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Government Shutdown Examined; Effect on the Military of Mattis Resignation; Any Wiggle Room on $5 Billion for Border Wall?. Aired 10- 10:30a ET

Aired December 24, 2018 - 10:00   ET

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

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JIM SCIUTTO, CNN HOST: A very good Christmas Eve morning to you. I'm Jim Sciutto on New York -- in New York. On this last full week of 2018, the focus in Washington is on 800,003 federal employees.

800,000 who woke up this morning on forced unpaid leave or do it work but also unpaid because of the partial government shutdown that is now in its third day, no signs of its ending.

The other three federal workers; Defense Secretary James Mattis, out even sooner than he planned. Over the weekend President Trump decided that he hated Mattis' resignation letter and basically fired him after the fact.

The head of the Federal Reserve, Jerome Powell is thought to be safe in his job for now, but only because the Treasury Secretary Steve Mnuchin, informed the president that the law would prevent him from firing him because he blames him for rising interest rates and falling stocks.

CNN has learned that the president's anger now centers on Mnuchin who recommended Powell for the Fed job in the first place, much more on all of this in the hour ahead. We begin though with CNN's Barbara Starr at the Pentagon. Barbara, we understand that the shake up at the top causing real alarm in the field. You have U.S. forces deployed in active warzones today who don't know what's going to happen next.

BARBARA STARR, PENTAGON CORRESPONDENT: Well that's right, Jim. Several senior commanders are overseas on long planned holiday trips to wish the troops the best and they are getting questions from the troops about what will happen.

Are they coming home? When will they come home? What can they tell their families? What will happen in these conflict zones in Syria and Afghanistan that they may leave behind? So there's a lot of uncertainty and that is not what the military likes to see.

Now, we know that Deputy Secretary of Defense Patrick Shanahan will take over on January 1st. Mr. Trump not happy with how Mattis' resignation letter was so widely and warmly received and the kudos that Secretary Mattis got from across the world for the job that he did. So now he will leave on January 1st instead of at the end of February.

Shanahan steps on to the world stage, a former bowing executive with no foreign policy experience. He will have to deal with America's allies and keep a sharp eye on America's adversaries.

One of the final acts that Mr. Mattis may have undertaken is over the weekend he signed the execute order, the military order that will now pave the way for how and when U.S. troops come out of Syria. Jim.

SCIUTTO: Barbara Starr, just quickly. Is Shanahan a possible candidate to be the permanent Defense Secretary? We know or it's our reporting that a number of other possible candidates have taken their name out of the running.

STARR: Yes, I think he way -- well may be on that short list to become the permanent secretary to be nominated by the president. He and Mr. Trump are said to have a relationship and that the president like Shanahan's business approach.

Shanahan has been in charge here at the Pentagon of all the business type matters; acquisition, contracting reform, foreign military sales, getting the space command set up that Mr. Trump wants.

So here's the interesting thing, Patrick Shanahan has never had to tell the president no because it's all the issues that he's dealing with are the ones that Mr. Trump likes. Now as Acting Secretary of Defense dealing with NATO, Russia, China, Iran, North Korea, ISIS, Al- Qaeda; he may be forced for the first time to confront Mr. Trump's instincts on national security. Jim.

SCIUTTO: Well that tends to -- to threaten one's job security in our experience. Barbara Starr at the Pentagon, thanks very much. I'm joined now by former Deputy of the National Security Advisor and former Deputy Secretary of State, Tony Blinken along with CNN political and national security analyst David Sanger.

Tony, just want to ask you; you -- you served inside government at a number of levels in national security, does the U.S. today have a national security decision making process where the commander in chief consults his commanders in the field, other senior national security staff or as we saw last week, make summary decisions and issues proclamations by tweet.

TONY BLINKEN, FORMER DEPUTY OF THE NATIONAL SECURITY ADVISOR: Jim, as far as I can tell the answer is no and that is deeply troubling and concerning. By the way, Susan Rice lays this out very effectively in an op-ed in the New York Times yesterday.

But, you know, in my 25 years in government three things were important. People, process, policy. You want to bring the best people around the table, you want to have a process and you want to result in an actual policy that everyone can -- can follow.

And what we're seeing now is the degradation if not the elimination of all three things. The best people are gone or going starting with Jim Mattis. There apparently is no process. The president just decides things arbitrarily.

And people think there's a policy but the president seems to disrupt it with a tweet. So all of the sudden the Syria policy's gone and so is the Afghanistan policy. That is not a way to run a government and it is a way to get us into trouble.

SCIUTTO: We just had, on this very topic, a new tweet from -- from the president and we tend to stay away from these just reflexively unless there's some news in here. But here's what the president is saying right now.

We are substantially rather, subsidizing the militaries of many very rich companies all over the world while at the same time these countries take total advantage of the U.S. and our taxpayers on trade. General Mattis did not see this as a problem. I do and it is being fixed.

David Sanger, the president seems to be applying his issue with NATO to a whole host of things because I can't imagine you can include the Kurds who are fighting ISIS as a very wealthy nation taking advantage of the U.S. here. But what's the president trying to do as he -- as he fields a lot of criticism on these in decisions in the last week.

DAVID SANGER, CNN POLITICAL AND NATIONAL SECURITY ANALYST: Well Jim, I think the fascinating part of that tweet is the end part. When (inaudible) went off to go interview the president in 2016 in some foreign policy interviews, he kept merging our role in helping protect countries around the world with our trade relationship.

And he asked the question why would you protect a country with whom you have a trade deficit? Well, the answer is that we're not always there just for them, we're there for us. That's been the concept of forward deployment that's been involved in American strategy since the end of World War II.

And so he does this sort of straight on equation as if they only reason that we have troops in Asia or the only reason we have troops in Europe or the only reason we have troops in the Middle East is to protect them instead of being our early warning system.

Instead of keeping the peace along the way. Instead of keeping those areas open for -- for trade. And this is a bit mystifying and you would have thought over two years that over time General Mattis and others would have begun to sort of change his view or explain at least how this system works. What's clear from this is he believes Mattis never came around to his view.

SCIUTTO: Right. If -- if they don't change, you're on your way out. I have to ask you, Tony Blinken because folks often ask me this, what does it mean? Right, what does it matter? Because as you know better than me Russia and China are watching this. They have places where they want to poke the U.S., the want to expand, et cetera.

Do they watch this and take advantage of it? I mean just an example; does Russia test NATO by invading, like it did Ukraine and -- Eastern Ukraine and Crimea, a NATO ally in the Baltics? Does China take this message and threatening Taiwan?

Because if you have a president here who is walking away from a whole host of alliances, what's to keep him from sticking to those?

BLINKEN: That -- that's certainly the message they're getting, Jim. And as they see the United States turn inward, it creates an atmosphere of impunity for them to start poking and prodding and testing and seeing what they can get away with.

And so I worry that this is a recipe for greater instability. Not -- not the opposite. And you know David's exactly right on -- on the points he was making. I would add just one thing. I think what the president misses is this, yes; we've made investments in our allies and partners around the world in their security, in their prosperity.

But we've gotten that back 10 times over, 100 times over. New markets for our products. New partners to deal with global challenges. And yes, new allies to deter and if necessary fight aggression. Sure, the NATO allies should be doing better and paying more but let's put this in perspective.

Together or NATO allies actually spend more on defense than Russia and China put together. That's important that's significant. We have global responsibilities, they don't. That's why our defense budget is bigger.

And -- and so we need not to alienate the very folks who've been with us in every single fight since the -- since the Second World War and who are actually making us safer and giving us an opportunity to be forward deployed in the world, as David said, as an early warning mechanism.

SCIUTTO: Do these decisions have real consequences? David, obviously a bit part of this is the politics. Here is a president; he's just lost the midterms. He's feeling squeezed by his own advisors who don't bend to his will. Politically, it seems like he feels empowered now to ignore the advice of others and just plow on with decisions.

You know damn the consequences. Damn the media firestorm. Do you expect more of these kinds of decisions going forward in these next two years?

SANGER: I think you have to, Jim. And I think the reason for that is twofold. First, the president surrounded himself initially with a group of advisors who were willing to push back some. Rex Tillerson did even if he was not very effective at running the State Department. Certainly Jim Mattis did. H.R. McMaster did.

SCIUTTO: Nikki Haley.

SANGER: Nikki Haley did. And each of them had been replaced now. We haven't seen yet for Mattis, with people who are not likely to go stand up and say to the president, you know I think you're going in the wrong direction.

I can't live with this. Mattis was sort of the last one to go do that. The second is the president's going to recognize that starting on January 3rd, he's already recognized this, he's got no domestic agenda left.

Democratic majority in the house will get in the way of that. So traditionally presidents become more foreign policy presidents after they lose their ability to go do that. Tony served in an administration where the president decided to head off in that direction.

But those two things combined, a president who is going to be heading more toward foreign policy because he believes he is -- has got more power there but who is not willing to go listen to others who push back. That may be what we're looking at in 2018.

SCIUTTO: Goodness gracious. Tony Blinken, David Sanger, thanks to both of you. I hope you get a break these holidays.

SANGER: Thank you.

BLINKEN: Thanks Jim.

SCIUTTO: Still to come, this could take awhile. Soon to be acting chief of staff, there are a lot of acting these days; Mick Mulvaney says it is possible the latest government shutdown will spill into 2019. Ahead, the latest on the shutdown and a top democrat says that he is ready to take on the White House to make sure that the Mueller report goes public in the end. We're going to discuss.

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SCIUTTO: Well, as we speak we are two days and just over ten hours into the partial government shutdown. And while the White House now says the president is open to lowering his $5 billion wall funding demand. Lawmakers are already home for Christmas so there are no signs of a compromise in sight.

In fact they're not even talking right now. Joining me now Margaret Talev, she's senior White House correspondent for Bloomberg news. So Margaret, firs on that, what do you read into the White House signaling here that they would come down from this $5 billion figure?

MARGARET TALEV, BLOOMBERG SENIOR WHITE HOUSE CORRESPONDENT: It looks like the president understands that the longer this creeps into January, once the democrats take over he's got very little leverage on that House side. If we end up there he understands that the game changes and then it becomes about blaming -- trying to blame the democrats for this.

But if he can try to make the point secure some money for border security and make it look like by holding out he gets a win, he may end up trying to do that and I think he'll use the next couple of days to sort of -- sort of test the waters on that.

It'll be later this week at the earlier, but again; it could well slip past the first of the new year. SCIUTTO: Let's look at those politics though. Democrats would be very aware, even if you get -- even if its $2 billion, the number almost doesn't matter. The president will claim a win and based on past practice he might even say that he got the better of democrats.

You could picture that. Do -- do the democrats, particularly as they're about to take over the House, come January 3rd, do they have any political incentive to yield on this?

TALEV: The only political incentive is that if they are able to start the new year with this out of the way, they can focus on what they were planning on focusing on, which is a series of investigation into the president and being able to set a proactive agenda rather than having to deal with it on his terms.

So you can see sort of the upside to a deal but you can also see that they understand from a policy perspective, they'll have much more leverage to be decisive and -- and stop him on some of these fronts if they wait until the beginning of January.

SCIUTTO: I -- I want to take a look over to the markets because not a good start to this -- to this Christmas Eve morning here. You see that they're down another 300 points. A percent and a half just in the first -- less than an hour trading.

As you know, Margaret, this is one of the president's favorite if not his favorite barometer of success and -- and it's been a lousy 2018. Market's down more than 1,000 points. I think approaching 2,000 points since the passage of the tax cut. How much is that indicator effecting the president's decision making on the shutdown and other -- other issues now?

TALEV: Yes, I mean I think it's pretty important. We're looking at right now at this moment at the U.S. markets being in really the worst position since around May of 2017, which you may remember on the calendar for different reason.

That's right around the time that Jim Comey changed jobs or left his position. So the economy and the markets are two different things but performance of both has been good in a way that's really helped President Trump to be able to use a hammer and to pursue some of these policies that combined with the initial bump from the tax reform plan has helped the president try to be able to make some of these arguments on tariffs and immigration policy and such.

He understands that losing that edge or having a sort of flip scenario to that edge if the -- if the markets are doing poorly and or if the economy is doing poorly, it weakens him greatly both in terms of how he deals with democrats and in terms of how he can campaign heading into reelection.

SCIUTTO: The -- the New York Times had some fascinating color from -- from inside the -- the White House right now. Describes the president as angry and frustrated but -- but this line caught my attention.

He spends even more time in front of a television, often retreating to his residence out of concern that he's being watched too closely. Frustrated with decision making, agitated by aides not listening to what he says. You covered this White House very well and closely. Is the president doing his job?

TALEV: Well, there is no one uniform definition for what -- how a president should do his job but it's certainly true that since the beginning of the administration the president has sort of tried to navigate traditional governance with his version, which is absolutely very reliant and very responsive to television coverage, news coverage, what conservative penance (ph) are saying.

And to the extent that these conditions have exasperated that, you see him spending more time alone, less time listening to advisors and when he reaches agreements with advisors or with republicans in Congress such as on the shutdown or how to pursue on Syria and then changes his own mind at the last minute.

It creates this discordance and sort of erodes whatever good faith is left. It's really important for him to be able to have a working relationship with the republicans in the Senate and with his own advisors and to the extent that that is ever more strained, it makes it that much more difficult for him to govern going forward in this new phase.

SCIUTTO: Margaret Talev, thanks very much.

TALEV: Thanks Jim.

SCIUTTO: Still ahead, a top democrat on the House Intelligence Committee is pouring cold water on any possible plan the might house -- the White House might have to block the public release of Robert Mueller's report on the Russia investigation. We're going to discuss that next.

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SCUITTO: Top Democrats in the House plan on ringing in the New Year with subpoena power. Incoming chairman of the House Intelligence Committee, Adam Schiff, already warning President Trump he better allow the public release of the special counsel's report on the Russia investigation. But if the White House were to try to block it release, as the president's lawyer said that they might, Schiff says he is prepared to force Mueller's report into the public eye.

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REPRESENTATIVE ADAM SCHIFF (D): I'm prepared to make sure we do everything possible so that the public has the advantage of as much of the information as it can. Now, there may be parts of the report that have to be redacted because they involve classified information or grand jury material. This case is just too important to keep from the American people what it's really about.

(END VIDEO CLIP) SCUITTO: Joining me to discuss is Sara Murray, political correspondent and Paul Callan legal analyst. Sara, to you, what's your latest reporting on the White House intentions regarding this report. Are they seriously exploring ways to block this?

SARA MURRAY, CNN POLITICAL COORESPONDENT: Well look, they've been clear they don't want to see this entire report made public, and I think there's good reason for that, Jim. I mean, we know sort of the view right now from the Justice Department is they can't bring charges against a sitting president, so let's say Mueller comes up with a report that says, look, the president did a whole lot of things wrong when he was running this campaign. He made a lot of bad decisions, a lot of errors in judgment, not just from him but people around him. That's not something the White House is going to want out there. They're going to try to protect as much as possible under the scope of privilege, but I think the reality is, and what Schiff is getting at, is the American public has spent a long, sort of waiting, hearing drips and drabs of this. There's been a lot of money devoted to this. And I think Democrats have a political reason to want that out there, but I think there are certainly many Americans who want to know what Mueller has been up to this whole time.

SCUITTO: Paul Callan, you hear Sara mention the idea of executive privilege, which is something this president, this administration, likes to use liberally. I mean, is there legal justification for, if not blocking the whole report, redacting significant sections, just say, hey these were private conversations with the president, his advisors, et cetera?

PAUL CALLAN, CNN LEGAL ANALYST: Well, if the president was conferring with advisers and the consultations were regarding perfectly legal president actions, yes, executive privilege could apply. But if the consultations were part of a criminal conspiracy of some sort, then the privilege would not apply and that would not be grounds to release. There are, however, other problems in addition to executive privilege, and that's the special counsel law itself.

It's got two sections that deal with how the report, if a report comes, gets released. And I will tell you that in reading it carefully, the attorney general has enormous power here to block disclosure to the Congress; if he wants to. So I think what you're going to see is a battle between the legislative branch, the executive branch, and maybe even the Supreme Court getting involved in whether it gets released.

SCUITTO: One more legal question, Paul. We learned what was explosive news in a week of explosive news, that the president's acting attorney general was advised by DOJ ethics lawyers, career lawyers to recuse himself from overseeing the Russia probe because of past and repeated comments criticizing that very probe. He refused that legal advice.

CALLAN: Yes.

SCUITTO: How unusual is that, and how can you consult the ethics lawyers? You're supposed to listen to what they say, aren't you? CALLAN: You are supposed to listen to them. And they reviewed this

extensively. And what they decided essentially was, that there's not technically a conflict of interest in him being involved because he publicly expressed an anti anti-Mueller opinion. That doesn't mean he will be biased now. That's what the law says.