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New Report Says, Americans' Confidence in the Economy on the Decline; Pentagon Pauses Plan to Carry Out Mass Firings of Civilian Employees; Judge Declines to Stop Mass Federal Firings By Trump. Aired 10-10:30a ET

Aired February 21, 2025 - 10:00   ET

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

[10:00:00]

PAMELA BROWN, CNN ANCHOR: Well, good morning. You are live in the CNN Newsroom. I'm Pamela Brown in Washington. And we begin with breaking news in a new look at how you are feeling about the economy one month into President Trump's second term. Just last night, Trump was touting his lowering of prices in a speech to Republican governors.

(BEGIN VIDEO CLIP)

DONALD TRUMP, U.S. PRESIDENT: Everything's coming down, you know? The eggs are coming down and the bacon's coming down. Everything is coming down. And that's the biggest thing, the energy.

(END VIDEO CLIP)

BROWN: But, in fact, everything is not coming down, at least yet. According to the Consumer Price Index, prices have jumped by half a percent since December, and Americans are feeling it most at the grocery store.

At any moment, the University of Michigan is releasing its consumer survey for February. It's expected to show the confidence in the economy is on the decline.

Joining us now, CNN Business and Politics Correspondent Vanessa Yurkevich and CNN Global Economic Analyst Rana Foroohar. Vanessa, to start with you, what else are we expecting from this report?

VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: Well, I can tell you what February's initial indicators have said. The University of Michigan puts out a preliminary estimate for how people are feeling just in the few days, the first few days of February, and here's what they found. They found that consumer confidence fell for a second month by about 5 percent, the lowest level reading since July of 2024. And as we dig into this report in a few moments, I think that trend is likely going to continue for the rest of February.

But the initial reading found that people were concerned about spending and buying and prices because of tariffs, a drop in 12 percent in terms of confidence in that, and a 6 percent drop in how they were feeling about their personal finances. That is the lowest value that we've seen in this report since October of 2023. And we saw in this initial reading concerns about inflation and where that is going to go in the next year. There was such a large increase from January to February in this initial reading. It was only the fifth time in 14 years of this report that the people who are producing this report have seen such a stark increase.

So, in just a few moments, we're getting that new data. I'll sift through it, but we're expecting that trend to continue. Folks feeling more pessimistic about the economy, that is a turn from how they felt over the summer, when people were feeling pretty good about the direction of the economy, Pam?

BROWN: Rana, to bring you in, President Trump, he has been back in office for just a month. Is that enough time to make progress on inflation and in particular prices at the grocery store?

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Well, in a word, no. And this gets to the point that, you know, presidents like to take a lot of credit for the economy when it's going well. They don't want to take responsibility when it's not.

You know, President Trump talked a lot on the campaign trail about how he was going to lower prices. But the fact is his policies, from tariffs to limits on immigration, rounding up migrants, whether you like it or not, more immigration has been responsible for lower wage inflation. And just the general geopolitical stress and uncertainty is actually increasing risk premiums. It's raising inflation. And I think that he's in a tough spot because the things that he says he wants to do, policy-wise, are not the things that are going to make people feel less pain in the grocery store at the pump when they're paying their heating bills, et cetera.

BROWN: Yes. And when it comes to, for example, his tariff plan, some of those tariffs haven't gone into effect, right? And so I think that that uncertainty about, well, what will happen when that does go into effect in terms of inflation prices? And there's this new CNN poll, 62 percent of Americans feel that President Trump has not gone far enough in trying to reduce the price of everyday goods, that comes as Walmart, the largest retailer in the U.S. warns that its sales and profit growth will slow this year. I mean, could Trump's lack of apparent focus right now on lowering prices come back and bite him sooner rather than later, Rana?

FOROOHAR: Well, 100 percent. And, I mean, this gets into one of the challenges for the Trump administration, but it was also something that Biden struggled with. When you want to make a fundamental change in the economy, when you want to shift to an economy that, frankly, for the last 50 years has been all about lowering prices and jacking up stock prices, and suddenly you want to change it to something that's much more about producing things at home, creating better jobs, I mean, that's a great goal, but that's something that takes years and decades. And during that time, there are periods of real pain and they have to be well-managed.

And I think that there's a sense that with all the sort of high speed moves this administration is making that the markets are really not sure how this change is going to be managed both at an economic or a political level.

[10:05:01]

BROWN: And Trump, for his part, he has talked about his inflation reduction plan involving cutting taxes, ramping up energy drilling leases, massive spending cuts by DOGE. Is that all taken together enough to bring inflation down, Rana?

FOROOHAR: Yes, I'm not at all convinced about that. For starters, I'm not convinced that DOGE is actually going to be able to make the kind of efficiency cuts that would really be meaningful. Also, on the flip side, I'm hearing from a lot of businesses, for example, in the energy sector that are saying, gosh, suddenly there's incredible regulatory uncertainty. You know, the permitting process is being changed. Entire agencies are being ripped apart. And so, again, business doesn't like uncertainty. And that actually could end up dampening investment in some of the areas that the president cares about, energy, critical minerals, manufacturing.

So, we are in an unprecedented period right now and businesses are really in a wait and see mode right now.

BROWN: Vanessa, you've actually had a chance to review this new report. What can you tell us?

YURKEVICH: Yes. Just taking a look at the top lines from this report, consumer sentiment in the month of February fell by 10 percent. The initial readings were closer to 5 percent. This is 10 percent. So, folks clearly not feeling great about the direction of the economy.

This was unanimous across age groups, income levels, and this report looks at about five indexes about how people are feeling. The biggest plunge that we saw was 19 percent in how people were feeling about spending, buying things, because this report says of tariffs, the uncertainty around what tariffs are going to mean for their bottom line.

Also for personal finances, how people are feeling about their own finances declining by about 10 percent in February. And sentiment for Democrats and independents fell, but for Republicans in this report, it kind of stayed the same. So, Republicans may be feeling a little more encouraged in terms of where things are going with inflation. It's about the same as the initial reading that we saw.

Folks are expecting inflation to pick up, and they do have concerns about that, but unchanged from the initial report, which was still a steep increase. I might note, about a full percentage increase. That's about just the fifth time in this report that they have noted.

So, unfortunately, the sentiment among consumers, the feeling, how people are feeling doesn't seem to be going in the right direction, at least for the president and how people are feeling about their own bottom line. Pam?

BROWN: What jumps out to you, Rana, from what she just laid out? FOROOHAR: Well, you know, I'm pulling back the lens and thinking about no matter who was going to be in office at this point, even if Kamala Harris had won the election, I would have been expecting a slowdown. I mean, if you discount the blip, the downturn and upturn that we had during COVID, we're several years overdue for an economic slowdown. I mean, they happen, right? And so this isn't unexpected.

I think that the fact that there's so much uncertainty around Trump's policies and there's just -- we have not been in a tariff -- a real tariff and trade war for, you know, close to 100 years. People don't know what to expect. Uncertainty tends to make them want to sit on savings, be cautious, batten down the hatches.

BROWN: Yes. And it's interesting because, you know, if you talk to -- I interviewed Peter Navarro, who works the White House overseeing the trade policy, and he says, well, the first time around, you know, we didn't see inflation that everyone was warning about, but the difference here is that what Trump is trying to do is much more dramatic, right, Rana, in terms of the tariffs.

FOROOHAR: 100 percent, you're seeing across the board you know. I'm not necessarily against tariffs. I agree with Navarro and Bob Lighthizer and others that there are, you know, but there are reasons to use this in targeted ways against sort of mercantilist practices on the part of China other nations. But I think across the board, tariffs that are reciprocal and that are hitting all at once, that's really unprecedented territory. I think it's really hard to argue that this is going to be an easy ride.

BROWN: Yes. And like you said, it's really the bottom line is the uncertainty right now of how this is all going to play out.

Rana Foroohar, Vanessa Yurkevich, thank you both.

And we are following some more breaking news, the Defense Department is now pausing its plan to carry out mass firings of civilian employees.

CNN's Natasha Bertrand joins us. So, what's behind the pause here, Natasha?

NATASHA BERTRAND, CNN NATIONAL SECURITY CORRESPONDENT: Yes, Pam. So, we reported earlier in the week that some defense officials were raising concerns with their superiors that these mass terminations that could impact over 50,000 civilian employees inside the Pentagon could actually run afoul of U.S. law, of U.S. law governing how civilian employees are managed within the armed forces. Because these kinds of mass terminations, they can't actually be done according to this law unless the secretary of defense carries out a pretty thorough review of how it might impact military readiness because, of course, a lot of these civilian employees are in very critical national security roles, like intelligence and cyber security.

[10:10:08]

And so there is a pause happening now, we are told, so that the secretary of defense can carry out that kind of thorough review and also to make sure by pending on lawyers in the office of general counsel that they are not running afoul of this law, that they are in compliance with this.

So, it remains unclear at this point just how long this pause is going to last. The Office of the Secretary of Defense declined to comment on this. But still, it is a temporary reprieve for a lot of employees inside the Pentagon who, of course, were worried about losing their job as soon as today.

And we have seen other instances, of course, where DOGE has acted so quickly in agencies that are very critical to U.S. national security that they've actually had to hire people back right after firing them. So, I think that part of this also is that the Defense Department just doesn't want to have to do that claw back employees that they have fired because they serve in these very mission critical roles.

BROWN: And also Trump's executive order this week that we've been reporting on giving him more control over independent federal agencies is actually raising some concerns among legal experts when it comes to the impact it could have on the military. Tell us about that.

BERTRAND: Yes, so my colleague, Haley Britzky, she has some great reporting on this. And, essentially, the order that Trump signed earlier this week, it says that the president, quote, shall provide authoritative interpretations of law for the executive branch, which DOD, of course, is a part of.

And it's raising concerns among legal experts who say that that could have a chilling effect on the decision-making amongst military judges in the military justice system. Essentially, the concern is that military judges, for example, won't be as inclined to disagree with an order from the president, who is the commander-in-chief and who does have the ability, of course, to interfere with the military justice system. But they will be less likely to push back on a kind of unlawful order.

And military commanders in particular, they could be susceptible to this, according to the legal experts that we spoke to, because whereas sometimes they will or often they will go to military lawyers and say, is this legal for us to do, the concern is that if Trump's executive order and his legal authority kind of trumps that, will they stop doing that? And so there's a chilling effect that experts are very concerned about here.

BROWN: All right. Natasha Bertrand, thank you so much.

And while the Department of Defense may be spared for now, several agencies are being hit by DOGE firings. And it looks like Elon Musk's team is not stopping anytime soon. Up next, more on a judge's decision to allow the mass firings to move forward.

(COMMERCIAL BREAK)

[10:15:00] BROWN: New developments this morning in President Trump's plan to slash the size of the federal workforce, a judge has declined to stop the mass firings that have rocked Washington in recent weeks. And a CNN tally shows these agencies right here have been some of the hardest hit so far, the IRS, which has seen thousands of job cuts right in the heart of tax season, the CDC, and the Department of Energy and Veterans Affairs also feeling the impact as are the U.S. Forest Service, Office of Personnel Management and the FAA.

CNN's Katelyn Polantz joins us now. So, where are judges landing on blocking Trump's ability to fire federal workers, because there have been so many lawsuits? Help us understand where things stand.

KATELYN POLANTZ, CNN SENIOR CRIME AND JUSTICE CORRESPONDENT: So many lawsuits and initial rulings that we're getting. These lawsuits are nowhere near the end. But what judges have been saying so far in at least two cases is that, you know, we might not be the appropriate place to step in and tell Donald Trump he can't fire federal workers. It might not be something for the courts to deal with.

So, what happened last night, there was a judge in Washington, D.C., a Democratic presidential appointee to the bench several years ago, very well respected judge said, you know, the union for the Treasury workers, which isn't just the Treasury Department, that's workers across the federal government, IRS workers, Forest Service workers, HHS workers, they had sued and said don't let the administration fire us, or somehow get rid of us, and he said, I don't actually think that this is something that the courts should be dealing with right now. This is a question for labor boards to deal with instead.

That was a very similar decision as to what we saw happen with the fork in the road way that the federal government was getting rid of 75,000 workers, prompting them to resign. A judge said, I'm not going to step in and stop this either for the same reason. And then we're waiting for another decision today about USAID workers, if they can be fired, waiting to see if the judge there says a similar thing.

BROWN: And there are also hearings on the Trump administration wanting to cut funding to the NIH and nonprofit and states that receive federal funding.

POLANTZ: Yes. And, Pam, whenever you look at this, there's the firings and then there's the freezing of funds. That's the other big issue in court. There's also a lot of cases about DOGE, but we won't talk about that today.

BROWN: We'll talk about that later on the show.

POLANTZ: Later. Well, there'll be time. But on the funding cuts, that question also comes down to, can he do that? Can the president and the people at the agencies cut off funding in different ways? There is a major hearing right now happening in Rhode Island where states are saying, we're losing our ability to get federal funding for highway road work, for healthcare, for substance abuse programs, HIV treatment programs, natural disasters. They want the judge there to make sure that funding stays in place for them. It's unclear though. There's a lot of confusion on what's happening there. And then also the NIH, can they cut funding in a case out of Boston? It's going to have an all day hearing today as well.

BROWN: You have been so busy, Katelyn Polantz. Thank you so much. And you are going to continue to be busy with all these lawsuits.

Well, coming up, it predates the formation of the United States, but major changes could be coming to the U.S. Postal Service.

[10:20:01]

I'll talk about what privatizing mail delivery would mean and concerns with Democratic Congressman Gerry Connolly. That's next.

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BROWN: New this morning, President Trump is now reportedly planning to take control of the U.S. Postal Service. Trump reportedly wants to disband the independent board that oversees the USPS, a step towards privatizing the service. And one of the main functions of the Postal Service is ensuring that all homes can get deliveries, not just the ones that are profitable. Even private companies depend on the Postal Service for the, quote, last mile delivery to some homes.

[10:25:04]

An interesting fact that might surprise you, the Postal Service is one of the most popular federal agencies. Pew found that it's only second to the National Park Service with an approval of 72 percent.

Joining us now is Gerry Connolly, the congressman who is the ranking member of the Oversight Committee. Hi, Congressman.

So, the White House is --

REP. GERRY CONNOLLY (D-VA): Good to see you.

BROWN: Good to see you. The White House is denying these reports. But what would the impact be if President Trump does go through with privatizing the Postal Service, which has been floated and around for a while?

CONNOLLY: You know, the Postal Service is one of the most ubiquitous government, quasi governmental services we've got. It reaches every household and every business every day. It is the last mile of delivery for even private sector delivery companies, like FedEx and UPS. It has 640,000 employees. They're all unionized. It has 30,000- plus facilities all over the country, especially in rural America, and it's got the second largest vehicular fleet in America, only after the Pentagon, 235,000 vehicles.

So it is an omnipresent, ubiquitous service that goes back before our country was actually independent. Ben Franklin was our first postmaster general in colonial times. And he set about to make sure that it was affordable and accessible. To your question, if he privatizes, if we were to try to privatize that kind of, you know, mammoth operation, it would increase prices for everybody and it would make rural delivery, especially in remote parts of America, almost impossible. It would be not affordable and wouldn't be profitable.

So, having a service that isn't focused on profit, but it's focused on delivery and service is critical to the lifelines of America. We saw that in the pandemic. One of the reasons to point Pamela why it's so popular the Postal Service is because people saw how important absolutely essential it was when we were in the midst of a deadly pandemic. And getting medicine, foodstuffs, supplies, clothing, you name it, it was all delivered by the Postal Service and done well.

BROWN: Well, proponents of privatizing the Postal Service say other countries, Germany, the Netherlands, U.K., they do it. It would improve innovation and efficiency. What do you say to that?

CONNOLLY: Well, we're not Germany or the Netherlands. We're a country of 335 million people, a huge expand, big, big states with remote rural areas that need to be serviced. If you look at a state like Alaska, if you privatized the postal service, there's not a piece of mail that could be delivered to Alaska for any kind of reasonable price. By having a national service, we're able to sort of spread out the costs and make sure that everyone is treated fairly and equally.

So, we don't have the same kind of situation that they have in Germany or the Netherlands, and I think it's a false analogy.

BROWN: I want to pivot to DOGE. Your committee is launching a probe into Elon Musk's status as a government employee. You sent a letter directly to President Trump about it requesting substantive documentation about Musk's role. Have you gotten an answer?

CONNOLLY: I haven't gotten an answer yet. But this is triggered in part by the White House itself under oath, a guy named Joshua Fisher, who is in charge of administration at the White House, saying that Elon Musk is not the administrator of DOGE, is not a government employee, and he said all that under oath. Well, if that's the case, with what authority is Elon Musk doing anything, let alone laying off thousands of workers, you know, transferring thousands of workers, offering early retirement for thousands of workers? Where is he getting that authority? If he's not, in fact, an employee of the government,

BROWN: Yes. And the White House says he's a special government employee. They gave a statement to my colleague, Phil Mattingly, he's saying he is overseeing the efforts and certainly some mixed messages coming from the White House as it pertains to Elon Musk and DOGE.

So, I want to ask you another question about your colleagues in the Senate offering amendments targeting DOGE. All of them were rejected. What is the unified Democratic message regarding DOGE? Is there one?

CONNOLLY: Well, I think there is one. I think that DOGE is operating unlawfully. I believe that they're making decisions that are sweeping and that contradict statutory language in legislation that Congress has passed into law. And I think that has to be upheld.

Earlier, you were talking about courts. Litigation is going to be really important, but we can't have courts kind of squirrel out of their responsibility.

[10:30:00]

They're going to be the place of last resort in adjudicating who has what jurisdiction, who has what power.