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CNN SPECIAL REPORTS

CNN Special Report: The Steve Bannon Interview. Aired 9-10p ET

Aired June 1, 2018 - 21:00   ET

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


[21:00:00]

FAREED ZAKARA, CNN HOST: Hello and welcome to the CNN SPECIAL: The Steve Bannon interview. I'm Fareed Zakaria in Rome.

Bannon came to worldwide attention in August of 2016 when he was named the CEO of Donal Trump's Presidential campaign. After President Trump's victory and inauguration, Bannon was named chief strategist at the White House, reporting only to the President. But for many he was also the chief ideaologist of a nationalist, protectionist populism, that he championed when heading up Breitbart News. His ambition then and now is nothing less than to remake conservativism not only in America but around the world and that's remaking politics.

But Bannon who was been everything from a Goldman Sachs executive to a movie producer was set to clashed off with other White House officials including the President's family. So not even a year into his job, Steve Bannon was fired. When he was dismissed, Bannon didn't disappear from the public eye. He resumed his post as executive chairman at Breitbart, the conservative news outlet and continued to give advice to the President.

Then in January, Michael Wolf's provocative inside account of the White House fire and fury was published. Bannon was a chief source for the book which painted the President in a less than flattering light. Trump had enough. In a statement he said, that when Bannon was fired he not only lost his job, he lost his mind.

After his presidential dressing down, Bannon also resigned from Breitbart but has continued to work to spread his brand of populism and is in high demand all over Europe especially in Italy. He invited me here to Rome to interview him. Why Rome? For a place that's been accused of being chaotic. Italian politics are more chaotic than ever. And what's caused all the trouble is a recent election win by Italy's populist whom Bannon has been supporting. We'll dig into that later in the show with Steve Bannon later in the show.

Over the next hour, you will hear his thoughts on the wave of populism rising around the world on the Republican chances in the mid-terms elections back home and on his former boss, President Donal Trump. Here is my exclusive interview.

Steve Bannon pleasure to have you on.

STEVE BANNON, FMR WHITE HOUSE CHIEF STRATEGIST: Thanks for having me, Fareed. ZAKARIA: You said that you thought that Don Jr.'s meeting with the Russians in Trump tower was treasonous.

BANNON: Yes.

ZAKARIA: And you said somebody should call the FBI. What in sense somebody --

BANNON: But I did make a call (ph) that --

ZAKARIA: But I want to ask a question about the issue there.

BANNON: Yes.

ZAKARIA: The substance, not the.

BANNON: Yes.

ZAKARIA: In a sense Rod Rosenstein called the FBI in the sense that he appointed somebody to investigate, that guys name is Bob Mueller.

BANNON: Yes.

ZAKARIA: Isn't that good and shouldn't that process be allowed to put you (ph)?

BANNON: By the way, I've been a big proponent of Mueller. I was the guy that said don't fire Comey. This things petering out. I say is the -- it's the C block on Anderson Cooper. Nobody is interested anymore. It will be done in 90 days and will be done with that.

ZAKARIA: OK, but I have to protest that lots of people watch the C block of Anderson Cooper.

BANNON: No, no, but I'm saying the energy by the time you get to C block, when Anderson's got something it's in the A block.

ZAKARIA: If you find guy special prosecutor?

BANNON: I've been a big proponent of Mueller, I've gone be part of that as a witness of fact. I've always said, you know, he's a combat marine great individual. That auto play out as this going to play out. Now, where I have a problem and a huge problem. I was a guy that said publicly that Ty Cobbb should be fired, OK. He gave the President I thought terrible advice. And I actually think lied to the President consistently about what the nature of this investigation was and the timing of it. And giving overall dockage. Remember, unlike all the Presidents that -- there were other president, we willingly wait and gave over a million pages of documents and allowed the White House counsel, the chief of staff, the chief strategist, the head of communication --

(CROSSTALK)

BANNON: To be -- to expedite this, which I thought was not wise.

ZAKARIA: OK.

BANNON: OK, but here -- I said Cobb should be fired and I also said -- and I was a guy that supported Rosenstein, I was there when Sessions brought him up as the guy that he sort, that he should be terminated. And here is why. Not Mueller but Rosenstein. And here is what I think you really -- the focus ought to be is that the President of United Sates is the chief law enforcement officer of the country. He ought to order Rosenstein to do what Devin Nunes did and to release every document associated with Stefan Halper and all this people associated whatever happened in Cambridge, OK.

We ought to see -- and by way, not to CNN not to the "New York Times" not to "Washington Post" or the White House, to give it to the chairman of the House Intelligence Committee. We have to find out all the paperwork who got paid, what happened when a spy and a recruiter of spies which appears from public things Halper is -- OK and by the way --

ZAKARIA: Let me ask you about --

BANNON: -- if Rosenstein doesn't do it, he shall be terminated.

[21:05:04] ZAKARIA: Let me ask you about Rosenstein's boss.

BANNON: Yes.

ZAKARIA: You were instrumental in getting Sessions --

BANNON: Yes.

ZAKARIA: -- to endorse Donal Trump.

BANNON: Yes.

ZAKARIA: Might people forgot now is the first senior Republican --

BANNON: Yes.

ZAKARIA: -- to do -- endorse Donal Trump.

BANNON: Yes, we're very close.

ZAKARIA: Donal Trump now says he wishes he had picked another attorney general, is Donal Trump right?

BANNON: I think the President is wrong. I think the President is wrong -- been wrong from the beginning about -- if I can respectfully disagree with the President of the United States, I think that -- I think the whole concept of recusal is not even an issue. I think that ruddy Giuliani or Chris Christie or Jeff Sessions, anybody associated with the campaign would have had to recuse themselves before Grassley's committee even voted him out to go to the floor for a vote. So I think the recusal is an issue -- yes an issue that was dealt with and had to be dealt with. Whether you picked Rudy or Christie.

And by the way, this thing about Sessions was not the first pick. Rudy was always the first pick. Jeff Sessions and Rudy all wanted the secretary of state, OK. So, even Rudy knew at the time there was going to be this issue of recusal. So, I think the President is wrong. I think if you look at what Jeff Sessions done on immigration, on migration or all the key issues of the Justice Department, I think Sessions is personally done an excellent job. And I think Sessions has done a job of involving this down to Rosenstein.

Now, I think the question is Rosenstein particularly get the southern district of Manhattan involved this whole Cohen thing. It looks like the southern district of Manhattan is involved in the Trump organization. Now they refuse -- he refuses to give some sort of briefing to the gang of eight. They refused to give these documents to Nunes, I think now that Rosenstein ought to be -- I think he would be given a direct order, very simple. You turn every document associated with this spy over in Cambridge and whatever foreign institution was involved, whether it's MI5, MI6 or anybody else. You give whatever the FBI did, you give whatever the CIA did.

You see Clapper and these guys on TV every night and Brennan they're just bitter old men. You turn over every document. And if he doesn't turn it over you give him 24 hours. Done turn it over, I would fire him. And that's not obstruction of justice. That's giving a law enforcement officer a direct order to turn over documents to Capitol Hill. And if he doesn't do it I would fire him.

ZAKARIA: Next on this CNN SPECIAL. Steve Bannon has complained about the preponderens of immigrants from certain parts of Asia in powerful positions in America.

So basically you're saying there are too many people like me in America, and isn't that racist?

(COMMERCIAL BREAK)

[21:11:14] ZAKARIA: I want to ask you about immigration.

BANNON: Sure.

ZAKARIA: You've said that immigration is the issue on which you're going to destroy the left. You going to beat the left --

BANNON: Yes.

ZAKARIA: -- you going to beat progressives.

BANNON: Yes.

ZAKARIA: What do you mean?

BANNON: Because immigration is about not just sovereignty. It's about jobs. Massive -- I remember the first bucket when we got on the Trump campaign. The first bucket was make massive on immigration and legal immigration, the central issue about jobs. A massive illegal immigration is the chamber of commerce, right. And a lot of the Republican Party that want to flood the zone because it's unfair competition for black and Hispanic working class. In other words you got so much labor right that you have basically in agriculture and then wall (ph) field services, et cetera. And the service industries.

If you have this unlimited pool of labor that you going to draw from legal immigration at the top are saying things, your not going to be able to take the Hispanic and black community from STEM system in grammar school. To our best engineering schools, to computer science in the great jobs at Silicon Valley, unless you start to limit this H1BV in this unfair competition, I think they have as an American citizens from East Asia and South Asia.

And it's no hit to the people from India or from China, they're fantastic. But we have to start to carve some space out basically by allowing our citizens to get those jobs. And so, that's why I'm saying from day one, the Democratic Party and particularly the progressive part of Bernie Sanders in the labor movement, the reason I think we need carnival and I've said this from day one, 25 to a third of the Bernie Sanders populist movement, the economic nationalist, is at the end of the day they don't have an answer for immigration. We have to limit massive legal immigration.

And you'll start seeing this in the Trump administration. What he's done to limit massive illegal immigration. That's why we have the lowest black unemployment in history, lowest Hispanic unemployment 20 years, and wages starting to rise particularly in agriculture and in all field services and construction.

ZAKARIA: Is this why Donald Trump has began to go -- particularly with this rhetoric very hard line on immigration? Is this the strategy that will limit the damage on the midterm? Is this the midterm alerts?

BANNON: I think you got the key. Here's what I think happened is, in the first year administration we clearly had this conflicting voices of the globalist, you know, the Gary Cohen and McMaster's sort of good guys, but they come with the such thing and the nationalist. I think now, as President Trump looks at the midterm election, right? And the Republican Party, you know, Paul Ryan's quit. The Republican Party has kind of this attitude and we'll fight this congressional district by congressional district, right.

What Trump has done I think is moved aside the chief of staff. He is now -- five or six people directly report to him, OK. He's got a new NEC, he's got a new NEC. Mick Mulvaney on the reports telling him comes reports to him. He is doing what he wants to do -- execute, OK. The execute on his plan. And that plan he sees is the promises he made up until build the wall which I'll get to in a second. This is clearly playing I think for November, 6th of 2018, it's going to be a base plus election, OK. And if you want to limit -- and by the way it's up or down vote on impeachment. Trump is on the ballot in every congressional district. This is not going to be some Democratic Congressman versus Republican Congressman. This is going to be Donal Trump versus Nancy Pelosi and Tom Steyer.

ZAKARIA: And he is nationalizing it using immigration.

BANNON: At one -- you are seeing more of this. You're going to see more of the central beating heart issues. Immigration is definitely going to be one.

ZAKARIA: Thinking about football players who happen to be black. Is that --

BANNON: Well no. I think, no and actually in the opposite. I think as you seeing Kanye West. I think what he's doing is that the black America is now understanding, hey, I got the lowest unemployment in history. My wages are finally starting to rise. What this guy is saying is making a lot of sense. We don't -- it's not about a minimum wage of 15 bucks. It may cost $20 to flip a hamburger McDonal's. What we have to do is limit this unfair competition. The working class blacks and Hispanic have been hit more than any other segment of our country, OK.

And these are some of the best patriots. They're the guys in the U.S. Army, they're the guys in rifle platoons, in the Marine Corps. That working class black and Hispanic have been eviscerated, between the financial collapse in this unlimited competition they have from foreign labor. That got has to stop.

(CROSSTALK)

[21:15:20] And by the way, Trump, I think -- this is going to be an up or down vote on November 6th. I think he understands that. That this is going to about impeachment, the tax cuts all the economy will go up in this. But the Republicans have been running adds on tax cuts alone it's not going to resonate. This going to be an emotional, you're either with Nancy Pelosi or with Donald Trump. So, to a degree -- remember, the Democrats have questioned his legitimacy from the very beginning, this nullification project.

The one things that Democrats in the opposition party media, CNN you guys got one thing right. You're rank get you do over. Trump's second presidential race will be on November 6th of this year. He's on the ballot and we're going to have up or down vote. Do you back Trump's program, OK, with all is good and all is bad? Do you back Trump's program or do you back removing him? Because that's what Pelosi and Tom Steyer and these guys what.

ZAKARIA: You say you're not a racist and I take you at face value. But I want to ask you about the policies and the intended or unintended consequences, because they sure as hell attract a lot of people as supporters who are about you racist. And I think about an exchange you have with Donald Trump on Breitbart Radio. It's very interesting, Trump said, that he was in favor of high skilled immigrants. And you said, well wait a minute if you're going to end up with two thirds of Silicon Valley CEOs being from South Asia --

BANNON: Yes.

ZAKARIA: -- and then you pause, and you said, a country is more than an economic community.

BANNON: Yes.

ZAKARIA: So, basically you're saying that there are too many people like me in America, I mean isn't that racist?

BANNON: No, no, no. Let's (INAUDIBLE), economic nationalism doesn't care about your race, your ethnicity, your religion, doesn't care, you know, your gender, doesn't care about your religion, doesn't care about what's your sexual preferences. It cares about if you're a United States citizen.

ZAKARIA: But those people -- in Silicon Valley. They are American citizens, they are --

BANNON: Well, we don't -- hang on we don't know --

(CROSSTALK)

BANNON: No, no, we don't know what's coming through by HB1 visa or not. What I'm saying is that, we can't get the country sorted out until we've now taken the entire elementary school and made it science, technology, engineering and math.

(CROSSTALK)

ZAKARIA: Steve with all due respect, what that answer implied was that they had come from the wrong culture. If they came from the right culture if I was white and Christian you might have a different.

BANNON: Makes no difference no.

(CROSSTALK)

ZAKARIA: What you mean.

BANNON: By the way, if you're from Asia and you hear second generation, your American citizen, absolutely no problem. This HB1 visas where you come here and basically that take the jobs of American citizens is just no acceptable, and that's not racist. Americans -- and by the way, the central beating heart of this is that Hispanics and blacks have to get into the high valley tech jobs, we're never going do that as long as they have unfair competition. Remember, when Sessions like first start this --

ZAKARIA: And by the way, also going to do that by gutting spending -- I mean you're celebrating the deconstruction of the administrative state, but it is all those scholarships and programs and you know Pre- K and nutrition programs that help poor people rise up. And I don't understand why --

(CROSSTALK)

BANNON: Have we -- we just pass a $4.3 trillion budget, they didn't cut a penny. In fact they add it to all the programs. When they added to defense programs they added to all these other programs. By the way we didn't cut one penny at those programs. We have -- we have $1. -- and by way it's $1.3 trillion f discretionary spending. We have $1 trillion deficit structurally now --

ZAKARIA: But the trillion and a half dollars tax cut. BANNON: You know, the trillion and a half dollar tax cut was supposed to be the concomitant part was supposed to be some significant cuts in the budget. And by the way the Republican -- the primary(ph) political class failed to do it. When President Trump finally woke up to the fact that he had been sold a bill of goods. Remember he saying that hey, this will never happen again. One of the events to watch in this coming election before November 6th -- September 30th is the end of the apprehensions year. He has already said I'm not kicking the can down the road anymore.

We're not having these CRS. And that's why you start seeing on Capitol Hill now. People are talking about we have to get this done before the August recess.

ZAKARIA: OK, I got to get a few more things.

BANNON: But by the way, what I'm saying is that I think the President Trump nationalizing this, the wall is central. The wall is not just totemic. The wall -- it's absolutely central to his program. I believe that what he is going to do is as we come up on September 30th if that appropriations bill does not include spending to fully build his wall not some 1.6 billion for prototypes, I mean to build the southern wall. I believe he will shut down the government. I believe the government will actually shut down in the run up to the election.

ZAKARIA: You've been really nice about Donald Trump in this interview and yet he calls you sloppy Steve. He says you've lost your mind. He says you had nothing to do with his election. What's your response?

[21:20:00] BANNON: He is Donald Trump. I think he is doing a fantastic job. Look every day is going to be different. So, you just got to hang -- you got to swing with it. And, you know, I knew Trump for many, many years before I stepped into the campaign. Not really well.

ZAKARIA: Does he call you to tell you Steve I'm just kidding?

BANNON: No. Trust me he does not do that. But look, every action he is taking, I am really happy with. I think he's got the right with Larry Kudlow, the right guy at NEC. I think with John Bolton --

ZAKARIA: He's going to free trade are you?

BANNON: Well, but by way, he made look what he did. The first interview that Larry Kudlow -- Larry Kudlow sat down with me --

ZAKARIA: I don't want to --

BANNON: No, no sat down with Peter Navarro, but when Larry Kudlow went on to CNBC and the CNN with his first interviews, he said hey, we have to be tough on China. China has, you know, has cheated us. You said it in your column two months ago. We've got China dead to rights in this thing. You know, they can't happy talk -- they can't go to Davos and give some big speech about globalization on how the world is about free trading when they run as mercantilist society. ZAKARIA: So, why did I come all the way to Rome to interview Steve Bannon? Well Italy's politics were in absolute chaos this week. And Bannon has a lot to say about the subject. Much more on that when we come back.

BANNON: We're coming up on the 10th year anniversary of the financial crisis. The fuse that was lit then that eventually brought the Trump revolution is the same thing has happened here in Italy.

(COMMERCIAL BREAK)

[21:25:17] ZAKARIA: What a week to be in Italy? I was invited here to Rome by Steve Bannon who has been of an avid supporter of the populist movement here, a movement that is created even more political chaos than Italy usually has. The trouble stems from the country's March elections. That vote saw the Populist Party surge in popularity, rejecting traditional party politics. The party's ran on Italy first mentality promising a crackdown on immigration, if that sounds familiar. And the populist coalition also threatened the Italy's relationship with the European Union causing grave concerns among many Italians, many Europeans and also global stock markets.

From Italy's own Borsa markets in London and New York, stocks were tumultuous this week based in large part on the turmoil in Italy. Steve Bannon is here to support and learn from those Italian populists.

In a sense you think we're in Italy in an unusual moment because this is the future and it might be the United States. So let me set the scene and then you tell me why this is the future. You had a strange left/right coalition, or kind of populist movement with the five-star movement along with the northern league kind of separatist movement of northern Italy. They won a majority in the election.

Why is this the future and what does it mean for the -- you know politics in the west?

BANNON: We're coming up on the 10th year anniversary of the financial crisis, the financial collapse that happened in September of 2008. As you remember in the presidential election of Obama and John McCain. The implosion of those world capital markets right, has never really been sorted out. That the fuse lit then that eventually brought the Trump revolution is the same thing as happened here in Italy. You've had this kind of stagnant economy.

The economy today is actually smaller than was in 2008. You've had a populist and nationalist movement kind of form. One in the north and one in the south. What happened that was so amazing --the reason I came over here and kind of saw this Trump rally type intensity, you had a full vetting of particularly the center parties, the traditional center parties in this populist and nationalist movement on the right and the populist movement on the left. They won.

In fact two thirds of the vote that took place in March was really anti-establishment, to saying hey we want to try something different. What was most amazing they talk about big ideas and they had incredible participation by young people, OK. Young people were engaged particularly on the five star movement which is really an internet based movement.

ZAKARIA: And that's the only populist movement in Europe at least that draws young people.

BANNON: Yes, for right now. I mean you do have some young people in these populist movements. But the five-star movement is a young person's movement, right? It's quite compelling not just from the south, but it draws young people. They then over the eight-week period -- and I was pretty vocal after the election in the media here saying, you know it would be interesting is they try to put together -- leave the old economy of left and right aside and try to put together a unity government that united north and south.

ZAKARIA: You see this as sort of like Sanders plus Trump.

BANNON: Absolutely. I see this is elements of the Sanders movement and elements of the Trump movement or the Trump base. And what was most important -- and I think for an American audience or world audience is what five star represents is really anti-crony capitalism and hey it's the political class, the permanent political class that's really (INAUDIBLE) this burden upon us. We want to get rid of all these guys. These people are not -- they're not really schooled in government.

I mean the head of it Di Maio is basically -- was formerly a waiter. I think the mayor of Rome, who's a women -- the young mayor of Rome I think she was formally a secretary. So, this is really people from every day walks of like and saying we're the anti-political party. In 80 days what was amazing, they put aside their differences of north and south, right and left, and came together with a government in a 56-page or 60-page document that layed out flat tax, how they -- we're going to do this to guaranteed income, right. But kind of graduated thing. Really well thought through on the migrant issue, on flat tax with, on growing the economy, getting the economy pay back up to 3%.

ZAKARIA: Broadly speaking, fair to say that policy was sort of left wing on economics but right wing on things like immigration.

BANNON: Except for the flax tax. You know, flat tax, is a libertarian -- I mean this is the Steve Forbes, Rand Paul dream of putting flat tax around central Europe, your starting to see Hungary, Poland, some other countries experimenting with it.

This would be -- remember, Italy is the fourth largest economy in the -- one of the founding members, I think the eighth largest economy in the world. It's still a major industrial power. You know, people forget it, this is not -- just not a place for tourism. It's a major industrial power particularly in the north. They were going to the 15% flat tax which is pretty radical.

But it was -- here's my point. It was well thought through, this not wide eyed. And here's what's most impressive about Di Maio and Salvini, the two leaders. They put their egos aside, they put another guy up unknown law professor as the prime minister and then they put together -- and put a guy Dr. Savona, who was an expert in the EU and actually the Euro, now he's quite controversial, because he said from day one, hey this whole thing's are German cage and they got us locked in, right? France is killing us and Germany's killing us. But they put him forward as a finance minister in the -- and the central guys rejected.

[21:30:30] ZAKARIA: And how will this come to America? Why do you think about in --

(CROSSTALK)

ZAKARIA: -- here's a similarly dismissed --

BANNON: I think after the Tea --

ZAKARIA: -- and Trump is inside.

BANNON: The Tea Party revolt of 2010 which all 62 seats go in the House kind of petered out a little bit with the Romney campaign and Obama. When I went -- I saw in the in the European elections in 2014 with Nigel Farage the kind of beginning -- the reinvigoration of this populist movement. Europe is about a year ahead of the United States. And I think you're seeing now pieces being put together where you see populist-nationalist movements with reform, with people are saying, hey it's the permanent political class and what we have to do is get rid these politicians, get to involve citizens and that's I think the power you're seeing here. You could begin to see the elements of Bernie Sanders, couple with the Trump movement that really becomes a dominant political force in American politics.

ZAKARIA: Next on this CNN SPECIAL. Trump, has yet to build his wall and his tax cut disproportionately helps corporations and people who are already rich, has the Trumpian revolution as Bannon envisioned, it fails? I asked Steve Bannon.

BANNON: Remember, I was a guy that argued there are to be a 44% tax for the for the upper brackets, right? But I was -- that was kind of dismissed early on. You have to make manufacturing competitive in the United States and that's the heart of that tax and by the way --

(CROSSTALK)

ZAKARIA: But it hasn't come back.

BANNON: OK.

ZAKARIA: Investment hasn't come back.

BANNON: No, no, no. Now --

ZAKARIA: The estate tax has been -- exemption has been doubled. Steve, 0.2% of Americans pay a state taxes. The 0.2, but this is not the --

(CROSSTALK)

BANNON: Fareed, I did -- I do disagree because I think sometimes you're carving too much process.

(COMMERCIAL BREAK)

[21:36:02] ZAKARIA: So you think at the heart of this populism that you see sweeping the Western world is the kind of economic populism to take care of these working-class people who have been often left behind? So I wonder 500 days into the Trump administration, the signature achievement of the Trump administration has been a tax cut that has basically been disproportionately to -- for wealthy, to corporations, there hasn't been much return of manufacturing jobs and you give a speech once where you said the three things they got to do. They got they got a control immigration, you got to take care of bring back jobs from China --

BANNON: Yes.

ZAKARIA: -- and get out of these wars.

BANNON: Yes.

ZAKARIA: None of that's happened, there's no wall, there's no jobs back from China that, they were still --

BANNON: Let's go it --

ZAKARIA: What we have is a big tax cut. I can't believe you approved that, that tax cut --

BANNON: Let's go to the tax cut. Remember, when we first came in, Paul Ryan and guys had been working on for seven or eight years. The border adjustable tax, that was very much made on the model of Germany to make us more of an export nation, heavy inducement to manufacturing, 100% expensing a capital equipment, period zero that blew up in the first 90 days. The Koch's and Walmart and the retailer said, this is going to be a value-added tax, we got to get rid of this thing.

The -- then the Trump Program was I believe in the center of it. I think it's quite wise because what they did is said, hey we can't get anything else done, what we have to do is get competitive with Germany. And we have to get competitive with China as far as taxes go and repatriation. The heart of it, the heart of a member, I was a guy that argued there ought to be a 44% tax for the upper brackets, right? But I was -- that was kind of dismissed early on. But the beating heart of it, I think even the reason populist came together, it was a major first step for trying to get investment back to United States. You have to make manufacturing competitive in the United States and that's the heart of that tax --

ZAKARIA: And by the way --

(CROSSTALK)

BANNON: I wouldn't when it's --

ZAKARIA: That hasn't come back. BANNON: OK.

ZAKARIA: Investment hasn't come back.

BANNON: No, no, no. We really don't --

ZAKARIA: The estate tax has been -- exemption has been doubled. Steve, 0.2% of Americans pay a state taxes. The 0.2, this is about the one --

(CROSSTALK)

BANNON: Fareed, I did -- I do disagree because I think sometimes you're carving too much process. And here's the thing, is that it's a beginning directionally, you are starting to see the animal spirits, you're all starting to see reinvestment in the country. It's one of the reasons we are 3% growth at the fourth quarter of last year. And now we're 2.2% this year. But the projection is up to 3% growth. A lot of that is for the reinvestment in manufacturing.

Now was it a perfect tax cut and as a perfect populist tax cut? The answer is no, but is it -- I stuck the thinking started to rejuvenate the American economy and kind of gives us an engine to drive? The answer is yes. And I think you're going to see President Trump in it later in his first term. And then in his second term, start to address some may be the inequalities in our tax code, which should have been addressed in the Ryan (ph) bill, but that kind of blew up very early on in the administration.

ZAKARIA: OK, so then the other part here --

BANNON: By the way, that's one thing about the elites. I -- here's the thing, I don't believe that people focus enough on what started this. And it's issuing your show start about 10 years ago, the financial crisis of 2008, the employee brought on by the elites of both parties, OK, where they bail themselves out. Remember, that was when the Bernanke and Paulson went up the capital -- went up to Bush's White House, said we need a trillion dollars, this is when Lehman Brothers went bankrupt on the 15, the administration let it go in.

The smartest guys from the geniuses didn't realize that Lehman Brothers was the heart of the world's commercial paper market. The whole economy started to blow apart. They go up to Bush and said hey we need a trillion dollars by 5:00 in the afternoon.

ZAKARIA: I got it Steve, but the point is --

BANNON: No, no but they --

ZAKARIA: The same thing --

BANNON: No, but they --

(CROSSTALK)

ZAKARIA: You're giving them one of the tax cuts, that's what I don't understand.

BANNON: No, no but here -- no, no --

(CROSSTALK)

ZAKARIA: Is that the price to thing --

BANNON: No.

ZAKARIA: -- to keep the Republican Party with you? Be a balance, you're paying a price to the Republican establishment.

BANNON: Well listen, when I first got into the campaign, you have to bring in remember, we're a coalition. We're a coalition of the Republican establishment in this kind of populist-nationalist movement and it takes both to -- it takes both to win. We're very cognizant in that. I do believe though the heart of his tax cut was these corporations to be competitive overseas with Germany and China. I think it's a winner.

[21:40:01] My point with the establishment, the balance sheet of the Federal Reserve in September 2008 was about $880 billion, it's 4.5 trillion a day. The same crisis happened in the Eurozone. What the elites did was flood the zone with liquidity to raise assets, right? To inflate assets, so there wasn't deflation and a collapse of the financial markets and so you've had both in the Eurozone here if you owned real estate, stocks or intellectual property is the greatest 10- year run in the history.

The working guy has been stiffed the entire time and that is the revolt that led to Donald Trump and that's what's that's really seen here in Italy and throughout the rest of the con (ph). And by the way, the elites don't have a response. You see, what has stunned me and being over here is the arrogance of people the United States think Washington is arrogant to the heartland of the country. It is nothing compared to what Brussels and the City of London are to these individual countries.

I mean, they have basically dismissed. Here you had an election with two-thirds of the people voted anti-establishment parties. Almost 50% voted for five star and four and for the league and yet they just completely dismissed after putting together government, they completely dismissed and said not acceptable.

ZAKARIA: Stay with me here, I have much more of my interview with Steve Bannon coming up. When we come back I'll ask him, did Donald Trump take over the GOP or did the GOP take over Donald Trump?

(COMMERCIAL BREAK)

[21:45:47] ZAKARIA: So the second part of your program was bringing jobs back from China. And I'm wondering, again, you look at what is happening with the administration. There's a lot of talk on being tough on trade, there's been very little action. Steve Mnuchin has walked back a lot of the comments. And then the President, your President, throws a life line to ZTE, a Chinese company that is basically, you know, exists on American technology and says he is doing it because he is worried about Chinese jobs. You must --

(CROSSTALK)

BANNON: You had a column a couple of weeks ago and I could not disagree with more. It's about Trump as a negotiator and versus a marketer. OK? Let's step back for a second.

We've been told with the rise of China, both from the cheer leaders, the rational accommodationist and even the hawks that it was inexorable with the rise of China.

Donald Trump has done something extraordinary that Wall Street and the corporatist told us could not be done. He's gotten three weapons, or three tools in his toolbox now. One is tariffs on a massive scale we haven't seen before. The 50 billion we're talking about and then there's another 100 billion after that and another 100 billion after that. So maybe up to a quarter trillion of a dollars of tariffs, OK?

Number two, is the 301 with the people is they -- is where China forces us, not steals our intellectual property, forces us to give the intellectual property acces, to access there in form (ph).

And the last is his actions like ZTE where we literally can implode a company by cutting more often the supplies.

ZAKARIA: By actions -- are you talking --

BANNON: OK. No. OK. Hold on.

ZAKARIA: But the action has been to throw a life line to ZTE.

BANNON: No. Hang on for a second. OK. But remember, this is -- there are whole thing about the grand bargain with China, do we try to set the geostrategic, you know, balance with China for the next 50 years and that's one of the things I think President Trump is working through.

On top of that he's got not just the South China Sea, he's got North Korea. So, he's got to balance these two flash points in the world which probably the two or the three most intense flash points where war can actually start.

In doing that he has brought, remember, before --

ZAKARIA: This is not answering the ZTE question, because I know you --

BANNON: Hang on. No, no, no, no, the Wall Street has told us all we have is the blunt instrument of switch system or cutting off from capital markets.

Trump has brought in three weapons at the same and put China in the back flip. Remember, Liu He came over here for the simple reason to have a sense of urgency. By the first time --

ZAKARIA: Head of the Chinese economy.

BANNON: Head and one of the most brilliant guys in the world. OK. He does get on the plane to come over here with the sense of urgency for nothing. They've always wanted to just to top us along and have the strategic conversations. In there, and you have obviously a split in the administration. You have one of the Wall Street guys with Mnuchin that want to accommodate. OK. And to Steven's defense, work at some deal in a short term deal they can list. And then you've got the hawks, the Lighthizer's, the Navarro's, the Miller's, the nationalist, to say no.

We finally get China where we want them. And I think, you know, the President is kind of -- is negotiating strategy, he's give a little take a little et cetera. Here is where I think we are both the NAFTA or around the world. We're at the beginning stages of a major renegotiation of the economics of the United States and how we are, you know, how we are treated throughout the world and what our place's in the world.

It's at the heart as you said a couple of months ago of the Republican Party in the reformation of the Republican Party. His biggest enemies in this are the Republican Party and it shouldn't be losing people.

When Liu He came, his first day he went to Capitol Hill. He went to Capitol Hill because he knew that's where the free traders are, right? So, he had some, you know, some basic backing to say, when I'm going to these negotiations I understand that Congress is full of free traders right from the Heritage and Kato and also some Democrats. So I got free traders there.

Trump, I think has done an amazing job. He has taken us farther than anybody that were going with China. He's now got real engagement. And we're going to see it's not going to happen overnight. But you're going to see in the next six months to a year.

I think a real, a recalibration of the relationship with China, we really put America first and we're going to stop being treated as a tributary state.

Remember right now, it's barbarian management 101, right? We are Jamestown to their Great Britain. We basically send them raw materials, natural gas, soybeans, hogs and they send us back -- they send us back, you know, advanced manufacturing.

ZAKARIA: So, let me ask you from the point of view of somebody in the Republican establishment, and I've talked to a few of them actually after that column of you referenced. And they said, look, from our point of view things are working out fine. Trump talks stuff on some of these things. Very little actually happens. But the stuff that gets implemented is the core Republican agenda.

[21:50:12] And what you're going to see is he's going to make some of these attempts of protectionsim, but look what the reality is, he has doubled down on Afghanistan, he has doubled down on Iraq. He is more engaged militarily in all those wars that you wanted him to get out of. There is no wall, there is no great tariff war with China right now.

So, when they look at it, it seems to me they're saying, "Donald Trump hasn't taken over the Republican Party, the Republican Party has taken over Donald Trump."

BANNON: OK, let me beg to defer for one second. You have to remember is that what he is doing is the right-wing populism is different than the populism you see in Europe. Europe, even at the end of the day always looks for a state solution.

Part of what right-wing populism is, is deconstructing the administrative state. Getting rid a lot of regulations, opening up entrepreneur opportunities for working class people. OK. And again, more of a piece of the action for the working class and the lower middle class.

What Trump has done with the judges, what Trump has done with this massive deregulation which is really under the surface is deconstruction the administration state, total place to the populus agenda, OK?

But one area -- and by the way, remember, these trade deals are enormously complicated, right? The trade is simple, we walk away from TPP, you've got all these bilateral deal he's trying to do. We're deep into it with NAFTA. He started to engage the EU. We're very deep into it with China, to the fact that we just laid on $50 billion in tariffs, right?

And so, and by the way, he is making progress on these every day. And let's talk about Afghanistan and the wars. The central thesis of the Trump movement at Donald Trump is America first, it's not America isolationist or America alone. What he looks at, is he does this in a very sophisticated way. I think the national security community doesn't quite get yet.

He says, look, the post-war liberal rules based order. They came after World War II is essentially today from Europe, the Persian Gulf, the Straits of Malacca, and the South China Sea, and the Northwest Pacific is essentially that combination of trade relationships, commercial relationships, capital markets and security guarantees and alliances is basically underwritten by the American tax payer. OK. Underwritten by the American tax payer and is the deplorable where that tax burden goes.

In addition, it's their kids in the Hindu Kush Mountains of Afghanistan, it's their kids in the South China Sea, it's their kids on peninsula of Korea. It's the deplorables are saying, hey, there has to be a recalibration of this. It's not that America is backing off in this. But America is more than an expeditionary humanitarian military force. That's there to be the worlds cup and to pay for it. So, in NATO, that's where he says, hey, it's got to be 2% right? It's going to be 2% and you have to be an ally and not to be a protector.

ZAKARIA: But that stuff Obama also said. And the point is -- the point is --

BANNON: But the difference is the present --

ZAKARIA: -- (INAUDIBLE), more troops now, and there are more bombs and there's more engage. But look --

BANNON: No, no, no, no, but here, there's important point, there's important point, because what he is doing, whether it's in northwest pacific with Japan or Korea, right, he's engaging our allies to say, hey look, this has to work for America overall. So, Korea I'm going to renegotiate our trade deal, at the same time we talked about the security lines, we same time we talk about the Fed system, the same time we talk about you paying for the Fed system, the same thing in Japan.

And by the way, it's the foreign policy community that has bifurcated this. Donald Trump has looked at this as a very practical businessman who's saying, you can't bifurcate these, these are inextricably link. Both are trade relationships international security in that engagement.

So, people, the first thing the opposition party maybe has says about him, he's an isolationist. He wants America just to go alone, it's the exact opposite. If you look at everywhere, it's engagement including in Iran. Rumor (ph) in Iran, it's the front line nations of Saudi Arabia, and the United Arab Emirate, Egypt, Israel, and Jordan. And Bahrain, they the ones with the biggest cheerleaders from what he's done. So, if you look around the world it's the exact opposite as he's been portrayed.

ZAKARIA: America seems to be deeply polarized under Donald Trump. European countries are also being torn apart. How will Steve Bannon end this wave of polarization and bring people back together.

I asked him when we come back.

BANOON: I keep saying that Bernie Sanders had been more confrontational and had more stones (ph). He would have been the nominee and would had a real fight with Donald Trump.

(COMMERCIAL BREAK)

[21:58:29] ZAKARIA: The studies show that America is more polarized today than at any point since the civil war.

BANNON: Yes.

ZAKARIA: And I wonder your style of politics, the intense polarization, the battle, the sense in which people are now war in tribes, isn't it, I mean, that might win -- work in politics, but how do you -- to you, to quote Lincoln, how do you bind the wounds of the country back together?

BANNON: We don't have the ones here. I think what we have -- I think it's healthy. I think it's healthy like here -- was here in Italy. Here is what I think it's healthy and you guys hear from (INAUDIBLE), people are more engaged in these topics now than they've ever been. These are the great issues of the day.

We're trying -- this is why I keep saying in this theory of history and by the fourth turning, we're in a fourth turning. The country is going to be one thing or the other. This battle between nationalist and globalist, OK, is at the fundamental roots of what America is, what America will be.

I welcome it, I love the confrontation. In fact I keep saying if Bernie Sanders had been more confrontational and had more stones, he would have been the nominee and would have had a real fight with Donald Trump in the run up to '18 or '16, not Hillary Clinton. What I think is that this is very healthy.

And by the way, for the folks at home I think this is going to go on for a long time. I think it's a long time before we bind up the wounds. We got a lot more fighting, a lot more fighting, a lot more scar tissue to go over.

ZAKARIA: Steve Bannon, pleasure to have you on.

BANNON: Fareed, thanks for having me.

ZAKARIA: And that's it. Thanks to all of you for watching. Don't forget, you can catch "FAREED ZAKARIA GPS" every Sunday at 10:00 a.m. Eastern Pacific. In the United States international viewers, check cnn.com for your local air times. Chao, from Rome.