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Interview with Kevin Hassett; Pakistan to Release Pilot; Inslee Enters 2020 Race; Sanders and Biden Lead in Polls. Aired 9:30-10a ET

Aired March 01, 2019 - 09:30   ET

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

[09:30:00] KEVIN HASSETT, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: Game is, as you mentioned, really far off. So do others.

POPPY HARLOW, CNN ANCHOR: Yes.

HASSETT: It's almost like the whistle blows in March and the race lasts into the early fall because of all the special measures that government can take.

HARLOW: Yes.

And -- and that issue, Kevin, you know, if it does become this protracted fight, is the impact on our credit rating. I mean last time it happened, because of that political brinksmanship, is why S&P downgraded our credit rating, which we have not gotten back yet, and that's bad for the United States. I mean are -- are you worried that that could happen again, that we could get another downgrade?

HASSETT: You know, I think that that downgrade itself is highly questionable. I think the U.S. debt is about the safest asset on earth if you look at asset prices and global debt markets. You know, global debt markets agree. And so, you know, in the end, these showdowns have always worked themselves out. You know, we're absolutely hoping to work it out amicably. And it's really possible to do that some times.

HARLOW: Gotcha.

HASSETT: If young go back and look at the prison reform last year --

HARLOW: Yes.

HASSETT: You know, when they're good ideas, then Washington can still work. And, you know, we're hoping we can find a place like that.

HARLOW: Fingers -- fingers crossed for it working.

HASSETT: Sure. That's right.

HARLOW: All right, let's talk about growth. I know you guys are really happy about it. I think America's happy about the growth number that we saw this week in terms of economic growth.

HASSETT: Yes. HARLOW: You told "The Wall Street Journal" yesterday you think we're going to see 3 percent or greater growth for the year. My question to you is, what could stop that, right? What could get in the way? Namely in a China trade deal does not come together -- let's hope it does -- but if it doesn't, would you still foresee 3 percent growth if those tariffs are ratcheted up?

HASSETT: Right. Well, again, the reason we see 3 percent growth is that the model that 16 months ago said that we'd have 3 percent growth in 2018 is actually saying that we're going to be a little better in 2019 than we were last year. So we're thinking maybe 3.2 this year. And that model has worked pretty well and it's based on peer reviewed science and so we feel pretty good about it.

Remember that last year we got 3.1, even though there was a lot of uncertainty about trade. I think if you're thinking about China and Europe and the rest, that probably the main trade risk this year is upside, that we get some really great deals and there's a heck of a lot of celebration about new access to new markets.

HARLOW: But what if there's not one? What if --

HASSETT: Then I think that it would look more like last year.

HARLOW: OK.

HASSETT: And, you know, and the fact is that one of the reasons why President Trump has been, you know, very aggressive on trade is that we've agreed to a lot of bad deals of the past that disadvantaged the United States. And so -- so the thing is then that if you look at say the tariffs that we put on China, they're a much bigger consequence for China than for our economy. And so if those were to stay in place, then I don't think it would have much of a material impact on growth this year.

HARLOW: OK. There are others that say differently. But let's see what plays out here.

I want to ask you about a number that doesn't get a lot of attention, but I'm fascinated by it and concerned by it. And credit to my friend Heather Long (ph) at "The Washington Post" who pointed this out in her reporting.

HASSETT: She's great. Yes.

HARLOW: She is great.

A record 7 million Americans, Kevin, are now 90 days or more delinquent on their auto loans. And these are things that people tend to pay off first, their mortgage, their rent and their auto loan. This is a million more than during the financial crisis.

The New York Fed, economists there wrote about this a few weeks ago and said the substantial and growing number of distressed borrowers suggests that not all Americans have benefitted from the strong labor market. Does it concern you? And why do you think it's happening?

HASSETT: Right. We're studying the auto market very, very closely. It's something that, you know, is a big part of the economy still. And you're right that the -- the loan data are a little concerning. That there are people having trouble making their loan payments.

I think that one thing, though, that you have to factor in is that the number of auto loans is at an all-time high, just about, and so, therefore, the percentage of loans that are in default could be steady and the number of loans that are in default could -- could go up a lot because there's actually the overall number of loans, right? And so loans in default --

HARLOW: But --

HASSETT: Go up with overall numbers of loans. And since there are a lot of loans because the economy's doing well --

HARLOW: But -- but what they're -- I get --

HASSETT: Then the default -- the default rates go up, too.

HARLOW: I get that, but they're saying that the --

HASSETT: So -- so I think we have to be real careful not to panic about that.

HARLOW: I hear you, but what the Fed is saying, the New York Fed, this is an independent body of economists. They don't have any political agenda.

HASSETT: Sure. They're really solid people. Uh-huh.

HARLOW: And they're saying that it's suggested that not all Americans have benefitted from the strong labor market. The jobs numbers are great under this administration, right? Credit where credit's due. But they're concerned that it's not equally shared.

HASSETT: Right. Well, you know, I think that we should always be concerned. You know, whatever we do, however good it is, it's not going to affect everybody we want to help. But if you look at wage growth in the bottom decile, right now it's about 6.5 percent. If you look at blue collar wages -- last year weekly earnings for blue collar workers went up by a whole of $2,500 per worker. So if you had two workers in a family, that's $5,000.

So there's a heck of a lot of good news. Of course it doesn't reach everybody.

HARLOW: Right.

HASSETT: Certainly people who are out of the labor force aren't necessarily benefitting from the higher wages. The one thing I can say, though, is, that even there you could see that we're making progress. And so if you look at the latest jobs numbers of -- over the last few months, 73 percent of the new hires came from out of the labor force. And so three or four years ago we were worried that people were stuck out of the labor force and we're going to, you know, have a hard time ever reattaching them to the economy and to civilized society really. And what we're seeing now is that people are coming back in, in droves. And that's really one of the best pieces of good news in the data right now.

HARLOW: OK. So you're not -- you're not too concerned about this number.

A few more things with tick through with you.

Share buybacks. You've been very vocal on this.

HASSETT: Yes.

[09:35:02] HARLOW: So, Senators Schumer and Sanders, Democrats, have proposed legislation to limit how much of their shares companies can buy back unless they hit a certain threshold of investment in workers in their communities. You react to this calling it, quote, economically illiterate, and you went on to say they should be ashamed of theirselves.

I wonder if you say the same of Senator Rubio's proposal, a Republican senator, that would also limit share buybacks in terms of --

HASSETT: I -- you know, I -- I haven't seen --

HARLOW: In terms of the tax advantage on it. It's not just Democrats.

HASSETT: Yes, I -- I will -- I will call a bad economic argument a bad economic argument regardless of who makes it. And the fact is that share buybacks are, you know, a sign of a healthy economy. And so what happens is, say Apple has all this cash. They repurchase some of their shares. And then that money goes out say new entrepreneurial firms that need equity capital in order to come up with the next great thing. And so it's a natural way that our economy recycles cash from sort of old, successful firms to new entrepreneurial firms. And if we were to stop share buybacks or slow them down, then we would basically be slowing down the cash flow to entrepreneurs.

HARLOW: But they're not saying stop them. But, Kevin, they're not saying stop them. Rubio's saying --

HASSETT: Oh, no, they want to slow them down with a tax.

HARLOW: Rubio is saying, you know, make the tax benefit here equal to dividends and, you know, push investment in workplaces and employees. And Sanders and Schumer are saying, look, invest x amount in employees and communities before you do this. Because, as you know, looking at last year's numbers, U.S. companies announced more than a trillion dollars in these buybacks.

HASSETT: Right.

HARLOW: And their feeling is that it, you know, disproportionately benefits wealthy investors.

HASSETT: If you really want to help workers, than what you want to do is create new firms with great new jobs that have a lot of upside potential. And the way you do that is you funnel money from old firms to new entrepreneurial firms.

In fact, there's this while economic literature about Europe where they talk about these zombie firms, where there are these really big firms with lots of cash that aren't sending the cash back out into capital markets and they're leading to things like, in Italy, you see total factor productivity has declined for a decade. They're calling it the great unlearning.

The reason you can get such really long-run, negative outcomes is you trap the money in old firms. And so it's really, really important that the firms that make money send it back out into capital markets so that the new guys -- if you and I were to start a company, we'd want to issue equity, take that equity and employ people, and, you know, buy new machines and create new ideas. And it's a lot harder to do that if we're locking the money in at Apple.

HARLOW: Kevin, let me ask you one final thing.

HASSETT: Uh-huh.

HARLOW: Larry Kudlow, your colleague there, called the green new deal yesterday something that will, quote, literally destroy the economy. Literally destroy the economy.

And I wonder if you believe that climate change is a threat to economic growth. Because you know that national climate assessment that came out. Thirteen independent agencies on it said that it would -- if we don't see a change here, that it would knock a tenth -- 10 percent off U.S. GDP by 2100.

What's -- what's your response?

HASSETT: Right. Well, you know, I haven't modeled the green new deal and so, you know me, I'm geeky enough that -- that I'll -- you know, I'll tell you what the effects are with precision once I model it.

HARLOW: You'll do it.

HASSETT: But -- but you go back to the early 1990s as an academic economist. I was one of the first economists writing theoretical papers about carbon taxes. It's the literature that I've been involved in for a really long time. I think Nordhouse (ph) was right to get the Nobel Prize for his work. And that it's -- you know, it's basically something that everybody should pay attention to as they think about future policy risks.

HARLOW: Do you think climate change is a threat to economic growth, yes or no?

HASSETT: I -- yes. I think that --

HARLOW: Yes.

HASSETT: I think that Nordhouse's work, you know, is food for thought about what could happen.

HARLOW: OK.

HASSETT: And it's something that people should take seriously and think about.

HARLOW: Kevin Hassett, nice to have you here. I'm glad the snow held back for the most part.

HASSETT: Thanks. Great to be here, Poppy. Thanks a lot.

HARLOW: Thanks, Kevin.

HASSETT: Yes. Bye.

HARLOW: Take care.

All right, a dangerous border crisis is escalating between two nuclear powers, India and Pakistan. We are live, next.

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[09:43:11] HARLOW: Today, a major attempt to ease rising tension between two of the world's nuclear armed powers. Pakistan is expected to hand over an Indian fighter pilot whose plane was shot down over the disputed border region with Kashmir. But one government leader in India this morning says Pakistan is not doing his country any favors by releasing this pilot.

Sam Kiley joins me now from New Delhi.

And, Sam, this is much bigger than one pilot. I mean this is seven years of history between the two. Two now nuclear-armed powers.

What is the sense you're getting on the ground here of where this is going?

SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Poppy, I think things have escalated very dramatically. Not so much yet on a military level, although India is crossing using aircraft into Pakistan territory where they lost an aircraft and claimed to have shot down a Pakistani F-16. And this handover is dramatic in its own right. But, today, we also heard from Prime Minister Modi here in India saying that in future any terrorist attack that is traced back to Pakistan would be met with retaliation with interest.

This is a short extract of what he said.

(BEGIN VIDEO CLIP)

NARENDRA MODI, PRIME MINISTER OF INDIA: This is a new India. This is an India that will return the damage done by terrorists with interest.

(END VIDEO CLIP)

KILEY: Now, India and Pakistan, Poppy, have fought at least three wars over Kashmir and other territorial disputes since partitioned in 1947. There are bitter exchanges, dangerous exchanges of fire across the line of control inside Kashmiri territory.

But this commitment by Modi, all be it in an election year, to retaliate against all and any terrorist attacks really ups the ante at a time when the Pakistanis, at least in public, with -- under Imran Khan, the new prime minister there, are calling repeatedly for talks. The Pakistanis trying to appear to be the more conciliatory while the Indians are definitely taking a m ore robust attitude at the moment, Poppy.

[09:45:18] HARLOW: Sam Kiley, thank you for being there in New Delhi, India. I know you're following all of it for us. We appreciate that.

Ahead, to politics in 2020. The first governor jumps in the race for the presidency. He is putting his money on climate change, betting enough people care about it that could get him all the way to 1600 Pennsylvania Avenue.

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[09:50:02] HARLOW: Just this morning, Washington state governor Jay Inslee is jumping into the 2020 race for the White House. He is the 13th official Democratic candidate, but the first governor to get in this race. He's also the first who intends to make climate change and fighting it the center of his campaign. And he is up against some serious Washington heft. A new poll out of New Hampshire shows Senator Bernie Sanders and former Vice President Joe Biden, who, by the way, has not even announced he's running yet, leading the field of candidates.

Joining me now is CNN political commentator Symone Sanders, of course, who was previously press secretary for Bernie Sanders' 2016 run.

That yellow looks marvelous on you, let me just say, this morning Symone. It does.

SYMONE SANDERS, CNN POLITICAL COMMENTATOR: Thank you, Poppy. Just trying to bring a little sunshine, OK. It's dreary here in Washington, D.C.

HARLOW: Look, I love that on a -- on a snowy Friday.

Thank you for being here, Symone.

Look, I mean, you know, it's important. Climate change is so important. But you know where it falls on American's lists of priorities of things they care about, of things they vote on. And so I'm interested in what your read is on -- on Governor Inslee making that his -- his platform.

SANDERS: Look, I think Governor Inslee is trying -- is getting into the race and he's trying to distinguish himself. I like to remind folks that the Democratic presidential primary is all about your delegate path. And because, on the Democratic side of the aisle, we have what's called proportional representation, meaning Bernie Sanders could win Iowa and Kirsten Gillibrand could come in third or fourth and she could still get a substantial number of delegates. And so this is all about who can get to the magic number. In 2016, it was 2,000 -- I think it was 2,383. That was the number of delegates you needed to win the Democratic nomination.

And so I think what Governor Inslee is doing is, he wants to be somebody who was on the voters' minds. And when you think about climate change, he wants you to think about him.

Now, he will have to have other platforms.

HARLOW: Right.

SANDERS: And so while climate change is his -- is his stable platform, he has to have a criminal justice platform. What is he going to do about the economy, so on and so forth. Health care. What is his message to black women? So I think we'll see that. And, you know, perhaps he'll be able to stand out on the debate stage. We'll find out in June.

HARLOW: Yes. Yes. Right. You've got to make the debate stage, but, yes, indeed.

Symone, look at this -- look at this poll out of New Hampshire. You've got your former candidate in 2016, Bernie Sanders, topping it out there at 26 percent. Joe Biden, former vice president, who hasn't even announced a run, 22 percent. We checked, after that, coming in third is Kamala Harris, Senator Kamala Harris at 10 percent.

You know, I feel like, from the outside, Senator Sanders benefitted a lot last time around, even though he didn't get the nomination, by being the underdog for so long and sort of being underestimated. He didn't have to face as much oppo research, et cetera. Now he's leading the pack. Does that bring with it a host of new challenges?

SANDERS: It does. And, I mean, you have to run differently. If I am advising a 2020 candidate, which I am not at this time, and my person was polling at the bottom of the pack in New Hampshire right now or at the bottom of the pack in South Carolina, I'd be OK. We don't want to peak to early because the earlier you peak, you open yourself up for criticism and to be a target. I mean lots of people view Kamala Harris as a frontrunner right now and she's getting a lots of what the young people would call smoke, Poppy. Lots of people are digging deep into her record and pulling things out.

So, look, I think what you see right now in that polling is literally about name recognition, though. That's why Vice President Joe Biden is polling so high, Bernie Sanders is polling so high. The voters know them. And from what they know, they seem to like them in New Hampshire. Those polls will look -- could look drastically different come December 2019 and definitely January 2020. And so --

HARLOW: You mean -- SANDERS: Yes, I mean --

HARLOW: I was just going to say, you mean you can win the presidency even if the polls don't look like you can?

SANDERS: Even if the polls don't look like you can. Shocker.

HARLOW: What do you make of this brouhaha some are upset about former Vice President Joe Biden calling current Vice President Mike Pence decent?

SANDERS: Well, those wouldn't be the words I would use to describe current Vice President Mike Pence.

Look, I think what folks need to understand about Vice President Joe Biden is that he is -- he has built himself as a consensus builder.

HARLOW: Yes.

SANDERS: He has worked across the aisle. A number of these folks -- he speaks so highly of Mike Pence because he served with him. He knew Mike Pence. So I don't know if that will play well with this new, young crop of potential voters who are looking for a Democratic nominee that's not necessarily willing to hug the current folks that occupy the White House.

HARLOW: Yes. One thing --

SANDERS: It remains to be seen.

HARLOW: Yes.

SANDERS: We don't know.

HARLOW: One thing finally, very quickly, that really interests me is that Senator Sanders has not said that he's just running for one term, for example, and Vice President Joe Biden, if he gets in, I don't know if he's going to do that. But I just wonder if you think that that would actually be an advantage for one of them to say -- you know, age obviously a consideration, but also, I'm just going to run for one term to govern, not to run again.

[09:55:01] SANDERS: I don't think we'll hear Vice President Joe Biden or Bernie Sanders say that for multiple reasons, but I think namely of which is that they both really want to be president, I think. If Joe Biden gets into the race, he gets into the race because he wants to be president of the United States. Bernie Sanders is running because he wants to be president of the United States.

Concurrently, I think, Kirsten Gillibrand, Cory Booker, Elizabeth Warren, Kamala Harris, they all want to be president. Governor Inslee. So if -- again, if I was advising somebody, we're not saying we're getting in just to be a one and done. I'm getting in because I think I can be the best -- my candidate can be the best -- the best choice out there and we want to be president and we want to be president for as long as legally allowed possible. So, two terms (INAUDIBLE). HARLOW: All right. Symone Sanders, thanks for bringing the sunshine this morning. Good to have you.

SANDERS: Thank you.

HARLOW: New reports that President Trump dismissed the objections of senior intelligence officials, his senior staff and ordered his son- in-law, Jared Kushner, to be given top secret security clearance. Now some members of Congress want answers and documents. They're threatening a subpoena.

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