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China Suspends Cooperation With U.S. on Range of Issues; Democrats Score Victory as Sen. Kyrsten Sinema (D-AZ) Agrees to Sweeping Economic Bill; U.S. Economy Adds 528,000 Jobs in July, Far Surpassing Expectations. Aired 10-10:30a ET

Aired August 05, 2022 - 10:00   ET



JIM SCIUTTO, CNN ANCHOR: The question now is what a slower jobs market actually helped produced inflation and protect the economy. Lots of the questions here but the headline number very good news. We are going to speak with Labor Secretary Marty Walsh in just a few minutes.

Plus, a major boost for President Biden's sweeping economic package, Senator Kyrsten Sinema now on board with what is known as the Inflation Reduction Act, giving Democrats those 50 votes they need. There is still one hurdle, though, to overcome before it heads to a vote.

And in China, the Ministry of Foreign Affairs taking action in response to U.S. support of Taiwan, that now includes halting future phone calls and meetings with U.S. defense leaders. All of this as Taiwan is reporting a record number of incidents and intrusions by Chinese warplanes. The White House has summoned the Chinese ambassador to the U.S. to condemn what it calls China's irresponsible military activities and we begin there.

CNN White House Reporter Natasha Bertrand, also CNN International Correspondent Selina Wang following the headlines.

Natasha, first to you. This is a change from the White House. The White House is pushing back very hard on what it says is inflammatory behavior by China.

NATASHA BERTRAND, CNN WHITE HOUSE REPORTER: Yes. And in the last several weeks, they have actually been trying to convey that privately to China. They have said, please don't up the ante here, in response to this visit by Pelosi to Taiwan. Now, they are making public the fact that they have in fact summoned the Chinese ambassador to the U.S. to the White House to essentially give him a dressing down about China's provocations against Taiwan in recent days.

They had said numerous times that they expected that China would have some kind of reaction to this visit by Pelosi, which was extremely offensive to the Chinese. But the White House has been, you know, kind of willing to respond in a meaningful way now to the Chinese activities that we have seen around Taiwan, which are really escalatory and are the most that we have really seen in decades.

And so what the White House is saying now is that they're reiterating to the Chinese that this is unacceptable, that the U.S. position on Taiwan has not changed over many decades and has not changed because of Pelosi's visit to Taiwan and that there is no reason for China to be carrying out these provocations because the United States is not prepared to accept that Taiwan is going to be independent.

So, reiterating that they're not going to back down, the U.S. won't, they are going to continue their operations in the Western Pacific, and also saying, look, this upping of the ante here, this new status quo that you're trying to create by trying to push the United States out of this orbit is just not going to work.

SCIUTTO: And make the point that what is unprecedented is not the visit, in the U.S. view, it is these exercises we're seeing here.

Selina Wang, in Beijing, Taiwan reporting a record number of incidents now by China's People's Liberation Army, tell us on what scale. Because, I mean, we have seen the missile launches, we've seen the military exercises in waters around Taiwan. What else is Taiwan witnessing?

SELINA WENG, CNN INTERNATIONAL CORRESPONDENT: Well, now, Taiwanese officials are saying that 68 Chinese warplanes flew into its self- declared air defense identification zone. Now, this is the air space around Taiwan where China frequently flies warplanes through, but this time it was a record number of daily incursions. And this follows the inflammatory news from state media yesterday that Chinese missiles had actually flown over Taiwan island, not around it, but over it for the first time in a major escalation.

And all of these provocative moves are part of this days' long military drills that are happening in a circle around Taiwan. The message China is sending the world here is that, look, at any moment, our powerful military could choke off Taiwan from the rest of the world.

But now we're seeing this retaliation from China also sink U.S./China ties to new lows. China has announced they are cutting off dialogue with the United States in a whole wide range of areas, including around military, anti-drugs, illegal immigration and perhaps most importantly on climate change. This is a huge deal because climate change was one of the only areas where the two sides were actually cooperating despite the heightened tensions of the last few years. Not to mention China has also now sanctioned Nancy Pelosi and her immediate family in a highly symbolic move.

But, look, Jim, I just want to make a point on those military exercises, which is when I speak to military experts, they say these drills couldn't have all been suddenly planned in response to Pelosi's visit. They took a long time to prepare. But by pegging it to Pelosi, it's whipping up patriotism at home and that's a welcome distraction for Chinese President Xi Jinping from all of the economic problems at home here, Jim. SCIUTTO: Well, it also shows their hand to some degree on what military plans they might have if the Chinese president were to order them against Taiwan.

Selina Wang in Beijing, Natasha Bertrand with me here in Washington, thanks very much.

Domestic politics and a big win for Democrats, Senator Kyrsten Sinema said that she's ready to, quote, move forward on their sweeping economic package. It looks like she got what she wanted out of the negotiations.

The Inflation Reduction Act, as it has been titled by Democrats, will no longer close what is known as the carried interest loophole, this means that investment managers still pay much lower tax rate by claiming their compensation is capital gains.


The New York Times reported she also won money for drought relief that several western senators had wanted.

Let's go to CNN's Manu Raju, he is on Capitol Hill to break down these changes, and also if you can update us on where the Senate parliamentarian stands on all of this because is still need that stamp of approval.

MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: Yes, that's right, Jim. And the changes were significant. This left for several days of negotiations to get Sinema on board, get all 50 Democrats on board and move forward on this major piece of legislation.

Sinema had raised concerns about the taxes in this bill that helped pay for the spending on climate change, and on healthcare initiatives and energy initiatives, but she had concerns about you mentioned the carried interest loophole, so-called loophole, that is the tax that Democrats wanted to impose on hedge fund managers and private equity. She got that eliminated from its proposal.

She had also raised concerns about how the 15 percent corporate minimum tax on major corporations, how that would be structured in this bill. She had raised concerns about how they are changing language and how companies can deduct depreciated assets on their annual tax returns.

They had narrowed that as a result of her concerns that she had raised after she got lobbied pretty heavily by manufacturers and companies who have been concerned about what the Democrats were proposing. In addition, the $5 billion in drought relief was a key provision she won.

Now, there was other changes Democrats had to make for the funding and revenue short fall, one of which was they added 1 percent excise tax on stock buybacks that companies make that will help generate more revenue. Democrats are contending that this would cut the deficit by about $300 billion, which had been a central item that Joe Manchin in particular had pushed. He, of course, was central to cutting this deal that was announced last week.

But there are still some hurdles ahead, namely the votes, and the Senate parliamentarian. Tomorrow, the Senate will move forward and have a procedural vote. They need all 50 Democrats to open debate. Then there will be 20 hours of debate evenly divided between the two sides, and then after which there would be a series of amendments that senators can offer on both sides as many as they want. It is known on Capitol Hill as the vote-a-rama, nonstop amendments essentially until they get worn down and can no longer offer amendments. And Republicans will try to scuttle this in every which way they can, whittle this down, but Democrats are likely to fend off those GOP attempts before it moves to final passage.

But that big question still that remains is whether the Senate parliamentarian will allow all these provisions the Democrats are talking about to be included in the budget process so it can be approved by straight party lines and circumvent a Republican filibuster. That is the big question in the hours ahead, but still getting Sinema on board, hugely significant. Democrats have a serious chance of getting this out of the Senate by the end of the weekend and the House next week.

SCIUTTO: A busy weekend for them and likely for you. Manu Raju, thanks very much.

So, far no Republicans have expressed support for what is known as the Inflation Reduction Act. And that's notable because it actually includes provisions that have been very popular with the GOP in the past. When you look at the bill, what you see is a series of trade- offs. So, here are the facts about what is in the legislation as it stands now.

For starters, it would be the biggest climate investment U.S. history with $369 billion set aside to combat global warming. That includes consumer tax credits on electric vehicles, roof top solar panels and energy efficient water heaters, among other thing.

But, we should note, there are also billions in tax credits to fossil fuel companies, to encourage them to invest in clean energy manufacturing. And this is key the bill actually supports expanding investment in domestic oil and gas exploration on federal lands and in offshore federal waters. In fact, for the next decade, any new wind or solar energy project on federal land could only be approved if a new lease is approved for oil and gas drilling as well.

On taxes, the bill abandons tax increases opposed by Republicans, including raising the corporate tax rate, the personal tax rate or the capital gains tax rate. The bill also includes changes to the healthcare system, including a measure on prescription drugs. Specifically, the bill would empower Medicare to negotiate the prices of certain costly medications, which is garnered bipartisan support.

The bill would also expand the Obamacare subsidies that are set to expire at the end of the year until 2025. And as for that carried interest loophole that Senator Sinema nixed, even President Trump expressed support for eliminating that in the past. But word comes to mind here, a rare one in Washington these days, and that word is compromise.


Still to come this hour, stocks opening down after that blockbuster jobs report. Actually, it is flat right now. Labor Secretary Marty Walsh will join me next to discuss.

Plus, Washington says it is willing to discuss a prisoner swap after WNBA Star Brittney Griner was sentenced to nine years in prison. How the U.S. is responding.

And a massive bolt of lightning struck just outside the White House last night. Sadly, it turned deadly. What we're learning, that's coming up.


SCIUTTO: Really big number out of this morning's jobs report. The Labor Department reports more than half a million jobs added in the month of July, really doubling what many economists had forecast.


What does this mean for the economy, recession fears, inflation interest rates?

Joining me to discuss, Labor Secretary Marty Walsh. Secretary, thanks for taking the time this morning.

MARTY WALSH, LABOR SECRETARY: Thanks for having me today, Jim.

SCIUTTO: So, first of all, prior to this report, as you know, after the second quarter GDP numbers came out, that the fears were of recession. You had a former Fed official, Bill Dudley, warning almost certainly there will be a full recession, Elon Musk talks about a relatively mild recession. From the White House view after these numbers, is that easing fears in your forecast that the economy will or has entered recession?

WALSH: Well, certainly, something out there today we're hearing, if we're in a recession, companies would be laying people off rather than hiring them. We saw people hiring at record -- well, not at record numbers, but big numbers. So, obviously, I think that a lot of companies are still growing, a lot of companies are still adding people on.

We have seen all the jobs that were lost pre-pandemic recovered from the pandemic. We saw the unemployment rate 3.5 percent today. The day before the pandemic was 3.6 percent. So, we're seeing lower numbers there. And we're seeing people go back to work.

In certain areas, we're seeing education, local education numbers going higher, we're seeing retail up, and manufacturing, quite honestly, is probably for me one of the most exciting, biggest surprises we have because we have seen not just that industry recover since the pandemic but we have seen that go beyond that. And then now with the chips bill that the president will sign into law next week, we're going to have the opportunity to really create more opportunities for manufacturing in the United States, particularly around semiconductors.

SCIUTTO: This report also showed wage growth above 5 percent. Inflation is also something the White House is watching very closely. Do you look at this number and say, inflation is not abating, in fact, perhaps we're going to see some more bad numbers coming forward when it comes to inflation?

WALSH: Well, certainly, it is great to see wage growth for American people and getting more money. I think it's 5.2 percent. Obviously, the inflation issue that we're dealing with is in all hands on deck. You know, the president is working on bringing down gas prices. I'm working with Secretary Buttigieg and other folks on making sure that supplies are coming to the United States of America. There is an Inflationary Reduction Act that is going through Congress hopefully this weekend that's going to be tackling other challenges.

So, the president laid out a plan to get 10 million Americans back to work. A year-and-a-half later, 10 million Americans are back at work. The president had a plan at the end of last year to deal with inflation. The number certainly wasn't as high as it is today but it's also not as high as it is in a lot of European countries and other countries on the globe. So, we have to continue to work to bring those numbers down as well.

It is not a simple solution and it wasn't caused by bad policy. Quite honestly, a lot of this inflation was caused because of a pandemic and we can't lose sight of that.

SCIUTTO: Senator Bernie Sanders has said that the problem he sees with the economic package is that it does not directly address people's pocketbooks as prices rise, despite the title of the legislation, that's his criticism. How do you answer that criticism?

WALSH: Well, I think one of the biggest ones is we have millions of seniors in America today, my mother is one of those folks, that are paying extraordinary amounts of money for prescription drugs. And by allowing the companies to be able to -- Medicare, Medicaid, and to negotiate prices, bring those prices down, will help millions of seniors in America. That is a big win for a lot of people in this country.

And I think that when you think about who is on fixed incomes and who we have to help, if you're a younger worker and you want to better your situation in life, people are doing that. They're jumping from job to get better paying jobs, we're making investments in workforce development and job training programs and we're creating those pathways.

When it comes to a senior citizen who's on fixed income, maybe social security or small pension that they're having, they don't have the ability and the option to go back to work. So, anytime we can help them bringing the costs down in their pocketbook and allow them to save some money, that's a big win

SCIUTTO: Let me ask you this, because this is, and by any reasonable accounting, it has been a good month of legislative wins for Democrats. You have this bill, granted if the parliamentarian comes through on it, it appears to have the votes. You have the CHIPS Act, which you mentioned, you had agreements on NATO and Finland, for instance, by bipartisan votes joining, and gun legislation, a lot of folks thought was not possible. Yet at the same time you have many members of the president's own party speaking openly saying that President Biden shouldn't run for president in 2024.

Rick Wilson, he tweeted this point earlier today. He said Democrats can't organize a two-car motorcade but they sure can turn the guns on the leader of their own party 90 days before an election. This is a basic lack of discipline.

I wonder, do you see your part -- some in your party is undermining their own president?

WALSH: Well, certainly, I think some in my party need to take a step back and maybe shut their Twitters off, because the president in the last six weeks, we have seen gas prices lower at the pump for the last seven weeks, quote honestly, going down. That's the fastest reduction in the decade.


We're seeing a major bill on infrastructure that people are going to see the investments in their communities coming up this summer and into the fall. We saw the CHIPS bill that was passed, bipartisan bill, by the way, that the president was able to reach across the aisle and vote for those bills to see more money for manufacturing and the Inflation Reduction Act that's going through congress right now.

I mean, I think that when it comes to -- it is easy to be Monday morning quarterbacker on the sidelines taking shots at the president, but he took over office with 10 million Americans out of work, he took over office with no plan on the pandemic, and, quite honestly, he's done an amazing job, in my opinion, of working across the aisle and pulling America together. And he's going to continue to do that.

So, they can have their opinions all they want, and if President Biden make a decision to run for re-election 2024, a lot of those folks will line up behind him.

SCIUTTO: Final question for folks watching right now who are seeing prices rise, you're crunching the numbers all the time, doing the best you can. Can you tell them when they might see some relief?

WALSH: I wish I could. I wish I had a crystal ball. But I want you to know that people out there that are struggling and listening to me right now to let you know that we're working hard to make sure we're doing everything we can to bring the costs down, whether through the supply chain issues, whether it is through releasing oil reserves, whether it is working on this Inflation Reduction Act, working with companies to bring more people back, we're doing everything we can to bring these inflationary pressures on you down so you have more money in your pocket.

SCIUTTO: Secretary Marty Walsh, good to have you back on the program.

WALSH: Thank you.

SCIUTTO: Russia says it is ready to talk prisoner swap with the U.S. Still ahead, we're going to be live from Moscow with the latest on the fallout from Brittney Griner's nine-year prison sentence.



SCIUTTO: The U.S. says it will pursue Russia's offer to discuss a prisoner swap. That offer coming after WNBA Star Brittney Griner was sentenced to nine years yesterday in Russian prison. Griner pled guilty to smuggling a small amount, about a gram, of cannabis oil into Russia earlier this year.

This morning, Trevor Reed, a U.S. Marine veteran, who served nearly three years in a Russian prison before his release earlier this year, spoke to CNN about the conditions there.


TREVOR REED, RELEASED IN APRIL AFTER SERVING NEARLY THREE YEARS IN RUSSIAN PRISON: Food there is terrible sometimes. That could be just some fish bones or broth of fish bones. You know, potato soup with -- it is mostly water. Solitary confinement there is basically consists of just a concrete room with a hole in the floor for a toilet, just really middle age looking stuff.


SCIUTTO: Just harrowing conditions to hear from someone who experienced it himself.

CNN Senior International Correspondent Fred Pleitgen is in Moscow. Fred, the U.S., as you know, suggested a prisoner swap before Griner's sentencing. RUSSIA kind of anted up. Do you find the statement now a sign that substantive negotiations will begin again?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it certainly appears as though there is some movement at least, Jim. And I think, first of all, you're absolutely right. The Russians were extremely irritated when the U.S. came out and said -- publicly said that there was a substantial offer on the table to try and get both Brittney Griner and Paul Whelan out of Russian custody, a swap.

And it is something that the Russians really didn't want to talk about publicly. They called it megaphone diplomacy. They said that the U.S. needed to return to quiet diplomacy. It seems as though there are changes to that now with Sergey Lavrov, the Russian foreign minister. They're publicly saying that Russia is willing to engage.

And one of the things that Brittney Griner's lawyers told us throughout this trial is that they believe that there needed to be a verdict in this trial and a sentencing in this trial for some sort of prisoner swap to actually happen.

Now, of course, that is something we have even though there is going to be an appeals process going on. The legal team telling me that they are going to file an appeal against this verdict. And so while we probably won't -- we definitely won't see it in public, it looks as though negotiations can possibly go into another gear now.

It was interesting today though that the spokesman for the Kremlin, Dmitry Peskov, he came out and he said that these negotiations could take place, but none of the details can never become public. He said that if details of negotiations about prisoner swaps, in general, become public, even some details, then those swaps simply are not going to happen, so for all this moving to behind closed doors.

And we heard Secretary of State Blinken, also who is in Cambodia today, saying that they are going to pursue this through the avenues that are in place and going to be taking up that offer from the Russians.

SCIUTTO: All right. We'll be watching closely. Fred Pleitgen, thanks so much.

Joining me to discuss is Jared Genser. He's an adjunct professor of law at Georgetown and a human rights attorney who specializes in representing Americans held by foreign governments. He's represented Nobel Peace Prize Laureate Desmond Tutu and Elie Wiesel, his current clients include two Americans in prison in Iran. Hared good to have you on this morning.


SCIUTTO: So, you've got a lot of experience dealing with governments who hold Americans, often governments who use their judiciary to create hostages, like we're seeing, like these circumstances have been described in Russia.


First, your read of that statement this morning from the Kremlin spokesman. Is that a sign to you that talks are happening again.