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AT THIS HOUR

Government Shutdown to Drag into January as Trump Issues New Threat; Wild Ride Continues on Wall Street as Trump Threatens to Close Southern Border Entirely. Aired 11-11:30a ET

Aired December 28, 2018 - 11:00   ET

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


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[11:00:00] NISCHELLE TURNER, CNN ENTERTAINMENT CORRESPONDENT: So question is, who's going to step in? Well, we will find out very soon.

Nischelle Turner, for CNN, Los Angeles.

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JIM SCIUTTO, CNN ANCHOR: Thank you, Nischelle. Quite a year.

Thanks so much for joining me today. I'm Jim Sciutto. I wish you and your family the happiest of New Year's.

"AT THIS HOUR" starts right now.

KATE BOLDUAN, CNN ANCHOR: Hello, everyone. I'm Kate Bolduan.

The government shutdown has now stretched into day seven. The update, we're now talking about weeks, not days, in terms of how long this thing could last. No one yet seeing a light at the end of this tunnel. No glimmer of hope on this horizon, and this glass is definitely more half empty than half full right now.

The House and Senate have both adjourned until the New Year, and that means about 800,000 federal workers will ring in the New Year either on furlough or without pay.

Here's how Republican Congressman Mark Meadows put it yesterday.

(BEGIN VIDEO CLIP)

REP. MARK MEADOWS, (R), NORTH CAROLINA: Well, obviously, over the last 24, 48 hours, things have not progressed. At this point, it looks like we could be in for a very long-term shutdown.

(END VIDEO CLIP)

BOLDUAN: As for the president, he's now upping the ante and leveling a new threat. Either he gets his wall funding or he closes the southern border. That's the new one.

Let's get over to the White House now. CNN's Boris Sanchez is there. Boris, it is starting to sound like they're getting further apart than

closer together. What are you hearing there right now?

BORIS SANCHEZ, CNN CORRESPONDENT: Hey, there, Kate. In the words of the incoming acting chief of staff, Mick Mulvaney, this morning on the North Lawn of the White House, talks have broken down. Mulvaney confirming Republicans approached Democrats sometime last week with a deal to end the government shutdown that contained less money than the president had demanded, the $5 billion he demanded for border wall funding. He wouldn't specify a figure but that confirms reporting from CNN that Republicans approached Democrats, originally in our reporting, we heard it was somewhere in the realm of $2.5 billion for border wall funding. According to Mulvaney, Democrats didn't even make a counteroffer. They said we're leaving and left for the holiday. He does not believe Democrats want to make a deal.

He says he has a gut feeling Chuck Schumer wants to move forward, but he believes Nancy Pelosi is holding the cards and she doesn't want to make a deal because it will impact her chances of becoming speaker of the House. Listen to this.

(BEGIN VIDEO CLIP)

MICK MULVANEY, INCOMING CHIEF OF STAFF: This all comes down to Mrs. Pelosi's speakership. I think left to his own devices, Chuck Schumer and the Senate Democrats would probably make a deal, but they're protecting Mrs. Pelosi. She does not have the votes. If she cuts a deal with the president of any sort, she's at risk of losing her speakership. We're in this for the long haul.

(END VIDEO CLIP)

SANCHEZ: Now, we should point out, according to our reporting, it appears Pelosi does have the votes to become speaker. And Democrats have planned to vote on one of three potential stop gap measures to end the government shutdown. None of which, I should mention, include any funding for the president's border wall. He's been active, as you noted, on Twitter this morning. I want to point out this tweet because the timing of the tweet is interesting. He writes, quote, "We'll be forced to close the southern border entirely if the obstructionist Democrats do not give us the money to build the wall and change our ridiculous immigration laws that our country is saddled with. Hard to believe there was a Congress and president who would approve."

It goes without noting, Kate, that if the southern border were fully closed, as the president is suggesting here, the ramifications to the United States economy would be immense. Not to mention to a stock market that is already volatile. Further, in another tweet, the president suggested we should go back to the days of pre-NAFTA. It's unclear if he means he has the intention of potentially scrapping that USMCA deal that he bragged about earlier this year -- Kate?

BOLDUAN: Yes, so is the new NAFTA on or is the new NAFTA going to be off? And now he wants complete comprehensive immigration reform with this deal? That tweet is confusing, if nothing else. Great to see you, Boris. Thank you so much.

A lot to discuss.

SANCHEZ: Thank you.

BOLDUAN: If this goes into had next Congress, which is likely, what does that mean for the Democratic majority in the House?

Joining me is "Politico's" congressional bureau chief, John Bresnahan.

John, I was joking to my producer, you and I on TV together is like the inmates running the asylum. Jay Sherman had a great quote today from the "Playbook," from a senior Democratic aide that said, "What part of Democratic majority and he's not getting the wall do they not understand?" That is a pretty confident statement. You have reporting on what the Democratic majority could be planning. What are the options?

JOHN BRESNAHAN, CONGRESSIONAL BUREAU CHIEF, POLITICO: Well, Boris mentioned it in his introduction also, that they have three options they're talking about. One is a short-term funding bill to reopen the government, restart negotiations. That would allow government operations to continue until February 8th. The other two are fund everything but the Homeland Security Department for the rest of the fiscal year, through September 30th. And the other is just do a continuing resolution kind of flat-level funding for the rest of the year for all government agencies that have been funded, all nine departments that have been funded. None of these are options that Trump wants to take or the Senate Republicans. And Pelosi and Chuck Schumer have offered them already.

[11:05:20] BOLDUAN: And that is one of my questions. Have they floated these options to President Trump yet?

BRESNAHAN: Well, look, Schumer and the Senate Republicans did a deal on February 8th, a continuing resolution. So that was -- at the time, the Senate Republicans thought Senate Majority Leader Mitch McConnell thought Trump would sign that.

BOLDUAN: Right. Right.

BRESNAHAN: Right. So that's been out there already. They have talked to, and Schumer and Pelosi met with Trump in the Oval Office in that unbelievable meeting, the now famous meeting, this was the other two options were what they discussed. We'll give you regular appropriations bills for everything but Homeland Security, and we'll just fund that through the rest of the year at flat level or we'll just flat-level fund everything. They have shown the White House all these cards up to now.

BOLDUAN: This new line that we're now hearing coming from the White House that Schumer's ready to make a deal, but it's Pelosi holding things up. Do you see any evidence of a crack in what has been to this point a united front between the House and Senate Democratic leaders? BRESNAHAN: No. And with all due respect to Mr. Mulvaney, Pelosi has

the votes to be speaker. You mentioned it as well. She has the votes to be speaker. This is not about her being speaker. Listen, Pelosi has not talked to anybody at the White House since December 11th. So they're not talking to Pelosi at all. And so when they say this is all about Pelosi, they're not even speaking to her.

BOLDUAN: Yes.

BRESNAHAN: So they're speaking through Schumer.

I do think they're trying to drive a wedge between Schumer and Pelosi. It's pretty evident what they're trying to do. I don't think that's going to go anywhere. These are two old hands at negotiations. They know the game the White House is playing. I don't think that's going to go anywhere.

BOLDUAN: Let us see.

Great to see you, John

BRESNAHAN: Thanks for having me on, Kate.

BOLDUAN: Thanks so much.

Joining me now to continue the discussion, Democratic strategist and former Clinton White House aide, Keith Boykin, and conservative radio host and CNN political commentator, Ben Ferguson.

Guys, I have so many questions for you right now.

BEN FERGUSON, CNN POLITICAL COMMENTATOR: Good morning.

BOLDUAN: Ben, what do you think of the options that John has laid out in terms of really what Democrats are looking at? What if McConnell gets pressured to send something to Trump that he doesn't want to sign?

FERGUSON: Yes, look, I don't think that's probably going to happen. I think what you see here, you actually have both sides that are pretty united in a strategy. I think Nancy Pelosi does have the votes to become speaker as long as she doesn't do a deal before they vote on her. If she did do a deal with this White House before January 3rd, it could put her in jeopardy, getting that job. So I'll say on the shutdown here, I don't think anything is going to happen until after January 3rd when she becomes speaker. She has the votes now. Why take that risk if you're her? It would make no sense. Then you'll see a real deal come together. At the same time, Republicans seem very clear here with the Democrats leaving town, OK, we'll deal with a new Congress after January 3rd and let's come to the table, and I'm willing to do X, Y, and Z, the president laid that out, to keep this going, and to fight for his border security. That's when I think the real game is going to begin, when she is actually the speaker of the House.

BOLDUAN: Phil Mattingly said to me last night, it was really eye opening, it's not about is this going to make it into the new Congress, it's how far into the new Congress this is going to stretch.

FERGUSON: Exactly.

BOLDUAN: Which is where we are, which is a scary thought for everyone now looking at still being out of work or without pay for that much longer.

I wonder, Keith, which option, short-term bill to February, a longer- term kind of funding bill with where things stand or funding everything except for the Homeland Security budget, if you will, which of these do you think most Democrats would want right now?

KEITH BOYKIN, CNN POLITICAL COMMENTATOR: I think most Democrats are onboard with any option that keeps the government open, that funds crucial priorities, including border security but that doesn't provide funding for Trump's wall. I don't think Democrats are rigid on anything except for the issue of the wall. Donald Trump campaigned for two years saying Mexico was going to pay for his wall. Mexico is not paying for his wall. He had two years of Republican-controlled Congress in which he could have gotten the wall funded. He did not do so. Now we are here at the 11th hour, the 11th minute, and Trump is deciding to shut down the government because he couldn't get this done. Why is it the responsibility of the Democratic Party? Why is it the responsibility of the American people to make up what Donald Trump failed to do? Let's wait until January 3rd while 800,000 people are still suffering, who are federal government employees who are on furlough, who are on leave, who are working without pay, because Donald Trump decided to have a meltdown to appease his base. That's essentially the situation we're in now. The Democratic Party is unified. The only question is whether Donald Trump will come to his senses and cut a deal.

[11:10:03] BOLDUAN: As John was pointing out, this new line, Ben, I want to get a take on. Schumer wants to make a deal, but Nancy Pelosi is holding it up. All the reporters I'm talking about are saying this is not what they're seeing. The facts are not there. The view is that this is the White House trying to push a wedge between these two leaders.

FERGUSON: Yes.

BOLDUAN: Why are they now making this about Nancy Pelosi and not about the wall? What does that tell you?

FERGUSON: I think -- you're talking about the government shutdown here. I don't think the Democrats in the House are willing to do anything until after she has secured the speakership, because if she does come together with a deal with Schumer, and I think Schumer is probably one of those that understands the optics of this long term, you want to get the government open, especially when Democrats take control of the House, pretty quickly. But she understands she wants to be the speaker, and if she does a deal with Donald Trump, there are Democrats that will leave her and say this is exactly why we didn't want her to be speaker. She's already doing deals with Donald Trump.

(CROSSTALK) FERGUSON: You don't want to do that.

BOLDUAN: But, Ben, you're saying a different version of what we're hearing from the White House. What I'm telling you from very smart reporters on the ground, they're saying that's not what they're seeing. There's no division between Chuck Schumer and Nancy Pelosi on this. They're together.

(CROSSTALK)

FERGUSON: I think Chuck Schumer -- look, I think Chuck Schumer is taking the lead of the House in securing Nancy Pelosi and then they're going to decide what they want to do. I also think they believe that a government shutdown long term is not bad for the Democratic Party. They're going to keep pointing to Donald Trump saying this is his fault. The one caveat here is, if you talk to conservatives, you talk to Trump supporters, you talk to the Republican base out there, they see this as a real issue of national security. They're OK with a government shutdown to get the funding for the wall and to get this thing built. So you have two different sides here that look at this as actually a political opportunity for them. That's why I think this could go on for a long time.

BOLDUAN: Absolutely.

(CROSSTALK)

BOLDUAN: I will say, though, the threat from the president now is a new one, though. It's now, I'm going to shut down the entire southern border. You, being a Texan, I don't know if that's something you would support.

Keith, I have to ask you one thing. One thing Ben is pointing out, when you talk about political advantage, and it's horrible to talk about it when you have people's jobs on the line, but that's what you see in Washington, is Democratic priorities going into the new Congress were an array of things, infrastructure, gun control, voting rights, you name it. Not among them, keeping the government open. But that is what they're going to have to deal with almost exclusively when they take control of the House. Is that already a win for Donald Trump?

BOYKIN: Well, yes, it's interesting. "The Daily Beast" had an article about this today that Trump and people in the White House actually are assuming right now that the shutdown actually benefits them because it supposedly distracts from the agenda the Democrats want to put forward in January. There was one source close to the White House who was in "The Daily Beast" article today who said that they actually want Pelosi not to be able to focus on investigations on Trump by focusing on the government shutdown. I have news for the White House.

(CROSSTALK)

BOYKIN: That's what they said in "The Daily Beast" today, that Nancy Pelosi and the Democrats will continue to investigate Trump and hold Trump accountable.

FERGUSON: Keith --

BOYKIN: They'll continue to make sure that there's oversight that should have happened for the past two years.

And this shutdown is the responsibility of the man who is in the White House, in the Oval Office with Nancy Pelosi and Chuck Schumer and said just a few weeks ago, he would take responsibility for it. He would not blame the Democrats. He went back on that. He lied about that just like he lied about who was going to pay for s border wall. And this whole thing needs to come to an end. Donald Trump needs to come to his senses. The Republicans need to make this work.

(CROSSTALK)

BOLDUAN: Let me end with this. I talked to Congressman, retiring, Ryan Costello last night, and I asked where is the urgency on this? He said there isn't any. And the reason why --

BOYKIN: Zero.

BOLDUAN: -- that both sides right now see there's a political advantage in their position, which is the saddest statement of the state of affairs.

Appreciate you guys coming on. Thank you so much.

BOYKIN: Thanks, Kate.

FERGUSON: Thanks.

BOLDUAN: Coming up for us, a new report about the 8-year-old migrant boy who died while in U.S. custody after crossing the southern border. Could have simple medical test have prevented this horrible tragedy?

[11:14:16] But first, Wall Street ends the year in dramatic fashion. What does all of this whiplash mean for 2019? Stay with us.

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BOLDUAN: It's another up-and-down morning for the stock market. Right now, down slightly. Slightly. Especially in comparison to what we have seen. This is after two days of gains, including a record- breaking rally on Wednesday. That's not mentioning the wild ride that got it there. Where will the market end today and what does it mean for this volatility mean for the overall economy in the coming year?

Joining me now, Rick Newman, columnist for "Yahoo! Finance," and Richard Quest, CNN Business editor-at-large and host of "QUEST MEANS BUSINESS."

Great to see you guys.

Opposite of what we normally do, let's start with the big question and work our way down. This month, Rick, is turning out, December is turning out to be the

worst month for the mar markets since the great depression. Last week, the worst since the 2008 financial crisis. Name a statistic, there's a lot of records being broken for not very good reasons. What are -- if this is what 2018 is ending up like, what are things looking like for 2019?

RICK NEWMAN, COLUMNIST, YAHOO! FINANCE: To put the negative superlatives in perspective, the overall market is going to end up down it looks like about 6 percent or 7 percent, so modest losses for the year. That is the worst performance since 2008, which was the year of the crash. What this turbulence in the last three months is telling us is investors are very nervous about the outlook for 2019. It doesn't mean a recession is coming. We're probably not going to have a recession in 2019. The real economy is still good,. But investors are worried about economic growth slowing, profit growth is probably going to slow, then there are all these kinds of unknowables. What's going to happen with the Trump tariffs and trade policy, will the government reopen in these sorts of political problems that are hard to predict?

[11:20:20] BOLDUAN: By definition, when it comes to the president.

What are you watching for, Richard, as the biggest indicator of whether 2019 trends up or takes a nose dive?

RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE & CNN HOST, "QUEST MEANS BUSINESS": Corporate earnings in the first quarter. Corporate earnings is going to be the barometer by which we can determine future growth of the market. We can sum up what has happened as basically the party is over. At least for the time being. And until somebody buys some more booze, that's likely to be the way it's going to be.

(LAUGHTER)

(CROSSTALK)

BOLDUAN: Are you offering it up? Are you offering to take that on, Richard?

QUEST: I'll use your credit card because that seems to be the way Americans have been doing it so far. And they have been borrowing. They have been buying, not as much as in the past.

But, look, the party is over. The hangover is there, but it's not going to be a thumping, long-lasting, "I wish I put my head in a bucket" hangover. It's going to be much more of those, all right, it's a slow drudge. And the reason is for all the reasons Rick just said. There's no obvious reason at the moment for this market to rally. And before you get a rally or a sustained rally, I should say, we'll have lots of dead-cat bounces over the last couple months. For a sustained rally, you need some form of booze, and I think that's going to come in the form of corporate earnings or a deal with China.

BOLDUAN: One of the forces, if you will, in the markets you have been writing about, Rick, is the president, and really what the president is saying and doing. Here's one part of one of your columns I was reading. "Markets aren't that gullible. They're now sending Trump a message he ought to heed. Get your act together."

What do you think getting your act together looks like now?

NEWMAN: For starters, reopen the government. That's uncertainty we don't need. This whole battle is over $3.5 billion in funding, which is miniscule in the federal budget. The booze that fueled the party that Richard was talking about in 2018 was the tax cuts. Those are not going away, but the one-time boost in corporate earnings is going to be over once we get into first quarter earnings, which we're not going to get until the sort of second quarter of 2018. So we have the trade policy and tariffs overhanging the market. Is that going to get better and get resolved, which means we go back to the way we used to be and there's no tariffs, which by the way are raising costs for consumers and businesses, or are they going to get worse and raise costs for consumers and businesses more? If Trump wants to stimulate the stock market, one thing he can do in 2019 is resolve the trade dispute with China, get through the tariffs, declare victory, whatever the deal might be, and say, look, I want businesses to get back to business as normal. I don't know if he's going to do that, but stocks would be happy if he did.

BOLDUAN: One thing also happening now, Richard, is the president is saying this morning, if he doesn't get the border wall funding, he's threatening to shut down the southern border completely. It's a political threat, yes --

(CROSSTALK)

BOLDUAN: -- but what could the real economic fallout be?

QUEST" Oh, yes, what a great idea. Let's shut down the border. Let's shut down the border where most of American automakers, aero makers, all sorts of industries, now part of just-in-time manufacturing, send vast amounts of goods between Canada, the U.S., and Mexico, I don't care if you call it NAFTA, NAFTA 2, USMCA, so you shut down the border and see what happens. Let's see how quickly you head toward a recession then. These threats -- I'm sure the president means he'll shut the border to everything except those matters of commerce, but it's not that simple. The U.S. economy is a very finely tuned clock. And each one of these events that we're talking about, that Rick talks about, is sand being poured into the gears, the cogs, and the wheels. It can only take so much before the thing will gunge up.

BOLDUAN: The market already doesn't like the government shutdown. Do you think a threat like this -- you talk about even the words the president -- the things the president is saying have had an impact if you look at the past week, with Jay Powell and all that? Even a threat like this, if it lingers, even that could do something?

NEWMAN: Markets have figured out to discount Trump's rhetoric. Markets don't start to react until it looks like there's a policy. There have been many instances of this over time. But we have seen times when this hyperbolic rhetoric did turn into a policy. I think one of the things that is happening is when the economy was stronger, probably stronger a year ago than it is today, which meant it was better able to absorb things that Trump put into play, such as first it was a small number of tariffs on washing machines, then the steel and aluminum tariffs. The markets got jittery, and then they recovered and they were fine. Then came the Trump tariffs, and they were jittery again. and then they're fine. All this turbulence at the end of 2018 is a signal that we're worried about 2019, and markets aren't as able to absorb these kinds of hits in 2019 --

(CROSSTALK)

NEWMAN: -- especially in 2020, as they were in 2018. And that is something Trump is going to have to pay attention to because he cares about the stock market.

[11:25:31] BOLDUAN: It's not the same movie come 2019.

NEWMAN: No.

BOLDUAN: That's a really important point.

Richard, Stephen Moore, who advised the president on economic issues during the campaign and still talks to him, he tells me no matter what the market does, the fundaments of the economy are still strong. He points at unemployment, consumer confidence and such. And it seems his point has been to me, over and over, is somewhat ignore the market right now. Is he right?

QUEST: Look, Stephen Moore is absolutely correct in terms of the fundamentals of the U.S. economy. No one, no commentator disagrees with him. The problem is, back to my clock, how much do you want to test it? How many dark clouds do you want to put over your head before you have got a storm raining all over you? At the moment, there's no reason to believe that we are going to have anything more than a garden-variety cyclical slowdown, which will pick up in due course. And as the market responds to the tightening of monetary policy, new circumstances, Fed money going away. But if you tinker around with this, and if you start having the bull in a China shop, then everything, then all bets are off.

BOLDUAN: This has been really eye opening. I think I learned something today.

Thanks guys. Really appreciate it.

Rick --

NEWMAN: Thank you.

BOLDUAN: -- thank you.

Richard, thank you.

QUEST: Thank you.

BOLDUAN: Coming up next for us, new information this morning about the 8-year-old migrant boy who died while in U.S. Border Patrol custody. What the medical examiner's report says and what it means for an investigation under way.

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