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Dow Jumps on Jobs Report; Migrants Seek Asylum; Federal Employees Furloughed by Shutdown; Sites for Second Trump-Kim Summit. Aired 9:30-10a ET

Aired January 4, 2019 - 09:30   ET


[09:30:00] POPPY HARLOW, CNN ANCHOR: The alarm on China's economy.

Also this morning, investors are keeping a very close eye on the Fed chairman, Jerome Powell. He will deliver a speech next hour.

With me now is conservative economist Douglas Holtz Eakin. He served as the chief economist in the Bush 43 White House, was an economic adviser to John McCain's presidential campaign, and is currently the president of the American Action Forum.

Good morning.


HARLOW: What a week. What a month, by the way, December was for the market. Gosh, the worst December for stocks since the Great Depression. The Dow off 660 points yesterday, up 300 here at the open.

You say this volatility is painful but good in the long run. Why?

HOLTZ-EAKIN: I think there's a lot of the market volatility that is really simply the Fed normalizing monetary policy. For years we've had excess liquidity and the Fed basically allowed the market to have double digit or high single digit returns with essentially no down days. And that's not typical.

And so when we see stocks go down, people who are unused to it panicked a little bit, I think. But the reality is that with equity investment come some volatility. Two percent volatility is not a big number. I think that's tolerable. There are other parts of this that I think are more concerning, underlying weakness in sectors of the U.S. economy --


HOLTZ-EAKIN: Or the global economy, that's what should be focused on.

HARLOW: Yes. Like housing, right? On the employment front --

HOLTZ-EAKIN: Like housing. Yes, we talked about that.

HARLOW: Right. On the employment front, we got a very good jobs report this morning.


HARLOW: But look at the -- look at the Apple warning. I mean I really feel like you can't overstate the importance of what Tim Cook said about how the trade war is putting pressure on China, that it is hurting Apple. You got that yesterday. You got a weaker ADP private sector employment report. You got a weak ISM report on manufacturing. And then the White House chairman of the Council on Economic Adviser, Kevin Hassett, told me this.


KEVIN HASSETT, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: 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 --


HASSETT: That are basically going to be watching their earnings be downgraded next year until, you know, we get a deal with China.


HARLOW: That -- I mean that, you know, markets listen very intently to that.


HARLOW: And that freaked a lot of people out. Is he right?

HOLTZ-EAKIN: I think there's a good reason for concern. I have been concerned about the administration's approach to trade from the outset. They have definitely harmed economic growth. You know, the administration said consistently, this is the right time to do this because the economy's very strong. That's admitting you're going to do some damage. And the question has always been, how much?

The Apple warning, I think, is a very significant one, not just for China, but for the growth in the global economy. I do think we'll see the large international companies report reduced earnings as a result. And the U.S. is not immune from that. And I think the administration would be wise to take the lesson and think hard about settling these with a minimum of disruption, having the world's two largest economies at each other's throats is not good for economic outlook.

HARLOW: Then what is the recession risk? Because we saw that big dip in consumer confidence.


HARLOW: Right. The biggest dip we've seen since July of 2015. You have this interesting Duke study that shows half of the chief financial officers of U.S. corporations think there will be a recession by the end of the year. What is your outlook for rescission risk this year or early 2020?

HOLTZ-EAKIN: I think the probabilities are low in 2019. I've been surprised at the negativity.

Yes, the U.S. will grow more slowly. It was inevitably going to come down and the question is to what. Will it come back to 2 percent? Will it come back to 1.8? Or will there be an improvement in the trend growth to something like 2.5 percent? But it's going to slow down.

It's hard for me to see a recession because of the household sector, the personal consumption expenditures in the -- in the national data. They really are 70 percent of spending. Households are in very good shape.


HOLTZ-EAKIN: During the fourth quarter of 2018, payroll grew by 7 percent. We saw the unemployment rate at historic lows. We saw wages rise in the most recent employment report at an analyzed rate of 5 percent. You know, you're not going to get a recession out of those numbers. Yes, you'll get slower growth, but recession is 2020 or beyond.

HARLOW: Before you go, the national debt. The president promised, in 2016, in this interview with "The Washington Post," that he would eliminate the national debt if he served two terms in eight years. What has happened? It has gone up by $2 trillion since he took office. A big chunk of that is because of the tax cuts.


HARLOW: Is there any world in which the president can actually follow through on that promise?

HOLTZ-EAKIN: There was not a world when he made it. And so, no, he's not going to get rid of the national debt. It would be a good thing for both parties to look forward and recognize the threat that this faces -- presents to the U.S. economy and get it to the point where the national debt is no longer rise rising faster than the economy so that we can stabilize our obligations to the rest of the world and then start pairing them down.

But no one's doing anything like that right now. We're really asleep at the switch in the face of a very great threat to the economy.

[09:35:08] HARLOW: Douglas Holtz-Eakin, important perspective, especially given the fact the number of Republicans that you have worked with on these issues. We appreciate it. Thanks very much.

HOLTZ-EAKIN: Thank you.

HARLOW: Cries for help by a young girl separated from her mother at the border by immigration officials earlier this year.


BORDER PATROL AGENT (through translator): Don't cry.

CHILD (through translator): I want to go with my aunt.


HARLOW: Alison Madrid is now back with her mother, living in the United States, but it may not be for long. Our Gary Tuchman has that reporting, ahead.



BORDER PATROL AGENT (through translator): Where are you from?

CHILD (through translator): El Salvador.

BORDER PATROL AGENT (through translator): Don't cry.

CHILD (through translator): I want to go with my aunt.

BORDER PATROL AGENT (through translator): You're going to get there. Look, she will explain it and help you.

CHILD (through translator): At least can I go with my aunt? I want her to come -- I want my aunt to come so she can take me to her house.


[09:40:12] HARLOW: Do you remember those cries? They were recorded. They went viral from a migrant girl separated from her parents at an immigration detention center. Now reunited, Alison Madrid and her mother are living a new life in Houston, but it may not be for long. Our Gary Tuchman explains.


GARY TUCHMAN, CNN CORRESPONDENT (voice over): Seven-year-old Alison Ximena Madrid, enjoying the day at the Children's Museum of Houston.

TUCHMAN (on camera): Are you happy today? (SPEAKING IN A FOREIGN LANGUAGE).


TUCHMAN (voice over): A very different story from when she and her mother first came to this country. And now, almost six months later, they're getting ready for their first asylum hearing, the start of a process which will determine whether or not they can stay in the U.S. As they've waited for the hearing, Alison Ximena has been going to a public school in Houston. When she arrived in the U.S., she did not speak a word of English.

TUCHMAN (on camera): So, Alison Ximena, you have something you want to read? A. MADRID: Yes.

TUCHMAN: OK. Let's hear it in English.

A. MADRID: Why I love America. I love my school. I love my church. I love to smile. I love and to live in the American dream. Happy New Year, America.

TUCHMAN: Happy New Year America to you, too.

A. MADRID: Happy New Year, America.

TUCHMAN (voice over): Her mother, Cindy, is doing her best to learn English at her church.

CINDY MADRID, MOTHER SEEKING ASYLUM: One, two, three, four, five.

TUCHMAN: She cannot legally get a job in this stage of the asylum process, but says she wants to work.


TUCHMAN: She says she would like to have a job cleaning or at a restaurant or whatever job she can get as long as she can do it with dignity.

A. MADRID: Rocks and (INAUDIBLE) work together. They mix. They mix the crab apples, sugar, sauce and some water.

TUCHMAN: So what is the likelihood that daughter and mother will be granted asylum. Their lawyer says she is hopeful, but --

THELMA GARCIA, ATTORNEY: There's a good chance that it may not be granted.

TUCHMAN: Attorney Garcia says Cindy Madrid left to protect Alison, her only child, from gang violence. Alison told us what her understanding is of that threat.


TUCHMAN: The gang, she says, they wanted to steal me. The attorney says if Cindy Madrid loses her case and is sent back to El Salvador, that is not an overstatement.

GARCIA: Could be death. They had very serious problems with gang violence. They had no protection by the police as well. So we're not expecting anything good if she is returned back home.

TUCHMAN: Alison Ximena says Houston is now her home.

A. MADRID: It is a sunny day when friends stick together.

TUCHMAN (on camera): (INAUDIBLE), the end.

A. MADRID: The finish. TUCHMAN (voice over): But this legal battle is far from finished.

Gary Tuchman, CNN, Houston.


HARLOW: Wow. It really brings it home for you. Gary, thank you for that reporting.

Ahead for us, hundreds of thousands of government employees being forced to go to work every day without a single paycheck. And that includes my next guest. What he would tell lawmakers as the shutdown enters day 14.


[09:48:07] HARLOW: So if you knew that you weren't going to get paid, would you still go to work? For more than 400,000 federal workers, that is not a choice. And when will that paycheck finally come? Only Congress can decide that.

Ray Coleman Junior is an employee of the Federal Bureau of Prisons in Tallahassee, Florida. He is one of those workers. He's also the president of the American Federation of Government Employees Local 1570. That's a union that represents those prison employees.

Ray, thanks for being here.


HARLOW: You're going to go to work today, just as you do every day. You're going to work in the prisons. You're going to help inmates get their GED and yet you are not getting paid for the work. You don't mince your words. You've said you feel like this is lawmakers treating you guys like pawns.

COLEMAN: Correct. We got to work every day. We have obligation to go to work every day and we'll continue to do so. But, right now, the political posturing we feel is being -- we're being used as political pawns to determine whether they want funding for certain things or whatever the case may be. And at the end of the day, that's not what we signed up for.

HARLOW: So can you tell me what it's really like for you then every day? You're going to, you know, the prison in Tallahassee today to teach these classes. What -- you know, what is the actual impact on you and your job in the prison?

COLEMAN: And it's not just at Tallahassee. It's across the nation.


COLEMAN: Every day you walk through those gates guarding some of the most dangerous criminals that this nation is holding at the moment, there's no guarantee that you're going to leave. So there's already a stress associated with the job. And now to do it and not know when you're going to get paid.

We've been understaffed since the beginning of the year. We lost 6,000 jobs under this administration. And so we're working 16 hours sometimes, being mandated on all type of swing shifts, and now we're doing it for no pay. So the stress and anxiety level is really high. The morale is really down. And we've been doing our job to uphold our end of the bargain and we're just ready for our lawmakers to do what they need to do, what they were elected to do, and get a budget passed.

[09:50:07] HARLOW: So let's -- let's break it down. First, to Congress --


HARLOW: What is your direct message to congress this morning?

COLEMAN: Do your job. If we're doing our job, day in and day out, and not getting paid, you should be able to do your job, for which you have been getting paid, by the way, for not doing. So, do your job.

Part of the biggest job of Congress is to pass a budget to make sure all these agencies are funded. So we want them to uphold their end of the bargain.

HARLOW: Does that mean that Democrats should give a little bit more or give some money toward the border wall that the president's insisting on?

COLEMAN: Our position has kind of remained the same. It doesn't matter, Democrat, Republican, they need to get behind a closed doors somewhere and work out a deal, whether it's giving more money, not giving any money, whatever it is, as opposed to wall or no wall. Our stance is paycheck or no paycheck. And we're not for the no paycheck option.

HARLOW: And what should the president do?

COLEMAN: The same thing. It's 537 people that are making this decision between Congress, the Senate, and the president. Everybody has a vital role. We come together as one unit and we work through what we work through. We take up for each other. We have each other's backs in the work that we do. And we need them to come together as a nation, as our elected leaders, and make something work. It's time out for the political posturing.


Two members of Congress, Alexandra Ocasio-Cortez and Representative Sean Maloney have both said that Congress, their salaries, should be furloughed during this. Do you agree?

COLEMAN: I completely agree. If you're going to shut down a part of the government, the central parts of the government, we're all public servants. We come to work and we protect the community. You have a job to do. I don't think it's right that you continue to get paid and not feel the effects. We couldn't even contact our congressmen during the shutdown over the holidays because they were on vacation. Meanwhile, our leave was canceled. We were told to report back to work.

HARLOW: Well, there you go. And, by the way, you can't reach the White House either. The switchboard is down because of the --

COLEMAN: Yes, the switchboard has been down.

HARLOW: Yes, because of the furlough.

We wish you luck. Thank you for the work you do every day. Ray Coleman Junior.

COLEMAN: Thank you very much. Thanks.

HARLOW: President Trump, Chairman Kim Jong-un, take two. The White House now looking for a place to hold the second summit.


[09:56:51] HARLOW: Welcome back.

U.S. talks with North Korea seem to be at square one, at a stalemate, but that has not stopped the administration from scouting out locations, possible locations, for a possible second summit between President Trump and the North Korean leader. According to two sources, Kim Jong-un sent a letter to President Trump to keep him enthusiastic about the denuclearization process.

Let's go to our national security reporter, Kylie Atwood. She joins me in Washington with more details.

Good morning.


HARLOW: Welcome to CNN. We're glad to have you.

ATWOOD: Thank you.

HARLOW: What is the administration really doing here? I mean how seriously are they taking this possibility of a second summit?

ATWOOD: Well, Poppy, they're actively engaged right now in searching for the location for this second possible Trump/Kim Jong-un summit. And sources have told CNN that scouting teams have been sent to multiple locations around the world that the U.S. is considering as a possible location.

Now, one source has told me that there's no leading contender here. And the U.S. hasn't even presented its possible list to the North Koreans. Of course, the x-factor is going to come when the U.S. and North Korea have to agree to a location, of course, and that's the complicating factor for a number of reasons.

First of all, we know Kim Jong-un doesn't like to leave North Korea very often. He's wary to do so. And an administration official told CNN that he was particularly sensitive after the Singapore summit. That's because he received criticism for arriving at the summit on an Air China flight.

The second complicated factor here, as you mentioned in the introduction, is that diplomacy between the U.S. and North Korea is stalled. And so Steve Biegun, who is the U.S. special representative to North Korea, has not yet met one-on-one, face-to-face with his North Korean counterparts. He was actually waiting for a meeting. He hoped for in Vienna. And that was at the end of last year. The last time he met with North Koreans was with Secretary of State Mike Pompeo. That was back in October.

So there's a lot of work to be done, but they're scouting out locations as we speak.

HARLOW: There's also a really big issue with all the criticism the administration did get last time for was this more about optics and a photo op than about real substance. And then when you look at reporting now, we're at square one really when you look at, has any true progress been made on denuclearization and the demands that Kim has made versus what the U.S. is willing to do. These letters that are being sent.

ATWOOD: That's a really good point, Poppy. And these letters are meant to encourage Trump to, you know, remind him of the enthusiasm that he felt for his relationship with Kim Jong-un after the Singapore summit. And then they skirt him from looking at the reality here, that denuclearization hasn't happened yet. And so basically folks are frustrated in the administration as they look at these letters and Trump being starry-eyed about the prospects.

HARLOW: Yep. Kylie Atwood, important reporting. Thanks very much.

ATWOOD: Thanks, Poppy.

HARLOW: All right, it is the top of the hour and it is a busy Friday morning.

Good morning, everyone. I'm Poppy Harlow. Jim has the day off.