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Dow Slides Amid New Recession Warning; Trump Hits Federal Reserve over Rates; Pelosi on Gun Legislation. Aired 12-12:30p ET
Aired August 14, 2019 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[12:00:10] JOHN KING, CNN ANCHOR: Welcome to INSIDE POLITICS. I'm John King. Thank you for sharing your day with us.
Recession fears send the markets into a tailspin. The first warning sign was from Germany. Then, U.S. bond markets hit a threshold that, for decades, has been a reliable predictor of a downturn.
Plus, several Democrats running for president are being urged to run for Senate instead. Colorado's John Hickenlooper is thinking about it. But Beto O'Rourke of Texas says the White House remains his focus.
And Congress and the White House are in serious talks about new gun controls, with expanded background checks atop the list. But there is deep skepticism there will be a bipartisan agreement even on that narrow issue, never mind other ideas being pushed by Democrats.
(BEGIN VIDEO CLIP)
SEN. KIRSTEN GILLIBRAND (D-NY), PRESIDENTIAL CANDIDATE: I think we should ban assault weapons, as well as large magazines. And as part of passing that ban, do a buy-back program across the country so that those who own them can be re-compensated for their money that they spent.
(END VIDEO CLIP)
KING: Back to the guns debate a bit later.
But we begin the hour with new signs an election year recession is a very real possibility. Hardly definite, mind you, as there remain many signs of U.S. economic strain. But, take a look, the Dow down over 600 points right now, 630 points, and investors say there's every reason for those deep market worries. One is this, what is called a yield curve inversion, yields on long-term bonds falling below yields of short-term bonds. Such an inversion hasn't happened in more than a decade and it is a phenomenon that has preceded every recession in the past 50 years.
Other warning signs come from overseas. A new report showing Europe's largest economy, Germany, might be tipping into recession. Plus, new Chinese economic numbers overnight, showing its powerhouse economy also slowing. A big piece of that is the trade war with the United States.
Now, for everyday Americans, a recession would mean job uncertainty, investment losses, probably declining home values and other big stresses. It would also mean job uncertainty for the president, too. A stronger economy is any president's best friend in a re-election campaign and the boom has help this had president weather storms over his character and his temperament.
Just a short time ago, President Trump quoting a Fox Business News segment arguing the Fed must now lower interest rates.
More on the politics in a moment. First, the numbers and the nervousness.
CNN's Cristina Alesci is at a very hectic New York Stock Exchange.
CRISTINA ALESCI, CNN POLITICS AND BUSINESS CORRESPONDENT: That's right. President Trump seems to be gambling with the global economy, not just the U.S. economy. He is tweeting that the Fed should lower interest rates because he thinks that's going to boost economic growth and mask the economic havoc he's wrecking on the global economy by -- by this protracted trade war.
Now, you mentioned the inverted yield curve. I think it's really important to note why that is happening. Investors are trying to escape this blood bath and run for cover in the safest place in the markets. And that is what is causing the inverted yield curve, which is a wholly unnatural state. It's basically when you are paying more to borrowing for a shorter period of time than you would a longer period of time. That is unnatural and it is followed by recessions for the past 50 years.
Also, investors waking up this morning and realized perhaps they were a little bit too optimistic about those tariff delays yesterday. There is still uncertainty in the business community, which has pulled back from investment spending and these -- this tariff delay doesn't do anything to resolve that uncertainty, which has caused so much of a pullback in stocks and throughout Wall Street.
KING: Cristina Alesci on the floor of the market. And 650 points as we speak. We'll keep an eye on that throughout the day. And, of course, throughout the days ahead.
With me in studio to share their reporting and their insights, Julie Pace with "The Associated Press," Jonathan Martin with "The New York Times," CNN's Phil Mattingly, and Ana Swanson with "The New York Times."
Ana, let me start with you in terms of the tug of war underway here. There are a lot of strong U.S. economic indicators, but then you get this bond issues, you get Germany, you see China. What are -- what is the strength of each side pulling, if you will, as the United States has a very real prospect of being pulled into what is a global slowdown?
ANA SWANSON, TRADE AND INTERNATIONAL ECONOMICS REPORTER, "THE NEW YORK TIMES": Yes, I definitely think you're starting to see the spill-over effects of the trade war here and the president pushing back on his tariffs. You know, there's a saying, been down so long it looks like up to me. And the stock market seemed to respond to that news yesterday of delaying the tariffs.
But, at the end of the day, the president just delayed some of them. They're still going into effect. We're still having tariffs on $100 billion of products going into effect in September and 160 billion going in to December. So that's definitely going to be weighing on the economy and you're seeing that around the world with Germany and China as well.
KING: And so you're a president now running -- going into your re- election campaign. You're also president of the United States and you understand what a recession would do to -- pain for your voters and any voters out there, anybody out there. So what can you do is the question.
[12:05:09] With divided government, we're not getting another tax cut if he wanted to stimulate the economy that way. So you heard the -- saw the president's tweet just a moment ago. That's a consistent message. Here's Peter Navarro, one of his economic advisers, saying that there's one tool the president wants, and that's more interest rate cuts.
(BEGIN VIDEO CLIP)
PETER NAVARRO, TRUMP TRADE ADVISER: And the biggest problem we're fighting right now at the White House is the Federal Reserve's interest rate policy. We lost almost a point of growth in Q2 simply because the Fed had raised interest rates too far too fast.
The good news here, Stuart, is I think the kind of volatility you see today and the inversion of the yield curve is sending yet another signal that the Fed needs to lower rate -- interest rates by 50 basis points as quickly as possible.
(END VIDEO CLIP)
KING: When the Fed did cut rates last time, just a few weeks ago, the signal sort of was that this is a one-time thing.
Rates are historically low, but the president and his team -- I don't know if bully is the right term, trying to nudge them into doing more.
PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Yes, the tweet essentially is saying, I'd like to Fed to stop me from punching myself, or at least keep me from being less injured by me punching myself to some degree.
Look, if you look at the prediction markets right now, obviously traders are viewing what's happened over the course of the last 24 hours as an indication that there will be a rate cut. The Fed will feel like it has to come off the sidelines on this.
I think the interesting element is when you compare and contrast the last two days where you have the immediate blip and the immediate equities jump based on the president's decision to blink or pull back on tariffs. And then the recognition that this isn't a one-to-one fight. This isn't China versus the United States. The Germany economy is heavily reliant industrially on what happens in China. The China economy, obviously, has wide-ranging spillover effect to many countries across Europe, throughout the course of Asia, when you see their economic indicators kind of araft (ph) them over the course of the last 48 hours coming out lower than what was expected. You see the German contraction as well. You recognize that it's not just U.S. versus China, it's not just tariff versus tariff. There's spillover. It's a global economy. And I think that's the concern right now, regardless of what the Fed decides to do at their next meeting.
JULIE PACE, CNN POLITICAL ANALYST: And this is the pitfall of a policy that leans into this idea of America first, that you're really only looking out for your own interests at home because the economy is connected. And if there is a downturn in China or somewhere in Europe because of a policy that the Trump administration is enacting, that could potentially backfire here.
And for the president, you know, at this moment, where he is now starting to really lean into his re-election, for Republicans they have wanted him to talk about the economy. It's what he really has. Any president riding this strong economy is in good position. And he has started to do that more. We started to hear from him more about the strong economy. This would break open this whole election in a -- and put it in a much different place if the economy starts to -- to take a dive (ph).
KING: It is hard to beat an incumbent president. But the last one who was beat was George H.W. Bush, who was coming out of a recession. Even though the numbers were getting better, the American people didn't believe those numbers. And that's what you have to worry about as President Trump, which is why it's interesting that he did back off the tariffs yesterday in a big way because he has consistently had the position, a, that he's right, b, that the fight with China has to be had and should have be had a long time ago, and, c, that the U.S. economy was strong enough to take it. He viewed it as sort of a smaller hit. But he -- you heard him yesterday talking about, we're worried about holiday prices, we're worried about consumers, for the first time acknowledging tariffs are paid by you, and you, and you, and you and everybody out there, not China.
JONATHAN MARTIN, CNN POLITICAL ANALYST: Yes, in the past he said that trade wars are very easy to win. And I think we're seeing this sort of recalibration of that. And also, to Phil's point about this connected world that we're in, you know, the biggest story at the moment is just how aggressively the Xi regime in China cracks down on the protesters in Hong Kong and what the president is going to say if and when that does happen.
You have the leader of the House GOP, Kevin McCarthy, coming out yesterday squarely on the side of the Hong Kong protesters in contrast to the president's very much uncertain trumpet on this whole issue. What's he going to say if there is a real aggressive crackdown in the streets of Hong Kong and how does that impact his negotiations with Beijing on tariffs? Is he going to get a lesser deal with China if he sounds, you know, too harsh of a note when it comes to their aggression on Hong Kong?
KING: If you're the Chinese and you see --
MARTIN: They (ph) would know.
KING: You see the markets today, you think, who has the leverage here? If you're the Chinese and you see the markets today, and you see, look -- look, there was a Fox News poll out last month, approve of the president's performance on the economy, 52 percent disapprove, 41 percent. That number has gone up. That is his only really good number. When you look into the pollings about characteristics of a presidency, truthfulness, honesty, temperament, the president has bad numbers. That's his good number. That is his -- essentially the oar he wants to ride through the election. So if -- if you are the Chinese right now and you see this, you're not in a mood to blink, right?
SWANSON: I think that's right. So the president --
KING: Although their economy is slowing as well. So you have a tough --
SWANSON: That's right. So, they are really struggling as well.
But, I mean, I think the president's strength on the economy is absolutely essential for his ability to win voters in the middle, the voters who are not his base. And this move to delay tariffs is really not about China. It's not China offering anything new at the negotiating table as far as we can tell. It's really all about a domestic audience and concerns about the economy and also the ability for Democrats to paint him as the Grinch that stole Christmas, putting on tariffs on toys right ahead of Christmas is not a particularly good look going into a re-election.
[12:10:27] MATTINGLY: Can I just say, I think what's interesting about this moment is kind of the theory of the case as it's been presented to me by people who have been involved in this, is that the U.S. economy, there is an understanding inside the trade team that the U.S. is going to feel pain, but that the U.S. can sustain or deal with that pain longer than the Chinese economy can. And that we are better -- the U.S. is better positioned than China.
And you're looking at the Chinese economic numbers right now and there's some validity to that. But when the pain happens, how willing are they to stick with this position, especially when anybody who's involved with the trade talks seems to acknowledge that the next meeting, that they're not expecting any major progress.
The pain's starting to happen. We'll see how long it takes. Often when you have an inverted yield curve, there's a bump in the market shortly thereafter. But it will be very interesting to see. If you think you can play the long game and you think you can withstand the pain longer than China can, well, now it's happening, so where do you stand.
MARTIN: Well, the -- this is not a president who codons (ph) to, a, bad news, or, b, dips in the markets, which he lives and dies by. And further I would add to that, that sustain the pain. In my experience covering politics is not a good bumper sticker slogan for re-election. Stay the pain, re-elect Trump I don't think would be very effective for the --
KING: And just -- to connect the two points, the American people have a lot more power to reflect anger at their politicians than the Chinese.
PACE: Yes, absolutely.
KING: The American people have a lot more power to vent their frustration.
MARTIN: Hear, hear.
KING: Up next for us, bipartisan talks are underway to expand background checks for gun purchases, but not everyone is on board and not everyone even in the negotiations thinks they can get to the finish line.
[12:16:29] KING: Welcome back.
White House and congressional aides expressing a lot of doubt and skepticism today, even as they continue talks to test the possibility of moving forward on gun legislation. An official telling CNN, Senate aides for Republican Pat Toomey, along with Democrats Chris Murphy and Joe Manchin are discussing details of new background check -- a new background check bill with White House officials. Since the mass shootings in El Paso and Dayton, Democrats have been calling for a variety of gun control measures. And even before those tragedies, the Democratic House passed several proposals. The first test now is whether Senate Majority Leader Mitch McConnell is willing to bring anything to the floor for votes. And if he does, one Democratic senator, who's also running for president, says his party should be prepared to narrow its focus.
(BEGIN VIDEO CLIP)
SEN. MICHAEL BENNET (D-CO), PRESIDENTIAL CANDIDATE: : Keep your eyes on the prize here. Keep your eyes on the background checks. The last time after -- after the shooting in -- in Connecticut, we didn't do that. And the public got confused about what we were trying to do on the floor. It was four or five different pieces of legislation. This needs to be about the background checks so that if they fail to pass it, the American people will know that something that 90 percent of the American people support, Mitch McConnell and the Republicans refuse to move forward.
(END VIDEO CLIP)
KING: Molly Ball with "Time" joins our conversation.
And this is a challenge in the sense that the House Democrats want more. Mitch McConnell, people behind the scenes say wants probably nothing heading into an election year, but could conceivably, if the president said do background checks, join that.
A, can McConnell get there? And, b, then could the Democrats say, fine, we will take one item as opposed to the four or five or six we would like?
MOLLY BALL, CNN POLITICAL ANALYST: Well, there's a couple of hypotheticals down the road before that has to happen.
First, the president has to make a decision that he -- of where he stands on this and how hard he wants to push it. That is the key to everything. And then you unlock those other question. Then you unlock the question of, what will McConnell do and what will the House Democrats do.
But right now I think the ball is in the White House's court. It's in President Trump's court. He has so much power over the Republican power. He has always had the power to make Republicans do things they don't want to do, but he has very rarely used it.
Think about criminal justice reform. That was something, there was a bipartisan coalition on, but it had been sitting there because Mitch McConnell didn't want it to go forward. The minute the White House decided to sort of put its shoulder into that legislation, boom, it was done. So there is the possibility for that on other issues where there is -- there are seeds of bipartisan agreement. But it's up to the White House to decide. This is something they actually want to back and pursue and are willing to take the heat on from elements of their own coalition.
KING: Right. And so -- and so why not is the question on this one in a sense -- in the sense if you look at this NPR/Marist poll. All registered voters, 88 percent support expanding background checks. 2016 Trump voters, 82 percent. White, no college degree, part of the Trump base, 87 percent. Rural, part of the Trump base, 85 percent. White evangelicals, 84 percent. Is this not an issue where the president would not alienate very much of his traditional base and then could go to the suburbs where he has very bad numbers and try to make some inroads?
PACE: In theory. This is one of those issue where he should be able to bring a coalition together, a bipartisan coalition together and not suffer with his own base, which is always his biggest fear.
But we've seen this story kind of play out a couple of times where he expresses this openness on background checks. He gets a call from Wayne LaPierre at the NRA and he hears a very different story from the NRA, where they say, hey, the polls might look this way, but if you imagine us leaning in on this issue even further, if you imagine us out in the states that you need to win trying to rally your base, you know, those poll will start to change. And we all know, you know, the argument to Trump that always works is, your base will start to leave you. And he has proven to be kind of susceptible to that argument from the NRA.
[12:20:14] You know, Molly is exactly right, though, Republicans just need some clarity on this from Trump. He -- they -- he can tell them -- if he can tell them, I am going to back stronger background checks and I will stick with you even when I get that call from LaPierre, they will move with him on it, but he's so inconsistent on this.
KING: And -- and this, this and only this, or this and this.
KING: He has to say one thing, two things, and be clear and consistent.
PACE: It has to be extremely clear.
KING: And as he does, and as we await that part of it, the House speaker, Nancy Pelosi, a while ago, saying, look, we've already passed some things. The Senate should act.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA): We must pass gun violence prevention legislation. Every day we lose lives.
We've been waiting since February and now public sentiment must weigh in to save lives to pass our bill and to look at high capacity magazines that should be eliminated as well.
(END VIDEO CLIP)
KING: It's the last part there. Senator Bennet, a more moderate Democrat in the Senate, says, let's just do one thing that we might. Even that would be hard. Even though it polls off the charts. That would be difficult to get through because of the political environment. He says let's do that. Speaker Pelosi, will she, in the end, if they give her one thing, will she take it?
MARTIN: Yes, I think that -- look, I think in conference she would pass what they can from the Senate. But I was talking to one GOP senator over the weekend about this very topic and this person said, look, the challenge that we're going to have is that we can probably get some kind of a red flags bill done, which, of course, is the provision that would allow people to alert potential threats for people who are acting erratically, to sort of take the guns away from them. But this senator said, the challenge we're going to have is getting the votes on the background checks. But the Democrats, as Senator Bennet got to in that clip, they're not going to be happy with a bill only on the red flags. They're not going to be satisfied unless there is at least a vote on the background checks. They've (INAUDIBLE) --
KING: And a lot of conservatives say, we'll do red flags as grants to states. This should not be a federal power. This should be in the states.
MARTIN: Even that's a challenge, right.
KING: Right. But it -- you -- the senators who are involved in this, Toomey, Manchin, Murphy, they've put their hand in this blender before. Forgive the metaphor. But they've been down this path, thinking they're close to the finish line, they have it go. Do they really think they can get there and do they trust the White House?
MATTINGLY: Yes, I think if you -- if they were being candid, they would tell you that there's not a whole lot of optimism that something's going to get done. But credit where it's due, that they're willing to have the conversations.
I think the -- when you talk to the people there are involved in the kind of preliminary talks as it stands right now, there's an acknowledgement of this, when you get into the weeds of the actual, technical provisions in these legislations, things get complicated really fast and opposition starts flying at you really fast. You can pull broadly background checks and get 89 to 90 percent. And then when you start talking about what -- how families pass it down, or whether a gift would be included in that --
MATTINGLY: Then things get hot really fast. And then you start to lose people. And I think what they're trying to do right now is figure out, how can we narrow this to a way that keeps everybody at least somewhat on board or at least the opposition neutral to some degree? I don't think the NRA's ever going to be neutral. But some of the opposition neutral. And I don't know, in talking to people that were involved in this, that you ever get there. But they're at least willing to give it a shot because, as Molly said, you never know where the president's going to end up on this. Maybe he decides to make this a thing and that changes the game to some degree.
MARTIN: The common reframe from Democrats and, for that matter, from the GOP, whether it's Brian Schatz (ph) or Chris Murphy on the left, or Joe Manchin certainly in the middle of their caucus or to the right of their caucus is this, President Trump, this is their plea, you've got to outline exactly what you want and you've got to say explicitly, I am for the Toomey-Manchin background check bill. Please pass the Toomey-Manchin background check bill. I support it, period. He's got to say that. He's got to put it in writing. He's got to tweet it seven ways from Sunday.
KING: Tweet it.
MARTIN: And unless he does that, it's going to be hard.
KING: Well, we'll keep an eye on the president. On negotiations as well.
When we come back, one 2020 Democrat mulling dropping out of the presidential race and running for Senate instead.
[12:28:41] KING: The Senate might suddenly look more appealing to John Hickenlooper, the former Colorado governor is a Democratic candidate for president at the moment and has, in the past, dismissed suggestions he run instead for Senate next year.
But, as first reported by "The New York Times," Hickenlooper is now considering leaving the presidential race and running against Republican incumbent Cory Gardner. That Colorado race critical to what at this point you would have to consider long-shot Democratic odds of retaking the Senate next year. And when you look at the Senate map, Hickenlooper not the only current presidential candidate whose name comes up.
Let's take a look at that map. Fifty-three-47 if you count the two independents who caucus with the Democrats there, 53-47. So, can the Democrats get it back?
First, they have to defend a few seats. Let's look at those. Right here, Alabama, the toughest race. Doug Jones, the Democratic incumbent in that race. A presidential year, a Democrat winning a Senate race in Alabama, that will be tough.
Democrats also say we've got to be careful about New Hampshire, we've got to be careful about Michigan, especially given the dedication of presidential campaign resources.
This is the hard one. Those are two on the watch list for Democrats. If they can hold that or if they lose that, their math gets more complicated.
How do the Democrats do this? Let's blank out the map and look at it from a different perspective. Susan Collins in Maine. Sure, vulnerable. She's also a proven survivor. But Democrats are targeting that race.
Where else do the Democrats look? That's where it gets hard. Can Democrats win Texas in a presidential year? That's why a lot of Democrats wish Beto O'Rourke would drop out of the presidential race. He says no for now. He has until December. Can they do that?