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Trump Faces New Reality as Democrats Take Control of House; Government Shutdown Enters Day 13th With No Deal in Sight; Interview with Congresswoman-Elect Jennifer Wexton; Interview with Kevin Hassett; Aired 10-10:30a ET

Aired January 3, 2019 - 10:00   ET


[10:00:01] POPPY HARLOW, CNN ANCHOR: And new investigations. And that's not all this wave of new faces brings to Capitol Hill, they bring more Democrats, more diversity and a record number of women. All of this as the shutdown stalemate enters day 13.

We begin with Phil Mattingly on Capitol Hill with the latest on this incoming Congress. It really is an historic day.

PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Yes, no question about it, Poppy. Look, it's a new world for the White House because divided government is certainly something different than what they've faced over the course of the last two years but it's also a new world for this institution. If you look at the class that's coming to Congress, we have never seen a class more diverse. We have never seen more barriers broken.

Just to drill down a little bit, in 2018, in November of 2018, never have there been more female members, new members of Congress elected. Never have there been once they're sworn in today, more black members in the freshman class. Never have there been more Latino members in the freshman class. Never have there been more LGBTQ members represented in the freshman class.

And it's really a seachange for an institution that for a very long time was considered old, white, and to be frank, reporter's perspective somewhat stodgy. Now it's not entirely reflective of the United States in terms of the diversity, but it's certainly a change in that direction.

And also you want to drill down to, Poppy, as well, on just the number of women that are going to be in Congress. Not just new members but overall, 102 women total, 89 Democrats, 13 Republicans. That's nearly 20 women more than have ever served in the institution. And again, it just underscores that the 116th Congress, there are going to be no shortage of battles, no shortage of gridlock to some degree, no shortage of fights, but there's also no shortage of barriers broken. And that's something, at least for one day, that everybody needs to pay attention to.

HARLOW: Yes, there you go. When it comes to priorities, we hear a lot from Democrats saying look, look, look. We're focused on what the American people need on passing legislation, et cetera. A lot of them, including Nancy Pelosi, have said things like impeachment of the president should not be a priority.

What is your real sense about what is the number one priority for all of these chairmen and chairwomen, especially of these committees?

MATTINGLY: Walking a careful line. And I think, look, they understand that, one, it's their right as members of the House, as a co-equal branch of government to conduct oversight.


MATTINGLY: And they certainly want to do that, there's no question about it, but they don't want it to turn into a circus. And obviously there's a lot of members, particularly newer members who perhaps go a little bit further out in terms of what they'd like to see happen in terms of investigations, and they'd like to maybe not go that far yet at least until the Mueller report comes out. But it's also important when you talk to leadership, when you talk to new members coming in, to do things legislatively.

Sure, Senate majority leader Mitch McConnell is a Republican, he probably is not going to take it up in the Senate, the president probably isn't going to sign it, but they need to lay down markers in terms of where they are on policy and to show that the individuals that were elected into this new freshman class that created this new Democratic majority can actually get things done when they get to Washington.

And, Poppy, I'll just note, obviously, reopening the government is really the first thing on the priority list, but also keep an eye on the first major piece of legislation House Democrats are moving. It's focused on ethics, it's focused on campaign finance, it's focused on changing the law where new presidential candidates would have to give 10 years of tax returns.


MATTINGLY: That's something they're going to want to focus on while we all certainly will focus on the investigations. Don't miss that they're doing legislative work, too.

HARLOW: Good luck getting the president to sign that tax disclosure piece of legislation.


HARLOW: We're not going to hold my breath on that one.

Appreciate it, Phil. Thanks.

Day 13 of the shutdown showdown, and it seems still no deal anywhere near in sight. President Trump and Democrats digging in over border funding.

Jessica Dean at the White House with more. Not an ounce. Not an ounce of progress made there yesterday. JESSICA DENA, CNN CORRESPONDENT: Not any, Poppy. And we were all

kind of maybe thinking OK, what might come out of this? Well, turns out nothing. That's when bipartisan leaders met here. Congressional leadership with the president. It was being billed as a border security briefing. They were there about an hour. And what they could all ultimately agree on, the one thing they could agree on, is that no progress was made. In fact they are quite entrenched. Take a listen.


SAVANNAH GUTHRIE, NBC NEWS: Are you willing to come up and give him some of this money for the wall?


GUTHRIE: Because apparently that's the sticking point.

PELOSI: No, nothing for the wall. We're talking about border security.

GUTHRIE: Nothing for the wall, but that means --

PELOSI: Well, we can go through this back and forth, no. How many more times can we say no? Nothing for the wall.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: He's not going to sign a bill that doesn't have money for the wall. If he gives in now, that's the end of 2019 in terms of him being an effective president. That's probably the end of his presidency. Donald Trump has made a promise to the American people.


DEAN: And we heard from a source who was familiar with the meeting yesterday that when the Democrats asked President Trump why he wouldn't go with their plan to essentially pass a package of bills that will reopen the government and pull out the Department of Homeland Security, continue it at its current rate and then open up 30 days to negotiate that, so effectively reopening the government while continuing to negotiate about the border wall and its funding, why wouldn't the president do that, the source said that on the third time, the president said, that's going to make me look foolish if I do that.

[10:05:08] For their part, the White House, the White House officials saying that Democrats are giving absolutely no indication that they're going to come up from that $1.3 billion for border security. Not the wall and not funding for the wall. So there they don't really have any incentive to do this right now. So again, they're just at logger heads over this, and we'll just see what progress might come.


DEAN: We are expecting for them all to be back here on Friday. The president has invited congressional leadership back. We'll see if anything comes from that, Poppy.

HARLOW: Yes, and in the meantime, you've got about a million American workers stuck in the crosshairs here.

DEAN: Right.

HARLOW: Jessica Dean, thank you.

With me now is Democrat Jennifer Wexton, congresswoman-elect just for a few more hours, of Virginia.

Thank you so much for joining me.

JENNIFER WEXTON (D), VIRGINIA CONGRESSWOMAN-ELECT: Thank you for having me. Nice to see you.

HARLOW: So let's begin with the shutdown and let's move on to the history being made here today. In November, you joined me on the show right after you won your election and I asked you, do you think the American people can expect more bipartisanship come January. And you said absolutely. So this morning, your leadership, Nancy Pelosi, says no. Nothing at all from the wall. Is that the bipartisanship that you said we would get?

WEXTON: Well, we're going to be presenting bills to reopen the government today as our first order of business after everyone is sworn in. You know, it's going to be the same package that was already passed by the Senate. We'll send it on to them and see if they are willing to actually put the bill forward when the House of Representatives agrees.

HARLOW: But it's not a dollar toward the wall. And look, your district is home to about 70,000 federal workers, right?


HARLOW: They're particularly impacted by this. And in November, you told me, quote, "using federal workers as a bargaining chip for political purposes, I don't think that's good or right to do. And I don't think it's good for the left to do it."

So when you speak to Leader Pelosi, will you tell her, let's give a little toward the wall, give a little, get a little, let's get the government back open?

WEXTON: Well, this legislation includes tens of millions of dollars for border security. You know --

HARLOW: But it doesn't include -- so, Jennifer, not to parse words here, but the words are really important, especially to this president, who has to sign it. None of that allocated $1.3 billion can go towards the wall.

WEXTON: Right, but the border security is more than just a concrete wall. And even the administration allegedly has come off of that over the time. And talking about, you know, metal slats and other kinds of border security. Nobody is denying that we need strong borders and we need border security, but there are smarter ways to do it than a giant concrete wall.

HARLOW: You think there are. The president doesn't. OK. So I guess I just wonder, to put a button on it, are you supportive of Democrats putting a dollar toward a wall?

WEXTON: I think we need to explore all of our options. And what we are going to be putting forward today, as I mentioned, includes tens of millions of dollars for border security, for smart border security, for high-tech border security. There's no reason to use a Medieval response to a 21st century problem.

HARLOW: OK, that -- OK, that sounds like no. That sounds like a no in terms of a dollar toward the wall.

Let's move on to the history being made. You are one of the record number of women now representing the American people, both Republican and Democratic women in Congress. I'm interested in how you think and how you hope that will actually change the country.

WEXTON: Well, women, you know, we're very good at multitasking, we're very good at checking our egos at the door and getting things done. Already, just working with the women in this freshman class, they're amazing, accomplished women and men who are going to be joining us who really are very interested in delivering positive results for the American people. And I think we're going to be able to do that.

HARLOW: Is there a priority number one for you on that front aside from obviously getting the government back up and running fully but that you think is possible now because of the increased diversity in Congress and the increased female representation?

WEXTON: Well, all kinds of issues are important. I mean, obviously, as you mentioned, getting the government reopened is a top priority. Health care is something we heard about a lot on the campaign trail. Gun violence prevention. I can't tell you how many new moms demand action -- chapters and other groups have really made this a very important issue in the election. And of course, restoring accountability and ethics to government. I think it's high time that we took some steps to do that as well.

HARLOW: Leader Pelosi, soon to be re-elected Leader Pelosi, sat down for an interview with Savannah Guthrie of NBC. Here's an important exchange. Listen to this.


PELOSI: Everything indicates that a president can be indicted after he's no longer president of the United States.

GUTHRIE: What about a sitting president?

PELOSI: Well, sitting president, when he's no longer president of the United States.

[10:10:02] GUTHRIE: A president who is in office. Could Robert Mueller come back and say, I am seeking an indictment?

PELOSI: I think that that is an open discussion. I think that is an open discussion in terms of the law.


HARLOW: Do you believe, Congresswoman, that whether a sitting president, sitting, can be indicted is an open discussion, and what does it signal to you hearing that from Pelosi?

WEXTON: Well, I think that that's, you know, the opinion of the Justice Department at this time. You know, the most important thing I think for me is that the Mueller investigation be allowed to continue to its conclusion and that we have all the information about what was discovered during the course of that investigation.

HARLOW: Congresswoman-elect Jennifer Wexton, it's a big day for you. Soak it in. Congratulations, and thanks for joining me.

WEXTON: Thank you. Thank you so much.

HARLOW: The president is downplaying last month's stock market plunge, calling it a little glitch. Why does he say that and what does he mean by it? We're going to ask one of his key economic advisers.

Also, the U.S. ambassador to Russia meets with the American citizen detained in Russia on spy charges, Paul Whalen. We're learning more about their conversation.

And Nancy Pelosi hours away from reclaiming the powerful speaker gavel. Why does she think she's qualified for the job? Our Dana Bash sat down with her.


PELOSI: None of us is indispensable, but some of us are just better at our jobs than others. And I have a following in the country, apart from anybody who has run for president.



[10:15:54] HARLOW: All right. Sharp losses on Wall Street this morning. Right now, the Dow is down more than 500 points. Look at that. The Dow off 570 points. This comes after markets suffered their worst month since the depression. The president says December's near historic sell-off was simply the result of a glitch and that things will get better.

There is, though, a stark warning from Apple this morning that's rattling investors. CEO Tim Cook says Apple will badly miss its quarterly sales forecast because of weaker demand from China for the iPhone. Listen to this.


TIM COOK, APPLE CEO: As we look at what's going in China, the -- it's clear that the economy began to slow there for the second half. And what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy. And so we saw as the quarter went on, things like traffic in our retail stores, traffic in our channel partner stores, the reports of the smartphone industry contracting, particularly bad in November.


HARLOW: All right, let's talk about all of this. Important morning to have Kevin Hassett with me, the chairman of the White House Council on Economic Advisers.

Thank you for being here. I appreciate it.


HARLOW: Good to have you. Let's start with Apple.


HARLOW: You've got shares of Apple off 9 percent right now at the open. That is an ominous warning from CEO Tim Cook who is pointing to the trade war between the U.S. and China as a big part of this major, major decline in their forecast. I mean, billions of dollars are wiping out of their revenue projections.

Is it alarming to you that one of the world's largest companies is blaming the trade war for deepening economic slowdown in China that's impacting their profits?

HASSETT: Well, again, I'm not sure I would call it a trade war, but the pattern of, you know, Apple announcing that they're having earnings trouble in China is something I have been talking about on TV for a few months now. You know, one of the big pieces of news since last spring is that Asian economies especially China and the European economies are slowing quite a bit. And you might recall that last spring people who are critics of the president were saying oh, it's just a global boom, it's not President Trump's policies.

Well, now we've got the U.S. growing at about 3 percent, the fourth quarter is looking about 3 percent as well, but the rest of the world is slowing. And that is having an impact on earnings, you know. And it's not going to be just Apple. I think that there are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be --


HASSETT: -- watching their earnings being downgraded next year until, you know, we get a deal with China. And I think that that puts a lot of pressure on China to make a deal. And I could say that, you know, listening to the reports almost every day about how the talks are going, I think everybody recognizes the seriousness of the situation and recall that about a year ago, the Council of Economic Advisers that I chair put out a report that suggested that China was stealing about $500 billion a year of our intellectual property.

And so they have been misbehaving in the global trading community.


HASSETT: And we're, I think, making great progress to make sure that they stop doing that. And I think that one of the reasons is, you know, frankly their economy is looking for them, you know, might be called a recession.

HARLOW: Yes, well --

HASSETT: It's slowing down in a way they haven't seen in more than a decade.

HARLOW: Look, that's a really significant warning from you in your position about what we may see in earnings season for all of these other big American companies that rely so much on the Chinese economy and what that earnings pressure could do to further hit U.S. markets and the --

HASSETT: Right, you know --

HARLOW: The flipside -- hold on just one second, Kevin.

HASSETT: OK, sure.

HARLOW: The flipside of China feeling the pressure from their economy is China going to feel more emboldened in these trade discussions in the final days given what they're seeing in the U.S. stock market. We're off 550 points this morning. We saw the worst December, Kevin, for U.S. markets since the Great Depression. Is the president concerned about that?

HASSETT: Right, well, I think of course the president is concerned about markets. And the fact is that in the long run, what happens is that if you have lots of economic growth, lots of profit growth, and income growth, which drives sales, then, you know, equities go up as they fluctuate between now and like the long run.

You know, that's Jeremy Siegel wrote the famous book, "Stocks to the Long Run." Right?

HARLOW: But if he's --

[10:20:02] HASSETT: So the point is that we've got to succeed with China 100 percent.


HASSETT: If we have a successful negotiation with China, then, you know, Apple's sales and everybody else's sales will recover.


HASSETT: But right now, China is feeling the blow really of our tariffs, and I think that that's an appropriate place for us to have taken the relationship given the amount of stuff that they were stealing from us.

And you know, I was like the globalist, right, when I came into this administration, and I can tell you the stuff that I have seen about what China was doing before the president took office made me feel like the measures that we've taken were actually appropriate.

HARLOW: And look, there's a trade --

HASSETT: And so now they're at the table. Now they're at the table.

HARLOW: There's a trade delegation, as you know, going to China this week, and trying to hash it out.


HARLOW: But that is still a big if. Can they get a deal that is good enough for America, that the president will sign? It's an if.

Kevin, yesterday, the president described the incredible swings we've seen in the market, again, the worst December since the Great Recession. Six days in a row in a seven-day period where the Dow was down more than 350 points. This is how the president described it and explained it.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Our country's doing better by far than any other country in the world from an economic standpoint. We're the talk of the world. And we had a little glitch in the stock market last month, but it's still up I guess around 30 percent from the time I got elected. And it's going to go up once we settle trade issues.


HARLOW: Was it a glitch?

HASSETT: Well, I think that what he just said is very consistent with our conversation, right? That so when we settle the trade issues with China, then people will go back to focusing on the long run growth that, you know, absolutely is going to return to probably even a higher level once we fix this problem with China. And so --

HARLOW: But --

HASSETT: Again think about all of the access to this massive Chinese market that our firms don't have because they have big tariffs on our products and they have closed off big sections of their economy to the sales of U.S. firms. And if we open that up, that's a big positive for U.S. markets. And the beautiful thing is that all of this stuff is happening. You know, markets don't go just straight up. They go up and down. But the beautiful thing is all this is happening and the U.S. is still growing at a very, very steady pace that people two years ago thought was impossible.

Again the fourth quarter is looking about 3 percent. We got the ADP numbers, the job numbers are up 270,000 in December. So -- and so you know we'll get the payroll numbers for the month.

HARLOW: But you do have some warning signs. I mean, you and I have talked -- you do have some warning signs.

HASSETT: Equity markets are a warning sign. You're correct.

HARLOW: Look at equity markets. OK, look at the housing market. Look at the Conference Board's consumer confidence numbers. Yes, the University of Michigan numbers were higher but the Conference Board showed the biggest single month drop in consumer confidence since July of 2015. Couple that with a new study out of Duke University that says half of U.S. chief financial officers see a recession as likely by the end of next year.

What is your concern level about a recession at the end of next year or early 2020?

HASSETT: Look, there's never been a recession that started in the quarter after a quarter like the one that we just had in the fourth quarter of last year. And so we're carrying a lot of momentum in the next year. We had a lot of capital spending last year which meant that firms were building new factories. As those factories, you know, plug their machines in and start producing output, that will increase GDP next year.

And so with the kind of momentum we've got, I really don't see a recession next year. And I think that if we add, and the president mentioned this yesterday, you played the clip, if we add positive outcomes to the things that have stressed markets like the trade negotiations, then there's lots of upside risk in the market.

But I think that the news today, you know, and I don't want to talk specifically about Apple, the news today is something that one should expect, and I'm sure that the equity analysts all over the place are looking for firms that have a large share of their profits from sales in China, because absolutely, 100 percent, the Chinese economy is slowing in a way that I haven't seen really in more than a decade. And that's going to be bad for profits for U.S. firms that sell things in China.

HARLOW: Yes. That's really important. And that's what we're seeing way on the market right now.

HASSETT: Correct.

HARLOW: On the issue of national debt, we have now seen, if you look at the numbers over the last years, we ended 2018 with the national debt at $21.97 trillion. That is, Kevin, $2 trillion higher than when President Trump took office. That is a 10 percent increase in two years. A few questions on this. HASSETT: Sure.

HARLOW: First of all, is the president concerned about that?

HASSETT: Right, yes, he absolutely is. And that's one reason why just, you know, as a headline that I'm sure you guys have covered, he ordered the Cabinet agencies to cut their spending by 5 percent across the board or almost across the board. And so he absolutely is beginning to focus on spending.

Don't forget, he came in with some problems he had to address. We had the highest corporate tax on earth which is why our growth was stuck in the 1's in 2016.

HARLOW: Well, that contributed to this, though, Kevin.

HASSETT: And we had --

HARLOW: A lot.

HASSETT: Yes, but, you know, revenue is one thing, but GDP is another thing. And if you just take the GDP growth that we got this year and then level adjust it out for the next 10 years, then you get a massive increase in income for Americans that's much bigger than the increase in the deficit. It's a trade that you would 100 percent be willing to make again.

HARLOW: And you know that the issue that this brings with debt service payments.

[10:25:03] I mean, you have the Congressional Budget Office now projecting the debt service payments will cost more annually, potentially cost more annually than the budget of the entire military. Is that a good use of American taxpayer money?

HASSETT: Right. Well, you know, we've got here cumulatively for a lot of reasons including about a doubling of the national debt during the financial crisis, which was kind of, you know, I think, an event that was inevitable and happened to almost every country around the world. Absolutely 100 percent, we need to address the debt crisis going forward, but I think the president was right to prioritize say getting the corporate rate to be competitive when he first got into office, but you're right that now we need to turn to these other things.

And actually, you're covering a lot of the give and take over the shutdown. Don't forget that a lot of times deficit progress is made most.


HASSETT: I have written about this before I came into government, when you have divided government, that it's something that we can disagree about a lot of things.

HARLOW: Yes, you have. HASSETT: But we can agree that maybe now it's time to get serious

about the deficit.

HARLOW: Let's see. That would be --

HASSETT: And so it's one of the things we should look forward.

HARLOW: That would be a good thing, to come out of the divided government.


HARLOW: To get serious about it. But just a final point to put a button on that. You know, when we look historically, you talk about how the deficit has risen during the Great Recession, et cetera. Never before, if you look at the Committee for a Responsible Federal Budget, they note that never before, Kevin, has the deficit been this high when the economy has been this strong. So many argue, isn't it reckless to dramatically raise the deficit now and doesn't it pull back on the ammunition you have to fight off a recession when it does come?

HASSETT: Well, I think it would be reckless to do something like Cash for Clunkers. You know, something a previous administration policy that was just a big increase in the consumption of Americans, but what we've done is we prioritized things that bring factories back home, that are investments, not consumption, and it's not irresponsible to give those investments because they produce future income and future revenue.

And so I think that, again, if you were to go back and look at, you know, the whole idea of the new normal and secular stagnation, the economy or the economic vision that was inherited by President Trump, you have to admit that we've snapped out of that, even with the troubles that we've been discussing today. And I think that we snapped out of that because of President Trump's policies.

So there might be a lot of things you disagree with him about, but you'd have to concede that the corporate tax cuts and the deregulation have created, you know, a big surge. Manufacturing employment in the U.S. has grown.

HARLOW: They --

HASSETT: And it was on a down trend. Right? And that's a fundamental change.

HARLOW: They have -- and it has added to the national debt. And we're looking at the reality of the numbers here. There are many sides to this coin.


HARLOW: It's an important discussion. I'm so glad you're here today as we watch the market.

HASSETT: Thanks. Right.

HARLOW: Look, the markets listen when you talk. And that's quite a warning from you about other --


HARLOW: About other corporate earnings this season on the heels of Apple's news. So thanks very much, Kevin Hassett.

HASSETT: Sure. Thanks. Great to be here, Poppy. Thanks.

HARLOW: I appreciate the time. It's good to have you.

Ahead for us, the brother of the American detained in Russia says, quote, "he is not a law breaker." That's David Whelan, Paul Whelan's brother. This as the family claims they did not know how he was discharged from the military. What does this all mean ahead.