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U.S. Economy Shrinks Again in Q2; Biden Administration Frustrated at Stalled Prisoner Swap Offer; Biden and Xi Speak as Pelosi Considers Trip to Taiwan; Mnuchin, Mulvaney Speak to January 6 Committee. Aired 11-11:30a ET

Aired July 28, 2022 - 11:00   ET

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

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

We begin with new and mounting concerns about the U.S. economy. For the second straight quarter, the U.S. economy shrank, contracting at an annual rate of 0.9 percent.

Soon we're going to hear from President Biden directly about the latest on the economy and also the big news that major pieces of his agenda, which have been frozen, may be on the move again, with a surprise deal between Joe Manchin and Chuck Schumer. CNN will bring you the president's remarks when they begin.

Let's start with the new GDP report. With me is Rahel Solomon and Matt Egan.

Walk us through the report, the numbers, what you see.

RAHEL SOLOMON, CNN CORRESPONDENT: So broadly consumers were still spending. It is a slowdown for sure. But overall that was a positive contributor to GDP.

On the other hand, business and investment, government spending slowed down. When we look at where consumers are spending, it's an acceleration of what we've already seen. Spent less on physical items.

Services, however, think airfare, which is why airports are so busy these days, hotels and restaurants, that really accelerated. Business spending declined and also inventories, which we have been hearing from a lot of retailers for sure but also other companies they are trying to move out their inventory, there has been a mismatch of what they have.

That was reflected here, too. But I think to put it simply, it is clearly showing a slowdown.

BOLDUAN: Matt, this is -- you've written a lot about this. This is one of the big indicators that people look to in determining whether or not the economy is in a recession. The Federal Reserve chairman yesterday said he did not believe the U.S. economy is in a recession right now.

So now what?

MATT EGAN, CNN BUSINESS SENIOR WRITER: Clearly, we are dealing with a slowdown at a minimum, after blockbuster growth last year.

What's crazy is, every single time since 1948 that you have back-to- back quarters of negative growth, you've had a recession every time. But that may not necessarily be the case this time. It's probably premature to say it is the case because the first quarter was an anomaly. There were all these quirky reasons why the GDP has been negative.

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BOLDUAN: It's been wacky since the pandemic.

EGAN: It's very hard to measure because we're in this very unusual situation. The problem with calling this a recession, is the jobs market is way too hot. Unemployment is at 3.6 percent. That is historically low.

It is a far cry from the nearly 15 percent of April 2020. How do you how do you have a recession when you don't have mass layoffs?

Some people define a recession as two straight quarters of negative growth but that's not how the score keepers define it. They say it's a significant decline in economic activity, spread across the economy that lasts more than a few months.

Some economists are already predicting positive growth for the third quarter. Morgan Stanley saying they think 2 percent growth in the third quarter. I think if that happens, that may quiet some recession fears.

BOLDUAN: And you just confused us even further.

The president's economic adviser, Brian Deese, was on with Jim Sciutto last hour. Listen to this.

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BRIAN DEESE, DIRECTOR, NATIONAL ECONOMIC COUNCIL: We are in transition. There's no doubt the economy is slowing. And that is what most expected when coming off of an extremely strong and fast recovery last year.

But all of the indications that we see right now are for an economy that's showing extraordinary resilience in the face of global challenges.

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BOLDUAN: What does an economy in transition mean to everyone without an economics degree? SOLOMON: That's a great question. I think it means we probably won't be spending as much, jobs probably won't be as plentiful as they have been. We are still in this phase where job growth and demand for workers is very strong.

There are 1.9 open jobs right now for every one person looking. That's probably going to change. We're at practically 50-year lows for unemployment. We're at 3.6 percent and 3.5 is the 50 year low. But whether that looks like 4 percent unemployment or something much worse, we just don't know.

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SOLOMON: But it is transitioning into something that hasn't been -- money won't be flowing probably as much as it has been. And it's changing.

BOLDUAN: In the president's statement, Matt, on the GDP report this morning, he said it's no surprise the economy is slowing down as the Federal Reserve acts to bring down inflation. But even as we face historic global challenges, we are on the right path.

Again, what do -- what's the next number?

What's the next thing you need to look at to know exactly where the economy is or if we are on the right path?

EGAN: I think this all comes back to inflation, right. For so many months, people thought inflation would be transitory. Obviously it wasn't. It keeps going in the wrong direction. We need to see inflation --

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BOLDUAN: And there's numbers and then there's -- the technical recession and if I feel I'm having a recession.

EGAN: Exactly. Some of this is semantics. They'll debate what a recession is, when it starts and ends; they'll not tell it when it actually happens. They'll wait for months before we know that.

We do know Americans hate this economy; 64 percent of Americans believe the U.S. economy is currently in a recession. That may not be the case. But that's what people feel.

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BOLDUAN: Don't tell me how to feel.

EGAN: Exactly. That is because of the high cost of living. People haven't experienced anything like this, many of us, in our lifetimes and they're feeling it at the gas station, the grocery store and at the mall. Until that improves, people are still going to dislike this economy.

SOLOMON: Here's something we saw in the report that I think really speaks to this idea of what matters in your wallet but also what matters in terms of how you feel.

We learned that personal income grew on a top line level. But when adjusted for inflation, it decreased. When adjusted for inflation, you're actually bringing home less. That's the problem. Even if you are making more, you're seeing less.

BOLDUAN: It's good to see you guys. Thank you very much.

Now to this, a blockbuster deal is set to shake up the airline industry. JetBlue agreed to buy Spirit Airlines for $3.8 billion. If the deal goes through, the combined company will become the fifth largest airline in the U.S. Yesterday Spirit pulled the plug on another deal to merge with Frontier Airlines.

Still ahead, the Biden administration frustrated about an offer to swap prisoners. That's next.

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BOLDUAN: New this morning, the Biden administration officials are frustrated that Russia has not responded in a meaningful way to what they have called a substantial proposal, a deal that includes a proposed prisoner swap, which CNN exclusively reported details on yesterday.

The U.S. is offering to release a Russian arms dealer imprisoned in the U.S. named Viktor Bout in exchange for Brittney Griner and former Marine Paul Whelan.

Natasha, what are you hearing now?

NATASHA BERTRAND, CNN WHITE HOUSE CORRESPONDENT: We are learning that the Biden administration is deeply frustrated that Russia has not responded in a substantive way to this offer that administration officials believed they would jump at, of course, because Viktor Bout, an international arms smuggler, is someone Russia has wanted back on Russian territory back since before he was even convicted here.

He has been sentenced to 25 years in prison and it is a very asymmetrical proposal. The Biden administration offered to swap Bout for Paul Whelan and Brittney Griner, accused of lesser charges.

Whelan accused of spying, Griner for bringing in a very small amount of cannabis that she says was not even on purpose.

So the fact that the administration has made this very significant proposal to the Russians is something that they have not taken lightly. And they are deeply frustrated that Russia has not responded.

John Kirby, the national security spokesperson, said that this is not a decision that was taken lightly, to make this public, the fact that they actually put this proposal on the table but that the Biden administration felt it was very important to show the American people that President Biden is doing all he can to bring these Americans home.

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ADM. JOHN KIRBY (RET.), COORDINATOR FOR STRATEGIC COMMUNICATIONS, WHITE HOUSE NATIONAL SECURITY COUNCIL: Ultimately, we came down on the side that it was important to put this out there, to let the American people know how serious President Biden takes his responsibility to bring Americans home when they've been unjustly detained.

But we also thought it was important for the world to know how seriously America takes that responsibility.

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BERTRAND: So the next step is a conversation that will happen in the coming days between the secretary of state, Antony Blinken, and Russian foreign minister Sergey Lavrov, where Blinken will try to convince the Russians that this is a good deal.

BOLDUAN: Thank you very much.

President Biden just wrapping up a call with China's president. The two leaders speaking for more than two hours amid growing tension over a potential trip to Taiwan by Speaker of the House Nancy Pelosi. Arlette Saenz is live.

What are you hearing about this call now?

ARLETTE SAENZ, CNN CORRESPONDENT: This call between President Biden and Xi Jinping lasted about two hours. We're awaiting a readout. But heading into the call, White House officials had acknowledged there are several points of tension that would likely arise.

That includes Taiwan and China's aggression in the South China Sea. Additionally, Russia's war in Ukraine and the economic competition between the U.S. and China.

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SAENZ: Officials said part of these types of conversations is trying to keep that open dialogue with one of America's greatest competitors. But this call also comes as that possible trip from Speaker of the House Nancy Pelosi to Taiwan is looming large over the discussions.

The call had been scheduled -- or they had been planning on having this call for some time -- but really Pelosi's visit has emerged as a flashpoint, as China has issued a strong denunciation about the prospect of Pelosi visiting the self-governing island.

Just last week President Biden revealed that the U.S. military does not believe it's an appropriate time for her to be traveling at this moment. And the Chinese have vowed a forceful response if she were to travel.

So we're still awaiting to hear how exactly these discussions played out, as there is that incredibly politically sensitive situation of Taiwan on the table.

BOLDUAN: Thank you for that.

Joining me is Susan Glasser, a staff writer at "The New Yorker," and CNN contributor Jill Dougherty, former Moscow bureau chief.

Good to see you both.

Susan, can I ask I about China, a phone call lasting more than two hours, what do you think comes from a conversation like that, considering all the cross currents and tension with the China relationship?

SUSAN GLASSER, CNN GLOBAL AFFAIRS ANALYST: Well, I think in a way it's important to cut through a lot of the surround sound noise and for the two leaders to directly hear from each other and try to understand what are the potential consequences that we're talking about.

The one thing that I think people are most worried about right now is an escalating spiral, if you will, right. China threatens to take action if Pelosi goes on the trip; the U.S. is forced to respond.

What are the actions that China is specifically talking about?

I heard increasing concern from senior U.S. officials that Taiwan -- that we're overdue for a crisis, that it may come sooner than expected, not necessarily the full-on military confrontation.

But Xi Jinping is facing a crucial party congress and renewal of his time in leadership next year. And this plays very strongly into his domestic goal of essentially restoring China as a nationalist (ph). And I think that he seems to be intent on provoking a confrontation if he can. But Pelosi and Biden are now in a very awkward situation.

BOLDUAN: And Jill, what do you think of the administration coming forward publicly about this deal that they say they've laid on the table?

JILL DOUGHERTY, CNN CONTRIBUTOR: You know, Susan used the word "awkward." And I think this is awkward for the administration. I mean, the coming out, which is really very different from the way anything like this has been handled in the past; usually if you have a deal to swap prisoners, it's all done behind the scenes.

It's all very quiet and then the announcement is made by both sides. Here, you have the United States coming out and, saying, hey, we offered a deal, you know, an unbeatable deal to Russia. And silence from Russia.

So I think now maybe the administration felt that they actually did have the works of a deal or they wanted to kind of pressure Russia perhaps. But I think there's also a big domestic component, which is right now we have a lot of families, not only Brittney Griner but so many people, Paul Whelan, et cetera, who have been saying, please help to save our relatives, who are held behind bars in various countries.

That's an enormous domestic political pressure on Biden. And I think they did want to show to the American people, as we just heard a couple of minutes ago, American people in the world, that Biden takes this seriously.

He's going to try do what he can and also a warning to countries, don't try to take our citizens because we'll do something.

But right now I think it is an uncomfortable position for Biden. And the Russians can play this out. There's no particular pressure on President Putin to do this deal. But Viktor Bout has been in prison for years. And there's no public pressure in Russia because this isn't a big story in Russia.

BOLDUAN: So interesting.

And Susan, prisoner swaps remain controversial. I want to give the take of two people, Jason Rezaian, who spent 544 days in an Iranian prison, and Trevor Reed, who was held in Russia for nearly three years. Both of their releases involved a swap. Here what's they say.

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JASON REZAIAN, FORMER IRANIAN PRISONER: There's absolutely no evidence that says that doing these kinds of deals increases the likelihood of more hostage taking.

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REZAIAN: But at the end of the day, until we have deterrent measures in place and we're able to punish and hold hostage takers accountable, it not going to stop.

They keep doing it because they get away with it. So while it's unsavory to think about the trade of prisoners for Americans who are innocent and wrongfully detained in exchange for people who have been convicted in American courts, sometimes that's the only option.

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TREVOR REED, FORMER RUSSIAN PRISONER: If that's the argument that this incentivizes taking hostages or taking people wrongfully and detaining them, I think that the evidence shows that they're going who do that anyway, even if they don't receive what they're asking for.

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BOLDUAN: A big question is, what does that mean within the administration and what do you think? GLASSER: Certainly to your point about inside the administration, there clearly was a debate and disagreement about making this offer. The Justice Department worked incredibly hard. It was a coup for them to have successfully arrested Viktor Bout in the first place.

He was practically a one-man crime spree, fueling civil wars, leading to terrible consequences. The U.S. was not eager to see this deal proposed. It's very awkward that the administration made this offer in June.

So, to me, I agree that going public now suggests that Russia is not biting on the deal for whatever reason.

But the big picture point, is Vladimir Putin encouraged by the United States making an offer like this?

Vladimir Putin is using an elevated hostage taking on a massive scale right now. It not just unfortunately individual Americans like Brittney Griner who have fallen prey to Putin's war in Ukraine.

The entire country of Ukraine and indeed the world are being held hostage. Europe is being held hostage by Vladimir Putin because of skyrocketing energy prices. Countries around the global south, millions of people are potentially victim to him holding Ukrainian grain hostage and creating an artificial food crisis.

So unfortunately, I don't think that Putin is going to be deterred from seeing blackmail and hostage taking as integral to what his government is doing right now. He's become essentially an outlaw regime.

BOLDUAN: Coming up for us, CNN has just learned that multiple Trump cabinet members now have been interviewed by the January 6th committee or are in talks to do so. The latest developments on who they are and the panel's growing interest in the 25th Amendment. That's next.

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BOLDUAN: Developing right now, sources tell CNN the January 6th committee has interviewed Donald Trump's former Treasury Secretary, Steven Mnuchin. And former White House chief of staff Mick Mulvaney is set to testify today. And the committee is also negotiating with former secretary of state Mike Pompeo.

His deposition could happen soon. The panel is clearly expanding its interests into conversations the cabinet may have had about removing the president from office after January 6th. CNN's Katelyn Polantz is live in Washington.

What more are you learning about all this? KATELYN POLANTZ, CNN CRIME AND JUSTICE CORRESPONDENT: We're hearing that the House Select Committee is clearly building out what happened in that crucial set of advisors in the Trump administration, the cabinet in the moments on January 6th, what they thought about the president and whether they considered the 25th Amendment, removing Donald Trump from office, to try and steady the democracy.

So the news today from my colleagues, Ryan Nobles, Zach Cohen and Annie Grayer (ph) on Capitol Hill is that Steven Mnuchin, the Secretary of the Treasury, has spoken to the House Select Committee. We also know that the House committee is negotiating for a potential interview with John Ratcliffe, who was the Director of National Intelligence, another cabinet level position.

There may be classification issues around what he can say to them. But they are in talks with getting him to sit down and say what he knew.

We also are expecting the former secretary of state, Mike Pompeo, to come in this week and have a closed door interview with the House Select Committee. We know from reporting -- from reporter Jon Karl previously that Pompeo was in touch with Steven Mnuchin as the cabinet was beginning to panic about what happened.

And then Mick Mulvaney sat down with the House select committee or is sitting down with them today. He was outside the White House by January 6.

He was a special envoy in the State Department to Northern Ireland but he did resign in protest that day and probably would be in touch with people at that level.

So there's a lot going on here. The House is really looking into this idea of what was going on in the cabinet. And they've already spoken to Eugene Scalia, the Labor Secretary, who wrote Donald Trump a memo, asking him to call a cabinet meeting after January 6th, when they were all panicking.

We'll have to see what emerges with this new testimony.

BOLDUAN: Thank you so much for laying that all out for us.

Joining me is Marc Short, former chief of staff to vice president Mike Pence. Marc was recently under subpoena. He testified before a grand jury in the Justice Department's investigation into January 6th.

It's good to see you. Thanks for coming in.

MARC SHORT, FORMER PENCE CHIEF OF STAFF: Thanks for having me.

BOLDUAN: You have Mulvaney, Steven Mnuchin, Pompeo.

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