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United Reaches Settlement With Dragged Passenger; President Trump Backs Down From NAFTA Threat; Did Trump's National Security Adviser Break the Law?. Aired 3-3:30p ET

Aired April 27, 2017 - 15:00   ET



UNIDENTIFIED FEMALE: We drew a circle. And she just said, OK, what's in the circle of your life? And she said, you know, what I notice is, I don't see you in there.

And I thought, wow, she's right. There's not a Debbie (ph) wedge. It makes me feel like I will get there. I feel optimistic and hopeful.


ANNOUNCER: This is CNN breaking news.

BROOKE BALDWIN, CNN ANCHOR: Thank you for being with me. You're watching CNN. I'm Brooke Baldwin.

We have got this breaking news here that the president's former national security adviser, Michael Flynn, may have broken the law by accepting payments from Russian interests.

The White House distancing itself from General Flynn. As we just learned, the Pentagon's inspector general opened this investigation into Flynn this month. We are also learning about newly declassified documents provided to Congress that the show the Defense Intelligence Agency, or the DIA, warned General Flynn not to take payments from foreign governments three years ago.

These revelations coming from the top Democrat on the House Oversight Committee.

The ranking member here, Elijah Cummings, lashed out today at the White House.


REP. ELIJAH CUMMINGS (D), MARYLAND: Earlier this week, the White House refused, absolutely refused to produce even a single document, not a single document in response to the bipartisan document requests that I sent with our Republican chairman, not one syllable.

I watched Sean Spicer make all kinds of excuses about how hard it would be to comply with our requests. Come on, man. I honestly do not understand why the White House is covering up for Michael Flynn. I don't get it, after the president fired him for lying. So the president fired him for lying about his communications with the

Russian ambassador. They should be bending over backwards to help us. It does not make any sense, and it makes the American people think the White House has something to hide.


BALDWIN: Flynn's lawyer saying he disagrees Congressman Cummings' characterizations of the letter from the DIA and that the Pentagon was -- quote -- "fully aware" of Flynn's trip to Russia.

When White House Press Secretary Sean Spicer was asked about the vetting process, he pinned the blame directly on the Obama administration.


QUESTION: Are you satisfied with the vetting that was done of General Flynn by the transition team before he came on board as the national security adviser?

SEAN SPICER, WHITE HOUSE PRESS SECRETARY: So that's a great question. I appreciate you bringing it up.

Let's walk through that for a second. General Flynn was a career military officer who maintained a high-level security clearance throughout his career in the military.

His clearance was last reissued by the Obama administration in 2016 with full knowledge of his activities that occurred in 2015, as you point out. So, the issue is, he was issued a security clearance under the Obama administration in the spring of 2016.

The trip and transactions that you're referring to occurred in December of 2015, from what I understand. So, obviously, there's an issue that, as you point out, the Department of Defense inspector general is looking into. We welcome that.

But all of that clearance was made by the -- during the Obama administration and apparently with knowledge of the trip that he took.


BALDWIN: Let's go to Jason Carroll now at the White House on what we heard from Sean Spicer, basically saying, you know what, the buck really stopped with the Obama administration.

JASON CARROLL, CNN NATIONAL CORRESPONDENT: Right. Not sure how that's going to fly, Brooke.


CARROLL: When you look at what is happening, look, it's very clear that a certain level of confidence and faith was put into Flynn, given that he's a decorated general. But when you look at the calendar of what happened here, I think

that's going to really be hard to stick just to simply blame it on the Obama administration.

It was very clear back in 2014 that Michael Flynn was warned not to accept foreign dollars. He did just that in 2015, when he had that appearance on the R.T. television, which is essentially an arm of the Russian government.

Following that, though, in 2016, what the White House is saying that he received a security clearance. And so what they are saying is he got the security clearance in 2016. Yes, he did go through a vetting process, but because he got that security clearance in 2016, because he is a decorated general, in a sense, what really happened here, his point in some ways was, was given a pass.

There are allegations there from some of the Democrats who are investigating this going forward about the White House covering things up, not turning over documents. The White House says not true. They say that they are already vetting documents that they have not received, that they can go over to the transition office and get those documents.


For his part, Flynn's lawyer releasing a statement saying: "General Flynn provided information and documents to the Department of Defense concerning R.T., the R.T. speaking event in Moscow. General Flynn provided two briefings to the department, one before and one after."

In terms of Sean Spicer, he is saying, Brooke, at this point that any investigation going forward by the Department of Defense inspector general would be appropriate. But it's very clear what this White House is doing to try to distance themselves from their own vetting process in a sense by blaming it on the Obama administration.

BALDWIN: Right. Jason, thank you.

I want to stay on this and bring you two more voices.

I have got Jamie Metzl joining us, who worked for the State Department and National Security Council under President Clinton. He is now a senior fellow on the Atlantic Council. And Pete Hoekstra, former Republican congressman from Michigan, former chair of the House Intel Committee.

Gentlemen, nice to have both of you.


BALDWIN: So, Jamie, beginning with you, how long is this blame game excuse going to work, putting it on the Obama administration from this current White House?

Yes, maybe three seconds, four seconds or even zero seconds. JAMIE METZL, FORMER STATE DEPARTMENT OFFICIAL: It's really just a

preposterous claim, because the Obama administration actually fired General Flynn as the head of DIA.

And for the Trump administration, who has basically distanced themselves from everything that the Obama administration did, to say, oh, we just have a lot of continuity and we take their word on it, just it really doesn't fly.

BALDWIN: All right, so he says three seconds.

Congressman, do you agree?


I mean, people should be very familiar with how the security clearance process works. People get issued security clearances for a period of time, regardless of what administration is.

I'm not sure exactly what the dates are for General Flynn's security clearances, but I believe he held this security clearance which was granted to him during the Obama administration. And that carries through even when there's a new administration coming into office.

So if I had a security clearance in 2015, 2016 that was good for five years regardless of whether I was serving in the Obama administration or the Trump administration, it would have been good.

The Trump administration would not have been expected to do a new security clearance review on General Flynn when they came into office.

METZL: But they would, Brooke, though, have to -- they have a vetting process.

And let's just say that the congressman is right. Then that points to a complete failure and breakdown in the vetting process, which is separate from any question of illegality. That's also a deep cause for concern.

HOEKSTRA: No, this is not. And it's not a complete failure in the vetting process. It means that maybe General Flynn may not have provided full, accurate information to the Trump administration.

That would be a failure on General Flynn's part, not of the Trump vetting process. I think the most similar case to this would be saying that President Obama's vetting process failed miserably and totally when they selected General Petraeus to be their CIA director.

If that's the standard that you're going to use, then you have got to say that President Obama's vetting process must have been some of the worst vetting in the world because General Petraeus was put into a position as director of the CIA after we found out -- or excuse me. Then we end up finding out that and he was convicted or pled guilty to a misdemeanor and accepting a two-year probation sentence and a $100,000 fine.


BALDWIN: I understand your example. And let me just jump in and I want to move the ball forward just a little bit more.

And, Jamie, I understand -- and you're not the only one to come on and say, well, man, that would be huge questions if there was some vetting issues, right, and if this might be emblematic of something else. Yes, noted.

But moving on from the fact that the security clearance happened during the Obama administration, the White House blaming Obama, the Obama administration.

Ultimately, though, Congressman, your point on the blame being on Flynn, because you have potentially -- because you now have the Pentagon saying that they did warn General Flynn not to take foreign payments, as he was going into retirement, and the fact that he still did, according to these now declassified documents.

Congressman, would that suggest -- does that prove that he did break the law?

HOEKSTRA: I don't know whether that it proves that he broke the law or not. I'm not familiar with that part of the rules and regulations as they apply to the Defense Department.



BALDWIN: Well, I'm just telling you, this is what the DIA says they told him, warning him, and this is what these declassified documents say.


And then there's the question about if you accept a payment from R.T. television, does that mean that you are accepting a payment from the Russian government?

And did he have discussions with DIA beforehand saying, I'm going to Russia, I'm going on behalf of R.T., whether they then said that's OK or whether they said, no, that still doesn't meet the guidelines?

I'll tell you, if you are told by one of these authorizing agencies that give security clearances, don't go or don't do this, the best advice you have, number one, to keep your security clearance, listen to them. And if you don't listen to them, yes, potentially, you have broken the law.

METZL: So, the Defense Department itself is saying that he did not ask for permission to go to Russia and to meet with R.T., a branch of the Russian government.

And the Defense Department, by launching this investigation, is clearly suggesting that there could be illegality. And so the best- case scenario here is that General Flynn potentially broke the law and there was extreme negligence on both the part of General Flynn and the Trump administration.

And the worst-case scenario is that we could connect the dots between all of these different things that are very suspicious, whether General Flynn, Carter Page, Russian interference in the U.S. election. That's the story that's not being told.

And the more that the White House withholds information and the more that we get these kind of -- quote, unquote -- "alternative facts" and alternative realities, the more the need for a special prosecutor becomes just ever more important.

BALDWIN: It just does make you wonder, would we even know this information had he not misled the vice president and therefore been fired, and now all of these questions are emerging about everything that we have just discussed?

Congressman and Jamie, thank you both so very much. We're going to stay on this very closely here at CNN.

HOEKSTRA: Thank you.

BALDWIN: Appreciate both of you.

Coming up, why won't the treasury secretary guarantee that the middle class will benefit from the president's new tax cut plan? The White House has responded to that. We will debate it.

Also ahead, was it a trillion-dollar bluff? How Mexico and Canada are reacting to President Trump's change of heart on NAFTA.



ANNOUNCER: This is CNN breaking news.

BALDWIN: All right, breaking news here on CNN, we're going to take a pause on politics and talk about this video. Right?

We now have news from this video seen all around the world of this United passenger, Dr. Dao, who was dragged and bloodied and beaten as he was taken off this United plane. This was, what, a couple of weeks ago.

So the news that we have is that his attorneys and United have settled. Right? The words we have, they have announce an amicable settlement. I know everyone is wondering what the dollar amount is. So am I. That is apparently confidential.

The attorney here said -- quote -- "Mr. Munoz, who is the CEO of United, said he was going to do the right thing, and he has."

Jeffrey Toobin is on the phone with me.

I mean, not a huge surprise that they didn't drag this thing out in court. I just -- I wonder how many millions he is getting paid.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: You know, I don't know, and I wouldn't want to speculate, but I'm sure we're well into the seven figures.

But, you know, as you point out, Brooke, this is not a case that United wants kicking around the courts for a year or two. They do not want a jury to decide how much money Dr. Dao is going to get. So I'm sure they paid a great deal of money, but at least the legal part of this story is now over for them.

BALDWIN: Why do you say legal part? What else remains?

TOOBIN: Well, their reputation, the fact that every time you get on an airplane now, you're exchanging glances with other passengers and everybody knows what you're thinking.

It's like, well, I hope they don't drag me down the aisle in the middle. You know, it's just -- this is something that captured America's imagination.

BALDWIN: It did.

TOOBIN: And it's not going to go away any time soon. I mean, I would venture to say that if you say United Airlines to 10 people on the street, at least seven of them, their first thought would be Dr. Dao.


BALDWIN: Do you think -- do you remember that press conference that Dr. Dao's attorney held a couple of weeks ago? It went on for, my goodness, maybe an hour.

So many people just sat listening to every word of it. Do you think -- and how he spoke. Do you think that helped their case, beyond this video?

TOOBIN: Absolutely. Absolutely.

I think his lawyers played it very cleverly. He's an extremely sympathetic figure. He was a doctor trying to get to his patients. What better reason is there to be on an airplane? Most of us don't have such a good reason when we're flying somewhere.

And, you know, there's a Latin phrase everybody learns in law school called res ipsa loquitur, which means the thing speaks for itself. That video speaks for itself. You know, you put that video on in front of a jury, how many million dollars are they going to give to Dr. Dao?

They just are not -- it was just a hopeless legal situation for United. And I think they made a smart decision, I guess. I don't know what the money figure is. But just in terms of their reputation, they have made some changes. I think it's fair to point that out, that they are...


BALDWIN: Well, apparently they are about to start paying big bucks for people...

TOOBIN: They have increased the amount of money that they will give passengers to get off flights.

BALDWIN: Exactly.

TOOBIN: And they are not going to bounce anybody off who is already on the plane anymore.

But, you know, it's a terrible, terrible situation for United, and this is one way of trying to put it behind them.

BALDWIN: Jeff Toobin, thank you.

We are going to have more on this in just a moment.

Again, just quoting this lawyer from Dr. Dao talking about the CEO of United "said was going to do the right thing, and he has. And in addition, United has taken full responsibility for what happened. For this acceptance of corporate accountability, United is to be applauded."

This is from the lawyer from Dr. Dao, who was dragged off that plane.

More on this in a minute. Quick break. We're back after this.



BALDWIN: President Trump's tax proposal includes lots of tax cuts. He says it will eventually pay itself through -- pay for itself through growth, but that's been refuted by economists on both sides of the aisle.

Here's Christine Romans with a reality check.


Every tax cut, every tax increase is different. Let me give you some examples from history. This was the Bush tax cuts 2001 and 2011. Look what happened here. Employment grew very slowly here, and real GDP grew just less than 3 percent.

So, this was kind of a mixed response to a tax cut from President Bush. But what about President Clinton? He was raising taxes. He was raising taxes, and employment surged. And so did GDP. What's the difference there when you look at those two?

Well, tax policy is just one lever in, frankly, hundreds of things in fiscal and economic policy that can affect the economy. George W. Bush, he was cutting taxes to boost growth. He had two big wars, spending on wars in Iraq and Afghanistan, and the national debt was growing because of that.

But Bill Clinton, he was raising taxes to reduce the deficit. Remember those days of balanced budgets? There was a dot-com boom. Business was surging, a P.C. on every desk. And NAFTA and the WTO, the U.S. entered into those big trade deals, so very different situation there.

Now, this is what Republicans, this is what conservatives and budget wonks, this is the Holy Grail. This is -- when they say you cut taxes, it explodes the economy, they look at Reagan and what happened in the Reagan years.

Ronald Reagan coming out of tough economic times cut taxes. And, look, you started to see the economy with a little blip doing better. And then he embarked on not just tax cuts, but tax reform. And that is what so important here, not just cutting taxes and exploding the deficit, but reforming taxes.

And look what happened. You got 7 percent growth here, multiple years above 3 percent. This is what people want when they talk about cutting taxes. But when you cut taxes, and you reform taxes and you explode the deficit, that's a whole 'nother story. Very hard to say that just exploding it on its own in terms of tax cuts and growing growth can make sure the deficit doesn't get bigger too. That's the real trouble here, Brooke.

BALDWIN: Christine Romans with the explainer.

One of my next guest knows definitely a thing or two about this. But to tell you about Art Laffer, I need to show you a napkin, a napkin. Laffer famously drew this curve on a napkin for White House advisers to President Gerald Ford, a theory that would later be called the Laffer Curve, a theory that would net Laffer the nickname father of supply-side economics, a theory that George H.W. Bush actually once called voodoo economics, for his theory led the Reagan White House to cut taxes so much in 1981, the budget deficit ballooned.

His theory, that cutting taxes will pay for itself, as it would unleash economic growth, generating new revenue, a theory that President Trump is reviving in his new tax proposal.

So, the man who penned the napkin himself, Arthur Laffer, shaking his head at me, because he probably...


BALDWIN: ... napkin in a minute.

Also with us, business analyst Dylan Ratigan.

So, guys, good to have both of you on.

And Arthur Laffer, just beginning with you. You served -- in addition to all of that, you served as one of Trump's top economic advisers from the campaign. You were involved in the White House tax plan. Explain why your theory would work great today. ART LAFFER, FORMER WHITE HOUSE ECONOMIC ADVISER: Well, people don't

work to pay taxes. People work to get what they can after tax.

It's that very incentive that motivates people to work harder. It motivates companies to move overseas, rather than come back here. It motivates businesspeople to seek for tax shelters, rather than reporting their income honestly and fairly.

And when you have taxes as high as we have on corporate profits, which are the highest in the OECD, and we have the fifth lowest revenues as a share of GDP for the OECD, I think that tax is a perfect one to bring down right now.

You will get the sheltering gone. You will get the incentives to move your businesses back to the U.S. And you will get an incentive to increase output, employment and production. But, most of all, you will collect all sorts of secondary taxes on payroll taxes. You will get them on income taxes. You will get them on sales taxes, property.

You know, there's a lot of feedback effects that come here that no one talks about. And that's really important. And if it works, and I think it will work very well, you will get less welfare, less unemployment. You will get more economic growth. And it's a win, win, win for the world.


DYLAN RATIGAN, FINANCE EXPERT: Listen, the fantasy is fantastic. And I honestly hope that Arthur is correct.


LAFFER: You can believe.


RATIGAN: I want to believe, Arthur. I do want to believe.

But I guess I would be interested to hear this from you. The thing that gives me the greatest concern, first of all, when I look at this tax plan -- really, let's call it a sketch, OK? It's not exactly a plan.

LAFFER: It's a sketch. My curve was a sketch, too, though.

RATIGAN: Fair enough.


RATIGAN: This -- this seems like a sketch that could be what Arthur is describing, or it may be a plan by billionaires --