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Treasury Chief Draws Back Initial Thoughts on Inflation; Kemp Allies Look for Trump Truce Despite Insults, Fraud Lies; Georgia A.G. Chris Carr Subpoenaed. New Blow To Durham Probe; Video Shows Teacher Did Not Leave Door Open That Gunman Used. Aired 7:30-8a ET

Aired June 01, 2022 - 07:30   ET

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

[07:30:00]

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JANET YELLEN, U.S. TREASURY SECRETARY: I think I was wrong then about the path that inflation would take. As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I at the time didn't fully understand.

(END VIDEO CLIP)

JOHN BERMAN, CNN ANCHOR: Joining us now, Larry Summers, the former Treasury Secretary under former President Clinton and former Director of the White House National Economic Council under President Obama. He has been warning about inflation for more than a year, and Mr. Secretary, when you hear Secretary Yellen say unanticipated shocks, is that a fair statement because you've sort of been anticipating the heck out of this?

LAWRENCE SUMMERS, FORMER DIRECTOR OF W.H. NATIONAL ECONOMIC COUNCIL, OBAMA WHITE HOUSE: Look, I think the consensus last spring was wrong. Consensus didn't see the overheating risk. I've been wrong plenty of times in my life, but I did see that there was a very substantial demand pressure that was building, and it seemed plausible given that there would be bottlenecks.

But I think in fairness to Secretary Yellen and in fairness to the Federal Reserve, what they were echoing was a consensus view of economists at that time. That consensus has turned out to be wrong, and I think that does require some rethinking of conventional models among the economists who do these forecasting, nowhere more important than the Fed, which is why I talked about the need for some institutional soul searching there.

But I think the important issue is looking forward, and I was gratified by what Secretary Yellen said about the primacy of the inflation problem. I thought the president's orientation and his comments yesterday to inflation is our central problem and to monetary policy as the first line of solution in a completely depoliticized way. We're just right.

BERMAN: Is the Fed acting enough, quickly enough?

SUMMERS: I hope so. I'm not certain. I think the test is going to come over the next six months. The temptation is always to stop the antibiotic as soon as you feel better, and that can often be the wrong thing to do that makes the problem come back later. And something similar is true with respect to monetary restraint. I think we need to be very careful to make sure that if we have a few good months on inflation that are better and a few months when the economy looks a little bit weaker that we don't ease monetary policy or stop tightening it too rapidly.

Here's the core fact. We've never stopped an inflation without raising interest rates by considerably more than inflation went up. Inflation has gone up a lot. By some measures it's gone up 4 percent. There are even measures where it's gone up 6 percent. So far, interest rates have only gone up by less 1 percent. So I think that in all likelihood to contain inflation we've got substantially more interest rate increasing ahead of us.

That could turn out to be wrong because it could turn out that the economy weakens much, much more in the next few months than most observers now expect, but I think that's what we've got to keep in mind what's been necessary in the past to contain inflation.

BERMAN: Sounds like what you're saying is that to contain inflation we need either a recession, which is not something that most people, most consumer want to see, or raising interest rates as much as 4 percent from where it is, which is an enormous - would be an enormous increase.

SUMMERS: I think that is the lesson of history. Here's the unfortunate, painful fact, and it's true of the U.S. experience, and it's true of the experience of other rich countries like us. When inflation's above 4 percent and unemployment's below 4 percent, you are almost certain to have a recession within the next two years.

[07:35:00]

BERMAN: How bad?

SUMMERS: Now we may be - we may somehow find a way of beating the odds at having a soft landing, but it would be a historic counter example, not a historic norm if that proves to be true.

BERMAN: When you talk about a recession coming, how bad do you think it could be?

SUMMERS: I think that people have an impression of a recession like what happened with respect to the pandemic or what happened in the great financial crisis. I don't minimize the pain associated with recessions, but I don't think we're talking about anything like double-digit unemployment necessarily. I think - and I would not expect that.

I think the risk is that if we make the mistakes that we made in the 1970s and don't confront this squarely and firmly and immediately with respect to inflation, then we're setting the stage for a really large problem.

BERMAN: You think tax increases should be on the table?

SUMMERS: I do think that taking back some of the huge windfall that President Trump conferred on the corporate sector would be a good idea. I think it would tend to help better balance demand and supply. I think if it was done in the right way it would foster international tax cooperation that would cause more investment to take place within the United States and go after tax havens.

I think a great thing that Secretary Yellen did was drive the effort to have a global tax treaty so that the biggest companies, the most profitable companies in the world couldn't go hide in tax havens and escape paying taxes, but that treaty's going to languish unless the United States passes the necessary legislation.

And so, whatever happens with respect to all of Build Back Better, I certainly hope that we will do that. It'd be good for inflation. It'll be good for fairness, and it'll be good for international tax cooperation, and it'll be good for strengthening the domestic economy.

BERMAN: Former Treasury Secretary, Larry Summers, we appreciate you being with us this morning. Thank you.

SUMMERS: Thank you.

BERMAN: So Georgia's Attorney General has received a subpoena in the investigation into former President Trump's efforts to overturn the Georgia election results.

BRIANNA KEILAR, CNN NEW DAY HOST: And a new shipment of baby formula headed to the U.S. from Australia. This one, CNN has learned, enough to fill two planes.

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[07:42:00]

KEILAR: Is Georgia Governor, Brian Kemp, trying to reconcile with former President Donald Trump? According to "The Atlanta Journal- Constitution", "Kemp's camp is hoping for a detente that could at least scale down the vitriol ahead of a November matchup against Stacey Abrams and the likelihood that Trump will return to Georgia to rally for Hershel Walker and Burt Jones, the two Trump-backed statewide picks who won," but is team Trump looking to make amends? That may be the question. And joining us now perhaps to answer it is "Atlanta Journal-Constitution" Political Reporter, Patricia Murphy.

OK, tell us about your new reporting here on this and if Trump is amenable to some sort of, you know, kumbaya here.

PATRICIA MURPHY, POLITICAL REPROTER, THE ATLANTA JOURNAL-CONSTITUTION: Right. Well after Brian Kemp's really huge victory win last week over David Perdue, who was Donald Trump's handpicked candidate to bring Brian Kemp down, there have been efforts and discussions among Kemp's allies to try to approach Donald Trump and at least create some sort of truce or detente between the two men ahead of the November elections.

There is enormous anxiety here in Georgia among Republicans that Donald Trump will start to attack not just Brian Kemp but also Georgia's election apparatus and have a replay of the 2021 runoffs here in Georgia when two Republican senators lost their seats when those Trump candidates and the Trump voters rather stayed home and didn't back those two Republican senators. So the Kemp camp is trying to find ways to avoid a replay of that, but it seems that Donald Trump is now quite ready to have a truce with Brian Kemp just yet.

KEILAR: OK, it is kind of puzzling, though, Patricia, that Kemp wants this considering Trump is facing a criminal probe in Georgia. He's still insulting Kemp, and he's obviously still lying at this point about primary fraud, potential primary fraud.

MURPHY: Yes, they don't really necessarily want any sort of an endorsement from Donald Trump. They don't expect an endorsement from Donald Trump and don't even know that that would help in the general election, but they do want Donald Trump essentially off the stage. They don't want him out in Georgia, coming to Georgia, attacking Brian Kemp from a rally stage, which is exactly what he's done earlier this year. He came to Georgia and said that Stacey Abrams would be a better governor than Brian Kemp.

And so, for those Republican voters who still like Donald Trump, still listen to him even if they're not the majority of Republican voters here in the state, Brian Kemp needs their support and doesn't need Donald Trump trashing him here in the state and trashing especially the elections and continuing to sew doubt in the elections and convincing those Republican voters to stay home. Brian Kemp can't afford that, and his allies understand that.

KEILAR: We've seen what happens, and if how effective Donald Trump can be in convincing Republican voters to stay home in Georgia and the impact certainly that it can have. Patricia, thanks for sharing your reporting. We appreciate it.

[07:45:00]

BERMAN: So Brianna mentioned the investigation into former President Trump in Georgia. The Fulton County District Attorney has subpoenaed Georgia State Attorney General, Chris Carr, in this investigation into Trump's efforts to pressure Georgia officials to overturn the results of the 2020 election.

With me now to discuss this, CNN Senior Legal Analyst, Elie Honig. Eli, first of all, I just want to start with the basics here. This is a grand jury investigation.

ELIE HONIG, CNN SENIOR LEGAL ANALYST: Yes.

BERMAN: What does that mean versus a jury trial.

HONIG: Very important to understand. A trial jury and a grand jury are different things, starting with what they do. A trial jury, of course, here's evidence, and delivers a verdict guilty or not guilty. A grand jury really has two things they can do. One is they can investigate, usually by issuing subpoenas which require somebody to testify or produce evidence. The other thing they can do, if they choose, is to issue an indictment.

Now this grand jury down in Georgia is a special grand jury. They actually do not have the power to indict. They can make a recommendation, in which case presumably it would go to a regular grand jury, which could indict. The mechanics are different.

A trial jury, 12 members. They have to be unanimous. The proof standard is beyond a reasonable doubt, the highest standard we have in our system. Our grand jury is much bigger, grand, 23 members. You only need a majority, 12 members, in order to indict, and the standard is much lower, probable cause. Lastly, on a trial jury, of course, operates in public. Anyone can go watch a trial. Sometime's there's TV cameras, but grand jury proceedings are secret, but that only means the prosecutor in the room can't talk about it. The grand juror cannot talk about it. However, witnesses are free to say, hey, I got subpoenaed. Hey, I just testified about this.

So we're not going to know exactly what's happening in that room, but we are going to have a good sense of who's getting subpoenaed and perhaps what they say.

BERMAN: What do you think that the crimes are that are being investigated here, the possible range?

HONIG: So the D.A. down in Fulton County, Fani Willis, put in her letter to a judge is that she has "reasonable probability that the State of Georgia's administration of elections in 2020 was subject to possible criminal disruptions." Now, she didn't specify what crimes. However, if you dig a little into Georgia law you will find it is a crime under Georgia law to solicit, meaning just to ask for election fraud, including willfully tampering with either votes or the certification of who won. Of course, the primary focus here will be on the infamous phone call between Donald Trump and the Georgia Secretary of State, Brad Raffensperger, back a few days before January 6 where Trump infamously said, "All I want to do is this. I just want to find," - key word there - "find 11,780 votes, which is one more than we have because we won the state."

BERMAN: Is the legal hinge here whether or not this constitutes an ask (ph) a solicitation?

HONIG: Well it's definitely a solicitation. The hinge here is going to be Donald Trump's state of mind. His defenders will say he thought he won. He just wanted a full recount. Prosecutors I think are going to say, but why find? That's a strange word, and why exactly one more vote than he would have needed to win?

BERMAN: All right, who are the players here?

HONIG: Yes. So we know Raffensperger has been subpoenaed as well as five other members of the Georgia Secretary of State's Office. The most interesting one to me is Francis Watson, who is an investigator, who Donald Trump also called her. That's the lesser-known reporting, but there is a tape of this, and he says things to this investigator like, "I won Georgia. I know that. By a lot. And a the people know it. And something happened there. Something bad happened." He says to her, "If you can get to Fulton," - Fulton County - "you are going to find things that are going to be unbelievable." And finally Donald Trump says to this investigator, "When the right answer comes out you'll be praised." That's an important piece of evidence.

John, also we now know, as you said, the Attorney General, Chris Carr, has been subpoenaed because Donald Trump asked him, hey, do me a favor. Don't object to our lawsuit challenging the result. Carr did object. We also could see Lindsey Graham subpoenaed. He called down to Georgia a few weeks before. The Governor, Brian Kemp, we know Donald Trump called Brian Kemp and asked him to call a special session of the legislature. What's a scandal without Rudy? Rudy could get subpoenaed as well. Remember, Rudy went in front of the Georgia legislature and he lied. That's a crime in itself. He lied about there being election fraud.

BERMAN: Sounds like there's some major acts left in this play.

HONIG: For sure.

BERMAN: Elie Honig, thank you so much for that.

HONIG: Thanks.

BERMAN: So a major blow in the Trump-Russia investigation investigation. Hillary Clinton's Campaign Lawyer acquitted of lying to the FBI. We have new reaction next.

KEILAR: Plus this just in. Gas prices in the U.S. hitting a new record this morning. In one hand holding his baby, the other a foul ball? A dad making a risky one-handed catch.

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[07:58:41]

KEILAR: A new blow to the investigation into the investigation into Trump world and Russia. John Avlon with our Reality Check.

JOHN AVLON, CNN SENIOR POLITICAL ANALYST: Yesterday, the hammer was supposed to finally come down. I'm talking, of course, about much hyped, long awaited verdict in the Durham investigation, but instead it was time to cue the sad trombone soundtrack as the jury came back with an acquittal for the Clinton Campaign Lawyer, Michael Sussmann, who had been charged with a single count to lying to the FBI.

Now this is after more than three years of investigation by a special counsel whose major accomplishment to date in the probe is getting a former FBI lawyer to admit to doctoring an email. His punishment was probation and community service. Now, by comparison the Mueller investigation took less than two years and it resulted in prison sentences for five members of the Trump circle, including Campaign Chairman Paul Manafort and long-time political advisor Roger Stone, both of whom Trump later pardoned, as well as former concubinary, Michael Cohen.

Now just to refresh your memory here, the Durham investigation was created by former Attorney General Bill Barr and pumped up relentlessly by ex-President Trump as the crime of the century. Now the goal was to investigate the investigators. A classic deflect and project strategy weaponized by the power of the presidency.

[07:55:00]

The folks over at Fox News obligedly hyped up the Durham investigation big time. Get this. According to LexisNexis transcripts, they've mentioned it at least 625 times on their air since 2019. The repetition reflects the alternate reality that get created by partisan echo chambers. And as it became evident that the trial was going sideways, right-wing media was already primed to explain away an acquittal, blaming the jury's bias and saying it contained Hillary Clinton donors, but this wasn't a close call. It was a fast six-hour deliberation followed by a unanimous verdict.

This fizzle should be a big blow to Trump land's alternate reality. As "New York Magazine's" Jonathan Chait wrote, "John Durham tried to prove Trump's Russiagate Theory. Instead he debunked it." And as the Daily (inaudible) points out, the verdict undercuts the whole lock her up chant we've been hearing for years.

And that wasn't even the only smack down delivered yesterday. Last night, Buzzfeed news got the results of a Freedom of Information Act inquiry showing that a Trump-era DOJ investigation found no evidence of a proper interference by Obama officials in unmasking General Michael Flynn, who briefly served as National Security Adviser. So another baseless accusation, breathlessly described as being worse that Watergate bites the dust. Or it should.

But the reality-based media and partisan media play by different rules, and there are still a lot of partisan dupes who are committed to the belief that Russia's interference of the 2016 election was a hoax. If you meet one of those folks - and I'm sure you have - remind them this isn't a matter of opinion. It's an established fact, and if they don't believe you please refer them to the five-volume report authored by the GOP-led Senate Intelligence Committee, which independently established Russia's attempts to issue the election on Donald Trump's behalf because less we forget Russian interference is the big offense here, not reporting however unsavory the details might be. After all, politics ain't beanbag, or as Michael Zeldin, a former federal prosecutor, told CNN's Marshall Cohen, "criminalizing political opposition research-related activity of this type services no criminal justice purpose."

Now one key question is where the Durham probe goes next. Remember that's continued its efforts under the Biden administration-led Justice Department presumably because of a desire to depoliticize the DOJ and the belief that this investigation would run out of steam on its own. It is an honorable approach, but I'd be surprised if it succeeds in stopping the conspiracies because the alternate facts crowd has their own echo chamber amplification system. That's why these partisan accusations without evidence should be treated with extreme skepticism and why actual verdicts must be reported. Because otherwise the misinformation dominates the debate, and we have got to find a way to operate form a common sense of facts again so we can reason together as a self governing nation, and that's your Reality Check.

KEILAR: John Avlon, thank you so much. And NEW DAY continues right now.

Welcome to our viewers in the United States and around the world. It is Wednesday, June 1. I'm Brianna Keilar with John Berman, and the investigation into the school shooting in Uvalde, Texas is taking new turns this morning. Police there say a teacher did, indeed, close a propped open door shortly before a gunman used it to get inside, contradicting what we were initially told that the door was propped open, but we have learned the door did not lock.

Now investigators are trying to figure out why. This is yet another new version of events from what we heard just days ago. There are also some new questions about the police response here. CNN affiliate KSAT has obtained audio of the school district's message alerting parents of an active shooter incident.

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UNIDENTIFIED FEMALE: Uvalde CISD parents, there is an active shooter at Robb Elementary. Law enforcement is on site. Your cooperation is needed at this time by not visiting the campus.

(END AUDIO CLIP)

BERMAN: Both the school's Facebook post and the audio message, according to KSAT, came during the time that officers were inside the school and apparently believed the situation had become a barricade situation. CNN has learned that Chief Pete Arredondo has stopped cooperating with investigators, failing to respond to a request for a follow up interview, but he was sworn in as a city councilmember on Tuesday. Also, funerals will be held today for Irma Garcia, the heroic teacher who died protecting her students, and 10-year-old Jose Manuel Flores Jr. Family and friends will also gather today in visitation and rosary services for 10-year-olds Nevaeh Bravo and Jailah Silguero.

Let's get to CNN's Shimon Prockupez. He is live in Uvalde, Texas with the very latest.

[08:00:00]

Shimon, you've been such a great barometer here for this investigation and the path it's taking.