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Markets Open Amid Inflation Concerns; Gowdy Investigating Porter Scandal; Conversations Over Kelly Successor Heat Up; White Calls Allegations Gossip. Aired 9:30-10:00a

Aired February 14, 2018 - 09:30   ET

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

[09:30:00] CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: For things like clothes, auto insurance, health care, rent, gas. These are things that you pay every day with and those prices going up a little bit more than economists had expected.

You know, inflation is the byproduct of an overheating economy. We've had almost no inflation for years. The Fed has kept interest rates very, very low and that has allowed the stock market to really soar.

We're entering a phase now, John, where people are trying to get used to a new normal, which is an economy that is very strong, interest rates and inflation that are rising. Now, inflation in general is still below the Fed's targets really overall. The Fed had wanted to see a little bit more inflation, quite frankly. But we're entering into this new phase where I think this is going to be the year that every single economic number that shows inflation is something we're going to watch very carefully. It will unsettle the stock market when you see sides of inflation.

JOHN BERMAN, CNN ANCHOR: All right, down about 100 points off the opening bell. It could be a heck of a lot worse. So we'll watch this very closely.

ROMANS: Yes.

BERMAN: As we wait for this to settle in, Christine, you had a fascinating interview overnight with the CEO of Goldman Sachs on really just this very subject, where are things headed.

ROMANS: Absolutely. Look, you've got -- the economy is strong. An unemployment rate of 4 percent. Lloyd Blankfein was speaking to small business owners. The Goldman Sachs 10,000 Small Business Initiative. Things are very good for these small business owners. The best kind of environment in years because of tax cuts and deregulation.

What could possibly go wrong, I asked him.

(BEGIN VIDEO CLIP)

ROMANS: Wrong?

LLOYD BLANKFEIN, CEO, GOLDMAN SACHS: What could possibly go wrong?

ROMANS: What could go wrong, Lloyd Blankfein?

BLANKFEIN: I haven't felt this way -- I haven't felt this good since 2006.

ROMANS: Yes, that's not -- that's not what I want to hear.

BLANKFEIN: Yes, exactly.

ROMANS: It could -- it --

BLANKFEIN: Well, that's true. You have to have that in mind.

ROMANS: Is there a risk of overheating here?

BLANKFEIN: Yes, of course there is. I would say the conditions are not just benign, they are very -- highly supportive of a good economy.

ROMANS: Right.

BLANKFEIN: The economy was good before. On top of it, we put in a trillion and a half dollars of tax cuts --

ROMANS: Right.

BLANKFEIN: $300 billion of spending over -- additional spending. Maybe even an infrastructure bill.

ROMANS: Right.

BLANKFEIN: And so the sentiment is very positive. And interest rates are relatively low for where we are in the growth cycle. The issue could be potentially -- I'm not saying this is -- this is certainly not my base case -- but I'm in the business of worrying about small but adverse probabilities --

ROMANS: Right.

BLANKFEIN: Is too much of a good thing. And I would say that the odds of a bad outcome have gone up.

(END VIDEO CLIP)

ROMANS: The odds of a bad outcome have gone up. And, John, that's exactly what the markets have been telling you the last couple of weeks, those days of just going up, path of least resistance, appear to be over and you will have investors and a market and an economy that will be struggling to figure out what is the proper level of inflation. Is it possible that an overheating economy could spike inflation and the Fed has to come in and put on the brakes?

BERMAN: All right. He's the type of guy you listen to when Lloyd Blankfein speaks.

ROMANS: Yes.

BERMAN: All right, Christine Romans, thanks very much. The market down about 123 points right now.

We're joined again by Congressman John Yarmuth, Democrat of Kentucky, who, by the way, is a ranking member of the Budget Committee. All this I think of keen interest to you, sir.

One of the things that does factor into inflation is all this discussion about debt and deficits. The president released his budget this week, which doesn't erase the deficit. Republicans have seemed to stop caring about the deficit. But my question to you is, I think Democrats are getting off easy here because I don't think that a spending plan, if you could release a spending plan right now, would get rid of the deficit either within the next ten years, would it?

REP. JOHN YARMUTH (D), KENTUCKY: Hold on, we wouldn't -- and we've -- we've actually had budgets that we've proposed over the last few years that don't. We actually do, though, keep those deficits at where we consider to be a sustainable percentage of GDP, which you can't say the same thing about with this Trump budget that just came out and -- which I'll remind you is -- adds $7 trillion to the debt. That's after the huge tax cut that adds probably $2.2 trillion, $2.3 trillion to the debt and after cutting non-defense discretionary spending by a third at the end of the budget window and Medicare by $500 billion and Medicaid by $1.4 trillion.

So this is -- you know, part of it is where we are. And we do have some very, very tough issues of sustainability, particularly on the mandatory spending side. But we can't necessarily just approach those by cutting the amount we spend on it. There's some structural things we can do, letting Medicare negotiate on prescription drug prices, for instance, which are really solid ways of driving down the cost of health care, which is the single biggest challenge we face.

BERMAN: Congressman, there is breaking news this morning that has to do with Congress, and that's that Trey Gowdy, the chairman, the Republican chairman of the House Oversight Committee now says that he is investigating the circumstances surrounding Rob Porter, the White House aide who was either fired or resigned after domestic abuse allegations surfaced. What is the role? What should be the role of Congress here? What questions need to be asked and answered?

YARMUTH: Well, obviously, the first question I would ask is, does the White House really have a clue what it's doing when it's vetting its potential employees? Because, you know, I -- we can argue all we want to about who lied when and whether Sarah Huckabee is lying or John Kelly is lying. That, to me, is not the most important question. The most important question is, is there a process in place to make sure that people who don't have security clearances are not allowed to have access to classified and top secret information? And from all intents and purposes, it looks like they don't have that kind of effective vetting process in place. So if Trey's going to focus on that, I think it's well -- it's a very, very good thing for him to do. A very important thing for him to do.

[09:35:40] BERMAN: And it sounds like that is what he's doing. I would only note -- you can -- you can note that it may be unsettling when senior officials in the White House are lying.

YARMUTH: Well, of course.

BERMAN: At the same time as you look into security issues. Both can be very, very important.

Congressman John Yarmuth of Kentucky, who I understand chairs the Bourbon Caucus. So, thank you for your service, sir.

YARMUTH: You bet.

BERMAN: We appreciate it.

YARMUTH: Thanks, John.

BERMAN: All right, this morning, the White House says it has confidence in John Kelly. Really?

(COMMERCIAL BREAK)

[09:40:12] BERMAN: All right, this morning, just one of the big questions surrounding the White House, is the chief of staff, John Kelly, on his way out? Sources tell CNN the conversations about replacing the president's chief of staff, those conversations are heating up. But Press Secretary Sarah Sanders said just within the last hour that the president still has confidence in John Kelly.

Joining me now, CNN political commentators Jack Kingston, former Congressman, and Scott Jennings. Jack was an adviser also to the Trump campaign. Scott, a special assistant to President George W. Bush.

Guys, if we can, I want to treat this in a sort of Republican intervention with the White House, what you think should be happening now. And, frankly, this morning, there is something more -- perhaps a more consequential Republican intervention, which is Chairman Trey Gowdy, the House Oversight Committee, has launched an investigation into the whole Rob Porter thing.

But, congressman, first to you. The president here. If you could sit him down and say, Mr. President, you need to do this today to get this mess over with, what's the one thing you would tell him to do?

JACK KINGSTON, CNN POLITICAL COMMENTATOR: You know, what I would say is, number one, just reemphasize what you've already said several times through Sarah Sanders is that you denounce any kind of spousal abuse. It's wrong and you don't want to have any part of it in your White House. Even though you have said it through Sarah, say it yourself. And then introduce John Kelly at a press conference or have him do it on his own and John Kelly has to say, the buck stops with me. I'm going to take the hit and I'm going to apologize. I will explain to you what happened and then I will tell you what the solution is and what the fix is so it will never happen again and then we're going to move on.

BERMAN: You say that with such a kind, gentle voice. I will only note that what you're suggesting is the exact opposite of what has happened to date. I mean the president has not said it in his own words, so it's interesting you say that he should. And John Kelly has certainly not said the buck stops here. He said everything is perfect. We've handled this all well.

Scott Jennings, your turn. To John Kelly, the chief of staff, what should he do today?

SCOTT JENNINGS, CNN POLITICAL COMMENTATOR: Yes, I agree with a lot of what Congressman Kingston just laid out. It strikes me that General Kelly -- and, by the way, I have the utmost respect for General Kelly. This man's a patriot. He has served our country, his family has offered the ultimate sacrifice to our nation. So I think he does deserves a chance to come out, as Congressman Kingston said, and explain what happened here. And to say that, look, I'm the chief of staff. These personnel issues do stop with me.

The White House needs to construct a timeline. The failure to construct a timeline at the beginning of this is what caused this to unravel over time. And so putting General Kelly out there with a plausible timeline to explain who knew what and when, even if it shows the White House made a mistake, even if it shows that poor judgment was used, being honest and transparent at this point is the only way to restore credibility in this process. And General Kelly is the only person who can make that statement and regain the credibility that they've lost here.

So I think putting him in front of the press, letting him explain a timeline, let him answer questions. Sometimes letting folks look under the hood of a process is what's required. And I think that's where we are.

BERMAN: The timeline only matters, if they're going to release it, if it's true, right, Scott? I mean the fact is here --

JENNINGS: Yes.

BERMAN: The fact -- you know, the facts may stink. The facts apparently do stink for this White House, according to the White House -- the FBI director yesterday who kept on saying, you know, we told the White House over the last year all these things. But you're suggesting they just have to own the fact that they stink?

JENNINGS: Yes. Look, sometimes you make mistakes. I mean we're all human. Everybody is fallible. And so if mistakes were made, admitting those mistakes and owning mistakes and owning bad judgment, whatever the facts show, is better than misleading, better than lying, especially in the face of the FBI director's testimony, other reporting facts that have come out.

There's a whole narrative here that's come out that they've lost control of. And the only way to regain control, frankly, is just to be transparent and honest. People will forgive mistakes and people can forgive bad judgment, but most folks don't forgive lying and misleading. And so that's where General Kelly's intervention with the press today I think would be critical. BERMAN: Congressman, Scott suggests there's a narrative that things

are under control. It may be, beyond the fact there's a narrative, it may actually be happening that things are under -- out of control in the White House. You have staffers telling "The Washington Post" calling the chief of staff a big fat liar. You know, whether or not the president chooses to do anything with John Kelly, there seems to be serious questions about whether he has the confidence of people who work beneath him.

KINGSTON: You know, I think there is, in Washington, not unique to this White House, I think there is this kind of, OK, somebody's down, somebody who's ahead of me, I can take a shot at them. I think that kind of thing is going to happen.

But I think that if John Kelly stands up to the microphone and says, the buck stops here, I want to get this over with, here are the facts, he has enough good will in America with Democrats and with Republicans that I believe that people will say, OK, I'm satisfied. He's addressed it. He's taken the blame. He's going to move on. I can live with this.

[09:45:08] He's looked the camera in the eye and said, of the 20 to 30 people who don't have all their clearances done, they're not going to work here until it's done and I want it done by the end of the week. And I'm going to make sure not one person takes a step in the Oval Office without having a security clearance, or whatever, you know, the issues could be that could lead to something like this.

BERMAN: Right.

Scott Jennings, it was fascinating yesterday, Senator Joni Ernst, here on this broadcast, saying she's extremely disappointed in the White House. Trey Gowdy, on "NEW DAY" an hour ago, publically questioning the White House here. It doesn't seem like Republicans are willing to give the White House anymore slack on this. They've had it. They've reached their limit.

JENNINGS: Well, and I can see why. I mean if you're a Republican elected official and you're going home to your district, you're walking around town, I mean this is all anybody wants to talk about over the last weekend. I mean nobody wants to defend a process that has unraveled the way this one has. I think that one thing General Kelly could do, by the way, in response to what Trey Gowdy has said today, is lay out what's going to happen in the future. I mean as Congressman Kingston said, we're going to get to the bottom of why people don't have permanent clearances. But I also want to talk to you about the steps I've put in place to reform and revamp this process so it doesn't happen in this White House or any future White House. Sometimes looking into the future is also a good way to show people that, hey, not only can we manage a crisis, but we can plan for the future. That would also help restore credibility and I think members of Congress would welcome the chance to work with the White House on that kind of a procedure.

BERMAN: Scott Jennings, Jack Kingston --

KINGSTON: He's not -- BERMAN: Guys, unfortunately, Jack, I've got to cut this intervention short.

KINGSTON: OK.

BERMAN: But I will invite you back for many more interventions. I enjoyed this one.

KINGSTON: Thanks a lot.

BERMAN: Thanks, guys.

JENNINGS: Thanks, John.

BERMAN: All right, passengers are calling it the scariest flight of their lives. Just take a look at this video. Part of the engine cover fell off a United Airlines flight as it was over the Pacific Ocean. Yikes. When it reached Honolulu about an hour later, the plane, it made an emergency landing, with the flight crew telling passengers to keep their head down and brace for impact. The engine manufacturer says it is helping in the investigation. It ended well. Remember that. That's the important thing.

One thing that did not end well, the Westminster Dog Show. Look at this. This is Flynn, the dog that won best in show. It is a Bichon fries. This is the second time a Bichon fries has won best in snow. No lab or golden retriever has ever won this coveted award. They still call it a dog show. I think the name very much in question this morning.

Just minutes after his third gold medal, American snowboarder Shaun White sparks new controversy. Stick around for that.

(COMMERCIAL BREAK)

[09:52:13] BERMAN: Shaun White clinched his third Olympic gold overnight, snowboarding a near perfect halfpipe run. When he saw the score, he broke down in tears, hugged his family.

But Olympic glory crashed head-on into the Me Too movement at his press conference. Here's what happened when White was asked about sexual harassment allegations.

(BEGIN VIDEO CLIP)

SHAUN WHITE, OLYMPIC GOLD MEDALIST: You know, honestly, I'm here to talk about the Olympics, not, you know, gossip. So -- but I don't think so. I am who I am and I'm -- and I'm proud of who I am and my friends, you know, love me and vouch for me and I think that stands on its own.

(END VIDEO CLIP)

BERMAN: Gossip. For the record, White has never denied sending lewd text messages to the former drummer of his band and later did reach a settlement with that woman. CNN Sports contributor Christine Brennan was at that press conference,

Christine, but interesting enough didn't get called on nor did any other female reporter. It was our friend Matt Gutman who asked that very important question.

CHRISTINE BRENNAN, CNN SPORTS CONTRIBUTOR: Well, that's right, John. And it was really interesting because, obviously, you've got Shaun White winning his third Olympic gold medal. It's a big day for him. But also this story bubbling to the surface, the Me Too movement as you described.

And so when they came to the part of the questions, I raised my hand. It turns out there were other women in the room. They raised their hand. And the moderator called on one man and then another man, and then another, another, another. Never calling on a woman.

So, you know, I'll leave it to people to figure out what that was about. But it was really not the best day for the U.S. Olympic Committee or for the snowboarding people in terms of that press conference in how Shaun White handled it and, frankly, how the moderator handled it as well.

BERMAN: It's interesting, later on the "Today" show, you know, NBC, the official network of the Olympics, which offered glowing coverage of Shaun White all through the night, Shaun White tried to clarify the gossip comment. Listen.

(BEGIN VIDEO CLIP)

SHAUN WHITE, OLYMPIC GOLD MEDALIST: I'm truly sorry that I chose the word gossip. It was a poor choice of words to describe such a sensitive subject in the world today. And, you know, I'm just truly sorry. And I was so overwhelmed with just wanting to talk about how amazing today was and share my experience. Every experience in my life I feel like it's taught me a lesson and I definitely feel like I'm a much more changed person than I was when I was younger.

(END VIDEO CLIP)

BERMAN: You know, winning three gold medals is a great thing, Christine Brennan, but these allegations against Shaun White are very serious. And you've written about them. And he can't avoid those questions. And the Olympic Committee shouldn't try to keep them separate just because it wants to focus on all the good things.

BRENNAN: Well, John, you know the Olympics. You know how fast things move along. You've covered them as well. And the U.S. Olympic Committee, snowboarding people, they had time with Shaun White. They could have sat him down. They said, hey, this is a big deal. This story is kind of exploding, at least for a few hours in the Olympic world, which it was.

[09:55:03] And, frankly, they blew it, John. They blew it. They did not have him prepared or he wasn't prepared and he kind of blithely, just as you saw, just kind of, you know, swept it aside. That's absolutely unacceptable. He knows it. I did, by the way, as he was leaving the stage, I did go up to the

stage. I said, Shaun, Me Too, it's gossip, really? And he just kind of again laughed it off and said, I've got to go get my medal. Of course understandably he wants to get his gold medal. But he got a second chance. I asked him and, of course, again, he just walked off.

BERMAN: And, finally, did clean it up later on the "Today" show. That response, you know, showed some thought at least, Christine Brennan.

Thank you for being there. Always a big fan of you and your reporting. Great to see you.

All right, just moments from now, top House Republicans face reporters after one of their own launches an investigation into the Rob Porter scandal. The breaking news this morning, Congress is now investigating the circumstances surrounding that man on the right, Rob Porter, gone from the White House after domestic abuse allegations.

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