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Biden's I Reduced the Federal Deficit Boast Distorts Reality; Against All Odds: 80-1 Rich Strike Wins Kentucky Derby; Ukraine Says, 60 Feared Dead After Russia Bombs School Shelter. Aired 8:30-9a ET

Aired May 09, 2022 - 08:30   ET

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

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[08:30:00]

BRIANNA KEILAR, CNN ANCHOR: President Biden is claiming success, touting his ability to reduce the federal budget deficit and cut annual spending. Here's what the president said last week.

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JOE BIDEN, U.S. PRESIDENT: Let me remind you again, I've reduced the federal deficit. All the talk about the deficit from our Republican friends, I love it. I reduced it $350 billion in my first year in office. And we're on track to reduce it by the end of September by another $1.5 billion, the largest drop ever.

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KEILAR: CNN Reporter, Fact-Checker in Chief, Daniel Dale has the facts here. What's really going on with the budget?

DANIEL DALE, CNN REPORTER: So, here are the facts. There is no doubt that the deficit has fallen under President Biden so far. It was about $3.1 trillion under President Trump in fiscal 2020. It was about $360 billion lower than that, so about $2.8 trillion in fiscal 2021, mostly under President Biden.

But even with that $360 billion decline, Brianna, experts I spoke to still scoffed at the idea that President Biden is personally responsible for having reduced the deficit. In fact, one advocate of deficit reduction, Marc Goldwein of the Committee for Responsible Federal Budget, told me that this claim is almost bizarre world, a reversal of reality. Why? Well, because the deficit was expected to fall by more than $360 billion at the time President Biden took office. In fact, at the time, the nonpartisan Congressional Budget Office had projected the deficit would fall by more than $870 billion in 2021 if President Biden did not implement new policy.

[08:35:10]

Then President Biden came in, and like most presidents, Brianna, did new policy. There's at one point $1.9 trillion pandemic relief bill. There was a big bipartisan infrastructure bill. There was an expansion of food stamp benefits. Whatever you think of all those policies, they all cost money. So, there ended up being less deficit reduction than expected.

Now, President Biden likes to cite a certain economic research firm called Moody's Analytics. Here's what the senior director at Moody's, Dan White, told me last week. He said, the actions of administration and Congress have undoubtedly resulted in higher deficits, not smaller ones. It is encouraging that the administration has proposed some initiatives to bring down the deficit but so far none of those initiatives has been seriously considered.

Now, Brianna, people might still be confused. Well, if President Biden's actions have made the deficit higher than it otherwise would be, how has the deficit still fallen at all under President Biden from the end of the Trump era? In short, it's because temporary pandemic spending. It was scheduled to expire and it has expired. Basically, there was an explosion of short-term spending in Trump's last year because of pandemic relief programs and tax revenue collapsed because the economy crashed, the deficit hit a record at 3.1 trillion, that was more than triple what it was the year prior.

But because a lot of that 2020 spending was short-term, the deficit was almost certainly going to fall in the coming years no matter who is president. And so, again, it did end up falling in 2021, but, again, it was by less than expected.

So, when President Biden talks about a projected $1.5 trillion decline in the deficit this year, even if that does happens, the deficit would still be higher this year than initially projected when he took office.

KEILAR: So, President Biden has also taken aim at Republicans over the deficit, right? He actually claimed last year that the deficit rose every single year under President Trump, even before the pandemic. Is that accurate?

DALE: That part, Brianna, is absolutely correct. Now, it is true that the deficit, as I said, exploded, more than tripled in 2020 because of the pandemic but it was also rising sharply under Trump before the pandemic in large part because of his major tax cuts.

So, I'll give you some numbers. In 2015 and 2016 under President Obama, the deficit was $439 billion, then $587 billion. Then under president Trump, it just kept going up. It got to $779 billion in 2018, $984 billion in 2019.

So, yes, we should be skeptical of President Biden's own deficit boasts, but it's not like President Trump and Republicans have some sort of high ground here.

KEILAR: Daniel Dale, as always, thank you so much for making sense of it all for us.

DALE: Thank you.

JOHN AVLON, CNN ANCHOR: President Biden will deliver a speech tomorrow on inflation, as his administration looks to further address one of the biggest concerns for voters ahead of the November midterm elections.

A CNN poll last week found eight in ten U.S. adults felt the federal government wasn't doing enough to combat inflation.

Joining us is Kevin Hassett, he's the former chairman of Council of Economic Advisers under President Trump. Kevin, it's always good to speak with you.

I want to get your take on this note from the Bank of England, which is warning that it would take a deep recession to stop inflation. Do you think that's the case?

KEVIN HASSETT, FORMER CHAIR, COUNCIL OF ECONOMIC ADVISERS UNDER PRESIDENT TRUMP: I think, sadly, it is the case. And, you know, if Daniel, who just did the fact-check were in my graduate program, I'd give him an A. I thought that was really well done.

But one of the things that's part of the flip side of what he was saying is that because all the COVID relief is suddenly disappearing that there's a really, really big decline in disposable income for most Americans who were getting relief checks last year but they're not this year. In fact, real disposable income is down about 20 percent relative to what it was a year ago because of all the checks that we're mailing out because of the stimulus that, again, for the most part, I supported. And so that's like a really, really big headwind for the economy, first quarter GDP was negative and the Fed is tightening.

And, you know, I don't know, you and I are starting to become old timers. When was the last time you remember looking like you're almost in recession, the Bank of England saying there's maybe a big recession coming to curb inflation and the Fed was tightening? It's a very unusual circumstance and it's a perilous one combined with that big fiscal drag. I think it's almost impossible, sadly, for us to avoid a recession.

AVLON: Well, it is. I mean, you kind laid out a policy double-blind there, right? I mean, you're saying that because these stimulus payments are tapering off, that people are suffering, less disposable income but you also say the stimulus payments helped contribute to the inflationary environment. So, what's the right policy course? I mean, let me just put it real straight to you, if you were on the Fed today, what would you recommend? What would you do?

HASSETT: Right. Well, I'd be doing what the Fed is doing, maybe a little quicker. You know, sometimes you have to rip the band-aid off. But inflation is really out of control. It's probably right now running at double-digit rates. You know, looking forward, the 8.5 rate you remember from the last headline number was looking back over a year. In the first half of the year, it wasn't so bad.

And so the Fed needs to act really aggressively but I think that Congress needs to act as well. And this is the part that's just politically impossible, that it's very easy -- going back to when Daniel and my graduate class, what we would do is we would say, well, what the fiscal policy has to do is balance itself in the long run. [08:40:09]

So, they need to reform the entitlements, they need give people who buy our bonds confidence that we're solvent in the long run. And that requires kind of bipartisan work that's just not going to happen this year.

So, absent that, I think what's going to happen is fiscal policy is not really going to help monetary policy and we're likely to have a recession. I think we could be in one right now. In fact, I ran the numbers and 94 percent of the time when you had a quarter as bad as our first quarter, it ended up being in a recession or about at the start of a recession since World War II 94 percent of the time.

AVLON: 94 percent of the time. So, 94 percent of the time, the first quarter would indicate, despite other quite strong numbers about job growth, that we are heading for trouble? You say Congress is not going to do the things that need to be done in a bipartisan way to do it.

So, put back on your old White House hat. Let's put country before party. What would you advise President Biden to say tomorrow in his speech on inflation?

HASSETT: Yes. You know, I think that inflation is very much out of control. It's out of control because there was all this demand created by stimuli, that, again, some of them dated back to the previous administration. President Biden's team has done a lot to squash supply. Their climate change person was out bragging about putting out 100 new regs on appliances and things. And while there are new regs going on appliances, then they are not going to be making a lot of appliance, right?

And so what he needs to do is refocus on supply, think about the things he can do to -- small business sentiments about as low as it has been since World War II I think in part because the government is intervening in their lives again. And he should just sort say, hey, we're going to focus on getting supply to boom and that will help us with inflation.

And I think that would be a big change in policy for him but it's not something that's unheard of for Democrats. You're going back to Jack Kennedy, to Bill Clinton. If he adopted the sort of more moderate Kennedy/Clinton tone, then he could revive supply and could have an effect on inflation.

AVLON: I want to ask you talk about gas prices, because, obviously, that is driving a lot of the inflation. As a reminder, it's a global market. And when you look at the war in Russia, Russia's war on Ukraine, does that tell you that higher gas prices are here to stay? And what could be done to bring them down, do you think?

HASSETT: Well, what will happen is that suppliers around the world will see the high prices and want to make more money and increase their supply.

AVLON: They're doing that. HASSETT: That takes a little bit of time. But, yes, I think that in the end, like a year from now, that there will be enough new supply online that even if Russia is not selling oil to the rest of the world, that the prices won't be completely out of control.

But the adjustment period is pretty big. If you're used to getting Russian oil, then your refineries are used to refining Russian oil. If you get oil from somewhere else, your refinery doesn't work. And so people have to retool. So, we're in that painful process right now. And for finished products, like gasoline, that's actually the most -- the biggest effect because, again, refineries can't switch from oil to oil without having to do a lot of retooling.

AVLON: Kevin Hassett, thank you very much, as always.

HASSETT: Thanks, guys.

AVLON: All right. Just in, Ukraine says it's alarmed by Russian forces crossing a major river in the east after the Russians built a bridge that could help attack Ukrainian supply routes.

KEILAR: And next, we'll be joined by the jockey who pulled off this come-from-behind win at the Kentucky Derby.

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UNIDENTIFIED MALE: The longest shot has won the Kentucky Derby. Rich Strike has done it.

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[08:45:00]

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UNIDENTIFIED MALE: Rich Strike is coming up on the inside. Oh, my goodness, the longest shot has won the Kentucky Derby.

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KEILAR: In a lightning fast finish, Jockey Sonny Leon and his horse, Rich Strike, came from behind to win the 148th Kentucky Derby in one of the biggest upsets ever in the history of the derby.

Joining us now is Jockey and Kentucky Derby winner Sonny Leon who rode Rich Strike an 80 to 1 long shot to win the derby, unbelievable.

Okay. Sonny, you look very chill right now, I have to say. And I'm wondering are you the only person in America who is not surprised or are you also surprised by what happened?

SONNY LEON, RODE AN 80-1 LONGSHOT IN DERBY: Wow, I'm surprised. I am still surprised.

AVLON: Well, how did you do it? I mean, this is unbelievable race. I mean, you're hanging behind, you move your horse to the rail, you kind of zigzagged through the other horses. It's unbelievable what you were able to accomplish. How did you see the openings?

LEON: Wow. I'm not in the mood right now, but I know now this is real. Wow, wow. (INAUDIBLE) to me whatever you want to (INAUDIBLE) I'll let you know about the race.

KEILAR: Sonny, did you have an idea that he could do this, even though the odds were against him?

LEON: I didn't have an idea he can win the derby, he could win the derby, the Kentucky Derby. But I had a very good feeling with him and I know he can (INAUDIBLE) thing in that race. But I didn't expect that really he did it in the Kentucky Derby. Wow, unbelievable.

AVLON: I mean, you were racing this horse. He got brought on as a fill-in just a few days before. You had been racing in Ohio. What was it like to just achieve that in your career, for the horse and yourself? I mean, my God, that's all your dreams coming real in one moment. What does that feel like?

LEON: Wow, that's (INAUDIBLE) for me. First time in my career, I win the great one stake. First time in my career, I rode the Kentucky Derby, and then we got the Kentucky Derby, man, wow.

AVLON: You sure did.

KEILAR: So, you thought that Rich Strike could come in the top ten but you didn't know that he could win. What was your approach coming out of the gate? What was your strategy, Sonny?

[08:50:00]

LEON: Well, my plan was -- the plan we did it last time when we rode, just stay (INAUDIBLE). So, the (INAUDIBLE). So, keeping calm, relax. We had a very, very bad first 20. Wow, that was the worst horse in the Kentucky Derby. 20, wow. You have 19 horses inside to you.

But, you know, they were so fast out of the gate. That can work for me, you know, because I can go down so quickly, see without (INAUDIBLE) and try to stay on the ground. And I had a very good view behind them because I know they were very fast. And I say, wow, I got it. I got to drive this horse to winning. But I never expected. That's the plan but you never know what's going on in the race.

AVLON: Well, of course, not. But calm, concentration, you held back, saw your opening and, man, you took it.

I got to ask a question. This is just a weird detail. Nothing takes away from what you accomplished, but after the race, I understand that someone else punched your horse. What happened?

LEON: Well, my horse after the race, you know, he was excited. He's a top horse. He was -- wow, I cannot explain that. He was happy, too, you know. This is an animal. This is a race horse. This is -- wow. He was very, very -- you know, very tough.

KEILAR: So, what is happening there? We see the video. Is Rich Strike kind of nipping at the escort horse? Is that what is going on and the escort guide is kind of shoving him off? And is there another way to deal with it?

LEON: Yes. You know, my horse had tried to bite him a few times, tried to bite the horse, tried to bite his rein. My horse was so crazy, you know, we had a lot of people around, you know, a lot of screaming. You know, we had (INAUDIBLE) in this moment.

I think the pony, he tried to do a little touch with the horse because we got to do sometimes because they are animals, you know? Everybody knows that, and so especially in a big race like this, you know.

KEILAR: Yes. The video, you see more than the still pictures. Oh, no, did we just lose Sonny?

AVLON: Sonny?

KEILAR: Oh, we lost his window. Okay. Well, we offline are going to send him our congratulations.

AVLON: Yes, we are.

KEILAR: Because what an amazing win, John Avlon, right? I mean, he just finds out like at the last minute another horse is out, Rich Strike is in. And the next -- it's like, oh, hey, I'm just going to be in the Kentucky Derby tomorrow, and, oh, by the way, I just won the thing.

AVLON: Just won it all, 80 to 1. I mean, they'll be making movies of this. The journalism around it is great. This is a huge come-from- behind David and Goliath story, real-time Kentucky Derby, you've got to love it.

KEILAR: Unbelievable.

All right, so this brand-new video just into CNN, Russia's ambassador to Poland doused with red paint while trying to lay a wreath at the cemetery Soviet soldiers in Warsaw. How Russia is responding.

AVLON: Plus, an update on the bombing of a school in the Luhansk region of Ukraine, where people were seeking shelter. Ukraine says the Russians are to blame. As many as 60 people are feared dead.

This is CNN's special live coverage.

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[08:55:00]

KEILAR: Time now for five things to know for your New Day. Senate Republican Leader Mitch McConnell says a national ban on abortion is possible if the Supreme Court's leaked draft opinion becomes the final opinion. Majority Leader Chuck Schumer says the chamber plans to vote Wednesday on codifying Roe versus Wade.

AVLON: Top leaders of the Oath Keepers have been sharing information with the January 6th investigators and detailing how they worked to help the Trump campaign. A lawyer working with the far-right extremist group tells CNN she has given phones to the FBI.

KEILAR: And the White House is warning that 100 million Americans could get COVID this fall and winter if Congress doesn't approve more money to fight the virus. The Biden administration wants $10 billion for vaccines, testing and research.

AVLON: Police are looking into the mysterious deaths of two men and a woman, all Americans, at a Sandals Resort in the Bahamas on Friday. Investigators say no trauma was found on the bodies and foul play is not suspected.

KEILAR: And the very first Formula One Miami Grand Prix is in the books. Dutch Driver Max Verstappen taking the victory before a star- studded crowd that included Michael Jordan, Tom Brady and David Beckham.

[09:00:02]

AVLON: How about that? Those are the five things to know for your New Day. More on these stories all day on CNN and cnn.com.