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Early Start with John Berman and Zoraida Sambolin

Biden Admin Offers Convicted Russian Arms Dealer for Griner, Whelan; Biden to Hold High-Stakes Call with China's Xi; Manchin Schumer Strike Deal on Health and Energy Bill. Aired 5-5:30a ET

Aired July 28, 2022 - 05:00   ET

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

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CHRISTINE ROMANS, CNN ANCHOR: All right. Here we go.

It is Thursday, July 28. It is 5:00 a.m. here in New York. Thanks for getting an EARLY START with us. I'm Christine Romans. Welcome to our viewers in the United States and around the world.

We begin with the White House waiting on the Kremlin. Will Moscow take the offer now on the table to bring who detained Americans home from Russia?

CNN was first to report the Biden administration would send a convicted arms dealer back to Moscow as part of a deal to secure the release of WNBA star Brittney Griner and former U.S. Marine Paul Whelan.

Let's bring in Jennifer Hansler from CNN State Department team.

So, nice to have you bright and early this morning on this really important story.

What can you tell us, Jennifer, about this offer?

JENNIFER HANSLER, CNN STATE DEPARTMENT PRODUCER: Well, Christine, that is right we have learned that the Biden administration is prepared to send -- this convicted Russian arms dealer back to Russia as part of a deal to try and bring Brittney Griner and Paul Whelan home.

Now, Bout is a notorious killer. He's nicknamed the merchant of death and he is currently serving a 25-year prison sentence here in the United States. Secretary of State Antony Blinken publicly announced yesterday that the administration has offered a, quote, substantial proposal to Moscow to try and get these to wrongfully detained Americans back home.

Now, Blinken did not go into specifics about what was in that proposal, but he did say it has been on the table for weeks now, and that it has the direct backing and sign off of Presidential Joe Biden.

Now, Christine, we know that prisoner swaps to require the president to sign off. His support would overrule any sort of opposition from other parts of the administration. So, this is a significant signal. Prisoner swaps are generally quite controversial in the administration and other administrations have generally avoided using them because there is a fear that other governments will see that entertain more Americans to try and use them as political pawns.

However, it was a prisoner swap that ultimately brought back another American from Russia, Trevor Reed earlier this year.

ROMANS: That is right, and there's a lot of questions when he was brought home about these other Americans who were detained around the world, specifically in Russia.

Has there been any response yet from Moscow?

HANSLER: Well, it's unclear. We haven't seen any public response. Viktor Bout is someone that the Russians have repeatedly raised in the public sphere as someone they would like to trade for a number of Americans now. However, there are indications they have not been responsive to this deal that is currently on the table.

A senior administration official said this doesn't come as a surprise to them, and they completely remain engaged on a number of levels on this issue. This is also something Secretary of State Anthony Blinken he intends to raise during a call with his counterpart, Foreign Minister Sergei Lavrov, expected to take place in the coming days -- Christine.

ROMANS: All right. Jennifer Hansler of the State Department team, thank you so much.

President Biden and Chinese President Xi Jinping are said to hold a high stakes call over Taiwan. Beijing has issued escalating warnings now about how Speaker Pelosi planned to visit the self governing island, but she, of course, has vowed to reunite with China by force if necessary.

Let's bring in CNN's Steven Jiang live in Beijing with more.

What are the two leaders expected to discuss here?

STEVEN JIANG, CNN BEIJING BUREAU CHIEF: Well, Christine, supposedly a wide range of topics from trade, to Ukraine, but as much as U.S. officials try to characterize this call as a routine follow-up between the two leaders the last conversation in March, this is anything but routine because of the latest showdown over Pelosi's planned visit to Taiwan.

Now it is all but certain that Xi Jinping would raise this issue with Biden, and asking him to stop or especially because the way the Chinese see it, they are both Democrats. But the problem, of course, the separation of powers, not to mention any U.S. presidents, Biden included, nobody wants to be seen as caving under Chinese pressure.

So after this, call if Pelosi still goes ahead, then from the Chinese perspective, it would be considered an even bigger insult on Xi Jinping, which in turn could compel them to take even more forceful actions then if there is no such phone call. As of now, of course, the Chinese warnings about these forceful or resolute countermeasures have been non-specific. They have been some speculations or educated guesses that the People's Liberation Army could impose a no-fly zone around Taiwan during her visit, or scrambling fighter jets to shuttle her plane, or even sending more planes to fly over Taiwan itself to try and prevent her plane from landing.

As of now, a direct attack on her plane seems very much unthinkable. But the worry of course is with so many military assets from China, from the U.S., from Taiwan operating at the same time in the same region, there is a growing possibility of miscalculation that could lead to real conflict.

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So, this is really a precarious situation at a time when no one can afford to look weak. That's why a lot is riding on policies decision -- Christine.

ROMANS: All right, Steven Jiang for us in Beijing, thank you so much.

For more on the global challenges, let's bring in political analyst and "Washington Post" columnist, Josh Rogin.

Good morning, Josh. Nice to see you this morning.

JOSH ROGIN, CNN POLITICAL ANALYST: Good morning.

ROMANS: So you say Pelosi trip to Taiwan pose the Biden administration in a bind, what happens on this call?

ROGIN: Well, I think there had been weeks of Biden administration, quite diplomacy with Speaker Pelosi to urge her to delay the trip to a time when they feel that tensions might be lower in the U.S.-China relationship, namely after the U.S. election and President Xi is coronated for his third term in November. But the problem is that the story leaked and the president confirmed it on the tarmac, and now it is a big public issue. If Pelosi backs down, she loses face.

So I think that means quite negotiations are largely over, and my guess is that Nancy Pelosi will go to Taiwan, and the U.S. government will have to support her with a huge massive military operation. So, what President Biden is going to try to do today is convinced that President Xi that it's not his idea, that he actually supported a good chance that President Xi will not believe him because in their system, the president says something and everybody does it.

So that is a massive diplomatic signaling, but the soup that the White House is in is largely of their own recipe.

ROMANS: Yeah, let's talk about Britney Griner, she was detained in Russia the week before the invasion of Ukraine. Paul Whelan has been held since 2018, late 2018. We know the White House has not made an offer for a prisoner exchange for those two, but this notorious arms dealer.

Do you think the Kremlin will accept this? ROGIN: Well, it's pretty unusual, Christine, and as you know for the

secretary of state to talk publicly, even obliquely about an ongoing negotiation for a prisoner swap. Typically these things are held under close hold until they are finished. So I think that is on one hand a positive sign that the Biden administration is very serious about making this happen, on the other hand it is a very troubling sign that they have had this offer on the table for weeks and there has been no Russian response.

I think what we can say is that Secretary of State Blinken by airing this publicly is seeking to put pressure on Foreign Minister Lavrov to move a decision in one way or the other. He is pressing the issue in a public way. That is a risk, but a risk worth taking from Blinken's point of view. I think there is a window coming up where the -- Russians will have a chance to make this happen, and I hope and I think that Brittney's family and a lot of people who support the Whelan family are hope they'll take it.

ROMANS: You know, the other risk, I guess, as the state department has been -- they feel they are counterproductive, they detained Americans around the world as bargaining chips or political pawns, do you worry about the aspect of this? Or is the importance of bringing Brittney and Paul home override that theoretical concern?

ROGIN: Right, well I don't necessarily see a pattern of people getting picked up because we make trades, in other words neither of these people were arrested because of -- I don't think we can make that connection.

At the same time, I think the concern really is that this is an unequal trade, and Viktor has the blood of thousands on his hands, and he is a major arm stealer all over the world. He would return to that vocation soon after being released to be sure. So there is a risk in releasing him as well, that people will suffer once he becomes free. So it is not really an incentive as far as I'm concerned, it is a cost-benefit analysis.

Now if you are the family of Paul Whelan or Brittney Griner, that is no calculation at all, but the state department has to worry about what happens the day after this, and I think that is a legitimate concern to be honest.

ROMANS: Yeah. All right. Josh Rogin, thank you. Nice to see you this morning.

ROGIN: You too.

ROMANS: All right. All the guessing about America's economic growth stops later this morning. Hard facts coming out soon.

Plus, as surprise deal on Capitol Hill gives Democrats a boost and the former Trump cabinet member who may soon answer questions about January 6.

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ROMANS: All right, it may have been Washington's best kept secret. West Virginia Senator Joe Manchin and Majority Leader Chuck Schumer reaching a deal on the energy and healthcare bill that nearly everyone else had given up on. It comes after more than a year of negotiations that collapsed time and time again.

The White House welcoming the news.

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GENE SPERLING, SENIOR ADVISOR TO PRESIDENT BIDEN: The president strongly welcomed the agreement by Senator Schumer and Manchin. You've seen a wide agreement. Even people who have disagreed or criticized us before, that this would reduce inflation, reduce the deficit, reduce drug costs, reduce health premiums for 13 million Americans.

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ROMANS: CNN's Daniella Diaz is live on Capitol Hill. Daniella, Manchin has been a thorn in the party side in terms of legislation. How significant is this deal for Democrats?

DANIELLA DIAZ, CNN CONGRESSIONAL REPORTER: Christine, so, so significant. This is a $369 billion package that would invest that money into climate and energy provisions, these programs that Democrats were hoping that they could pass during this Congress. Look, it would be the biggest climate deal in history, if passed it would actually slash U.S. greenhouse gases by 40 percent by 2030 which would be a major achievement, Christine.

And this provision spans everything from electrical vehicle tax credits to clean energy manufacturing and investments, to environmental justice communities.

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And it would also allow Medicare to continue negotiating drug care prices, and Affordable Care Act subsidies, and, look, also to raise the revenue to pay for this package. It imposes a 15 percent minimum tax on corporations, which would raise 313 billion dollars over a decade.

This is a major achievement that nobody saw coming, especially since earlier this month, these negotiations on climate provisions between Schumer and Manchin fell apart, and they may have just been dealing with drug and Medicare subsidiaries during this, along party lines. Something to refresh our viewers, Christine, is that in order to pass a package like this, they are going to need every single Democratic senator to sign on because they want to pass a process called budget reconciliation. It's a process for tax and economic packages. They just need 51 votes. A simple majority to pass a package like this.

That's why Manchin needed to be on board, because no Republican senator is going to support this legislation. But it is really telling that Manchin changed his mind in the last couple of days. In fact, most senators did not know this is coming. When they went to vote last night, they did not see the provisions for this package that Schumer and Manchin had agreed on, but really, really notable that this came to fruition last night. And they're going to try and pass this before August recess -- Christine.

ROMANS: All right. Daniella, thank you so much.

Okay, the drama, the intrigue this morning with a key measure of America's economic growth due in a little two hours from now. Wall Street and the White House bracing for the possibility of the second straight quarter of declining GDP, which is, of course, the first sign of a recession. You see the first quarter there, the GDP fell 1.6 percent.

Today, the forecast is the U.S. economy may be slightly expanded in the second quarter. That's according to estimates by Refinitiv. But bottom line, anything could happen. Slightly negative, slightly positive. And as Fed Chair Jerome Powell points out --

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JEROME POWELL, FEDERAL RESERVE CHAIR: Generally, the GDP numbers to have a tendency to be revised, pretty significantly. It's just that it is very hard to accumulate U.S. GDP. It's a large economy, a lot of work and judgment goes into that. You tend to take the first GDP reports, I think, with a grain of salt.

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ROMANS: What we know for sure is that economic growth is slowing in the first half of the year from a blockbuster pace last year. The flood has been trying to tackle in inflation for that growth. Without this, we will tackle into a session.

For the first time in history, they raise three quarters of a point, twice in a row, the first largest hike since Clinton was in the White House. Four rate hikes in a row now, the fastest rate hike since the 1980s.

Let's bring in Jeanna Smialek, Federal Reserve and economy reporter with "The New York Times". This is her beat. And she is watching history here.

I mean, this has been remarkable. Usually you see the Fed do point increments to acclimate consumers and the economy, and the financial systems at this rate. The painful inflation, here is painful interest heights. Powell says the economic sacrifice today is necessary to put America back on a sustainable path, you know, with slow, predictable prices to get back to that 2 percent inflation target.

How are they doing?

JEANNA SMIALEK, FEDERAL RESERVE & ECONOMY REPORTER, NEW YORK TIMES: I think that we are, clearly things have slowed down in the economy, as you alluded to. I think that we are going to see in the light of this Schumer deal, is actually a lot of people questioning. Is this pain necessary? Do we have to address this inflation with rate hikes?

And I think the answer you are going to hear coming out of the Fed, and maybe coming out of the White House is, you know, the things that the White House and Congress can do to more surgically address inflation, and not painfully address inflation. They take a while.

And the clock is really running her. Inflation has been high for more than a year. Consumers are starting to expect it, and when consumers expects inflation, it behaves in ways that makes it more likely to stick around. And so, you know, I think that the Fed is trying to get on top of this. Moved very quickly, and have it all under control.

ROMANS: Yeah, definitely inflation is considerable. Going up nearly 9 percent in the U.S., and it can be sticky. Inflation can start to get sticky. It can be hard to get it to come down because of those changing consumer behaviors. You mentioned some Democrats that were saying this wasn't the right tool,? Write this blunt instrument that the fed has is actually counterproductive. We've heard it from Senator Elizabeth Warren in an op-ed this week. She's been out talking to the business, press talking about how this is not the only way, or even the right way to go?

SMIALEK: Yeah. And this is a really interesting argument. It is clearly evolving and becoming more prominence on the left, I think.

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But we are hearing a lot of people say that basically this inflation is caused in part, by supply disruptions. As we all know, that the factory shut down during the pandemic. Supply chains around the world got really messed up, should being routes got tangled, and we don't have enough stuff to go around.

And the argument is basically, not that you don't have enough stuff to go around, how the rate increase is possibly solving that problem? If we don't have enough things, enough workers, rate raises can't do anything, to make someone's budget, or make Russian oil gas cheaper.

And so, the solution that Senator Warren and other Democrats suggest is that the White House and Congress should be doing more to solve this, because their tools can address root causes, whereas the Feds tool basically just slows down the economy. Hoping to bring demand down that supply comes back into balance. So, that's the argument we are seeing evolving.

Like I said, the issue from the Feds perspective, and from Washington's perspective, is really an issue of timing. That policy works with lag, but it works pretty relative to whatever the White House and Congress can do.

ROMANS: Interesting. All right. Jeanna Smialek, thank you so much. Nice to see you this morning.

SMIALEK: Thank you.

ROMANS: All right. Coming up, the third political party in America doesn't have a chance.

But, first, the former Trump aide who could now help the January 6 investigation.

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ROMANS: Welcome back.

New developments in the January 6 criminal investigation. CNN has learned that the Justice Department has obtained a second justice warrant. It's a cell phone of the former Trump advisor, John Eastman. This one allows prosecutors to search the contents of the phone which was seized earlier this month. Eastman, one of the architects of the scheme, to pressure Mike Pence into overcoming the 2020 election.

CNN's Ryan Nobles has more on the Justice Department's investigation.

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RYAN NOBLES, CNN CONGRESSIONAL CORRESPONDENT (voice-over): The Department of Justice investigation into the events that led to January 6th is expanding at a rapid clip.

ALYSSA FARAH GRIFFIN, FORMER WHITE HOUSE COMMUNICATIONS DIRECTOR: I am aware of other White House officials who have been reached out to by DOJ and are planning to cooperate.

NOBLES: Former White House staffer Alyssa Farah telling CNN that DOJ has reached out to more former officials in the Trump White House, beyond just Marc Short and Greg Jacob, two top aides to former Vice President Mike Pence.

CNN now learning that Cassidy Hutchinson, a former top aide to Trump's chief of staff, is just the latest official from the administration to start cooperating with the DOJ's criminal investigators.

GRIFFIN: And I think DOJ is keeping an eye on who is coming before January 6th and who may have helpful information.

NOBLES: The news come at the same time sources tell "The Washington Post" and "New York Times" that federal investigators have asked questions specifically about Donald Trump's actions, suggesting their probe is getting closer to the former president himself. All while a separate state level investigation is looking at Trump and election interference in Georgia.

NORM EISEN, FORMER HOUSE JUDICIARY SPECIAL COUNSEL: You see a pincers movement on Donald Trump. And perhaps this will be the occasion in which he cannot dodge criminal liability.

NOBLES: The public posture of the DOJ is welcome news to members of the January 6th Select Committee who have been publicly pleading with federal prosecutors to take action. REP. JAMIE RASKIN (D-MD): That encourages me or solidifies the

understanding I have always operated with which is the Department of Justice has a vast arsenal of resources at their disposal. These are extremely competent, effective lawyers. They know what they're doing.

NOBLES: However, there is no question the political calendar and a pending presidential announcement by Trump could complicate their plans. And Trump continues to show no sign he is backing down.

DONALD TRUMP, FORMER PRESIDENT: Now we have the January 6th unselect committee of political hacks and thugs.

NOBLES: But Attorney General Merrick Garland pledged that nothing, including political pressure, will impede their investigation.

MERRICK GARLAND, ATTORNEY GENERAL: We will hold accountable anyone who is criminally responsible for attempting to interfere with the transfer, legitimate lawful transfer of power from one administration to the next.

(END VIDEOTAPE)

NOBLES (on camera): And while there is no doubt that the Department of Justice investigation is expanding, we shouldn't take that to mean that the January 6 Select Committee is wrapping things up. In fact, they have now trained their focus on members of the Trump cabinet, and in particular, the former Secretary of State Mike Pompeo. Authorities telling us he could set up for a court deposition as soon as this week, and the committee is essentially focused on conversations related to the 25th Amendment, after the Capitol riots.

Ryan Nobles, CNN, on Capitol Hill.

ROMANS: All right. Ryan thank you for that.

The man accused of attempting to murder Supreme Court Justice Brett Kavanaugh researched how to assassinate someone and was shooting for three justices, not just Kavanaugh, according to a search warrant application by the FBI.

Nicholas Roske looked up terms like most effective place to stab someone, and quietest semi auto rifle before traveling to Kavanaugh's home. Roske told investigators he was upset about the leaked Supreme Court draft opinion overturning Roe v. Wade, and also feared Kavanaugh would loosen gun laws in the country.

A CNN investigation of Hunter Biden's emails reveals years of high incomes, and even higher deaths. More than half a million dollars in unpaid bills, repeated warnings from banks, the IRS even threatening not to renew his passport. This before the Justice Department weighs possible charges against the president's son.

CNN's Drew Griffin has more.

(BEGIN VIDEOTAPE) DREW GRIFFIN, CNN SENIOR INVESTIGATIVE CORRESPONDENT (voice-over): The emails posted by right-wing operative on the Internet have long been used as a political weapon against President Joe Biden.

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