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Interview With Wisconsin Congressman Sean Duffy; President Obama Delivers Address on National Security; Trump Making More Deals; Trump Claims Credit for Big Investment by Japanese Firm; Growing Pressure on Trump to Dump Flynn; Controversy Over Carson Nomination for Housing Secretary. Aired 6-7p ET

Aired December 6, 2016 - 18:00   ET



WOLF BLITZER, CNN ANCHOR: Trump is about to hold a rally on his thank you tour, and he will introduce his pick for secretary for defense. But General James Mattis will need special action by both houses of Congress before he can be confirmed. Will Democrats try block Trump's Pentagon pick?

Countering terrorism. President Obama gives his final major speech on security, touting his legacy on fighting terror. The president says the U.S. is breaking the backs of ISIS, but warns the terror threat will endure. Did also send a message to Donald Trump?

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Breaking news tonight, president-elect Donald Trump announcing on Twitter that the Japanese tech conglomerate SoftBank will invest $50 billion in U.S. businesses, creating 50,000 new jobs here in the United States.

Trump is claiming credit, saying the SoftBank CEO told him the investment is happening only because Trump won the election.

Trump also blasted American plane manufacturer Boeing, criticizing the cost of the new presidential planes, saying the order should be canceled. We're standing to hear directly from Donald Trump. He will be speaking soon at a rally in North Carolina, the latest stop on what he calls his thank you tour, celebrating his White House win. Trump will also appear with his nominee for defense secretary, General James Mattis.

And President Obama issued a veiled warning to Trump just a little while ago in his last major speech on national security. The president defended his counterterrorism legacy and warned that reversing course on the Iran nuclear deal and the torture ban could be enacted -- if it were to be enacted, could have dire consequences.

We're covering all of that, much more this hour with our guests including Congressman Sean Duffy. And our correspondents and expert analysts, they are also standing by.

Let's begin with our senior correspondent, Jeff Zeleny.

Jeff, you're at the Trump thank you rally that is about to get under way. Update our viewers on the very latest.

JEFF ZELENY, CNN SENIOR WASHINGTON CORRESPONDENT: Wolf, it was like "The Art of the Deal" presidential edition all day long at Trump Tower today.

Even before taking office, Donald Trump is trying to get to work, trying to create the change that he promised out here on the campaign trail, even if there was more showmanship than specifics.


ZELENY (voice-over): Donald Trump spent the day announcing deals on Twitter and in the lobby of Trump Tower. He is soon to be president, but he eager to still be seen as a businessman.

DONALD TRUMP (R), PRESIDENT-ELECT: Ladies and gentlemen, this is Masa of SoftBank from Japan. And he's just agreed to invest $50 billion in the United States and 50,000 jobs. And he's one of the great men of industry, so I just want to thank you very much.

ZELENY: With the Japanese CEO at his side, Trump taking credit for new U.S. jobs and investment. It's the latest sign he intends to be a very public negotiator in chief. But so far, there is more showmanship than details.

The tech conglomerate SoftBank had already planned a big investment, at least some of which was in the U.S. Before taking office, Trump is working to create the impression of momentum starting last week with a Carrier factory in Indiana. Today, he started by railing against what he called bloated spending, signaling out the Boeing company, the nation's largest exporter.

TRUMP: We want Boeing to make a lot of money, but not that much money.

ZELENY: He first went after Boeing in a morning tweet. "Boeing is building a brand-new 747 Air Force One for future presidents. Costs are out of control. More than $4 billion. Cancel order."

Speaking to reporters a short time later, he raised questions about two new presidential planes the Air Force is trying to get ready by 2022 to replace an aging fleet.

TRUMP: Well, the plane is totally out of control. It is going to be over $4 billion for Air Force One program. And I think it is ridiculous. I think Boeing is doing a little bit of a number.

ZELENY: Donald Trump didn't explain the $4 billion figure. A Boeing official says the cost yet can't be estimated. The company said it would deliver the best plans to the president for the best value for the American taxpayer. Republicans are bristling at some of Trump's proposals, including his

threat to impose a 35 percent tariff on goods sold by U.S. companies that move jobs overseas. Vice president-elect Mike Pence arriving on Capitol Hill today to sell the idea. Tonight, Trump is making another stop on his victory tour.

At a rally in North Carolina, he is set to be joined by retired General James Mattis, his defense secretary pick he first floated last week.

TRUMP: They say he is the closest thing to General George Patton that we have and it's about time.

ZELENY: All this as the son of Lieutenant General Michael Flynn, Trump's pick as national security adviser, was removed from the transition team. Mike Flynn Jr. drew attention for promoting a hoax: Hillary Clinton and campaign chairman John Podesta ran a sex trafficking ring out of a Washington pizzeria.


The false conspiracy theory prompted an armed attack Sunday. CNN has learned Mike Flynn was in line for a security clearance. In an interview with CNN's Jake Tapper, Pence downplayed his removal.

GOV. MIKE PENCE (R-IN), VICE PRESIDENT-ELECT: Mike Flynn Jr. is no longer associated with General Flynn's efforts or with the transition team. And we're focused eyes forward.


ZELENY: Now, Donald Trump is going to be making his way here, Wolf, but I am told his plane actually had to land in Raleigh, North Carolina, which is more than an hour from here, because of bad weather here in Fayetteville. But he will be coming here to this arena.

And, Wolf, this is the third time that Donald Trump will have addressed this crowd in this exact arena, of course, the first time though as president-elect. Part of his victory tour, he will be continuing on this week with stops in Iowa, Michigan and beyond -- Wolf.

BLITZER: Yes, he will indeed. All right, thanks very much, Jeff Zeleny, for that report.

Let's get some more on all of this.

Republican Congressman Sean Duffy of Wisconsin is joining us.

Congressman, thanks very much.

REP. SEAN DUFFY (R), WISCONSIN: Hey, good to be with you, Wolf.

BLITZER: So, can the president-elect really take credit for this Japanese investment? Because there have been reports that it was in the works long before he was elected president of the United States. DUFFY: Well, none of us will know that until a little later date.

But obviously he came out. The two of them appeared together. And I think for all investment, all business, if they look at the transition that is going to happen from the last eight years of Barack Obama to what Donald Trump is talking about, which is reform the tax code, streamlining rules and regulations that make it so difficult to do business in America, no doubt that is going to be the incentive for businesses to invest in our country.

Now, they might have already had plans for some investment. Maybe that investment increased with the new plan on the horizon with a Donald Trump presidency.

BLITZER: But the jobs don't exist yet. Here's the question. Is the president-elect getting ahead of himself if these jobs for whatever reason don't materialize?

DUFFY: Well, what I think is important is that Donald Trump conveyed to the American people that: I'm fighting for you. I'm working on getting investment in America that is going to create jobs. I'm working on keeping jobs in America like with Carrier.

And so, yes, they haven't happened yet, but I think it is a good sign if investment comes. Donald Trump, before he is even president, as a president-elect, is already having a huge impact on our economy. Talk to Carrier, talk to these investments, but also look at the markets.

What does American business think of the transition that's happening? They must think pretty positive things because the stock market has gone up, which means millions of American families have more wealth in their 401(k)s and their pensions because people are excited about the reforms Donald Trump is going to bring to Washington.

BLITZER: The Dow Jones keeps going up to record highs, closing over 19000 again.

As you know, or maybe you don't know, this Japanese businessman was warmly welcomed by the president-elect over at Trump Tower in New York, Masayoshi Son. He also owns the majority stake in Sprint. He apparently tried to merge that phone company with T-Mobile back in 2013, but was rebuffed by the Obama administration.

Do you think he may have been trying to curry favor with the president-elect and maybe have a second try to get that merger through?

DUFFY: I can't look at the personal conversation. He may have.

But I would just tell you, in this town in Washington, Wolf, you know that people come up to Capitol Hill and to the White House and try to curry favor all the time. What is important, though, is, as elected representatives here in Congress, but also Donald Trump is, we focus on doing what's right by way of the American people.

And if you're going to make an investment in America, that's great, but that should not be a condition of some future merger you may want.

BLITZER: But is that OK if he's trying to do that with the president- elect? Trying to curry favor in order to get another shot maybe getting this merger through?

DUFFY: Well, Wolf, I have only been here six years. People try to curry favor up here all the time. So, I don't know what his original intent is. Is it to curry favor with Donald Trump?

But I would argue that if you're going to make that significant of an investment in America, it is probably because the landscape for American business is going to be much better under a President Trump than a President Obama.

BLITZER: We woke up this morning to a surprise. I'm sure you were surprised as well, Congressman, when the president-elect went after Boeing, the deal, not even a deal yet, but it's in the works the build a new Air Force One plane to be delivered in 2024, if you will. Listen to what the president-elect said after that initial tweet.


TRUMP: Well, the plane is totally out of control. It is going to be over $4 billion for Air Force One program. And I think it is ridiculous. I think Boeing is doing a little bit of a number.

We want Boeing to make a lot of money, but not that much money.


BLITZER: Boeing is the largest exporter, creating hundreds of thousands of jobs here in the United States. Do you think it is wise to have an attack against an American company like this during this transition?


DUFFY: Well, first off, I love Boeing. They make great planes.

And, as you mentioned, they're a great exporter and they employ a lot of Americans. So we should take what we think about Boeing, which is wonderful things, and separate that.

Donald Trump is talking about American tax dollars. How are we spending tax money that Americans send to Washington? And if you think it's a bad deal because we're paying too much for the next fleet, I think it is incumbent upon him to renegotiate that deal and make sure the costs for the next fleet of Air Force One is consistent with what he finds appropriate as a cost structure.

But this goes back to what I think Americans, where I come from -- I'm from Wisconsin. They applaud this kind of stuff, Wolf. They go, thank you for fighting to spend our money well. Just don't unilaterally spend our money with a Boeing contract if we're paying too much for these airplanes. Fight to spend the money well. There's not enough of it. And I work too hard for my money. I want

the guy in the White House to make sure he spends my money as well as I would spend my money. And I think this kind of stuff resonates well in Middle America.

BLITZER: Here's one of the problems, though, that I have heard from various folks here in Washington. Boeing is working on all sorts of deals. China, for example, is going to spend hundreds of billions over the next 10 or 15 years buying aircraft. They can either buy Boeing or they can go to Europe and buy Airbus planes.

And when the president of the United States says something like this, criticizing Boeing, that weakens the leverage they have. Your reaction to that?

DUFFY: I disagree with that.

Listen, Boeing is a great company and they make a superior product, Airbus, and they sell those airplanes at great prices. I think if China or any other country is looking at buying airplanes from America vs. Europe, they look at the quality and the price and that's how they make their decisions.

I think this government contract is a little bit different and sometimes I think your viewers would note that the American people don't always get the best deal for the tax dollars. And again they want Donald Trump to fight to get a good deal. That has I think no bearing on the contracts that Boeing negotiates with foreign countries or domestic airlines.

BLITZER: There was a story in "The Washington Post" today. I'm sure you saw it, that the Pentagon has wasted $125 billion and tried to hide that, if you will. But I didn't hear the president-elect tweet about that, talk about that. You saw that story. That's pretty shocking.

DUFFY: You know what? It really is shocking.

And I suppose he has so much bandwidth to tweet, but that is something that we have to address. And again it goes to the point that Americans are so sick of the fraud, waste and abuse. And you know what? When money is wasted, there should be transparency. And the fact that you have the Pentagon trying to cover up and hide this waste, it should be exposed.

We should be able to bring people in and say, how do we do this better? How do we spend your money more effectively? Let's shine a light on this whole process, reform the way we do business and spend your money like you would.

BLITZER: As you know, some House Republicans, including some leaders like Kevin McCarthy, among others, Republicans, they're trying to block Donald Trump if he goes ahead and enacts the 35 percent tariff on companies that move jobs overseas.

Are you with the president-elect on this, a threat of a 35 percent tariff, which would raise prices on various goods for the American consumer, or are you with, let's say, Kevin McCarthy?

DUFFY: So, Wolf, I want to keep jobs in America for American workers.

I think the best way to do that is to make sure we have a great environment here again with taxes and regulation. We have the smartest, hardest-working work force in the world. I think when you start threatening tariffs, that could be a slippery slope into trade wars with other countries.

And in the end, that hurts everybody in every country around the world. I think a freer, but fairer trade system is the best way to go. Donald Trump fighting for good deals is important. But when you start threatening tariffs, I would probably lean more to the McCarthy model, where you don't want to start, again, trade wars and tariff wars.

You go back to Smoot-Hawley and the Great Depression, it made the Great Depression that much worse, because everyone started to erect tariffs and barriers, and it devastated our economy. We don't want to see that same thing happen today.

BLITZER: Congressman, I want to take a quick break. I want to resume this conversation. There is a lot more going on. We will be right back.



BLITZER: We're back with Republican Congressman Sean Duffy of Wisconsin.

We're standing by to hear directly from the president-elect, Donald Trump. He's about to hold a thank you rally in North Carolina celebrating his election victory.

President Obama, meanwhile, has just finished what will likely be his final major speech on terror. He used it not only to defend his legacy, but also issue a veiled warning to Donald Trump.

Our White House correspondent, Michelle Kosinski, is in Tampa, Florida, where the president spoke at the U.S. military Central Command headquarters.

Michelle, the president warned that, despite progress, the terror threat will endure.


And this was not the fiery President Obama from the campaign trail. This was again the lawyerly Obama, making a careful defense of his policies, looking into the future. But within that, of course, are warnings for the next administration, that unless you're extremely careful with these matters, unless you learn from the mistakes of the past, including overreach, then big problems could get even bigger.


KOSINSKI (voice-over): Tonight, President Obama says America and the world still face many threats, both seen and unseen, even after his eight years in office.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: For eight years that I have been this office, there has not been a day when a terrorist organization or some radicalized individual was not plotting to kill Americans. We did not choose this fight, but once it came to us, the world saw the measure of our resolve.


KOSINSKI: Looking to bolster his legacy and tout his national security victories, the president came to MacDill Air Force Base to thank the men and women, the special operators who carried out his orders.

OBAMA: To you and your families and to the extended family of American service members, let me say that our nation owes you an unbelievable debt of gratitude.

KOSINSKI: And said he does not regret hesitating to put troops in harm's way.

OBAMA: I have seen the cost. I have held the hands of our wounded warriors at Walter Reed. I have met the caskets of the fallen at Dover. And that's why I make no apologies for only sending our troops into harm's way when there is a clear mission that is achievable and when it is absolutely necessary.

KOSINSKI: In one of his final speeches as commander in chief, Obama said the United States has made progress countering terrorism.

OBAMA: ISIL has lost more than half its territory. ISIL has lost control of major population centers. Its morale is plummeting. Its recruitment is drying up. Its commanders and external plotters are being taken out, and local populations are turning against them.

KOSINSKI: But he also acknowledged that threats from ISIS and others may always remain.

OBAMA: To say that we have made progress is not to say that the job is done. We know that a deadly threat persists. We know that, in some form, this violent extremism will be with us for years to come.

KOSINSKI: Without naming the president-elect, President Obama warned against potential practices which he said run counter to American values and traditions, like banning Muslims or any other religious groups from entering the U.S.

OBAMA: The United States of America is not a country that imposes religious tests as a price for freedom. We're a country that was founded so that people could practice their faiths as they choose.

We're a nation that believes freedom can never be taken for granted and that each of us has a responsibility to sustain it, the universal right to speak your mind and to protest against authority, to live in a society that's open and free, that can criticize our president without retribution.


KOSINSKI: And warned about overreaching policies which could sacrifice individual liberties and even hurt America's standing in the world.

OBAMA: Upholding our values and adhering to the rule of law is not a weakness. In the long term, it is our greatest strength.


OBAMA: The whole objective of these terrorists is to scare us into changing the nature of who we are and our democracy. The fact is, people and nations do not make good decisions when they are driven by fear. These terrorists can never directly destroy our way of life. But we can do it for them if we lose track of who we are and the values that this nation was founded upon.


KOSINSKI: Inevitably, the president's legacy on this issue is going to be a complicated one.

This was a president who wanted to end wars, found himself embroiled in a new one that his opponents blame on his policies. You bring up the problem with the administration, the situation in Syria, the unimaginable suffering there, the inability to find the political solution, radicalization, they acknowledge those problems.

But they're also very quick with defenses, that, in their view, there is no evidence that additional U.S. military force would solve those problems. You can almost sum up the president's point today in one of his lines saying the U.S. is taking fight to terrorism everywhere, not through invasion, but through a network of partners -- Wolf.

BLITZER: All right, Michelle, thanks very much, Michelle Kosinski reporting.

By the way, CNN's Fareed Zakaria talks with President Obama about the triumphs and the struggles of his time in the White House. It's a CNN special report, "The Legacy of Barack Obama," tomorrow night, 9:00 p.m. Eastern and Pacific only here on CNN.

Let's get back to Congressman Sean Duffy.

Was that the veiled message, if you will, from the president to the president-elect in that speech? You heard it. Do you agree that the U.S. should not be imposing so-called religious tests, that people should be able to freely criticize the president of the United States without fear of retribution?

DUFFY: Absolutely. That's a basic tenet of our American democracy. I don't know what he is speaking to with regard to Donald Trump, what

he is trying to get at. But everyone, Democrat, Republican, independent, hold up that tenet.


BLITZER: I guess he was suggesting that the fear of banning Muslims, for example, or having a Muslim registry, that would go against American principles.


BLITZER: Also, some of the president-elect's supporters have said, you know what? Those news organizations that are critical, just ban them, if you will. Don't even let them show up at the White House. Don't give them credentials.

You have heard some of them, ignore them, if you will. Would that be appropriate?

DUFFY: So, to go back to the Muslim ban first, that's inappropriate.

But I do think you have to recognize that we have some hot zones that are terrorist breeding grounds that are in other places in the world. And we should be very cautious about allowing folks into our country from those regions if we can't vet them and guarantee they want to be part of the American dream and, as Donald Trump, that they are going to love America.

That's different than a complete Muslim ban.

In regard to the media, listen, CNN, Donald Trump might not like the reporting that you have given, or MSNBC, what they have given Donald Trump. But the bottom line is, you're tough, you're usually fair and, frankly, all media should have a seat at the table to ask tough questions to our president-elect.

It is part of holding people accountable. And to conservatives who watch your show, that would be no different than Barack Obama trying to ban FOX News. Everybody should be welcome. We should ask tough questions. We should have a great American debate.

And I think that forms the opinions of the president far better than just catering to the people that agree with him, whether we're talking about Barack Obama or president-elect Donald Trump.

BLITZER: I couldn't have said it better myself, Congressman. Thanks for the nice words. I agree.

Sean Duffy joining us, thanks very much.

DUFFY: Thanks, Wolf.

BLITZER: We're standing by for the Trump thank you rally about to get under way in North Carolina, a huge crowd once again there getting to receive the president-elect. Will he reveal any more of his picks for top post?


BLITZER: President Obama just a little while ago wrapped up his final major speech on terrorism, touting his legacy and warning against reversing the Iran nuclear deal and his ban on torture, which the president-elect has indicated, at least during the campaign, he might do.

[18:31:45] Let's discuss with our panel. Gloria Borger, is there a Trump Doctrine that is emerging right now? We've seen over the past eight years, an Obama Doctrine, if you will. But the Trump Doctrine seems so far a bit murky.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: It is a bit murky. First of all, what we know about it is that it's not Obama. I think that would be one way to describe it. At this point, we don't have a secretary of state yet.

But what we've seen from Donald Trump obviously is mixed messages on the question of torture, for example. We do know he wants to keep Guantanamo open, which is something the president said today that you cannot do. He called it a blot on us. We know that he wants to redo or end the Iran nuclear deal, which the president said is so important today.

So I think while we don't know specifics, and while this campaign was not about it, I think we can say very safely that they -- there are a lot of people around Donald Trump, including Donald Trump, who look at what Obama's foreign policy, and they see weakness. And what they want to project is strength in a very, very different way.

And that's what the president was warning him about today. The president was saying, "When you get in my chair, it looks a little bit different."

BLITZER: Phil Mudd, what do you make of the Trump national security agenda so far, based on what we've seen?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: Wolf, I don't see a national security agenda yet. I'd agree with Gloria, and I'd take it a step further. I don't think it's murky. I don't think we've seen anything that's coherent with one exception. On the campaign trail we saw a man who suspended everything political pundits said was possible.

Now transitioning to the national security front, when you're looking at what he said this week on China, what he said about Guantanamo, what he said about waterboarding, what he said about cooperation with the Russians, that flies in the face of what people inside the Beltway say. I don't think he's done anything yet that's coherent with that one exception of saying, "I don't care what the experts say. If I want to do it, I'm going to do it."

BLITZER: Richard Quest, what did you make of the announcement, the president-elect walked the lobby of Trump Tower with the Japanese businessman from Softbank and said there's going to be a $50 billion Japanese investment in the United States, creating a 50,000 jobs. Can Donald Trump really take credit for that?

RICHARD QUEST, CNN CORRESPONDENT: Probably not. But it won't stop him.

But look, Wolf, the reality is I'm having to rethink the way I even respond to that sort of question. My natural instinct is to say, "Where's the money coming from? When's it going to be spent? What's it going to be spent on? Who's paying for it? And it most important of all, let's wait until it's actually done before we start giving credit."

But we are seeing a new form of delivery of information, a new form of communication. And I think, you know, maybe my fellow panelist there will shout me down. I think maybe we have to give him the benefit of the doubt in this and say, in this new world, we're just going to have to wait and see and be prepared, Wolf, to point out when it doesn't happen.

But to excoriate on the old traditional way of saying, "Well, where's the money? Who's paying? When's it going to be spent? What's it going to be spent on? It's all very shady and all very odd." I think that might be a mistake.

[18:35:05] BLITZER: David Chalian, should we give him the benefit of the doubt?

DAVID CHALIAN, CNN POLITICAL DIRECTOR: Well, I think we should. At least, give him the benefit of the doubt that trying it a different way may produce results that we don't know. And so you think -- I think Richard is right that we have to allow for that. We can do that at the same time while contextualizing and saying, "This is without precedent. This is different than it's been done before," just like we did throughout the campaign. It didn't mean he couldn't get elected, quite frankly. It's just the context.

And then, of course, when the actual policy announcement is made, that is when you probe and ask questions and hold them accountable. And when the results come in, you can adjudicate, and the American people can sort of make up their minds. But I think we do have to allow for the fact that, just because it hasn't been done this way before doesn't instantly make it an unacceptable way to do something.

BLITZER: You know, Rebecca, the other story, Rebecca Berg, the other story that emerged earlier this morning, this Boeing tweet that the president-elect released. That is, comments. Let me put it up on the screen, what he tweeted: "Boeing is building a brand new 747 Air Force One for future presidents but costs are out of control. More than $4 billion. Cancel order." Why do you think he's using his bully pulpit right now to go after Boeing?

REBECCA BERG, CNN POLITICAL ANALYST: Well, it's unclear what started this for Donald Trump, why this suddenly came to his attention. But what we know is his whole campaign was predicated on this idea of him eliminating government waste; making the government work better; draining the swamp, to use his words, of companies using the government for their own profit, people using the government for their own profit. So he's trying to hit on that theme, I think, with this tweet.

But it's really interesting that he would really sort of signal out this company for his criticism. And that's something that, you know, traditionally, Wolf, Republicans don't like that. They don't like the government using its power or government officials using their power to, to use Mitt Romney's words, actually pick winners and losers among corporations. And that's exactly what Donald Trump is doing right now. And my question is, how long are Republicans going to sit around and, you know, let him do that and be OK with that?

BLITZER: Richard Quest, you're our aviation correspondent. What was your reaction when you heard this slam against Boeing this morning?

QUEST: Oh, for goodness -- I mean, first of all, there's no order for any planes. Second of all, where does he -- where does he get the number of $4 billion? It's $2.9 billion budgeted, and Boeing has only got $170 million of it so far. So thirdly, how can he cancel planes that haven't been ordered when he's not even president of the United States yet?

Now, this comes to Chalian's -- David Chalian's point, you know, he's completely and utterly ripped up every traditional way that we would expect this to be done. And I have to say, I don't think it's particularly clever to do it in this way: on a random Tuesday in December, to suddenly lash out at Boeing for no apparent reason, taking the stock down 1 percent. It rallied by the close.

And yet I've got to also question myself as to the motive. Is this to get a better deal for the American taxpayer? Is this to somehow generate a more business-friendly environment? But is it strategy or naivete? Is it cleverness or is it -- if you like, misfeasance? That I don't know.

BORGER: There's not necessarily any strategy here. I think for us to sort of presuppose, you know, there's a strategy or what was Donald Trump trying to do? I think he saw something. We're not quite sure what it is. We don't know where that $4 billion number came from. But he saw something or read something. And he tweeted about it, saying, "I want to save the American people some money and this costs too much." Who is going to be against waste, fraud and abuse? Nobody.

BLITZER: Everybody.

BORGER: Nobody.

BLITZER: Maybe some Boeing executives.

BORGER: Maybe some Boeing -- but we don't know that there is any. We don't know that there is any. What Donald Trump is doing is he's saying to the American people, "I'm going to make sure your taxpayer dollars are well spent." And who's going to be against that?

BLITZER: Well, he wants to fight for that. Let's see what he -- what he can do, if anything, because I've heard presidents say for years and years-- BORGER: Sure.

BLITZER: -- they're going to eliminate waste, fraud and abuse. Ad you know what? You read the "Washington Post" this morning: $125 billion in Pentagon waste just this morning that officials tried to cover up.

Everybody, stay with us. Stand by. Much more coming up. Donald Trump getting ready to speak at a huge rally in North Carolina, the latest stop on what he calls his thank-you tour, celebrating his White House win. We'll be right back.


[18:44:31] BLITZER: We're standing by for Donald Trump's thank you rally, where he'll appear with his pick for defense secretary, retired General James Mattis.

But Trump is facing growing pressure to dump his controversial choice for national security adviser at the White House. Our chief national security correspondent, Jim Sciutto, is working that story for us.

Jim, mounting opposition to retired Lieutenant General Michael Flynn.

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: That's right. General Flynn, had distinguished command roles in both Iraq and Afghanistan, but he's also spread conspiracy theories. He allegedly mishandled classified information; and he was fired from his top military post, but he will soon serve as President-elect Trump's closest national security adviser. Now activist groups are pressing Mr. Trump to cut ties.


GEN. MICHAEL FLYNN (RET), INCOMING NATIONAL SECURITY ADVISER: Donald J. Trump to be the next president of the United States.

SCIUTTO (voice-over): He is tapped to be President-elect Trump's closest adviser on the most sensitive threats facing the nation. And tonight, there is growing criticism that his inflammatory views make him unfit for the job. More than 50 progressive nonprofits, ranging from religious to social justice organizations, signed a letter asking Trump to dump Flynn.

FLYNN: Islam is a political ideology. It is a political ideology. It definitely hides behind this notion of it being a religion.

SCIUTTO: Citing the former defense intelligence chief's numerous Islamophobic remarks, including tweeting in February that fear of Muslims is rational.

Today, Vice President-elect Mike Pence praised Flynn on CNN.

PENCE: We are so grateful and honored to have General Flynn as our nominee for national security adviser. He brings an extraordinary wealth of experience. SCIUTTO: But the groups also raised more substantive allegations. On

one occasion while overseeing intelligence in Afghanistan, former officials tell CNN that Flynn shared classified information from another agency with Pakistan. Flynn told CNN the allegation, quote, "is not true. Not even close." But the incident led to an informal reprimand, though no charges, officials tell CNN.

And even as Flynn received classified intelligence briefings during the campaign, he was lobbied on behalf of foreign clients, among them, Turkey, who Flynn has uncritically backed as it has cracked down on domestic dissent.

Trump's transition team told CNN last month that Flynn's dealing with Turkey were within his rights as a private citizen and that Flynn would sever ties to his consulting firm when he is part of the administration.

FLYNN: I've had people in the media, mainstream media said, oh, that's all a conspiracy. It's a lie.

SCIUTTO: In his public statements, Flynn has repeatedly dabbled in conspiracy theories. Just one week before the election, he tweeted, quote, "You decide. NYPD blows whistle on new Hillary e-mails, money laundering, sex crimes with children, et cetera. Must read," end quote. Allegations that remain entirely unsubstantiated.

Flynn's son Michael Flynn Jr. who served as his aide has been a leading proponent of a bizarre fake news story alleging that a D.C. pizzeria was home to a child sex ring, visited by Clinton campaign staff. The story led an armed man to enter the restaurant this weekend, he claimed, to investigate the allegations. He was arrested only after firing several shots.

And yet on Sunday, Flynn Jr. was still defending the conspiracy theory, tweeting, quote, "Until pizzagate, proven to be false, it will remain a story. The left seems to forget Podesta e-mails and the many coincidences tied to it."

Today, Flynn Jr. was dismissed from the transition, the decision, sources tell CNN, coming directly from the president-elect.


SCIUTTO: Now, regarding his father, I've spoken to Democratic and GOP lawmakers who see General James Mattis' selection as defense secretary nominee as somewhat balancing Flynn. Mattis enormously selected by both parties. And, Wolf, many I've spoken to note that he outranked Flynn four stars to three when they were in uniform. And that has relevance going forward, they say.

BLITZER: Yes. OK, Jim Sciutto, good report. Thanks very much.

Let's bring back our panel.

Phil Mudd, you're a former CIA counterterrorism official. Do you think General Flynn is the right guy to be the president's national security adviser in the White House?

MUDD: Absolutely not. Zero chance. Let me transition, Wolf, from being a CNN commentator to a former CIA official.

We have a history of remarkable servants in the Oval Office and in the Situation Room under Republican presidents. People you and I know inside baseball, Brent Scowcroft, Condi Rice, Colin Powell, Steve Hadley.

We transition now to a national security adviser in a political real who argues that an opponent on the stump should be locked up in prison and who argues that a billion plus Muslims should be grouped together. And then we go on to argue that individual's son, who retweets fake news, should be given access to top secrets.

You want to tell me that we're going to transition to the Situation Room to reality and I'm watching clown show. I've had it with this, Wolf. I want to see a transition from campaign to reality and I don't see it yet.

BLITZER: David Chalian, do you see any pushback? Do you think General Flynn is in trouble right now as far as Donald Trump is concerned?

CHALIAN: I have not seen Donald Trump ever walk away from a controversy or a controversial figure in a big, prominent way.

[18:50:02] That he didn't do much of that during the campaign. This is not a Senate confirmable position.

If General Flynn had to go through the Senate confirmation process, I would imagine that would be a difficult moment. But that's not the case with national security adviser, which is probably one of the reasons he's in this role is that Donald Trump can have his guy and weather the controversy.

BLITZER: Yes, some of the controversy, Gloria, that his son who was working for him almost like a chief of staff for General Flynn was on the verge of getting security clearance.

BORGER: Right. And tweeting fake news, dangerous fake news. And, look, I think there are a lot of people who feel the way that Phil Mudd feels. And I think Mike Pence is defending Flynn. Donald Trump feels like he owes Flynn an awful lot. We have never seen as David is saying, Donald Trump back away from somebody who he believes has been ultimately loyal to him.

This -- if this were a confirmable job, I don't know that they would have nominated him for it. But what we're seeing play out here is questions about what does Donald Trump do with the people who work for him. For example, Rudy Giuliani. What is he decide to do with Rudy Giuliani now, wanted to be secretary of state. It doesn't seem like he's going to be secretary of state.

He has to find something for him because that's the way Donald Trump operates. So, I don't see him backing off of this at all. And Mattis is kind of a counterbalance to him, and that may be one of his jobs.

BLITZER: He's going to be introducing Mattis at this event.


BLITZER: This rally momentarily.

All right, guys. Standby. And also to our viewers, be sure to join CNN's Van Jones as he talks about the election with Michael Moore, Rick Santorum, our own Ana Navarro, in a live town hall event "The Messy Truth with Van Jones". That airs tonight at 9:00 p.m. Eastern, only here on CNN.

And once again, we're only minutes away from the start of Donald Trump's "thank you" rally in North Carolina. You see a huge crowd already gathered there. We'll introduce his nominee for defense secretary. Will he make any major cabinet announce announcements?


[18:56:32] BLITZER: Democrats are voicing concern over Donald Trump's pick for housing secretary, his former presidential rival, Ben Carson. Critics are questioning why the president-elect is nominating someone with no relevant experience.

Our senior Washington correspondent Joe Johns is joining us right now.

Joe, Trump himself was sharply critical himself of Dr. Carson when they were competing for the nomination.

JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: That's certainly right, Wolf. And, you know, Ben Carson raised eyebrows all throughout the primary campaign, not just with the things he said but also the support he got on early from Republican voters. Now, Carson is racing eyebrows again as Donald Trump's nominee to be secretary of housing.


JOHNS (voice-over): Ben Carson is a formal presidential candidate and world renowned neurosurgeon but has no experience in public housing or government.

BEN CARSON (R), FORMER PRESIDENTIAL CANDIDATE: I grew up in inner city and have spent a lot of time there and have dealt with a lot of patients from that area. And recognize that we cannot have a strong nation if we have weak inner cities.

JOHNS: During the GOP primary, Carson was critical of government efforts to fight housing segregation.

CARSON: This is what you see in communist countries, where they have so many regulations encircling ever aspect of your life, that if you don't agree with them, all they have to do is pull the noose.

JOHNS: And wrote in "The Washington Times" that housing policy can enhance the opportunities available to low income citizens, but entrusting the government to get it right can prove downright dangerous.

Trump has pledged to revive the country's inner cities.

TRUMP: What the hell do you have to loose?

JOHNS: Though Trump accused Carson in the primaries of the embellishing his own experience growing up in Detroit.

TRUMP: When he took the knife, he went like this --

JOHNS: Including a claim of trying to stab a friend.

TRUMP: How dare the press not believe me that I went after my mother with a hammer, that I hit somebody in the face with a padlock, that I tried to stab a friend of mine who's name was Bob but now's it's changed?

JOHNS: Trump even telling CNN then that Carson had a very serious disease.

TRUMP: That he's got a pathological temper or temperament. That's a big problem because you don't cure that. That's like, you know, you know, I could say, they'd say you don't cure, as an example, child molester. You don't cure these people.

JOHNS: Meanwhile, Trump's choice is drawing sharp criticism from Democrats on Capitol Hill. Senator Chuck Schumer writing, "I have serious concerns about Dr. Carson's lack of expertise and experience in dealing with housing issues. Someone who is an anti-government as him is a strange fit for housing secretary to say the least.

But Vice President-elect Mike Pence says Carson is up to the challenge of leading the department of 8,000 employees and a nearly $50 billion budget.

PENCE: Absolutely qualified and more than that. He's going bring to life the president-elect's vision of really bringing real renewal to urban America.

JOHNS: Ben Carson himself has never lived in public housing but former Arkansas Governor Mike Huckabee said Carson had in a tweet that also taunted House Democratic Leader Nancy Pelosi who criticized Carson's nomination. Huckabee later said mea culpa after the "New York Times" issued a correction to say its story that said Carson aide Armstrong Williams originally told the paper Carson was raised in public housing.

So, confusion there.

BLITZER: All right. Joe Johns reporting for us -- thanks very much, Joe.

That's it for me.

"ERIN BURNETT OUTFRONT" starts right now.