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Kelly Sworn In; Kelly's Challenges; Let Trump Be Trump; Moscow Expelling U.S. Diplomats; State Department on Russia Actions; Trump to Handle North Korea. Aired 1-1:30p ET

Aired July 31, 2017 - 13:00   ET

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

WOLF BLITZER, CNN ANCHOR: Up first, west wing makeover. President Trump's new White House chief of staff is officially on the job today. The appointment of John Kelly represents a reset for the Trump administration. The president praised Kelly for his work as Homeland Security secretary.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We just swore in General Kelly. He will do a spectacular job, I have no doubt, as chief of staff. What he's done in terms of homeland security is record shattering. You look at the border. You look at the tremendous results we've had.

(END VIDEO CLIP)

BLITZER: Observers will be watching to see if Kelly, a retired U.S. Marine Corps general, can bring order and discipline to this White House. But this morning, President Trump downplayed the dysfunction. He tweeted this. Quote, "Highest stock market ever. Best economic numbers in years. Unemployment lowest in 17 years. Wages rising. Border secure. Supreme Court. No White House chaos." Close quote.

Let's bring in our Senior White House Correspondent Jim Acosta. Jim, the president says there is no chaos. But does he see the appointment of General Kelly as a chance to move beyond all the drama of the past week or so?

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, General Kelly or chief of staff Kelly, whatever we're going to call him in the coming days, he certainly has his hands full, Wolf. And you did hear the president praise him earlier this morning. They feel very good about the job that General Kelly did over at the Department of Homeland Security.

Now, he does have a tough task on his hands in getting these rival factions under control. Not only do you have the factions between Trump -- former Trump campaign people who work here at the White House and the former RNC people, like Reince Priebus and Sean Spicer. They were fighting with each other inside this White House.

You also have the rival factions like Steve Bannon and aides who are close to him. And people who are close to Jared Kushner, for example, the president's son-in-law. Those factions have fought with one another from time to time inside this White House. And that is, essentially, the task for General Kelly.

And, of course, when you see the president tweeting that there's no White House chaos here, that is, obviously, very far from the truth. That there's been almost nothing but chaos since he came into office -- Wolf.

BLITZER: The president and the attorney general, Jeff Sessions, interestingly, they came face-to-face in today's cabinet meeting over at the White House, Jim, in the wake of the president's public berating of the attorney general.

What's the latest on the tension between these two men? The prospect that the president might replace Sessions?

ACOSTA: Well, I mean, from all appearances, Wolf, it seems as though things have settled down between the president and the attorney general. The president has not been tweeting at Jeff Sessions the last several days.

He's been more fixated on his loss over health care reform. And, of course, you saw the president tweeting about that earlier today. He's continuing with these threats aimed at Congressional Republicans, even members of Congress and their staffs, as to whether or not they're going to maintain their federal subsidies in order to buy health care from those exchanges that are a part of Obamacare.

But, at the same time, and you saw in that cabinet meeting earlier today, the president did not direct any comments at the attorney general. And he was again praising General Kelly as his new chief of staff.

Interesting to note, Wolf, and this is something you heard from the president all morning long, he feels as though the accomplishments of his administration have been overlooked. The stock market hitting these record highs. Unemployment being so low. The president taking credit for that.

But at the same time, we've heard the president today say to the cameras that they've inherited a lot of problems from the Obama administration. So, when the president talks about the bad things that are going on this country, he blames the Obama administration.

But, of course, a lot of critics will point out that the economy humming along at the rate that it is right now on Wall Street with the unemployment rate being as low as it is right now, those trend lines were in place before President Trump came into office -- Wolf.

BLITZER: Jim Acosta reporting for us at the White House. Thanks very much.

Let's get some perspective on the Kelly appointment, the west wing reset. Our panel is here. We have Shannon Pettypiece, White House Reporter for "Bloomberg News," CNN Military Analyst retired Major General James Spider Marks, and CNN Senior Political Reporter Nia- Malika Henderson. Nia, the president has given Kelly what he describes as full authority to get the job done. Do we know that some senior White House officials will be reporting through Kelly to the president, or, for example, Anthony Scaramucci, the new White House communications director, when Reince Priebus was the White House chief of staff, he said he was reporting directly to the president. Is that still going to be the case?

NIA-MALIKA HENDERSON, CNN SENIOR POLITICAL REPORTER: You know, it's still an open question, at this point. Of course, this is John Kelly's first day on the job. You imagine a lot of this is being sorted out, as we speak.

Kellyanne Conway, who's, of course, the counselor to the president, was asked this. And she was, essentially, like, she doesn't really know yet. She'll do whatever the president says or whatever General John Kelly says, in terms of chain of command and who's reporting to whom.

I did talk to a source who essentially says, if you're a high-level White House staffer who's had walk-in privileges with this president since day one, it's very unlikely that you're going to go on the record saying you no longer have that direct access to the president.

[13:05:10] So, we'll see what happens. I mean, there are so many, kind of, power centers here, right? I mean, there's Jared and Ivanka. You can imagine they're still going to have those walk-in privileges. And then, there are people like Anthony Scaramucci as well as Kellyanne Conway and Steve Bannon.

But that is the challenge, I think, that Kelly is going to have. Really kind of leveling things out and figuring out what the chain of command is after these six months when people have been used to this, really, kind of, loosie-goosie (ph) atmosphere in the Oval Office.

BLITZER: Nia, the president was very upbeat in describing the current situation. Let me play another clip what he said earlier today.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Overall, I think we're doing incredibly well. The economy is doing incredibly well. And many other things. So, we're starting from a really good base.

I predict that General Kelly will go down, in terms of the position of chief of staff, one of the great ever. And we're going to have a good time. But, much more importantly, we're going to work hard and we're going to make America great again.

(END VIDEO CLIP)

BLITZER: Clearly, the president was impressed by General Kelly's work as secretary of Homeland Security.

HENDERSON: Yes. And whether or not he can transfer that to what needs to be done, in terms of the White House. Not only just the org chart in the White House but how does that transfer into legislation. How does that transfer into reviving health care? How does that translate into tax reform, into the border wall, into infrastructure?

In terms of all of those things that this president has promised and yet to deliver on. How was he going to be able to get some of those things going in the White House? That's the question.

BLITZER: Spider, you know General Kelly. You worked with him in the U.S. military. A retired four-star Marine Corps general. Can he bring that kind of military discipline, that order to what is essentially not only a job to be chief of staff but a political job? He's got to deal not only with national security but with a lot of domestic political issues at the same time.

MAJ. GEN. JAMES "SPIDER" MARKS (retired), CNN MILITARY ANALYST: Well, certainly, he's not able to boil the ocean nor will he. He's going to come in with a very fixed focus. You know, when you lead, you lead not only down but you have to lead up. So, let's start with the down piece.

And, Nia, as you indicated, there are policy priorities that have to be addressed and those all have to galvanize together. And you have to have an organization that ensures that all of the resources necessary to get those priorities moving. A large part of that being communications, policy movement over on the Hill have to be able to go through John Kelly. He's got to synchronize all of that.

However, you will always have the one-offs. Ivanka and Jared Kushner are not going to go through John Kelly to talk to the president of the United States. But when they leave the Oval Office, their first stop is with John Kelly. And he needs to be able to sit there and say, great. I know you had some personal. You had some off the record. But there is no casual conversation with the president of the United States.

You have to tell me what you're talking about because when you want something done, when this gentleman who sits in the Oval Office wants something accomplished, I'm the guy who's got to get this -- get the engine of governance moving. John Kelly is absolutely qualified to get that going.

BLITZER: And when you worked with him, you were always impressed. The solid --

MARKS: Very measured, very focused. No drama at all. Completely dedicated to the mission requirements. I mean, there's no noise in John Kelly's world. He will eliminate that and he'll push it off to the side.

BLITZER: In a piece for "CNN Politics," Shannon, our Editor At Large Chris Cillizza wrote this. He said, the problem with all of the talk of a reset in the White House led by Kelly is that Donald Trump is still the president.

And listen to Corey Lewandowski, a former campaign manager for the Trump campaign, on "Meet The Press" yesterday. Listen to this. (BEGIN VIDEO CLIP)

COREY LEWANDOWSKI, FORMER CAMPAIGN MANAGER, TRUMP CAMPAIGN: The thing that General Kelly should do is try -- is not try to change Donald Trump.

Chuck, as you know, I've said you have to let Trump be Trump. That has what has made him successful over the last 30 years. That is what the American people voted for. And anybody who thinks they're going to change Donald Trump, doesn't know Donald Trump.

(END VIDEO CLIP)

BLITZER: So, let Trump be Trump. What do you think?

SHANNON PETTYPIECE, WHITE HOUSE REPORTER, "BLOOMBERG NEWS": I mean, I think that's the advice coming from a lot of people in the outer circle. Can't change a person. Only yourself. You can only change the system around him.

I feel like Trump has been being Trump, though, to a great extent. I don't think Reince Priebus was stopping Trump from being Trump. He was being who he was.

But to the extent of the orbit around him and bringing some control that that chaos, that is certainly something he could do, if it's a command and control mission. But the chief of staff's role should also be a broader political role.

And when we talk about those comments earlier about the economy and the stock market, all those things doing so well. That's because of hope about tax reform. You know, that's because of the message on jobs that he had coming right out the door.

If you don't get to that message and that political strategy under control, coming from the chief of staff, then the good things you've accomplished, the stock market, the economy, the jobs, those are going to start to trickle away.

So, that chief of staff job needs to be a political job as well and that's going to be a new test for Kelly. Not that he hasn't dealt with politics before on the Hill or in the Pentagon, but I think that's going to be a big challenge that he's going to have to face.

[13:10:07] BLITZER: He's going to be entering some new territory for him as a retired four-star general.

The relationship between the attorney general, Jeff Sessions, and the president. They were both in the cabinet meeting today. We didn't hear any effusive praise. We didn't hear any praise from the president for Sessions, although Sessions is making it clear he's staying, as far as he's concerned.

HENDERSON: Yes, and that's been the story. You had so many conservatives basically come to his defense over these last many days. As you saw, the president describing him as weak, describing him as beleaguered. In tweets, talking about his -- in tweets, in talking about his disappointment that Attorney General Jeff Sessions recused himself from the Russia investigation.

So, there he was, in the room there with Donald Trump. And, you know, in some ways, that's significant that he was in the room. He's still there. He's seems to be hanging on and really have the backing of the conservative wing of this party and Trump doesn't want to lose that.

BLITZER: One bit of strength General Kelly has. He knows the national security issues and right now, with North Korea, with the Middle east, with Syria, with a lot of other national security issues right now. This is a big advantage that he has. He can help bring some discipline in that area.

MARKS: Yes, he's intimate with all of those problems. And, also, he's intimate with the team that's been charged to get their arms around it, when you look at H.R. McMaster, National Security Adviser; Jim Mattis, Secretary of Defense. He's absolutely on board.

Plus, he's been able to build this relationship with Secretary Tillerson over the course of the last six months. So, this is a very knowledgeable individual who's going to step into this role. I'm optimistic that there will be adjustments.

And you're exactly right. I mean, you do have to -- you have to lead up. President Trump's going to remain President Trump. But there are ways that you can use that to your advantage.

BLITZER: And there's no doubt Trump will still be Trump. There may be some nuances here and there, but he's still going to be the same guy he has always been.

All right, guys, thanks very, very much. Nia-Malika Henderson, Spider Marks, Shannon Pettypiece, appreciate it.

Up next, the kremlin slashing the number of U.S. personnel in Russia by hundreds. So, what does that mean for American diplomats? Where does that leave U.S.-Russia relations right now? We'll have the very latest.

Plus, President Trump calling on Congress to vote again on health care, but Republican senators say they have another idea. We'll have the details.

All of that coming up.

[13:12:36]

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[13:16:12] BLITZER: Russia is now moving ahead with diplomatic retaliation against the United States, ordering the exit of 755 staff members from U.S. diplomatic missions in Russia. The deadline, September 1st. The decision was met with this from the vice president, Mike Pence, who's traveling in the Baltics today.

(BEGIN VIDEO CLIP)

MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: To be clear, we hope for better days, for better relations with Russia. But recent diplomatic action taken by Moscow will not deter the commitment of the United States of America to our security, the security of our allies, and the security of freedom-loving nations around the world.

(END VIDEO CLIP)

BLITZER: Let's go to our senior international correspondent Matthew Chance. He's joining us live from Moscow.

Matthew, this is mostly in retaliation for moves by the Obama administration in its final days when the U.S. seized two Russian compounds out in Long Island and Maryland, expelled 35 Russian diplomats. Why retaliate now?

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, because I think that's just part of the timing, the reason for the timing of this retaliation. The other part of it is the decision by the Congress to pass that new U.S. sanctions bill so overwhelmingly.

The Russians calculated that, you know, the situation was just not going to improve. The domestic opposition to an improvement in the relationship between Russia and Moscow is so great in the United States, they decided to strike now. That they did it just after that congressional vote and before President Trump had the chance to sign it into law. And so they could sort of blame it on the Congress as well.

But I guess it also signifies the fact that the Russians have moved on from this idea that the Trump administration was going to be able to deliver a significant improvement in the relationship between Moscow and Washington. This is a sign and the scale of this retaliation is pretty dramatic, 755 people. That's the number of people that the U.S. mission here in Russia, the embassy and the three consulates, will have to be reduced by. It signifies that they just don't any no faith anymore that President Trump is going to be able to do what he said he would do, which is turn that relationship with Moscow around, Wolf.

BLITZER: The 755 people, that includes U.S. diplomats, but it also includes Russians, local hires working for the U.S. embassy and the U.S. consulate. Is that -- is this it as far as Russia's retaliation for what the Obama administration did in its final days and for this latest sanctions legislation that the president is about to sign, or are further moves on the horizon?

CHANCE: Well, I think we definitely have to be sort of mindful of the fact that there could be further moves, particularly if there is a response in the United States to this kind of huge slash in the number of personnel at the U.S. mission. In fact, the Kremlin have said they've got other measures that they could have introduced. Vladimir Putin said this when he announced the 755 figure. But he said -- he made the point that -- but he's not in favor of introducing those measures now because it could hurt Russia just as much as it hurts the United States. One example is cooperation in the space industry. Astronauts from NASA

currently use Russian rockets to get to the International Space Station. They could cut off that kind of cooperation, but it would cost the Russian treasury billions of dollars that the United States currently pays for that facility. And so there are other measure that could be taken down the line, but at the moment the Russians are saying that this is it for the moment.

BLITZER: For the moment, key words.

All right, Matthew, thank you very much. Matthew Chance in Moscow.

Joining us now to discuss all of this and more, retired Rear Admiral John Kirby, CNN military and diplomatic analyst, former spokesman for both the Pentagon and the State Department. Also with us, Fareed Zakaria, the host of "Fareed Zakaria GPS."

[13:20:01] Fareed, retaliation was expected in some form, but are you surprised by the scope, the extent of what the Russians have now done?

FAREED ZAKARIA, CNN HOST, "FAREED ZAKARIA GPS": I am. And I think it represents a realization in Russia that this, the administration, the Trump administration, has not worked out as they anticipated. They were clearly ecstatic about Trump's victory. You remember the scenes of Moscow legislators celebrating, breaking out the champagne. Putin giving a -- giving a comment in some way. He said nobody in the world expected this except we did. We predicted it. We expected it. He talked about how patriotic Russians might have taken part in this because they might have seen that it was going to be good for their country.

Well, because Trump has sort of boxed himself in on Russia, essentially what is happening is, he has no room to maneuver to seem more cooperative because it would appear that he is a pawn of the Kremlin and he has to go along with congressional hawks who have been stressing a harder and harder line. And so U.S. policy is essentially paralyzed, out of the control of the administration, and I think Russia has realized that. So they are now in many ways responding not so much to the Trump administration but to congressional hawks who are really running the show.

BLITZER: Yes, the -- I suspect that this was largely the result of the legislation that was passed overwhelmingly, 419-3 in the House of Representatives, 98-2 in the U.S. Senate. Now the president really has no choice. He's got to sign it. Otherwise, if he vetoed it, it would be overridden by two-thirds majorities in both chambers.

You know, John, it's not just the U.S. embassy in Moscow, but it's consulates that the U.S. operates elsewhere as well. You worked at the State Department. Practically speaking, 755 fewer people, Americans and Russians, working for the U.S. diplomatic experience there, how big of a deal is this?

REAR ADMIRAL JOHN KIRBY (RET.), CNN MILITARY AND DIPLOMATIC ANALYST: Well, it could be. I mean there's three other consulates in addition to the embassy in Moscow and they will -- they're working -- I talked to the State Department today. They're working through how they're going to make these decisions, because they have to keep some vital functions, like counselor affairs, and taking care of Americans that are on travel. They have to continue to do that kind of stuff. So they'll keep the major muscle movements of the bilateral relationship in place in terms of diplomacy, but it will have an impact.

Here's another point, Wolf. I mean about 800 of these -- all of our employees in Russia are local nationals. They're Russians. That has never sat well with Putin. He's never liked that. And they have been -- those employees have been under constant pressure by the Russian government to do more spying on us or to be, you know, not so -- not to be so helpful to us. So some of this is designed against -- to get at that very bur in his saddle, if you will. But it's obviously not proportional, 35 versus 755.

BLITZER: You know, Fareed, I was surprised that back at the tail end of the Obama administration, when the U.S. expelled 35 Russian diplomats, accusing them of espionage, shut down two Russian compounds in suburban Maryland outside of Washington, as well as in Long Island, that they didn't retaliate right way. Sergey Lavrov, you remember, the Russian foreign minister, he said they would retaliate right away, but then President Putin overruled him and said, not so fast, and now they're retaliating. What was the delay? Normally when one state does this, the other state responds immediately.

ZAKARIA: If you remember, not only did Putin overrule his foreign minister and say, no, this time we're not going to provoke the Americans, Donald Trump then tweeted congratulating Putin and saying I always knew he was a smart guy, in effect signaling, don't -- you know, don't rise to the bait on this one. I'm going to be a guy you can work with. I'm going to be cooperative.

So it's absolutely clear from both sides. Trump expected that he was going to have warm, friendly and cooperative relations with Russia. Putin expected exactly the same thing. So I do think that what you're seeing now is the delayed reaction and -- but also this realization that they're in for a much tougher Russia policy than they thought because Donald Trump is not controlling Russia policy.

BLITZER: Yes, Congress clearly has a say, as it obviously should.

Let's talk about North Korea, John. The president saying he's going to deal with this and he's going to deal effectively with this. Listen to what he said earlier today.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We'll handle North Korea. We're going to be able to handle them, right? There will be -- it will be handled. We handle everything.

(END VIDEO CLIP)

BLITZER: Do you have a good understanding of what he's about to do as far as stopping North Korea from moving ahead with its intercontinental ballistic missile testing and miniaturizing a nuclear warhead?

KIRBY: No, I don't. And it's hard to discern that from "we handle everything." What does he mean by that? I hope by the "we" he means the international community. And that he wants to continue to exert multilateral pressure on China to use the influence that we know they have on Pyongyang, as well as pressure on Pyongyang.

When he says "handle," I hope he hasn't foreclosed diplomacy because once you start saying it's, you know, as Ambassador Nikki Haley said, that we're not going to talk about North Korea anymore. Once you foreclose diplomacy, it leaves you very few options. You either get into a containment situation or you start talking military options, which obviously nobody wants to do.

[13:25:19] So it's unclear right now. I have given and continue to give the Trump administration high marks for thinking through North Korea. I think they have taken a very deliberate approach. Obviously the shaming aspect on Twitter for Beijing is not working. I think they need to continue to find other avenues or diplomatic answers with Beijing. That's really the key here.

BLITZER: Fareed, I'm really looking forward to your special, your documentary that will air later tonight, premiere later tonight, here on CNN about the 2016 presidential election. It's entitled "Why Trump Won."

So tell our viewers here in the United States and around the world the focus of your documentary, the message?

ZAKARIA: Well, what we really tried to ask, Wolf, was not even why he won but why he even came close, because everybody has their own pet theories, whether it was Hillary was a weak candidate, the Comey letter, or Russia. But really the bigger question is, this is the most unorthodox presidential candidate, really. Why did he even win the nomination against 16 very talented politicians? Why did he come close when he made so many statements, gaffes, mistakes that would have blown up the candidacy of anybody? There must have been something there that was deeper.

And we tried to get at that deeper issue, which is really a portrait of America. A kind of cultural and class portrait of an America that feels deeply resentful about the direction the country is going in and the people who run the country. People, you know, who are professionals, urban, educated. This is, in a sense, an act of class rebellion. It is an act of cultural rebellion. And Donald Trump is their guy.

You can -- you can ask -- we tried to explain why he became their guy, but he is their guy and, you know, my sense has always been, they have latched on to him the way you latch on to a sports team. The fact that the sports team is not doing well does not mean you will give up support. So when people keep watching and saying, well, but Trump is not really a conservative. Ideology doesn't matter. They say, well, he's not accomplishing much. Competence doesn't matter. This is some kind of tribal identity and they're sticking with him. BLITZER: They certainly are. That base clearly -- at least most of

that base is very much with him right now. Fareed Zakaria, John Kirby, guys, thanks very much.

And to all our viewers, don't miss Fareed's special later tonight, "Why Trump Won." It airs at 10:00 p.m. Eastern and Pacific right here on CNN. Must-watch TV.

The future of health care in the United States, up in the air right now. The president and the Congress can't seem to agree on the next step. We're going live to Capitol Hill. Stay with us.

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