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GOP's Establishment Crushes Tea Party; 26 V.A. Facilities Now Under Investigation; GM Recalls Chevy Aveos Over First Risk; JPMorgan to Invest $100M in Detroit

Aired May 21, 2014 - 09:00   ET

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

CAROL COSTELLO, CNN ANCHOR: Thanks. Have a great day. NEWSROOM starts now.

Good morning. I'm Carol Costello, thank you so much for joining me. The Tea Party may not be over, but this morning the lights are on and the music is off in the biggest contest so far of this year's midterm elections, Republican voters rejected the hard right candidates and instead backed those endorsed by the GOP's establishment. Not a single Tea Party candidate survived. This morning's headlines say it all.

Our home page asks, "Is Tea Time Over?" Politico seemingly answers that question saying the Tea Party uprising is starting to look more like the Boston massacre. The "Wall Street Journal" declares primaries taming the Tea Party. And the "Daily Beast" says dollars distinct the Tea Party. And of course, no candidate embodies the GOP's power elite more than Mitch McConnell. The Senate minority leader from Kentucky.

He cruised to an easy victory over Tea Party favorite Matt Bevin. And in Georgia, the mainstream's two Senate candidates emerged from a crowded field. They'll go to a runoff. The Tea Party candidates will go home.

And the Republican mantra heading into November becomes unity.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: A tough race is behind us. It's time to unite. To my opponent's supporters, I hope you'll join me in the months ahead and know that your fight is my fight.

(END VIDEO CLIP)

COSTELLO: Our political team is covering all the angles. Let's begin, though, with Dana Bash at the McConnell campaign in Louisville, Kentucky.

Good morning, Dana.

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Good morning, Carol. Well, you just heard Mitch McConnell make a plea for Matt Bevin supporters that did go out and vote really adamantly against Mitch McConnell to come back. Now it was only about 35 percent of the Republican voters who didn't support him, but if the race that Mitch McConnell has against Alison Grimes, the Democrat here, continues to be as neck-and-neck come November as it is now, even losing a small percentage of that, a small percentage of those Republicans who didn't go for him, if they stay home, for example, which is probably the most likely scenario if they don't go for McConnell, that could be big trouble for him. So that's why they are continuing to work behind the scenes here to bring them on.

But look, you mentioned the fact that across the board, Tea Party challengers were crushed. That was what Mitch McConnell now famously said that he was going to make sure that he did. And he certainly did it here in Kentucky. And he did it with some pretty hard-fought campaigning and privately, they even admit, some dirty tricks.

COSTELLO: And, Dana, you were mentioning, you know, now comes the hard part because the election in November will be really fascinating because he's got a worthy opponent in the Democratic candidate. Tell us about her.

BASH: That's right. She is a 35-year-old woman who is a secretary of state here. But she is -- the benefit that Mitch McConnell and his team think that they had is that she is not that well known and she's much -- she's theirs to define. And that is what the race is on to do right now. But at the same time, McConnell has made it very clear that he is trying to make it not so much about her, but about the president, to nationalize the election play-up, the fact that President Obama is incredibly unpopular here.

Listen to what he said last night to set this up and her retort.

(BEGIN VIDEO CLIP)

MCCONNELL: My opponent is in this race because Barack Obama and Harry Reid want her to be in this race. A vote for my opponent is a vote for Obamacare and the president who sold it to us on a mountain of lies.

ALISON GRIMED (D), KENTUCKY SENATE CANDIDATE: Mitch McConnell would have you believe that President Obama is on Kentucky's 2014 election ballot. Well, let me set the record straight tonight for our senior senator who is out of touch with the commonwealth of Kentucky. President Obama is not on Kentucky's 2014 election ballot.

(END VIDEO CLIP)

BASH: At least in the short term who wins that argument is going to determine who wins that race because already the placards were made last night for the victory party at McConnell headquarters saying that a vote for Grimes is a vote for Obama. A vote for McConnell is a vote for Kentucky. And that is certainly how they're going to be framing it because Mitch McConnell is really unabashed in the way he describes the stakes here. It's about being able to get back to Washington, to fight President Obama, and perhaps if Republicans do take six seats in fall, become the majority leader to lead Kentucky to do that.

COSTELLO: And that certainly is Mitch McConnell's goal.

Dana Bash reporting live from Louisville, Kentucky, this morning.

Now that the primaries are over, what are some of the lessons learned? Across the nation, establishment Republican seemingly tamed the Tea Party. The message, now it's time for the party to unite.

The two big names in the Democratic establishment, Bill and Hillary Clinton were not enough to boost in-law Marjorie Margolies. She lost.

Joining me now to talk about all of this, CNN's chief political analyst, Gloria Borger.

Welcome.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Hi to you.

COSTELLO: Hi. So let's just talk a bit more about Kentucky and the race to come in November because this female candidate is strong. This could be one of the most expensive races in history in the state of Kentucky.

BORGER: $100 million.

COSTELLO: And the most vicious.

BORGER: Yes. And so look, Mitch McConnell is a tough politician. She's going to have to be just as tough, fighting back. You saw him there last night talking about two things. One is his wife, his family, women who have been important to him. So that's sort of a key, that women are going to be important in this race and Grimes needs to get those women out there to vote. And the other thing is President Obama. You know, not only is Obamacare unpopular in the state of Kentucky, but the president himself has a 32 percent approval rating.

So they're going to try and tie Democrats, of course. It's going to go on around the country to the president. So it's not only Obamacare, it's the president himself. And that's what Mitch McConnell is starting to do with ads today. And she's just going to have to be tough and fight back. Kentucky is a Republican state, but there's a changing demographic in the state that gives her -- that gives her a bit of a shock.

And as you can tell from this primary, McConnell is tough.

COSTELLO: Yes.

BORGER: He doesn't make a lot of political mistakes.

COSTELLO: Yes. She's also released ads already.

BORGER: Yes.

COSTELLO: And they're running neck and neck. So it will be fascinating. Let's go back to the Tea Party or the establishment over the Tea Party.

BORGER: Sure.

COOPER: Tea Party groups are putting their own spin on last night. This is a statement from Freedom Works CEO. Matt Kibbe said in part, quote, "When the establishment runs on our issues, it's clear there's a larger cultural shift happening. Constitutional conservatives and libertarians are setting the agenda in the Republican Party." Is he right?

BORGER: For now. That's how I would put it. I totally agree with Matt, for now. Because don't forget, what you're heading into, 2014, primary voters are the base of the party, the most active people in the party who come out to vote in the midterms. It's a very different group, it's a smaller group from people who come out to vote in a general election.

So what do you want to do? You want to attract Tea Party voters now to those more establishment candidates. And that is why you see the kind of melding of the agenda. I mean it's not as if John Boehner doesn't have trouble with Tea Partiers in his House caucus. He does. Remember the shutdown?

But for now as they try and increase their margin of control in the House, they're going to hold hands. They're going to run on the same agenda and they are going to make believe like the party is completely united which, of course, it isn't.

COSTELLO: OK.

BORGER: I mean -- that's what they're going to do.

(CROSSTALK)

COSTELLO: OK. Let's talk about the Clintons now.

BORGER: Yes.

COSTELLO: Because it was a split decision on whether or not they can actually help candidates. They certainly helped the candidate -- the female candidate in Kentucky, right, Miss. Grimes.

BORGER: Yes.

COSTELLO: But in Pennsylvania their candidate lost. What do you make of that?

BORGER: Well, you know, this was a really personal thing, as you know, Carol. This is the Clinton's daughter's mother-in-law. Marjorie Margolies' son is married to Chelsea Clinton. And so -- and there's another personal connection here which is Marjory Margolies 20 years ago cast the deciding vote for Bill Clinton's budget as a freshman Democrat and then she got thrown out of office because of that vote. So this was personal. It was a little payback. They both came out and raised money for her. And Bill Clinton did some of those robocalls for her. In the end she had been out of politics for too long. She lost to somebody who had a lot of support in the Philadelphia area with labor unions, and so she couldn't quite make it over the line and she's going to have to find a political comeback maybe somewhere else.

This was her old district. The difference is when she ran and won 20 years ago, it was largely Republican. Now it's largely Democratic and she still couldn't do it.

COSTELLO: Interesting. Gloria Borger, thanks for your insight.

BORGER: Sure.

COSTELLO: I appreciate it.

BORGER: Sure.

COSTELLO: Still to come in the NEWSROOM, we'll dig into the Georgia race as Republican Senate contenders are set for a runoff. There's just one thing missing, the Tea Party. We'll talk about why. Our political coverage continues after a break.

(COMMERCIAL BREAK)

COSTELLO: For Republicans in Georgia the road to the U.S. Senate will run through two fairly traditional candidates. Businessman David Purdue will battle against Jack Kingston, a 22-year member of Congress in a July runoff. Voters giving the boot to the Tea Party candidates who are in the running. And that's a bit of a switch for a state that's been home to one of the most conservative voting records in the past five years. This is Tea Party country after all.

Here to talk about that, Larry Sabato, director of the University of Virginia Center for Politics and John Avlon, CNN political analyst and editor-in-chief for "The Daily Beast."

Welcome, gentlemen.

JOHN AVLON, CNN POLITICAL ANALYST: Good morning, Carol.

LARRY SABATO, UNIVERSITY OF VIRGINIA CENTER FOR POLITICS: Thank you, Carol.

COSTELLO: Good morning. Larry, I'd like to start with you. What is this about money? Was it just because the establishment candidates were more well-funded?

SABATO: Well, money never hurts. But I think it's more than that, Carol. You know, political parties are like average people. Really after you get hit on the head with a two-by-four two or three times in a row, you tend to avoid the two-by-four. I think they learned from some of the mistakes that Republican electorates made in 2010 and 2012. And they have chosen in Georgia and also in Kentucky the candidates most likely to win in the fall. That's what parties are supposed to do in their nominating process.

COSTELLO: John, what struck me now -- and I hear you, Larry -- but it seemed like the establishment Republican candidates in Georgia running talked more like Tea Party candidates. Was it a little bit of that, too, John?

AVLON: Yes, look, I think -- I think the, quote-unquote, "establishment candidates" are singing from the Tea Party script. The Tea Party lost this battle, but they may be winning the war when it comes to the soul of the GOP. That's something to watch.

In Georgia, as in so many states last night where the Tea Party really faced a total shutout, you saw the Chamber of Commerce wing of the party rising up. Folks interested in governing, they were going to tack right to do what they need to, to fend off challenges from the far right. But at the end of the day, they're totally focused on winning. And that's what's been missing from the Tea Party equation over the last several years.

COSTELLO: I understand. So, Larry, I ask you the overarching question, is the Tea Party candidate diminished, is it dead? How would you characterize it?

SABATO: Oh, it's still a piece of the Republican Party. Look, America is an incredibly diverse country demographically and in terms of political factions, both parties are coalition parties.

So, the Republicans need the Tea Party people. They certainly need the evangelical Christians. They need a slice of moderate Republicans that used to dominate the party. They certainly need the establishment wing for money.

You know, victory or the smell of victory tends to bring party factions back together. Whether they're right or not, the Republican factions sense victory in the fall. They sense they are going to take over the Senate, we'll see if that's true. They sense they're going to strengthen their position in the House of Representatives. That brought them together.

COSTELLO: Interesting.

OK. So, John, I want to touch on the Democratic side of the equation. I'll use an example here, in Georgia. Two candidates with name recognition and deep roots in the state, Michelle Nunn and Jason Carter who happens to be Jimmy Carter's grandson, both easily won their primaries.

Will it be a different story come November?

AVLON: Sure. I mean, the most important thing, Carol, in election outcomes is the election cycle, is the level of turnout. You know, Georgia's demographics are changing. Georgia is not going to be a lock conservative state some point in the distant future.

But in these midterm elections not on presidential cycles, you have lower turnout, the turnout tends to be whiter and older, and that's good for Republicans. So, Democrats reaching for that kind of name brand ID, Nunn, Carter, that allows them to run the tables in the primaries.

Is it going to be a tough fight in the fall? Yes. Is it going to be "all politics is local" that internal rule? Absolutely.

But whenever you see parties reaching for the name ID, it's not necessarily a state of strength, it's a sign of comfort. And it can help folks win primaries, but it's not enough to take them over the top. The important thing to remember in the swing states and really in any state, even if they're conservative, it doesn't mean they're crazy.

For Democrats that look at the Tea Party losing the primaries, that's not a good thing if your name is Nunn, Carter, or if you're in the Democrat Senatorial Committee. You wanted to run against those Tea Party folks and that's an important lesson here.

COSTELLO: Absolutely. Larry Sabato and John Avlon, thanks for your insight. I appreciate it.

Still to come in THE NEWSROOM: The White House is scrambling to respond to the growing scandal of the veterans who died waiting for care at V.A. facilities. President Obama meeting today with the agency secretary.

Michelle Kosinski is following that for you.

Good morning.

MICHELLE KOSINSKI, CNN WHITE HOUSE CORRESPONDENT: Hi, Carol.

Yes, this is a big meeting the day. The V.A. secretary has been called to the White House. Many want to see what kind of change, if any, this will bring. We'll have that coming up.

(COMMERCIAL BREAK)

COSTELLO: President Obama under increasing pressure over the scandal involving V.A. hospitals will meet next hour with the embattled V.A. Secretary Eric Shinseki. Twenty-six facilities now under investigation amid allegations of dangerously long care delays and secret waiting lists for patients. A newly revealed V.A. memo from 2010 shows officials warned of inappropriate scheduling practices and attempts to conceal long wait times.

A whistle-blower told CNN's Anderson Cooper last night the problems are pervasive.

(BEGIN VIDEO CLIP)

DR. SAM FOOTE, V.A. WHISTLEBLOWER: This is a systemic problem and they have been cheating this and gaming it for years.

ANDERSON COOPER, CNN HOST: I mean, how can you say that for sure? FOOTE: Well, I guess I can't say that for sure. It's certainly been going on in Phoenix for years. I talked to people at other vas and they tell me the same thing.

COOPER: Is the core issue here that the V.A. is underfunded and they don't have the resources to treat the large number of vets?

FOOTE: Well, we've had poor administration for several years which has compounded the problem of more demand than we can supply. Rather than admit to it and address it, they've elected to cover it up. That's where the problem lies.

(END VIDEO CLIP)

COSTELLO: CNN's Michelle Kosinski is following this story from the White House.

So, what will this meeting involve involving President Obama and Secretary Shinseki?

KOSINSKI: Yes, this is happening now and the timing is interesting. The president has been facing tough questions over this. He has called Secretary Shinseki to the White House. They will meet soon in the oval office.

Also, there will be top White House adviser Rob Nabors who the White House has kind of put on the case, to work alongside the internal V.A. investigation in this.

It really has been a tough couple of weeks. A crisis breaks like this, very embarrassing scandal within the V.A. You always want to be on the leading edge of that, kind of proactively showing that you're on top of it, you're leading the way and making the changes right now.

But the White House has really been put on the defensive day by day as the scandal has only grown by the day. The White House has been unwavering in its defense of Shinseki. I think that makes it seem unlikely that this meeting today will lead to any real changes in his status unless he chooses to resign.

But they've highlighted his successes over the past few years to try to make the V.A. better. But, also, the White House has tried to kind of shape the dialogue in it, saying that the president has been personally involved in this, although this is the first time since the scandal broke he's meeting directly with Shinseki. Some within the president's own party, Tammy Duckworth, herself a wounded war veteran, has said she thinks she'd like to see more of the president's personal attention.

I think what's most interesting is the resignation or stepping down that we did see of the V.A. undersecretary, but the White House will not clarify whether that was a firing or a retirement because it turns out he was set to retire this year anyway.

COSTELLO: OK. Michelle, I'll throw something out there. Why doesn't the president talk to the American people and explain things? KOSINSKI: Exactly.

COSTELLO: Wouldn't that put rumors to rest and maybe put the White House more on the offensive?

KOSINSKI: Right. That has been the big question. The White House has faced that question day after day in the briefing room.

So, now, the administration is saying, yes, we will hear from the president soon. This big meeting the day raises the possibility that we could hear from Obama directly on this as early as today, Carol.

COSTELLO: Well, we'll see in the next hour. Their meeting should be over by then. Who knows though.

Michelle Kosinski reporting live from the White House -- thank you.

All right. We have two big business stories just in to CNN.

Get this -- General Motors is adding another 218,000 cars to its recall. This time, it's the Chevy Aveo. Its daytime headlights can overheat and actually catch fire.

So far this year, G.M. has recalled more than 15 million cars and trucks around the world. That's more cars than they sold last year.

Also just in this hour, another sign target has been hit hard by that holiday credit card hack attack. New numbers released by the company show profits took a dive last quarter. Executives still don't know how much the cyber attack will cost them.

Alison Kosik is live at the New York Stock Exchange to tell us more about Target's woes.

Good morning.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Good morning, Carol.

Oh, yes, it's been a really tough time for Target, lately, to say the least. It doesn't look like it's going to be ending any time soon.

This morning, we learned what the first quarter earnings were. They fell. Also, Target cut its profit outlook for the year. In business- speak, that means Target is not confident about the future.

Here is another problem, and this is a biggie. Sales at Target are down. You know shoppers just aren't coming in, and its data breach is still a monkey on target's back. You look at the stock. It's really beaten down since the breach was announced late last year. The stock is down 11 percent since then.

The breach itself cost target $87 million so far. Believe it or not, that $87 million is not huge considering the company had $17 billion in sales last quarter. Keep in mind, Target is also getting insurance money to cover the breach. But for investors, this is still a problem. This is still a lot of uncertainty. The problem is target doesn't know how long this breach will affect its bottom line. That's a big issue.

And customers, they're clearly spooked, although some of the lack of foot traffic target is seeing is because the economy ain't so hot at this point. Other retailers are having similar situations, too.

But for Target interim CEO John mulligan, today's results are just a reminder the pressure is definitely on -- Carol.

COSTELLO: Oh, yes. Alison Kosik, thanks so much.

City of Detroit is about to get a big boost from JPMorgan. This morning, CEO Jamie Dimon announced $100 million investment in aid to the bankrupt city, as it struggles to emerge from billions of dollars in debt.

(BEGIN VIDEO CLIP)

INTERVIEWER: There's money to be made here?

JAMIE DIMON, CEO, JPMORGAN CHASE: I hope so. I mean, we're doing this to grow investments and grow the city and create a healthy vibrant city. If that happens, it will be good for us, too.

(END VIDEO CLIP)

COSTELLO: Dimon says the money will be used to boost worker training programs and help clean up the city among other projects.

Poppy Harlow is covering this story. She has more.

POPPY HARLOW, CNN BUSINESS CORRESPONDENT (via telephone): Good morning, Carol.

Well, JPMorgan, that Wall Street giant, announcing this morning they're investing $100 million in Detroit to help with the bankrupt city's recovery. About 40 percent will be investment, meaning they expect so make some money back. Sixty percent is philanthropic, basically in the forms of grants. $50 million, half going to community developers trying to turn around struggling neighborhoods in Detroit.

One of the biggest problems in Detroit is all those abandoned homes, $25 million will go toward tackling neighborhood blight, which is a problem across Detroit.

And, final $25 million will go toward worker training, small business development, also financing initiative like a new rail line.

Now, the CEO of JPMorgan, Jamie Dimon says he wants to see the city recover. Obviously they're putting their money behind that.

Also, important to note, Detroit is a big customer for JPMorgan. They've been in that city for 80 years. They have millions of customers there. Detroit, when you think about big pictures, this is a city that's more than $18 billion in debt. They are working to get concessions from investors, and city workers and retirees, trying to eventually emerge from bankruptcy.

But this is expected to be helpful, of course, to Detroit in this situation, the financial situation, that it is in right now. Carol.

COSTELLO: Poppy Harlow reporting for us this morning.