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Wild Market Swings; Trump Officials Tout Fundamentals; Trump Lawyers Worry About Muller Interview; Trump Allies Caution Against Interview; Another Short Term Funding Measure. Aired 12-12:30p ET
Aired February 6, 2018 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[12:00:13] JOHN KING, CNN HOST: Welcome to INSIDE POLITICS. I'm John King. Thank you for sharing your day with us.
A roller coaster on Wall Street. The market dives, rallies, then falls off again. Volatility is the world of the day.
Plus, the president's lawyers don't want him talking to the special counsel because they worry he can't tell the truth, the whole truth and nothing but the truth.
And as Congress debates yet another short-term spending plan, the defense secretary says he's frustrated the military can't make long- term plans, and he tells lawmakers, grow up.
(BEGIN VIDEO CLIP)
JAMES MATTIS, DEFENSE SECRETARY: It is not lost on me that as I testify before you this morning, we are again on the verge of a government shutdown, or, at best, another damaging, continuing resolution. As hard as the last 16 years of war have been on our military, no enemy in the field has done as much to harm the readiness of U.S. military than the combined impact of the Budget Control Act's defense spending caps worsened by operating for 10 of the last 11 years under continuing resolutions of varied and unpredictable duration.
(END VIDEO CLIP)
KING: Secretary Mattis has a point, and we'll get to it in a few moments.
But we begin with another day of extreme volatility on Wall Street. The Dow whipsawed between losses of more than 500 points, to gains of nearly 400 points. This after the index suffered just yesterday its largest single day point loss in history.
Right now, you can see right there, the Dow up a little bit, close to even for the day, even a little up. A stomach-churning few days, but in the grand scheme of things, a small blip in a nine-year bull market.
Here's one way to look at it. If you had $100,000 in an S&P 500 index fund on Election Day 2016, well, you had $134,000 when the market hit its all-time high on January 28th. As of this morning, you were down a bit to about $124,000.
CNN's Cristina Alesci has the great task of being at the New York Stock Exchange today.
Cristina, tell us what's driving all this turmoil.
CRISTINA ALESCI, CNN MONEY AND POLITICS CORRESPONDENT: Well, it's really interesting. You know, to your point about the volatility, that really is the story of the day today. When I walked in this morning and we watched the opening bell, I mean technically at the opening bell, we hit a correction. We had a 500-point drop. That made the Dow hit the correction territory which means a 10 percent decline from its last peak just a few weeks ago. And then, a couple of minutes after that, we had a big 200-point spike after that. So you can see these big swings all day today.
Look, what's driving this? It's the fact that we've had stability for so long. You know, one trader told me on the floor today, you know, stability breeds instability, and that's the theme of the day. You layer on top of that inflation fears and the expectation that the Fed will raise rates, that has investors anticipating that people will pull money out of the stock market and put it into other assets tied to the rising yields. And that's what's driving these moves fundamentally.
But, look, these market corrections are in some part very healthy. What investors don't like to see are very dramatic drops, like the ones that we saw -- like the one that we saw yesterday around 3:00 p.m. That, in large part, was driven by some algorithmic trading, some computer programs, and that's the kind of stuff that gets people really nervous. But a 10 percent correct, at this point, most people are saying is pretty healthy. We'll have to see where we go from here.
KING: Up 32, 33 at the moment. Cristina, we'll watch it during the day. You're in for a nice ride. Hang in there. We'll tough base later as developments warrant.
ALESCI: Thank you.
KING: For a president who brags about every Dow milestone and every new market high, yesterday, of course, had to hurt. So today administration officials are rushing and pushing a consistent message. They say, overall, the economy's doing just fine.
(BEGIN VIDEO CLIP)
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: And the fundamentals of this economy continue to be very strong.
STEVE MNUCHIN, TREASURY SECRETARY: I'm not overly concerned about the market volatility. I think the fundamentals are quite strong.
UNIDENTIFIED MALE: The economic fundamentals are really strong.
(END VIDEO CLIP)
KING: You get the message there.
With us today to share their reporting and their insights, Molly Ball of "Time," CNN's Jeff Zeleny, Sahil Kapur with "Bloomberg" and "The Wall Street Journal's" Greg Ip.
Greg, let me start with you.
To Cristina's point, this happens.
GREG IP, CHIEF ECONOMICS COMMENTATOR, "THE WALL STREET JOURNAL": It sure does.
KING: It's just it's just not pleasant when it does 1,100.
IP: Look, it hasn't happened very much for the last nine years. I mean this bull market's been marked not just by its extraordinary strength, been tripling in value since 2008, but the very calmness of it. We haven't had a 20 percent bear market in that period of time. That's very unusual. Ten percent corrections used to come along every year or two. We haven't had one of those in several years. So, yes, people are getting used to the idea that markets do go down, as well as going up.
The other fundamental factor going on here is probably the single most important driver of that bull market has been the willingness of the Federal Reserve and central banks in other countries to keep interest rates near rock bottom levels and to actually piling on by going out there and buying bonds. There are growing signs that that period is at an end. Central banks don't need to do that any longer. So people are grappling with the fact that they are losing that very important source of monetary support.
[12:05:20] KING: And so interest rates may start to go up.
I just want to show the real economy because, again, if you're investing in the market, if you're planning to retire, yesterday you probably got a little panic. If you're in for the long haul, this is -- you get a little whiplash.
But, unemployment, 17-year low. Wage growth, fastest rates since 2009. I'll come back to that in a minute. Consumer confidence here, 17-year high. A strong holiday season retail sales. Relatively strong corporate earnings.
The wage growth part, though, is that part of the inflation concerns that we're seeing. That it's a good thing if average Americans are seeing their wages go up, but that also tells the market that that means inflation may go that way.
SAHIL KAPUR, NATIONAL POLITICAL REPORTER, "BLOOMBERG POLITICS": Right, their -- the congressional leaders, particularly on the Republican side, are arguing that the wage growth and the fact that the Fed is expected to raise rates, that essentially, as a result of the tax law that they argue, creates a sustainable economy that can raise rates and that can do well down the road. Politically, though, it's, obviously, concerning for the White House. I think they've admitted that this morning. But, you know, it's -- this is -- it's still very early. The elections is a long way away.
KING: That's a great point because I cover the White House for nearly ten years and they tell every new person who comes into the communications shop or ever new policy member that comes in, don't talk about the stock market. Talk about the big things. Talk about the unemployment rate if you want. Talk about wage growth. Talk about this. Talk about that. Don't talk about the stock market.
This president has thrown that out the window. Most of his team has thrown that out the window. So listen to the Treasury secretary, who understands Wall Street. He was up on Capitol Hill this morning. And, suffice to say, you're not supposed to talk about it, but he's paying very close attention.
(BEGIN VIDEO CLIP)
STEVE MNUCHIN, TREASURY SECRETARY: They have been quite volatile today. As -- I normally wouldn't be looking at my iPhone, but given that the market moves, I'm checking it. It's now up 187 points. So we're back up today.
UNIDENTIFIED FEMALE: Well, the administration has claimed credit for the markets going up. Are they going to claim credit when the markets go down?
MNUCHIN: Again, I think we'll still claim credit for the fact that it's up over 30 percent since the election.
(END VIDEO CLIP)
KING: In the conversation, is there anything Washington-specific to this? Greg mentioned the change at the Fed. There are some concerns there. You go from Janet Yellen to Jerome Powell. But for the most part, the last several months, the tax -- the markets, excuse me, have loved the tax cut plan. They've loved the less regulation from Washington. Is there something Trump-centric to this, Trump administration centric to this?
JEFF ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: So I think -- I mean the one question is the -- how much of this was built into this market. I mean the -- everyone has suspected that the tax cuts were likely to happen last year. Never mind the dysfunction in Washington. So the market didn't really climb because of that, it was already built in. So that, I think, is the question here.
But one thing I was struck by yesterday, you know, those six words, the fundamentals of the economy are strong, we all remember in late September of 2008 when John McCain said that and that became a soundtrack of the Obama campaign going after him. It was the same day that Lehman Brothers collapsed.
The problem -- or the advantage for the Trump White House this time, it's true, as you were just pointing out. So I think what -- I was told by an adviser this morning, they want the president to keep talking about the economy but not talk about the stock market. It's a very New York-centric thing. He can say that on television and talk about it, but they want him to talk about factories in Wisconsin. They want him to talk about things in red states that actually have happened. So there is a long list of metrics he can talk about, but somehow he has been focused and wrapped himself in the stock market and now that's coming back to bite him.
KING: But, Molly Ball, do you have any doubt that the president will continue to talk about Wall Street because, as he has consistently, it's been setting records and he likes records.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The stock market has added more than $8 trillion in new wealth.
That's pretty amazing. $8 trillion and set every record in doing it.
The stock market has smashed one record after another.
The 401(k) is doing well. The stocks are doing well.
The stock market is shatter shattering one record after another.
And I'm telling you, we have a long way to go.
(END VIDEO CLIP)
KING: The last part might want to take back.
MOLLY BALL, NATIONAL POLITICAL CORRESPONDENT, "TIME": Well, we don't know where this ends. I mean I think, to Jeff's point, if you say the fundamentals of the economy are strong and then there's a huge crash, then that looks really bad. But we don't know where this is going and at this point it does not look like it is headed straight off the cliff in the way that it was in 2008.
And, you know, yes, the president likes records. He also likes rich people. His friends are making a lot of money, as he has said, so that is sort of his frame of reference.
But I think it's totally defensible, actually, to -- that the -- on -- that he's claimed credit for it going up without taking responsibility for it going down because it did have something to do with Trump's election that the market went up. Not as much credit as he thought he deserved, but it did have something to do with it, the rising confidence in the business community, whereas this downturn has very little to do with him, apparently. So I don't think that's necessarily as hypocritical as a lot of people are making it now (ph).
KING: And to that point, is it just, this is the way it goes, or is there anything the administration or Washington should do to respond to this, or is it -- or is the best response just step back, this is what the market does?
[12:10:08] IP: Absolutely, you step back and let buyers and sellers work it out. Look, for the president, it's a calculated risk. If you think that the market will go up more days than it goes down, then you'll be talking about good news more often than you'll be talking about bad news. And there's also calculation, will the public connect me to the good news but not to the bad news?
So we've been talking about inflation. People aren't going to blame Trump for inflation. However, if people are caught starting to fixate on the fact that we're going to borrow a trillion dollars this year for deficits, partly because of his tax cut, and that was a factor in the sell-off, that's going to hurt him. If he goes out there and he starts talking tough about trade and that scares people and that causes the market to sell-off, as we -- that was a factor in the 1987 stock market crash -- those are, I think, are the bigger risks for him.
KING: All right, we'll watch this play out. We'll watch what the market does today and beyond.
And while we're talking about the Trump economy, a reminder of the Trump approval rating. Gallup's tracking poll has the president up a few points from the few weeks. He's now at 40 percent. That's one number the president will like.
[12:15:12] KING: Welcome back.
The White House and other Trump allies get angry at us when we report President Trump's constant trouble with the truth. Oh, yes, they do. And today they can direct their anger, I guess, at the president's legal team. Here's the headline from "The New York Times" last night, "lawyers tell Trump to refuse Mueller interview." And this sentence in that story says it all. "His lawyers are concerned that the president, who has a history of making false statements and contradicting himself, could be charged with lying to investigators."
CNN's Lauren Fox joins our conversation for this part of the conversation.
Jeff Zeleny, I'll start with you because you cover the White House.
The president said, absolutely, I want to sit down with Robert Mueller. His attorneys are now telling him, absolutely not, in part because they view it as a perjury trap. What goes through the -- what will the president -- how will he react when he keeps reading that his lawyers don't trust him, his lawyers don't find him truthful? Forget what the media says. These are the president's lawyers arguing, you can't do this because we don't trust you.
ZELENY: In normal circumstances, I think this would come under a category of something that really annoys the president, and that is when people try and manage and handle him, because that's exactly what this reads like. You know, he knows best. He does not like when someone either, a, takes credit for something he's done or when someone tries to essentially babysit him. But this may be a different scenario because he knows the stakes are so much higher, obviously. And there are a lot of his allies who have been out arguing very much in public probably to get his attention. Newt Gingrich, Chris Christie and others saying that, you know, he shouldn't sit down. It's so dangerous.
KING: Well, look --
ZELENY: So the question is, which side does he fall on his legal advice? We don't know yet. He's not talked about this yet. But look for him maybe to talk about it this afternoon. He knows it's risky but we still, the last time we heard him say, he said, I would absolutely like to do it. So that's going to be the tug and pull inside of his head, I guess, if you will, if he's going to follow the advice or not. We don't know if he will.
KING: Well, you mentioned Newt Gingrich and Chris Christie. So let's listen on the idea that the president has a legal decision and a political decision. Which does he pick? Here's there advice.
(BEGIN VIDEO CLIP)
NEWT GINGRICH (R), FORMER HOUSE SPEAKER: And I think the idea of putting Trump in a room with five or six hardened very, very clever lawyers, all of whom are trying to trap him, would be a very, very bad idea.
UNIDENTIFIED MALE: Should the president sit down with him face to face?
CHRIS CHRISTIE (R), FORMER NEW JERSEY GOVERNOR: No.
UNIDENTIFIED MALE: Why not?
CHRISTIE: I don't believe so. I -- listen, I don't think there's been any allegations -- credible allegations against the president of the United States. And I don't think the president of the United States, unless there are credible allegations, which I don't believe there are, should be sitting across from a special counsel.
(END VIDEO CLIP)
KING: There are a long list of credible questions. Christie is -- Governor Christie uses the term credible allegations. There's a long list of credible questions about Michael Flynn, about the June 2016 meeting at Trump Tower, about the efforts to spin that from Air Force One. So walk me through. Legal decision? Political decision? Which will the president pick?
BALL: Well, I think, in a sense it doesn't matter because he may not have a choice. I think that's what we're really looking at here, right? He can make the decision to sit down voluntarily or not. But if he doesn't, we have every indication that Mueller will still seek to interview him, but there may a subpoena, as there was with President Clinton, that could create another whole showdown and a different set of potentially unfavorable circumstances for the president if he has to face, instead of these hardened, clever lawyers, a grand jury. So that has to be part of the calculation as well, part of his lawyers' calculation as well is, even if, yes, he does -- he tends to lie and he's lied under oath before, but is this still going to be a more favorable scenario than the one he might otherwise face.
KING: Right. And if he -- if they does -- if it does end up as a subpoena fight, and we end up in court, that guarantees this extends throughout the election year because that will go all the way to the Supreme Court. The losing side will keep appealing.
So to that point, political -- again, a political decision verses legal decision. Listen to Jim Himes here, Democrat of Connecticut, a House member, who says, Mr. President, I thought you were innocent? What are you afraid of?
(BEGIN VIDEO CLIP)
REP. JIM HIMES (D), INTELLIGENCE COMMITTEE: Every other past president that has been asked to testify in front of an investigation has. So this raises a huge issue.
Secondly, my God, this is a man who from moment one has said, this is all a big hoax. There's nothing there. The Democrats are making this up.
Mr. President, if that is true, there is absolutely no risk to you sitting with Mueller's investigation and telling the truth.
(END VIDEO CLIP)
KING: He's right, past presidents have answered questions. Molly made a very good point. Bill Clinton didn't exactly run voluntarily to do so. It took a fight over that.
LAUREN FOX, CNN CONGRESSIONAL REPORTER: Well, I mean, this is the catch 22 that the president is dealing with. If you don't sit down with Mueller, then Democrats can say on repeat during the campaign trail, look, he's guilty. What is he hiding? Why won't he sit down with Mueller? What does he have to, you know, hide from the American public? And I think that is exact the kind of clip that we will see replayed over and over again before the midterm elections. And this could go on and on. And that is what the president has been deeply frustrated about since the beginning of this investigation and why folks around him have been trying to tell him, oh, this will be over by Christmas, this will be over by the new year and, of course, we're still dealing with it.
KAPUR: And, politically, it's a problem, right? It's inconsistent with the posture that I have nothing to hide if you don't speak to the investigators and try to clear things up.
[12:20:02] As for President Trump, we know that on things that he's very sensitive about, he tends to exaggerate, he tends to make false statements, he tends to lie. Tim O'Brien, who's a colleague of mine, was sued by President Trump in 2006. There was a long disposition. And by the end of it, President Trump, not the president then, the future president, ended up having to admit to lying 30 times about things like the size of his real estate empire, his wealth, speaking fees, the price of his golf club membership.
We know that he's sensitive about all those things. We also know that he's very sensitive about this Russian investigation, what it says about, you know, the election, whether he would have won otherwise and how brilliant of a victory that was. So of course if you're his lawyer, you're going to be worried that given who he is and given the way he's behaved in the past is something that he is this sensitive about, that he is going to, you know, repeat that. And there are much grave -- much more grave consequences this time if he does.
KING: More than 30 times in a civil deposition. Well, I guess I get the lawyers there.
ZELENY: And this is a much different type of case here. And the question is what exactly is Mueller looking for? Does he want to talk about obstruction only or potentially other things, like money laundering and other matters? So --
KING: I think that's why we're in this conversation.
KING: This is as much a negotiation as anything.
ZELENY: No doubt.
KING: We'll talk about obstruction, but we won't talk about money laundering because the Mueller investigation has so many --
ZELENY: As you say all the time, they know more than we do here --
ZELENY: About specifically what they're going after.
ZELENY: But they have not yet made the official ask of the White House because they're still working this out through the negotiations.
KING: All right. As we watch that, we're also watching something else that's a little closer. Less than 60 hours away now from, oh, yes, the U.S. government running out of funding, again. This is not a repeat. And the House GOP back to a very familiar play.
[12:25:45] KING: Welcome back.
No need to reach for the remote or to adjust your TV. This is not the DVR episode of INSIDE POLITICS from three weeks ago, though the story we're about to talk about is essentially the same one we talked about then thanks to your dysfunctional Congress in Washington.
Yes, we're staring at yet another government shutdown possibility. This calendar should look all too familiar. This time February 8th is the day the government will run out of money unless a new spending plan gets done. In all likelihood it will be another continuing resolution that merely buys lawmakers more time, probably a few weeks, to not solve the key issues they can't agree on, including immigration. House Speaker Paul Ryan pointing figures across the aisle during a news conference a short time ago.
(BEGIN VIDEO CLIP)
REP. PAUL RYAN (R), HOUSE SPEAKER: We are voting on yet another continuing resolution this week. I will remind you that the only reason we do not have a full budget agreement is because Democrats continue to hold funding for our government hostage on an unrelated issue. They must stop using our troops as pawns in a game of politics. And that's why the House will send the Senate a bill to fully fund our military for this year while we keep working toward a budget agreement.
(END VIDEO CLIP)
KING: Democrats, of course, have a different perspective. Phil Mattingly tracking this all up on Capitol Hill.
Phil, there is a House vote this evening for another short term funding measure. Will it pass?
PHIL MATTINGLY, CNN CORRESPONDENT: It will. House Republicans very clearly have the votes to actually move that forward. But I think it's worth noting that that bill is dead on arrival in the Senate. And what really matters right now, John, and this is according to several people directly involved in these negotiations I've just been talking to over the course of the last hour is the Senate is on the brink of a major agreement.
Now, they've been close on this before. But right now I'm told that they are almost there.
And what will that entail? It would be a large universal agreement. It would be agreeing on the budget caps, increasing them. That would increase defense spending and increase non-defense domestic spending, something both Republicans and Democrats have been pushing towards for a long period of time. It would likely include a disaster relief bill for the hurricanes that ravaged Texas, Florida and Puerto Rico. It would likely increase -- include an increase to the debt limit as well, as well as some health care spending provisions, community hospital centers, a number of different items.
John, should this occur, it would be a very big deal.
Now, again, this has been something that's been on the table now for months, six, seven months. They always walk right up to the line and it ends up falling apart. Why? Because of immigration. Repeatedly, Democrats have made clear they don't want to sign on to any major budget agreement. So as long as DACA is hanging out there and there's no resolution there. That appears to have shifted, at least that posture at this point in time. Clearly, Senate Democrats would be on board for this deal. I'm not being told that House Democrats, maybe not from the top all the way down, but at least to some degree would be there as well.
Obviously, there's a very short period of time. We are under 60 hours right now in terms of a deadline. But basically how it works, the House will pass their version tonight. That will go over to the Senate. It would strip out the defense funding piece. And, if they reach this global agreement, replace it with that and kick it back over to the House. If the agreement falls apart, they will strip out the defense funding and send some much skinnier version back to the House and we would do this all over again.
But I think the key issue right now, John, is, right now Senate negotiators are close to doing something that, as you laid out, would actually buck the trend of the five CRs that we've done up to this point. Should they get there, it would be a big deal. But, obviously, they've fallen short many time before now. So don't quite cash in those chips yet.
KING: Potentially adult behavior. That would be breaking news.
Phil Mattingly, we'll stay in touch throughout the hours ahead. Sixty hours, as Phil notes.
Let's bring it in the room.
That would be a big deal. I was trying -- talking to -- show staff this morning is, what is the analogy in life to what Congress keeps doing? Like pulling into the gas station and getting two dollars' worth of gas so that you can come back every day or every couple of hours to get more gas? It's dysfunctional. It's ridiculous. They both blame each other. It's all of their faults. It's all of their faults that they can't -- they know the partisan breakdown. They know the issues that divide them. Their job is to pass a government funding bill. But is this real, this Senate plan that Phil talked about? Can they actually -- they've danced up to the line before, as he notes, can they actually step across it this time?
KAPUR: It's certainly plausible they reach that deal this week. They're not going to be able to write an appropriations bill to fund the entire government by the February 8th deadline. So we're looking at another stopgap measure. It will be the fifth in five months.
But the issue of defense spending caps, the issue of non-defense discretionary spending and disaster relief, as Phil was talking about, the two parties are not that far apart on these things. They've mostly figured it out. They just need to write it in a way that both parties can claim, you know, it didn't violate their red lines. There will be some gimmicks. There will be some funny money in there.
[12:30:08] But the issue that has held this up constantly has been immigration and DACA and I don't see a deal quite coming together on that.