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Montana Amid 500-Year Flooding Event; Jack Lew is Interviewed about the Economy; China Voices Support for Putin. Aired 8:30-9a ET

Aired June 16, 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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[08:31:40]

JOHN BERMAN, CNN ANCHOR: Some good news this morning for people in Billings, Montana. The city's water plant is back online after it was shut down by what officials describe as a 500-year flood event. We've seen that flooding. You can see it right there, literally sweep a house into the Yellowstone River. Parts of Yellowstone National Park may be closed for the entire summer season because of the flooding.

CNN's Nick Watt is live for us this morning in Billings, doing more fantastic reporting on what's happening there.

Nick, what are you seeing this morning?

NICK WATT, CNN NATIONAL CORRESPONDENT: Well, John, here in Billings, the peak has passed for new. I'll get to why I say for now in a second.

What basically happened here in Billings is, in the space of five days, the river went from flowing at eight feet to 16.5 feet.

And the water plant that you just mentioned is a very interesting fact here. That plant was built to operate only when the river runs at 15 feet or less. So, when it was built, no one figured that the river would ever run at more than 15 feet. It did, 16.5 feet.

The other interesting thing here is really just the unpredictability. So, exactly a year ago, the river was running at all-time lows here, 8,000 cubic feet per second. Yesterday, 87,000 cubic feet a second. That is a huge difference and just speaks to the unpredictability of these kind of bursts of weather that they are dealing with here right now.

So, we are now nearly 200 miles downstream from where we were yesterday at Gardiner, at the gates of Yellowstone National Park. But the story here in Billings, way downstream, is still all about what happens in the park up there. And it's all about watching the rainfall and the temperatures. And the issue is, tonight, there is going to be warm air moving in over those high still snow-packed peaks, and that means that the temperature is not going to drop below zero overnight, so the snow will continue to melt.

Also, this weekend, there are going to be some rainstorms, some thunderstorms moving in, and that is the combination that caused all that devastation that we've seen in Yellowstone and down the river valley. So that is what people are looking for, that combination of the snow melts and the rain that caused this river to rise, hugely this past week, and might make it rise again. At the moment, it's not looking quite as bad, but forecasts can change.

Now, if you can cut to that drone shot that we have up live, you will see what is happening down here 200 miles or so down from where we were yesterday. This river is big. It is still swollen. I mean when we were here last night, the river was, I would say, a few feet higher at about 10:00 p.m. It has fallen. But, as I say, the fear is that it will rise again.

I'm told that they don't think it will rise as much as it did this past weekend. But, again, we didn't really think it was going to be as bad this week as it was. So, nobody is really certain. So, it's kind of a braced, cautious position right now here in Montana. We know more warm weather is coming. We know more precipitation is coming. It's just a wait and see.

Sunday night they think the temperatures will drop and the rain, the precipitation, will fall as snow.

[08:35:01]

That is very good news.

For now, watching, waiting, hoping.

John.

BERMAN: It's great to have you there, Nick. Such a beautiful place, but such difficult times.

WATT: Yes.

BERMAN: Thank you very much.

WATT: Yes.

BERMAN: So, this week's unemployment claims report just came in. We're going to have a breakdown of the numbers, next.

BRIANNA KEILAR, CNN ANCHOR: Plus, former Treasury Secretary Jack Lew will join us on the latest Fed moves.

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KEILAR: Taking a look now at the stock futures this morning, down quite a bit after the Fed hikes interest rates by three quarters of a percentage point. A huge hike. And jobless claims just coming in this morning. Weekly jobless claims falling to 229,000 last week, a decrease of 3,000 from the previous week.

Joining us now is former Treasury Secretary, under President Obama, Jack Lew. Thank you so much for being with us this morning.

Let's talk about the elephant in the room, the "r" word, because we're hearing it thrown around a lot more. Are we going to see a recession?

[08:40:01]

JACK LEW, FORMER TREASURY SECRETARY, OBAMA ADMINISTRATION: Look, I think anyone who predicts with certainty where we're going is exaggerating what they can know right now. I think we can expect volatility, we can expect it to be bumpy because we're dealing with still exiting from Covid, a war in Europe, and a difficult adjustment under the best of circumstances from extraordinary intervention to deal with the Covid economic crisis, back to normal.

So, if you weren't dealing with all of the factors that you don't control, you'd have about a 50/50 chance of avoiding having some economic downturn. Whether it's a recession, that will depend. It doesn't have to be a recession. It could be bumpy. I think anyone who says they know with certainty that it will be is getting ahead of what we can actually know now.

One has to expect that when you raise interest rates it will slow down economic activity. That's how you control inflation. I think the Fed deserves a lot of credit for being patient, waiting until the data is as clear as it can be and then acting with a bit of a surprise and going farther to show their determination to deal with inflation. But they're going to be watching the data as they go along. And that's what they've said, and that's, I think, what they should do.

BERMAN: I know you're reluctant to say there will or won't be a recession. But if there is a recession, how would this one, based on what we know now about where we stand in different metrics, how would this one be different than the ones we've seen in the past?

LEW: Well, I think it's important to look at where we're starting from and the unemployment numbers that you started this segment with kind of are further evidence of that. It's a strong economy, you know? It -- job growth continues. And it's an economy that's come out of Covid far stronger than anyone really expected.

I actually think that that is in part because there was a dramatic response, both in terms of monetary and fiscal policy. The fact that we now see that that dramatic response may have gone a bit too far, if you gave me the choice again, I would have gone too far to come out of Covid than not far enough because you could have created a recession two years ago that would have not ended.

So, here we are where consumers have more savings still. You're going into what would be a period of slower economic growth with household balance sheets, savings more available in order to deal with some of the disruption. That will be something of a cushion.

I think the fact that the economy is going into it strong is a plus. You know, so I've never wanted to predict whether there will be, you know, something that's a technical recession or not. I think everyone should expect it to be bumpy for the next period of time.

You know, I think the determination the Fed has shown to deal with inflation will ultimately calm down the concern that they're not going to do what it takes to deal with inflation. To do that without creating a recession will require a bit of good fortune in terms of some of the extraneous factors that they don't control. But, you know, I just remind everyone that when we were at the height of Covid, oil prices were so low that you had to pay to store excess oil. It was actually a negative price. We now have a lot of turbulence in the world. You know, supply chain disruption still going on and a war in Europe. So, the price will - it's a - it's a volatile market. I can't predict where the oil price will be. But I think anyone who thinks that they know six months from now where all of those factors will be is getting ahead of what can be known.

KEILAR: Janet Yellen says, and I think we all knew this, but she's now saying, and it's significant, that she got it wrong on inflation. Would we be here if she had not gotten it wrong on inflation?

LEW: Look, I don't think anyone could have predicted that there would be a war in Europe. I don't think anyone could have predicted that China would have a hard shutdown or that this far out of the height of Covid that global supply chains would still be months if not years away from being fully normalized. Those are things that, if you had assumed the worst, you might have made different decisions.

Yes, in the - in the - in the 2020 vision of hindsight, you know, there are things that you might have done differently. I think it's objectively clear that inflation is higher than it was expected to be. And I actually think that's all she was saying.

You know, when you look at the package, you know, at the time my critique of the package was that it wasn't well targeted. It didn't put money in the hands of people in the middle -- lower middle class, the people at the lower end as much as it should have compared to people who were going to save it. So I would have designed some of those things differently.

But I would also remind you that there is bipartisan support for those untargeted tax cuts. It was the topic of the Atlanta -- of the Georgia Senate races. Everybody wanted to do another stimulus check.

I think now, as we look at a response, one of the things we ought to be really focused on is that the people who have nowhere to go in terms of flexibility are the people at the low end of the income scale. And things like taking the child tax credit and extending or making permanent the refundability of it, making sure that the poorest families with children continue to have some help paying their bills, those are the households where the choice will be between food on the table or not.

[08:45:13]

And that doesn't mean I'm unsympathetic to others. But if we think about a response, we ought to think about a targeted response. BERMAN: Very quickly, Ron Wyden of Oregon has proposed a surtax, a 21

percent surtax on exit profits from oil companies without saying exactly how he'd measure that. Is that something in theory you would support?

LEW: So, I'm not an expert on the oil industry, oil markets. I do know that, you know, commodity prices are global phenomena. They're not just company specific phenomena. And at a time when you've got the crude oil price so high, and these companies with, you know, decade -- multidecade investments that they're drawing on, in terms of providing, you know, crude for distilling, you have issues that really are very technical, refinery capacity, will middle men buy the stock, are they worried that it's going to go down in price and they're going to be left holding the bag. It's really complicated.

I personally think a lot of questions have to be asked before you reach a conclusion. And a conversation, which is what I saw the invitation to in yesterday's letter, is the right way to deal with it. There ought to be a clear understanding of what is going on.

Certainly, if production can be increased that would help, because we do have supply issues. We're asking everyone in the world to increase supply. We are a major energy producer. If we can increase supply, it would not just be good economic policy, it would be good national security policy.

BERMAN: Former Treasury Secretary Jack Lew, great to have you here. So nice to see you in person.

LEW: Terrific to be with you in person.

BERMAN: So, a significant development in Russia's war in Ukraine. China's president voicing his support anew for Vladimir Putin. Fareed Zakaria joins us next.

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[08:51:10]

BERMAN: Chinese state broadcaster CCTV is reporting that in a phone call between Chinese President Xi Jinping and Russian President Vladimir Putin, Xi told Putin that China would continue to support Russia on, quote, issues related to sovereignty, security and core interests, and that China is willing to continue to play its role in promoting a proper solution to Ukraine.

Joining us now, the host of CNN's "FAREED ZAKARIA GPS," Fareed Zakaria.

Fareed, you look at what China is continuing to do with Russia. Its positioning. And you still see them trying to be somewhat nuanced. Explain.

FAREED ZAKARIA, CNN HOST, "FAREED ZAKARIA GPS": Well, there's no question there is an alliance and it's actually almost a personal ideological alliance. Xi Jinping likes the idea that Vladimir Putin is also a kind of anti-American who tries to block America and Germany in various ways. But the Chinese are very careful. They have offered rhetorical support for Russia and its war against Ukraine. They've offered very little material support, even though the Russians have asked for it, and they have actually provided humanitarian aid to Ukraine.

Even in this meeting, in this phone call, which was, by the way, a happy birthday phone call to Putin, the Chinese readout is very different from the Russian one. The Chinese readout says that the Chinese government retains the decision - you know, its independent judgment on Ukraine and is looking to find a peaceful solution. The Russian readout says China supports Russia's claims in Ukraine and intends to increase economic and military ties.

So, I think that the support, which is real, is measured. And what we should take from this is that China recognizes that this is a risky bet as it were and we should be trying, look, rule of strategy number one is divide your enemies, don't unite them. And we should be trying to exploit ways in which there are differences here because while the Russians and the Chinese are, in a sense, ideologically aligned, there are lots of strategic issues on which they're very different. After all, all of China's trade is not with Russia, it's with the western world. It's with countries like Japan and Korea.

So, they know that while they have this, you know, this ideological tie with Putin's Russia, they need to make sure they have stable relations with their largest economic partners.

KEILAR: Well, to that point, right now we know that President Biden, as he's trying it to deal with a lot of economic challenges, there's only so many options that he has, right? But one that we keep asking about is, is he considering lifting those Trump era tariffs on China. And it appears at this point, he's in the middle of a decision-making process here. What do you think that he should do?

ZAKARIA: This is a no brainer. The tariffs were a bad idea when they were put in place. They did not achieve their goal in -- on any dimension. By the way, U.S./China trade is up. The United States has not been able to bring back those manufacturing jobs. And it's not just tariffs against China. Trump put in place tariffs against Europe, against Canada. There were all kinds of Trump tariffs. None of which have worked.

And just to remind viewers, tariffs are a tax that American consumers pay. And so the question is, is this tax worth it? Has it served any strategic purpose? There's really overwhelming evidence that it hasn't. And particularly in an inflationary environment, what it's doing is, obviously, adding to the cost of goods. And so the simplest thing would have been for President Biden to have come into office and said, I'm getting rid of all these and negotiating from a - from a, you know, a new playing field.

[08:55:09]

We're going to look at all of this anew. Unfortunately, he didn't, because he was scared that he would - that he would look bad. That, you know, there's the image that tariffs are protecting American jobs, which they have not done. He should repeal them, and he should really try to make the United States more competitive. We should be going in the opposite direction, which is, we're trying to lower the cost of goods. We should be trying to find ways in which American businesses can lower the cost of goods for American consumers. That's the way you fight inflation.

BERMAN: Fareed Zakaria, thank you so much for being with us this morning. And, of course, everyone can catch "GPS" on Sunday at 10:00 Eastern Time.

KEILAR: And we do have one more programming note. CNN's special live coverage of the January 6th hearing begins at noon today. A very big day ahead for these hearings.

BERMAN: Yes, the focus will be on the former vice president, Mike Pence, and all the activity surrounding him on that day.

Stay with us.

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