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Biden's Legal team Finds more Classified Documents; Inflation Continues to Ease; Corrupt File Caused Ground Stop; Cals for Santos to Resign; Heather Caygle and Heidi Przybyla are Interviewed about Santos. Aired 9-9:30a ET

Aired January 12, 2023 - 09:00   ET

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

[09:00:41]

ERICA HILL, CNN ANCHOR: Good Thursday morning. Top of the hour here. I'm Erica Hill.

JIM SCIUTTO, CNN ANCHOR: And I'm Jim Sciutto.

Some major economic news this morning and some good news. Inflation showing signs of easing in the month of December. Consumer prices posted their biggest monthly decline in months. Also some easing in the annual growth rate. The impact this could have on the Fed's decision to race interest rates, how much, how long. We're going to break down all the numbers just ahead.

Plus, President Biden's legal team has discovered a second batch of classified documents. The White House has declined to comment on the matter. Republicans certainly have much to say. We'll discuss the legal, political ramifications facing the administration, also the differences with Trump's handling of such documents.

HILL: And the airline industry this morning recovering from that massive damage done by a single corrupted file yesterday. What is the FAA saying as they investigate the cause for these thousands of delays and cancellations yesterday. We'll bring you up to speed.

First, though, this morning, we do have more on President Biden's legal team finding that second batch of classified documents at another location.

SCIUTTO: With us now, CNN's senior legal affairs correspondent Paula Reid, also CNN's senior White House correspondent MJ Lee.

Paula, first to you.

Tell us exactly what this discovery was, who discovered it, and then what they did with these documents.

PAULA REID, CNN SENIOR LEGAL AFFAIRS CORRESPONDENT: Well, we don't have answers to any of those questions, Jim, because all we know right now is the headline that Biden's legal team discovered an additional batch of government documents that includes classified information. The White House is making a deliberate decision not to get out in front of this matter and to allow this to leak through the press. I'll let MJ handle the reporting on why that is.

But we know, of course, this is the second batch of documents that has been discovered. Previously we learned that they discovered ten classified documents in an office that they were cleaning out. That those documents included top secret information. And we've learned that those documents cover subjects like Iran, Ukraine and the United Kingdom.

So, right now, we certainly have more questions than answers. We're asking, where were these found, how many documents, what did they contain.

And the other big question hanging out there, is this it? So far they've been very careful not to definitively say that the first batch or now the second batch is all there is.

The other big question, of course, is, what will Attorney General Merrick Garland do with this? He has, of course, tapped the U.S. attorney in Chicago to review we certainly know the first batch. It's unclear what is happening to the second batch, if that was part of this review.

But now that you have batches, plural, of classified information potentially mishandled, the odds of a special counsel are increasing.

HILL: So, MJ, when we do look at this, you know, the White House, as Paula laid out, being very careful about what they do and what they don't say. And they're not saying very much. Do you have any more insight into this strategy, I guess, is the word by the White House communications department and why this is the approach we're seeing this morning?

MJ LEE, CNN SENIOR WHITE HOUSE CORRESPONDENT: Yes, you know, Erica, so far the White Houses has not commented at all on the second batch of documents and really they haven't said much at all about the first classified batch of documents either as evidenced by the White House press briefing yesterday when the press secretary basically evaded answering question of question and really just wouldn't say anything new.

So, what we are left with right now, and Paula ran through some of those questions, is just a whole bunch of things that we just don't have answers to, including on the timing factor here, right? Why was it that folks knew about the first batch of classified documents going back to November, but the public wasn't aware of it until several days ago? What were some of the details of how those documents actually ended up at the private office?

And then, of course, when it comes to the second batch of documents, just the details of where exactly was that found and who put those documents there?

And I think the biggest question probably is, and Paula again got to this is, whether we are about to find out about the discovery of additional documents. It is not going to be helpful to the White House, to say the least, if this ends up being a sort of drip-drip situation. And we know, just based on what we have heard from Republican lawmakers so far, that they are very intent on adding this to their growing list of investigations targeting the Biden administration and the Biden White House.

And, of course, just in terms of the political timing, all of this is unfolding, it is now looming over an expected decision coming soon from the president on a potential second term.

[09:05:09]

SCIUTTO: Paula Reid, MJ Lee, thanks so much.

All right, the economic news, and this just in to CNN, a key measure shows inflation is continuing to cool. The Labor Department released new numbers minutes ago. They show inflation eased once again in December. You had both a monthly decline but also a slowing at least of price growth on an annual basis. And it's the sixth straight month of slowing.

HILL: CNN chief business correspondent Christine Romans joining us now with more.

So, this feels like good news. Is that what the data is essentially saying?

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Unless you're buying eggs, this is good news.

Let me show you the overall numbers here because, Jim, you're exactly right, that monthly decline in CPI, we haven't seen that since the beginning of this inflation nightmare. That's the first decline from one month to another in the CPI since May 2020. When you look at the chart, you can clearly see those six months of slowing annual inflation growth.

Now, 6.5 percent is still too high, you guys. The Fed still has a long way to go. It would like it to be more like 2 percent. So, there's still work to be done, but it looks like the worst of this national nightmare is behind us here.

When you dig in the numbers, it is gas prices declining both month to month and year on year. You've probably seen that if you've been filling up at the gas station. But food prices still high here and shelter up 7.5 percent overall here. Egg prices up 59.9 percent. So, you're still seeing these higher prices at the grocery store for a variety of reasons.

But overall inflation, everybody, a lot of economists, it looks like it has peaked here. Still some work to go. The Fed meets again in February. And the feeling is those days of 75 basis point interest rate hikes might be behind us. The Fed will continue to raise interest rates to cool this inflation, but maybe not by such big moves.

HILL: Maybe not as high.

ROMANS: Yes. HILL: All right, well, we'll take it.

ROMANS: OK.

HILL: I will take all the good news, and I love it when you bring it.

SCIUTTO: Yes.

HILL: Christine, thank you.

ROMANS: You're welcome.

SCIUTTO: All right, joining us now to discuss, Rana Foroohar, she is the global business columnist and associate editor at the "Financial Times."

Rana, good to have you on today.

So, listen, prices still going up, right? But they're going up more slowly on an annual basis. But Christine noted something there that stuck out to me, the first month-to-month decline in prices since going back to early 2020. So, the early May 2020, the early stages of the pandemic.

How significant is -- are these numbers in your view?

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Oh, for sure. These are big-deal numbers. And I think that they really show that the Fed's efforts have worked, right? I mean the central bank has been trying to land this plane without crashing it, as, you know, Elizabeth Warren has been - has been saying. And I think that they're doing that.

I mean, you know, we've still got some inflation. Christine's right. We've got inflation in wages, which, you know, that's always a mixed bag, right? I mean that's something that the Fed's still worried about. But, on the other hand, people need more money in their pockets.

So, it's a delicate balancing act, but these numbers say to me, look, the efforts are working.

I do think -- and this is good news for consumers - I think we're going to go back more to the days of, you know, quarter percent point interest rates rather than some of the faster, bigger hikes that we've been seeing.

HILL: So, you're saying in February, when the Fed meets, you - that increase could be as low as a quarter percent?

FOROOHAR: I wouldn't be surprised. I wouldn't be surprised if we're at least, you know, in the next few months we're going back to that more normal environment of rate hikes. I don't think they're going away yet.

SCIUTTO: Yes.

FOROOHAR: But I think that people, you know, that are worried about interest rates are probably going to be in a good place going forward.

SCIUTTO: Let me ask you this because there's been a lot of talk here - I mean from a political perspective Republicans say this was all about, you know, stimulus money. And that clearly was a factor. But we've seen inflation around the world. And there was certainly a pandemic factor here, a supply chain factor.

On that side of things, are we beginning to see that, not just here in the U.S. but around the world, that that pressure is being relieved on the economy?

FOROOHAR: Oh, for sure. You know, I mean, if you look back at the pandemic, this is kind of a once-in-a-generational event, at least in terms of the kind of supply chain disruption that you saw. And now we're seeing a much more regionalized world. You know, companies are saying, wow, we can't just have one highly vulnerable supply chain going from China to the U.S., we've got to have a lot of different supply chains. We've got to create more resiliency. Over 90 percent of big multi nationals in the U.S. are rethinking their supply chains.

SCIUTTO: Yes.

FOROOHAR: They're going regional. They're going locally. I think that's going to be actually very good for local communities.

SCIUTTO: Yes.

HILL: Rana Foroohar, always appreciate your insight. Good to see you this morning. Thank you.

FOROOHAR: Great to see you.

HILL: Airlines expected to get back to their normal schedules in the next few hours or so. This, of course, after that logistical nightmare, which was created by the nationwide ground stop yesterday.

SCIUTTO: Listen to these numbers, 10,000 flights delayed, another 1,300 canceled.

[09:10:01]

That hurts when you're traveling. Now the FAA says the chaos created by a system outage was sparked by a single solitary corrupted file.

CNN aviation correspondent Pete Muntean joins us now live from Reagan National Airport.

So, Pete, I mean we've all had corrupted files, you know, shut your computer down for a little bit, but are you telling me that one single file shut down this key system which then had these carry-on effects for flights around the country?

PETE MUNTEAN, CNN AVIATION CORRESPONDENT: Jim, we were the first to report that it was a damaged database file at the center of this meltdown in the NOTAM system, the Notices to Air Mission systems that pilots need to get critical information before they take off. They can't take off without it. It's in the federal regulations bible and verse. They must read the NOTAMs. It gives them all that information about the airport they're going to, also the airspace along their route.

We are learned from multiple sources that this damaged database file caused the system to melt down on Tuesday evening. And the FAA first realized it then. They tried to reboot not only the main system but also the backup early on Wednesday morning when they thought it would have the least impact on air travel, but that ultimately failed, paralyzing airports across the country for about 90 minutes. A nationwide ground stop, we have not seen that since the 9/11 terrorist attacks.

What's also interesting that we're learning from sources is that the FAA is not totally clear just yet on whether or not one person is behind this damaged database file, whether or not it was a particular entry into the NOTAM database system, whether or not it was one particular action even that caused this to meltdown. They simply unplugged it and plugged it back in, for lack of a better metaphor, and that just didn't work.

I want you to kind of listen now to Transportation Secretary Pete Buttigieg. The FAA fall under him. He's been very critical of the airlines' own meltdowns over the summer and this winter. This was not an airline problem. This was on the FAA. And there's been so much criticism about the FAA's own systems, whether or not they're outdated and whether or not they're underfunded. Pete Buttigieg has directed an internal review here and he says that the agency owns its problem.

Listen.

(BEGIN VIDEO CLIP)

PETE BUTTIGIEG, TRANSPORTATION SECRETARY: These kinds of disruptions should not happen. And my primary interest, now that we've gotten through the immediate disruptions of the morning, is understanding exactly how this was possible and exactly what steps are needed to make sure that it doesn't happen again.

(END VIDEO CLIP)

MUNTEAN: A lot of questions facing the FAA now, especially given that criticism based on the fact that so many folks say that they are underfunded and understaffed and these systems are outdated. It all comes during a time when the FAA is going into its reauthorization process to fund the agency. We will see as that pans out. And we'll also see if this lands in hearings on Capitol Hill sometime soon. A lot of pressure from Congress as well.

HILL: Yes, probably would not be surprising to see that.

Pete, appreciate the update. Thank you.

An important update for you here on a story we've been following all week. More than 7,000 nurses here in New York City now back at work this morning. This ends a three-day strike. The nurses union has struck a tentative agreement with Mt. Sinai and Montefiore Hospitals after workers demanded, not just higher pay, but really what was key here was more staffing for them.

SCIUTTO: Yes. Yes, that's been a consistent message.

The union says the new deal will provide enforceable safe staffing ratios, and at Montefiore the hospital agreed to financial penalties for failing to comply with agreed-upon staffing levels in all units. The hospitals are calling the deal fair and responsible. That's good news. It affects a lot of people.

Coming up next, freshman Congressman George Santos, Republican from Long Island, is now facing more calls to resign from at least five members of his own party, as well as his local Republican Party chapter. New details about the lies he told after getting a look at his actual resume.

Plus, the neighbors of the Idaho murder suspect are speaking out saying that he brought up the killings in conversation before his arrest, calling them a crime of passion. We're going to be live in Moscow, Idaho, as Bryan Kohberger is set to appear once again in court this morning.

HILL: And a bit later, incredible images from Ukraine's front lines. So, this picture that you're seeing on your screen, that's part of a live grenade a military doctor was able to successfully remove from a soldier's torso.

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[09:18:32]

SCIUTTO: Well, this morning, a growing number of House Republicans are calling for New York Congressman George Santos to resign. Now five GOP lawmakers say the embattled Republican should step down over many falsehoods he's told about his experience and background. During his campaign, Santos lied about his job, his education, as well as his family's background and heritage.

(BEGIN VIDEO CLIP)

REP. ANTHONY D'ESPOSITO (R-NY): And I wanted to make it very clear that that is not our brand, that's not what we stand for. I decided to stand with the Nassau County elected officials and call for his resignation.

ANDERSON COOPER, CNN ANCHOR: Do you think he should resign?

REP. NANCY MACE (R-SC): I do, actually.

We want to sew trust in the work that we do in Congress. And this is, you know, one of the places where we've got to start.

(END VIDEO CLIP)

HILL: Well, plenty of calls. All of them being rejected still at this point by Congressman Santos.

SCIUTTO: Yes.

(BEGIN VIDEO CLIP)

QUESTION: Will you resign?

REP. GEORGE SANTOS (R-NY): I will not.

UNIDENTIFIED MALE: Guys, guys, we're going to need a little bit of - we need a little bit of space here.

QUESTION: How can you possibly do your work with the entire ordeal over your head?

QUESTION: New York Republicans are calling you a disgrace. You will not resign?

(END VIDEO CLIP)

HILL: CNN's Melanie Zanona following all of this for us from Capitol Hill.

House GOP leadership, we should point out, including the speaker, still stopping short of pushing Santos to resign. Has anything changed overnight?

MELANIE ZANONA, CNN CAPITOL HILL REPORTER: Well, I will say that the reason Kevin McCarthy says he will not call on Santos to resign is because he says it should be up to the people. And this morning we heard George Santos echo that himself. He told reporters this morning, I was elected by the people, when he was asking about these growing calls from his colleagues to resign.

[09:20:00]

But I am told that there is a political calculation here for leadership as well. The reality is, if Santos were to step down, that would tee up a special election. And this is a very blue district. It is a Biden-won district. And it is very likely that Democrats could flip that seat. And that would make the House GOP's razor-thin majority even slimmer.

Now, this could all change if Santos is indicted or if there's an ethics investigation that turns up more information. That might change the calculation for leadership. They might feel forced to call on him to resign or intervene in some way.

But it is just remarkable what we already know. I just want to tick through this "New York Times" resume of Santos that was obtained by the publication, because it's just remarkable. It says on the resume that Santos was a project manager at Goldman Sachs. Well, he never actually even worked there. He said he was an asset manager at Citigroup. Again, never even worked there. He said he got an MBA from NYU. Never attended the university. And he also said he got a bachelor in finance from Baruch College and, again, he never went there. So, this is just the stuff that he admitted to lying about. There's probably a ton more that we don't know about. So, everyone kind of on Capitol Hill is just waiting for the next shoe to drop.

Jim. Erica.

SCIUTTO: Melanie Zanona, thanks so much.

Joining us now to discuss, Heather Caygle, managing editor for "Punchbowl News," and Heidi Przybyla, national investigative journalist for "Politico."

Good to have you both.

Heather, I mean, listen, the political calculation is clear here, right? I mean this is an embarrassment for the GOP. Kevin McCarthy does not want to lose another seat and they might lose this seat if there's a special election. But you do have five members of his own party calling for him to resign. What -- which wins out, the party math here or a sense that this guy just can't survive?

HEATHER CAYGLE, MANAGING EDITOR, "PUNCHBOWL NEWS": Well, Jim, I think right now McCarthy is making the calculation that he can continue to say innocent until proven guilty, right? Santos has not been charged with anything. While federal and state and local officials are investigating things, there are no indictments against him or anything like that. And so the -- I checked in with leadership this morning. The calculation there is, they can't force him to resign because then -- at this point because then they set the standard that every Republican lawmaker who somehow generates bad headlines or potential accusation, they'll have to take the same move. They want to see this play out a little bit more.

They have told him to get a good lawyer. They have advertised him that he cannot talk his way out of this, as we reported this morning.

Now, that being said, as you said, five members of his own party have already come out and said he should resign. And we expect more as -- if more allegations come out.

Just this morning, "The New York Times" reported that there was an unregistered super PAC that funneled thousands of dollars of donations to his campaign that wasn't even registered with the Federal Election Commission. So, every day it's kind of this drip, drip, drip of more accusations.

SCIUTTO: Yes.

CAYGLE: I do think if that continues to happen, this could, at some point, become an untenable situation for leadership.

HILL: Heidi, when we look at the political calculus here too, there is that very thin margin and there is the concern that if this does go to the voters, and there's a special election, the seat could flip. The other part of that equation, though, is that when he is up for re- election, if he does, in fact, stay in that seat, this could also cause some blowback, especially on the Republican Party in New York state, which just had some pretty significant and important gains.

HEIDI PRZYBYLA, NATIONAL INVESTIGATIVE JOURNALIST, "POLITICO": Yes, Erica, I think that's why this demonstrates just how fragile this situation is with McCarthy's leadership in the House, is that the longer-term risks here clearly are much more significant. It could go to Democrats short term, right? But long term, it could swing decisively towards Democrats, and it could put a stain on the entire delegation in a state, New York state, where arguably Republicans made some of their biggest gains. New York state gains accounted for about one-third of the overall gains that Republicans made in the last midterm elections. And what you see there is practically unified delegation saying - and at the local level as well, saying that this guy needs to go.

And while Speaker McCarthy may not be able to force his resignation at this point, there's other levers that he could be pulling that he's not. For instance, censuring. We saw in the last Congress Paul Gosar, for instance, he's retired -- he's out of Congress now, but he was censured simply for putting up a cartoon that depicted him violently - or I think it was pointing a gun or killing Alexandria Ocasio-Cortez. So, censure is definitely a tool that he could be using that at least right now he's not using.

But certainly, this is concerning the entire delegation.

SCIUTTO: Well, and censure would avoid a special election, which might lose you a seat, right? There's also that -- that part of the calculation.

Heather, on the issue of the president and a second discovery of classified documents here, I mean, is it your sense that they're looking now, basically that, you know, they found this second tranche because they're making sure there's not more out there, right, to see if they can put a lid on this?

[09:25:02]

CAYGLE: Yes, absolutely. I mean they did come under significant fire for not reporting this to the public until it leaked. We know that federal officials have known since before the election about the first trove. And so I think now they're definitely in damage control mode.

And this really - I mean on - in the -- on The Hill it's a gift to House Republicans in many ways because they're coming out of last week when all of the attention was on Kevin McCarthy and (INAUDIBLE) elect on the speakership and his conference was in chaos, the new majority couldn't govern, things like that. And now they have this classified document issue to rally around.

And if you ask them, you know, they look at it and they're like, well, Democrats, they say that former President Trump did all of these things and want to investigate, but they're not holding Biden to the same standard. Of course, the circumstances, as far as we know, that have been reported, for President Biden and what was found are much different than the situation with Donald Trump, but that hasn't stopped House Republicans from using this as a rallying cry, talking about launching investigation, just really uniting around it.

SCIUTTO: Yes.

HILL: We know that it's not exactly apples to apples, but, Heidi, the fact that the White House is being so tight-lipped, frankly, about so much of what has come out, I mean that's not exactly helping them. Is there - is it your sense that there is any plan by the White House communications department to try to get ahead of this and get a handle on it?

PRZYBYLA: Certainly there's a PR strategy, but this is also a legal issue. And the Department of Justice potentially getting involved here. They know that part of that process, it does not help you to start speaking out before you know everything, right?

The situation here is different in that it appears that these documents were handled by aides, or mishandled if you will in this case potentially, by aides. So, Biden may not know if there's more out there. It sounds like they're doing a search. And so right now the best strategy may be just to allow his surrogates to point out the differences.

Republicans certainly will be trying to liken this to the situation with Donald Trump, but it's up to the president's allies to point out that, number one, this is different because these were the aides who most likely were responsible for this, that they were turned over after they were discovered, whereas President Trump knowingly took these to his residence, took the documents to his residence, refused to turn them over, to the point where he was being accused of engaging in obstruction and federal agents had to issue a search warrant and the DOJ get involved.

So, that will be up to the surrogates.

SCIUTTO: No question.

Heather Caygle, Heidi Przybilla, thanks so much to both of you.

HILL: Still ahead, we are live in Moscow, Idaho, this morning, where the man accused of killing -- brutally killing four college students is preparing to appear in court this morning. Neighbors now speaking out about the suspect. What they're saying about the man who is facing four first degree murder charges.

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