY, BASKETBALL PLAYER, GOLDEN STATE WARRIORS: That's not what I'm playing for, to be the face of the NBA, to be this or that, or to take LeBron's throne or whatever. You know, I'm trying to chase -- we're chasing rings. And that's all I'm about. So, that's where the conversation stops for me.

(END VIDEO CLIP)

WIRE: M-hm, I think this is game of thrones going on, Steph. LeBron, he's chasing rings, too. The Cavs only lost two games the entire playoffs this year. But still the focus has been on Golden State. And have you seen that look in the eye of LeBron lately? Don't think for one second that LeBron doesn't want to remind everybody why he's named King James. LeBron's sixth straight finals appearance. Two titles, twice as many MVPs as Curry. And LeBron makes four times the amount that Curry makes on endorsements each year. Look for LeBron to go beast mode in the finals.

But like Curry, LeBron's not playing into this whole rivalry thing, listen.

(BEGIN VIDEO CLIP)

LEBRON JAMES, BASKETBALL PLAYER, CLEVELAND CAVALIERS: You talk about rivalries you talk about Carolina-Duke to Ohio State-Michigan. It's hard to say LeBron and Steph. If there's a smaller scale or another word for a rival -- the fact that we're going back-to-back, I think it's pretty unique. It's pretty unique to be in this position.

(END VIDEO CLIP)

WIRE: Come on LeBron. This is some epic rivalry stuff. This is Ali- Frazier, this is Wile E Coyote versus Roadrunner, Elmer Fudd versus Bugs Bunny, and we can't wait to see it. Game one tonight in Oakland. And oh, it's going to be awesome. Carol? COSTELLO: I became so excited to hear your report I'm exhausted now but I'll be watching. It's going to be fantastic.

WIRE: That was good (ph).

COSTELLO: Coy Wire, thanks so much ...

WIRE: You're welcome.

COSTELLO: ... and thank you for joining me today. I'm Carol Costello, AT THIS HOUR with Berman and Bolduan starts now.

[11:00:00]