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White House Slams Sanctuary Cities Judge; Flynn in Legal Trouble; Trump's Tax Reform; U.S. Anti-Missile System Deployed in South Korea; U.S. "Concerned" About Strikes on Anti-ISIS Allies. Aired 4:30-5a ET

Aired April 26, 2017 - 04:30   ET



[04:30:57] CHRISTINE ROMANS, CNN ANCHOR: The White House attacks again the justice system after another legal ruling it didn't like. What's next in the president's battle to strip funding from sanctuary cities?

DAVE BRIGGS, CNN ANCHOR: Potential legal trouble for Michael Flynn. Congressional officials say the former national security adviser may have violated the law by not reporting payments from Russia.

ROMANS: And President Trump's plan for tax reform goes public today. It is Tax Day in America. Not that Tax Day. Who will benefit the most? Who has pay to make it happen? That's the big question and will deficit hawks believe the dynamic scoring.

BRIGGS: Where have the deficit hawks gone quite frankly?

ROMANS: We'll see. We shall see.

Welcome back to EARLY START. I'm Christine Romans.

BRIGGS: I'm Dave Briggs. Thank you for joining us this morning. A busy one once again.

The White House reaching for an old playbook, slamming a federal judge who has blocked an executive order, then vowing to appeal that ruling. This time, it's Judge William Orrick temporarily halting enforcement of President Trump's executive order on sanctuary cities. President says his order would withhold billions of dollars from jurisdictions that refuse to cooperate with immigration enforcement.

ROMANS: Orrick found that San Francisco and other jurisdictions suing to overturn the order could face immediate irreparable harm if that order were enforced. He signaled the legal challenge to the executive order will be upheld once the case is fully heard. The White House at first stayed clear from attacking Judge Orrick, but then overnight put out a statement that went straight at him.

BRIGGS: Yes. It called the case one more example of egregious overreach by a single unelected district judge, adding, "Today's ruling undermines faith in our legal system, raises serious questions about circuit shopping. We're confident we will ultimate prevail in the Supreme Court."

Our coverage begins with CNN's Jeff Zeleny at the White House.


JEFF ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Christine and Dave, the White House is trying to show accomplishment this week as it closes in on the 100th day of the Trump presidency.

Something else, though, is stacking up as well -- legal setbacks. That ruling on Tuesday from a federal judge in California about sanctuary cities is the latest in the legal setbacks for the president's immigration agenda. Now, he signed an immigration executive order five days into taking office. Now, a federal judge on Tuesday ruled simply that they cannot do that. It exceeded his authority.

Now, the White House is vowing to appeal this. Chief of Staff Reince Priebus told me they will take this all the way to the Supreme Court. But it is another sign of the tests and the limits of presidential authority.

Now, this White House so far has signed 26 executive orders since taking office in these first 100 days. They are signing even more this week. Now, that's a record for any president. But, again, they are also seeing the limits of presidential authority and powers because the travel ban and now this have been turned aside by federal judges -- Christine and Dave.


ROMANS: All right. Jeff Zeleny at the White House -- thank you.

This is the second time President Trump's own words have come back to haunt him in court. As with the travel ban, the judge looked at the president's own rhetoric, noting what he said about defunding sanctuary cities, contradicted what government lawyers were arguing in court about withholding only a limited amount of money.

BRIGGS: Judge Orrick wrote, quote, "The president has called it a weapon to use against jurisdictions that disagree with his preferred policies of immigration enforcement."

The president and his lawyers disagree about exactly what constitutes a sanctuary jurisdiction. The lawyers had a more narrow definition, saying it would apply only to jurisdictions refusing to share information required by law and to certain Homeland Security and Justice Department grants.

ROMANS: Judge Orrick was skeptical, calling that interpretation toothless. Now, in the wake of is ruling, the Justice Department simply says it will continue to enforce grant requirements and compliance with the law. All right. It is Tax Day. Not that Tax Day. It is a different Tax

Day. A Tax Day where the Trump administration will roll out its new tax plan.

But the president himself won't be there. Instead Treasury Secretary Steven Mnuchin and National Economic Director Gary Cohn, they will present this long awaited plan.

[04:35:08] As I have been saying all week, the administration has been light on the details, so this is critical here. And we've got a lot of questions we need to answer.

For example, will this focus on corporate tax cuts first? An administration official says Trump will slash the tax rate to 15 percent for all businesses. That includes pass through businesses for which owners profits on their tax returns. For those firms, it's a cut from as high as 39.6 percent down to 15 percent. So, big tax relief for businesses.

Which leads to my second question, will it be real tax reform or just tax cuts? These are not the same things. Comprehensive tax reform involves tradeoffs that pay for any proposed cuts. So far, the treasury secretary suggested economic growth would offset costs. But many experts say there's little evidence that works.

Last, what's in it for the middle class? The treasury secretary repeatedly said middle class tax relief is a priority. First thing he said on the record when he was first named as treasury secretary. But analysis of some of Trump's earlier tax proposals heavily favor the top 1 percent and raise taxes on a sliver of middle income families.

You know, tax reform is hard. There's a reason we haven't done it since 1986.


ROMANS: You know, are companies willing to trade 15 percent corporate tax rate for all the loopholes that they use to lower their tax bill. One in five profitable large companies in America pays no taxes at all. So, people with 41 percent on, I'm telling you, there are companies that are going to have bigger tax bills.

BRIGGS: And you asked a lot of questions there. There are so many. Including, can they get this through on budget reconciliation with no Democratic votes? That has to have no impact on the deficit in ten years.

How do they possibly make that argument? And what will Democrats take them on? Will be it about the 1 percent? Will it about this helps President Trump's personal businesses?

ROMANS: What I think -- we need tax reform. I don't want --

BRIGGS: Everyone agrees with that.

ROMANS: We need tax reform. Thirty-five percent stated tax rate is too high. Everyone agrees. President Obama also agrees we needed lower taxes but Congress wouldn't with him on that. So, we'll see if it gets done this time.

BRIGGS: Pay for, it's going to be big here.

All right. A legal battle may be looming for former national security adviser Michael Flynn. The two top members of the House Oversight Committee raising serious concerns about payments made to Flynn by the Russians and whether he broke the law and while the committee was able to review some classified documents related to Flynn, they did not get to review others they had expected to.

The White House declined to provide documents related to Flynn that the oversight committee had sought to review.

We get more now from CNN's Manu Raju.



Now, the House Oversight Committee really with the bombshell announcement, announcing that Michael Flynn, the former Trump national security adviser, may have broken the law by not disclosing in his security clearance form payments he received for a 2015 trip to Moscow, paid for by RT, that's the Kremlin-based television network that actually had actually paid Michael Flynn up to $45,000 to appear at that event in Moscow in 2015. Him not disclosing that allegedly on that 2016 security clearance form. Also not disclosing, and not getting permission for receiving payments from the Russian entities as well as Turkish entities as required by the law, something that he has to do as a former military officer.

Yesterday, Jason Chaffetz, the chairman of the House Oversight Committee was pretty blunt about the prospects of Mr. Flynn possibly breaking the law.

REP. JASON CHAFFETZ (R-UT), CHAIRMAN, HOUSE OVERSIGHT COMMITTEE: Personally, I see no information or no data to support the notion that General Flynn complied with the law and that is he was supposed to seek permission and receive permission from both the secretary of state and the secretary of the army prior to traveling to Russia to not only accept that payment but to engage in that activity.

As a former military officer, you simply cannot take money from Russia, Turkey or anybody else. And it appears as if he did take that money.

RAJU: Now, Michael Flynn really the center of a number of investigations on Capitol Hill. One the Senate Intelligence Committee which is looking at the broader issue of Russia meddling in elections and campaign ties that occurred between Trump officials and Russian officials, a cyber campaign that was launched under the orders of Vladimir Putin to influence the elections. Michael Flynn's role in that central to the Senate Intelligence Committee's investigation -- Dave and Christine.


BRIGGS: Hardest working man on Capitol Hill right there -- Manu Raju.

Flynn's lawyer says his client is not hiding anything and claims he briefed the U.S. Defense Intelligence Agency about his paid visit to Russia both before and after this trip. He also claims Flynn answered all questions that were posed by the DIA during those briefings.

ROMANS: All right. The Trump border wall no longer standing of a bill to fund the federal government.

[04:40:03] The White House budget director says the president is willing to sign a bill that does not include money to begin construction on border wall so that a government shutdown can be avoided.

Backing off his demand the president says for him nothing has changed.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The wall is going to get built, folks. Just in case anybody has any question, the wall is going to get built and the wall is going to stop drugs and it's going to stop a lot of people from coming in that shouldn't be here and it's going to have a huge effect on human trafficking, which is a tremendous problem in this world, a problem that nobody talks about. But it's a problem that's probably worse than at any time in the history of this world. Human trafficking, what's going on. The wall is going to get built.


BRIGGS: So, even with border wall funding off the table for now, obstacles to getting a spending bill passed by the deadline Friday remain.

We get more now from CNN's Phil Mattingly.


PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Dave and Christine, four negotiators trying to keep things open after Friday night, some good news, the border wall money, that is now no longer in the negotiation. That's a big deal going forward. Democrats made very clear they would not support anything that had that funding inside of it and Democrats are needed to pass this bill in the Senate and probably the House as well.

But that doesn't mean the problems are resolved. At the center right now is Obamacare subsidies, these cost reduction subsidies that insurance companies more or less require in order to be able to function opinion in the exchanges. These are subsidies that the House Republicans have actually sued over, but understand that they more or less need to don't exist in order for the exchanges to operate. There's one problem. President Trump, he's not so sure about that.

Because of that, Democrats trying to force this money into the funding negotiations, Republicans very wary of this, even as they acknowledge that it's a necessary kind of entity that has to be in there -- Dave and Christine.


BRIGGS: Phil, thank you.

While both sides fight over how to fit health care into President Trump's first budget, key Republicans are taking steps to advance a broader repeal and replace effort. They have actually taken the critical step of circulating legislative text for a new bill, hoping that would trigger another round of health care talks before the president's 100th day in office. A draft amendment obtained by CNN shows where the GOP may be headed.

ROMANS: The draft would allow states to seek waivers to weaken several key Obamacare provisions like protections for patients with pre-existing conditions. The measure is designed to bridge the gap between the conservative House Freedom Caucus leader, Mark Meadows, and the more moderate head of the Tuesday Group, Tom MacArthur.

But there is little evidence the math has changed to get a new health care bill through the House.

All right. What do lumber and tuna have in common? They are at the center of a trade disputes with two of America's biggest trading partners setting a tense tone as the U.S., Canada and Mexico prepare to renegotiate NAFTA.

First, U.S. home buyers may be paying for that new tariff on Canadian lumber after the administration slapped tariffs up to 24 percent on imported softwood, the Canadian government warned the tax will actually hurt American home buy terrifies most. Canadian lumber makes up 31 percent of the U.S. market. Trade groups argue that tariff will increase the cost of a new home by 3,000 bucks. And that price tag will be passed on to consumers. It also could hurt construction workers costing 8,000 jobs and $500 billions in lost wages, that according to a trade group for home builders.

Trump's decision to hit Canada with tariffs first was surprising, especially considering his criticism of Mexico on the campaign trail. A lot of folks saying, wait, the first tariffs that go into effect are against Canada, our ally, our closest neighbor?

The fact that the U.S. just lost $163 billion trade battle with our southern neighbor as well, the dispute over this one was over tuna. The U.S. government said Mexican tuna wasn't dolphin safe. Mexico assured it was. The World Trade Association sided with Mexico, allowing Mexico to impose sanctions worth $163 million against the U.S.

So, you're starting to see movement on trade front with these three very important trading partners who are about to start renegotiating. BRIGGS: And you say the Canadian government says that, but the "Wall

Street Journal" points out this morning in their piece, the opinion piece saying this would raise the prices of new homes.

ROMANS: They call it -- yes, they call it Trump's new housing tax. It's amazing, you know, the pro-business "Wall Street Journal" coming out hard against the Commerce Secretary Wilbur Ross announcing that he was going to make America great again by raising the cost of new homes. So, you can see is that tariff not popular with the business folks.

BRIGGS: But Trump's base likes this, likes to see him fighting back and doing something.

ROMANS: Fighting back on behalf as the commerce secretary said, yesterday, on behalf of dairy farmers in Wisconsin, you know?

BRIGGS: Yes, yes. This is what he was elected to do.

The entire U.S. Senate heads to the White House today for a briefing on the North Korean threat. We'll have a preview from Seoul, next.


[04:49:10] ROMANS: All right. Something very unusual is happening in Washington today. Virtually every single U.S. senator will be on the White House grounds for an all hands briefing on the standoff with North Korea. This briefing will be led by top officials, including Defense Secretary Mattis and Secretary of State Rex Tillerson.

But the president himself may not show up. The White House says if he does come it will be a brief drop by. That has a lot of president's critics concerned that this meeting is nothing more than a giant photo op. Republicans are pushing back, insisting it has value as a show of force.

BRIGGS: A briefing for the full house has been added for tonight as well. And an interesting new development this morning, U.S. military observing significant activity at a North Korean nuclear testing site. A new digging effort at a tunnel suggesting yet a nuclear test could be imminent.

CNN's Paula Hancocks is tracking the latest developments live from Seoul for us.

[04:50:03] Good morning to you, Paula. What's the latest?

PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: Hello, Dave. Well, the satellite imagery of the Punggye-ri site in North Korea is always very key for experts to find out exactly what is happening. As you say, a U.S. defense official saying that they do see increased activity, digging at the entrance of one of the tunnels, but suggesting that might mean a sixth nuclear test is not imminent, suggesting there's more work to be done.

We have heard from 38 North, the tracking group in the U.S. in the past, that they were primed and ready for that nuclear test. But experts say they're still assuming it's a matter of when and not if they will carry out number six.

Now, we also know that the U.S. missile defense system THAAD has been relocated here in South Korea, the pieces had been arriving. They've now moved to the area where it will be set up and the U.S. and South Korean defense officials say they're hoping it will be fully operational by the end of the year. That's slightly later than we have been hearing from U.S. officials, but they have been saying they want it operational as soon as possible.

We're also seeing a tit for tat in military drills on both sides of the border on the Korean Peninsula. The U.S. and South Korea military drills are the annual routine defensive nature ones that we have every single year. They last for two months.

I just went to a live fire drill, a massive display of firepower which the U.S. does say is just routine but, of course, the message cannot be lost on the North Koreans when they see those imagines. We also know that North Korea had its own military drill being called the largest ever combined fire exercise -- Dave.

BRIGGS: Paula, thank you.

ROMANS: All right. The Facebook COO Sheryl Sandberg on the subject of resilience. How the death of her husband is inspiring her new movement when we get a check on CNN Money Stream, next.


[04:56:05] BRIGGS: American officials say they are deeply concerned about a series of strikes by Turkey targeting U.S. allies fighting ISIS. It's a delicate situation as all sides look to carve out influence in the complex battle against the terror group.

Journalist Andrew Finkel is live in Istanbul for us this morning.

Good morning to you, Andrew. What do we know about these strikes?

ANDREW FINKEL, JOURNALIST: Well, impact, there was another strike just now, the Turkish armed forces have put out a communique saying their jets were in action over northern Iraq, striking what they say is a build up of PKK, of anti-Turkish Kurdish separatist forces on the other side of the border.

Now, this second attack follows an attack last Sunday which was as you say condemned by American officials or American officials said they had deep concerns about these attacks. Why did they have concern about these attacks? Because they believe the attacks were not directed at forces against Turkey but against Kurdish forces which have been helping the United States in their fight against ISIS.

Turkey has said that was not the case, that, again, these mountain bases have been used by Syrian forces who are posing as helpers of -- fighters against ISIS but really directing their attacks against Turkey itself. The Turkish foreign minister just gave a live statement saying that he was himself concerned by the fact that American military personnel appear to be visiting the camps which had just been attacked.

BRIGGS: Some new strikes today. That could further complicate things for President Trump who called President Erdogan to congratulate him.

Andrew Finkel for us -- thank you.

ROMANS: All right. Nearing the top of the hour here, 5:00 a.m. in the East, let's get a check on CNN Money Stream.

NASDAQ tops 6,000 for the first time ever, in two days of huge gains. Solid quarterly earnings from big name companies, excitement over tax reforms are the drivers here. Here's what markets around the world right now. Investors today can expect more earnings and an announcement about Trump's proposed tax plan. It looks like at this point, it could be another nice day.

Huge day for the Dow yesterday. The average up triple digits, driven by four of those 30 Dow stocks. There they are, Caterpillar, McDonald's, DuPont and Goldman Sachs helped power to 30-point climb for the Dow all reported earnings that beat Wall Street's expects.

Facebook CEO Sheryl Sandberg is launching her next movement and this is about resilience. Her husband, as you know, died suddenly in 2015 while the two were on vacation in Mexico. In a new book out this week, Sandberg writes about coping with grief while working in the C- suite in one of the world's most valuable companies.

She tells Jake Tapper how that experience has inspired her to help others.


SHERYL SANDBERG, AUTHOR, "OPTION B": I brought it up, I was reminding someone, you can't remind me I lost Dave. That's absurd. I know that.

You also can't remind someone they have cancer. That their father just went to jail, you know? That they face sexual assault.

We can't remind people of these things. But we can talk about them. And that means we're not there for each other when we most can be and the reason I wrote this book with Adam and we started is to try to get people to talk openly when they want to. Not everyone wants to all the time so we can support each other. No one gets through these things alone.


ROMANS: So, this new movement is similar in execution to Lean In. That's a nonprofit she launched with her previous book. Lean In helps women advance in the workplace and really almost has -- almost a cult following among some women, and young women especially graduating from college and they're reading "Lean In". ]

This one, though, is about grief. It's about resilience. It's about real human side of work.

BRIGGS: What a great interview last night with Jake.

All right. EARLY START continues right now.


ROMANS: The White House pushing back with force after judge put a halt to the president's order on sanctuary cities.