Coats faces greater scrutiny as fallout from Russia summit spreads

As the fallout from his Russia summit spills into the weekend and spreads among his staff, President Donald Trump is retreating to the site of his most consequential personnel decision, the dismissal of FBI Director James Comey last spring.

Trump’s return to his Bedminster golf club in New Jersey, where he often surrounds himself with close friends and family, follows a calamitous week, beginning with the news conference in Finland with his Russian counterpart, Vladimir Putin, and ending with news that the president’s longtime personal attorney made a recording of Trump talking about payments related to a former Playboy model.

Trump loyalists have come to see the White House staff’s response as insufficiently supportive, as officials inside struggle to explain the president’s seesaw statements about Putin and Russia’s interference in the 2016 election. The hair-trigger situation culminated in an on-brand yet off-message remark by his director of national intelligence, Dan Coats, stirring further angst among some in the president’s inner circle.

Trump, according to two outside allies, has grown exasperated with Coats, whom he blindsided Thursday when White House press secretary Sarah Sanders announced on Twitter that the administration was working to bring Putin to Washington this fall. The news landed while Coats was in the middle of a live interview with NBC in Aspen, Colorado.

Republicans in Congress have managed to block measures backing the intelligence community’s assessment that Russia meddled in the 2016 election. But the Trump allies told POLITICO that directly confronting, let alone firing, Coats — who before the latest blow-up over Russia was believed to be weighing his own retirement date — could create an uncontainable firestorm on Capitol Hill.

One former Trump senior official described the situation to POLITICO in one word: “meltdown.”

The White House did not respond to a request for comment, including whom the president will meet with this weekend.

On Friday, Coats called and spoke with Vice President Mike Pence, according to a person familiar with the conversation. In the past he has said he has a good relationship with Trump, and in late 2016, when he was still a U.S. senator representing Indiana, he praised the president-elect’s negotiating skills.

Coats, who strongly denied plans to retire when asked by POLITICO in February, was seen by intelligence-watchers as bringing a calming stability amid friction between Trump and the national security establishment.

Still, some who have kept in contact with his office had been saying for months that it made sense that Coats, who came out of retirement last year when Trump selected him, wouldn’t want to stay in the intelligence role indefinitely.

For one thing, Coats turned 75 in May — and he previously indicated that he didn’t want to work long past that age, according to several of these people.

“He was not particularly eager to take the job to begin with and was sort of talked into it on the theory of when the president asks, you should serve,” one former high-ranking intelligence official, who is in regular contact with current intelligence leaders, said early this year. Like others who spoke to POLITICO, the former official spoke on condition of anonymity to discuss confidential conversations.

As the director of national intelligence, Coats is in charge of coordinating the work of 17 military and civilian intelligence agencies, including the National Security Agency and FBI — a task he has carried out with a notably low public profile. His time in that office coincided with the rise of Secretary of State Mike Pompeo, the former CIA director, who served a much more vocal role for the Trump administration on issues such as Iran and North Korea. Both men, in their roles, provided Trump with his daily intelligence briefing, Pompeo explained earlier this year during an event at the conservative American Enterprise Institute.

A second former senior intelligence official said of the post of director of national intelligence: “The role typically has been low-key. But Director Coats has been particularly absent from public view.”

In his statement to POLITICO in February, Coats said that in the coming months, he would be “excited to lead the upcoming announcement and implementation of the ODNI transformation and IC future-focused initiatives my team has been working on for the past year, which will help ensure the Intelligence Community is best positioned to address the current and future threats facing our nation.”

A Coats retirement or dismissal would set the stage for a potentially contentious fight over who should replace him, particularly with Trump’s outreach to Putin reaching new levels of engagement and the upcoming midterm elections.

Among the agencies Coats works with, the FBI in particular has come under heavy criticism from the White House and congressional Republicans who accuse it of being biased in its investigation of whether Trump team colluded with Russia during the 2016 election. The bureau is also looking at whether Trump and his aides may have obstructed justice in the probe.

Trump’s struggle with the intelligence community was already well underway when he announced Coats’ selection in early January 2017.

This was a rocky period when the incoming president was repeatedly casting doubt on intelligence agencies’ conclusion that top Moscow officials had orchestrated a sweeping digital influence campaign eventually aimed at putting the billionaire in the Oval Office. Similar to his more recent attacks on the FBI, Trump argued then that intelligence agencies were pushing a false narrative aimed at undermining his administration.

Soon after the election, The Intercept reported that Trump and his top advisers had worked on a plan to scale back the Office of the Director of National Intelligence — and had even discussed scraping the director post entirely. For both Republicans and Democrats rattled by the reports, Coats was a reassuring presence.

“He seems like a reasonable person, gets along with people, isn’t going to rock the boat, willing to do it,” the former senior official told POLITICO. “Put that all together, I could see how they arrived at him.”

Indeed, Coats’ confirmation hearing reflected a sense that the former lawmaker — who had also served as an ambassador to Germany during the George W. Bush administration — was taking the job out of a sense of duty.

“You’ve agreed to do a job that many have called thankless — why?” Sen. Richard Burr (R-N.C.), chairman of the Senate Intelligence Chairman, asked Coats.

“I believe, if asked by your leader of your country to serve your country again, the answer needed to be yes,” he responded.

But Coats’ role was soon complicated by the rise of Pompeo, a former Republican congressman from Kansas who had made a name for himself on the House Intelligence Committee and the House Select Committee on Benghazi. Observers speculated that Pompeo’s rise as Trump’s go-to person on intelligence issues might have made the job less desirable for Coats.

Trump and much of his national security team view the CIA, not ODNI, as the embodiment of the American intelligence apparatus, according to current and former intelligence-focused individuals both on and off Capitol Hill. Well before Pompeo was elevated to secretary of state, Trump’s team turned to him to deliver public remarks on the Iran nuclear deal, North Korea and WikiLeaks — which he labeled a “non-state hostile intelligence service” — and to forcefully push back on criticism of Pompeo’s recent meetings with two Russian spy chiefs.

Last November, at Trump’s request, Pompeo met with William Binney, a former National Security Agency official turned surveillance critic who has disputed Russian involvement in the hacking of the Democratic National Committee leading up to the 2016 election. Many observers thought the meeting lent credence to a notion that Pompeo’s own agency has discredited.

Trump has also continued to toy with overhauling the U.S. intelligence apparatus, according to news reports. Foreign Policy reported last month that the president might choose Stephen Feinberg, a billionaire private equity executive, to helm a key intelligence advisory board.

During this period, Coats has mostly stayed out of the spotlight.

If Coats were to step down, Trump might struggle to get a successor confirmed, given the looming 2018 midterms and the Russia controversy. Observers have also long speculated that career intelligence professionals might not want the job, given the contentious relationship between Trump and the broader intelligence community.

Matthew Nussbaum contributed to this report.



How the Fed’s Powell prepared for Trump’s criticism

Federal Reserve Chairman Jerome Powell has been preparing for this moment.

Since taking the helm of the central bank in February, Powell has downplayed the risk that President Donald Trump would try to influence the direction of Fed policy. “No one in the administration has said anything to me that really gives me concern on this front,” he declared on Marketplace radio last week.

But at the same time, Powell, a Trump appointee, has worked for months to shore up goodwill and support for the Fed. He held more than two dozen meetings with lawmakers between February and May, steered clear of commenting on issues outside the Fed’s jurisdiction, and repeatedly made the case for the central bank’s political independence.

The moment that Powell had to have known was coming finally arrived on Thursday. “I don’t like all of this work that we’re putting into the economy and then I see rates going up,” Trump told CNBC. “I’m not thrilled.” That was followed up by a couple of sharp tweets the next morning.

Powell did not put out a statement in response, letting his words from the interview last week stand on the question of Fed independence.

“We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns,” the Fed chief told Marketplace. “We do our work in a strictly nonpolitical way, based on detailed analysis. … We don’t take political considerations into account.”

“I’m deeply committed to that approach,” he added. “And so are all of my colleagues here.”

The Fed already faces a delicate balancing act in supporting sustained economic growth without stoking inflation, as the near-record-long expansion continues. Now that the president has openly criticized the Fed, every action it takes might be viewed through the lens of a reaction to him.

“If the decision is to slow [the pace of rate hikes], I would expect Trump to crow and call it a triumph, and that will be devastating for the Fed’s reputation,” said Peter Conti-Brown, a professor at the Wharton School of the University of Pennsylvania.

And if the central bank raises rates again, as it has projected it will do twice more this year, “I fear this will now be set up as the Fed defying Trump,” he added.

But experts suggested Powell’s political savvy might help him navigate headwinds from the White House, particularly by heading off criticism from the more powerful threat to the Fed: Congress, which can do whatever it wants to the central bank through legislation, and public opinion.

He has already got a head start; in a Senate that can agree on few things, Powell — a Republican originally nominated to the Fed board by former President Barack Obama — received 84 "yes" votes for his chairmanship earlier this year.

“Jay Powell’s professional identity has been in politics and in the private sector, and this caused a lot of people to pause on his candidacy to be Fed chair,” Conti-Brown said. “But Powell might have a skill set that is uniquely able to build political coalitions on a front like this.”

In recent decades, presidents have tended to avoid commenting on Fed actions — a policy formalized under former President Bill Clinton — under the assumption that short-term politics cloud the central bank’s ability to act in the long-term interest of the economy.

Strong advocates of Fed independence point to a previous Fed chairman, Arthur Burns, who was pressured by former President Richard Nixon in the lead-up to the 1972 presidential election to keep interest rates low. That episode eventually contributed to a rapid rise in prices, requiring one of Burns’ successors, Paul Volcker, to raise interest rates as high as 20 percent to combat inflation.

In a speech in May, Powell seemed to directly refer to this episode to make the case for the firewall between the Fed and politics, in an apparent precautionary message to Trump.

“For a quarter century, inflation has been low and inflation expectations anchored,” he said. “We must not forget the lessons of the past, when a lack of central bank independence led to episodes of runaway inflation and subsequent economic contractions.”

Beyond repeatedly affirming the Fed’s political independence, Powell has also made a notable shift in how he communicates compared with his academic economist predecessors: speaking in language that the average person could understand, in the hopes that the Fed will seem less mysterious.

“Because monetary policy affects everyone, I want to start with a plain-English summary of how the economy is doing, what my colleagues and I at the Federal Reserve are trying to do, and why,” he said at the start of a press conference in June.

“In particular, we think that gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive,” he added.

Powell also frequently refers to the limits of Fed power, even clarifying: “I don’t think of myself as the guy running the economy. You know the economy is a $20 trillion economy.”

He has also cautiously avoided any direct criticism of the president’s trade policies, though he has warned of the potential consequences if it leads to prolonged economic warfare.

“I’m not an independent agency that has any authority over trade,” he told a lawmaker who asked if the U.S. was in a trade war.

Luckily for Powell, members of Trump’s own party are generally supportive of the Fed’s rate hike campaign, favoring a return to a more traditional monetary policy. And Democrats, who are more likely to favor slower increases in the hopes that the unemployment rate will continue to drop, have tended to be less openly critical of the Fed.

“Presidents should respect the independence of the Federal Reserve,” Sen. Sherrod Brown (D-Ohio) said in a statement Thursday. “I asked Chair Powell under oath at his nomination hearing if he would maintain that independence and he assured the Senate that he would. I take him at his word.”

Market participants and Fed watchers alike downplayed the notion that Powell would be swayed by the president, and St. Louis Fed President James Bullard said he was “not surprised” by Trump’s remarks.

“I’m used to debating monetary policy on a wide basis around the world,” Bullard told reporters on Friday. “I doubt there will be any influence one way or another.”


Trump’s new midterm threat: A trade war smacking voters

President Donald Trump’s trade wars could become a major political drag for Republicans, with job losses and price increases piling up just as voters head to the polls in November.

Trump jolted markets once again early Friday when he said he’s prepared to impose penalties on some $500 billion in Chinese goods regardless of the consequences that might ensue, economic or political. “Look, I’m not doing this for politics,” the president said on CNBC. “I’m doing this to do the right thing for our country.”

But market analysts, industry experts and economists warn that the economic fallout of the president’s tariffs — those that are already in effect and those he’s threatening to impose — is only going to intensify over the coming months and could reach a peak around election time.

“We’re already hearing complaints now from companies, so by the time we get to the midterms, you’re going to be hearing governors, mayors, Congress complaining about jobs, about cost increases, about problems,” Carlos Gutierrez, the former Commerce secretary under President George W. Bush, told POLITICO. “The question is: Will that be strong enough to offset the idea that we have to get tough on our trading partners, and that our jobs are being stolen overseas?”

It takes months for most consumers to feel the impact of tariffs, but as the fall approaches, everything from groceries to appliances could start to cost more at major retailers across the country. Democrats could use these price increases as a political cudgel against Republicans in swing districts as they try to take back control of Congress.

Trump has so far suffered little political blowback for his tariffs and trade threats, saying that he is simply following through on promises he made during the campaign to crack down on trading partners, even close allies, and put America first. Since March, he has imposed blanket tariffs on nearly all imports of steel and aluminum and placed penalties on $34 billion in goods from China, a total likely to increase to $50 billion next month and into the hundreds of billions later this year.

In return, countries have retaliated with tit-for-tat duties on everything from U.S. agricultural goods to Kentucky bourbon and Harley-Davidson motorcycles, aiming to sway top Republican lawmakers by hurting constituents in their districts.

But Trump and his party could soon begin to face consequences as companies in the coming months start reporting lower earnings, reassessing their supply chains and holding back on investment, all of which will begin to ripple throughout the economy and could lead to a slowdown or full-blown recession, experts say.

If all of the tariffs that have been proposed take effect, they would bring down long-run U.S. GDP by 0.47 percent — about $118 billion — in the long term and cost more than 364,000 jobs, a new analysis from the Tax Foundation shows. The International Monetary Fund also warned this week that trade tensions could cut global output by some $400 billion by 2020, and that the U.S. is "especially vulnerable" to effects of an international slowdown.

Price increases would vary by product, ranging anywhere from a few cents on a can of beer or soup to around $6,000 on a family car, if the administration moves forward with auto-specific tariffs it has threatened.

Even if Trump doesn’t move forward with any additional duties, the uncertainty caused by his policies and rhetoric is leading some companies to begin pulling back investments in research and development. They’re afraid that if they develop products for foreign markets, those markets might no longer be accessible to them in six months or a year.

The agricultural industry has been particularly vulnerable: Countries like Mexico have begun to diversify their import markets by buying more corn and soybeans from Brazil instead of the United States, in an attempt to reduce their dependence on a country that could erect new trade barriers at any time based on the president’s whims.

And while the administration has so far taken pains to avoid hitting consumers directly, leaving products like flat-screen televisions and cellphones off the list of products facing tariffs, they will be unable to continue to do so as the list of goods caught in the crossfire begins to expand.

“If this escalates into a full-blown trade war, the innocent victims are going to be American consumers,” said Matthew Shay, president and CEO of the National Retail Federation. “That’s what we’d like to avoid.”

As midterm campaigns heat up, vulnerable Democrats and Democratic super PACs are already using the president’s trade war — and the Republican Party’s reluctance so far to challenge him on it — to frame their opponents as complicit in an escalating trade battle with no end in sight.

The Democrat-aligned group American Bridge launched an effort Thursday aimed at targeting Republican candidates for, as the group says, “failing to stand up to Trump’s trade war.” In one of two launch ads, the group targets Josh Hawley, who is running to unseat Missouri Sen. Claire McCaskill, for saying that he supports Trump’s goals on trade and feels that the president is doing the right thing.

“Hawley welcomed this trade war,” it reads at the end of a minute-long spot featuring clips of local farmers and manufacturers complaining about the harmful effects of Trump’s tariffs. “Now Missouri families are paying the price.”

The president has so far ignored increasing calls from Republicans in Congress to back down on trade, or at least to begin pursuing dialogue with Chinese President Xi Jinping. The White House insisted this week that trade talks with Beijing are ongoing, but there are no formal discussions on the books and the two sides have not met at the ministerial level since Commerce Secretary Wilbur Ross traveled to China early last month. Treasury Secretary Steven Mnuchin will have informal opportunities to talk with his Chinese counterparts at the G-20 finance ministers’ meeting in Buenos Aires this weekend, but no formal bilateral meetings are expected.

Instead, Trump has sought ways to expand his tariff crusade: Beyond ratcheting up duties against China, he has directed the Commerce Department to conduct investigations examining whether to impose penalties on imports of cars and car parts, as well as uranium. And he has continued to frustrate Canada and Mexico by refusing to back down from what they see as unreasonable demands in the ongoing renegotiation of NAFTA.

Moving forward with either car tariffs or a NAFTA withdrawal before November elections would be an “enormous political mistake,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies. “If he does that, you’ll see an immediate sharp consumer impact, which I think will translate into a political reaction. Everything else will be like sand leaking out of the bag.”

But even the slow accumulation of economic effects could build up enough by November that consumers will be feeling the pain. It might be difficult for everyday Americans to recognize at this point how the tariffs will affect them, given that many of those proposed are not yet in effect, so in the meantime, the retail industry is working to educate consumers that “there are greater consequences, and price increases and real impacts” that could be coming in the near future, Shay said.

“That’s going to create a lot more attention around the things that right now sound a lot more hypothetical,” he added.

So far, at least, polls show that Trump appears to still have the support of the bulk of Republican voters when it comes to tariffs. Nearly three-fourths, or 73 percent, of Republicans and Republican-leaning independents who responded to a Pew Research survey out this week said they felt increased tariffs would benefit the country. Roughly the same percentage — or 77 percent — of Democrats and Democratic-leaning independents felt the opposite.

But reaction overall is trending increasingly negative: Nearly half, or 49 percent, of all respondents to the Pew poll said they feel tariffs are a bad thing for the country, up 4 percentage points from a similar survey done in May.

The partisan split bodes well for Trump, who has so far shown little willingness to heed anyone’s advice over trade policy beyond his own and who will likely barge into the midterms with the same protectionist messages that helped him win over laid-off factory workers and struggling farmers in 2016.

Democrats might try to point to a worsening economy to say that Trump’s policies are wreaking havoc across middle America, but the White House has already begun to fire back that the long-term payoff will be worth it.

“It’ll be those two competing narratives” during midterm campaigns, said Gutierrez, who now chairs the board of the National Foreign Trade Council. “It all depends on how bad the numbers get and how much pain there is that can’t be offset by simply saying, ‘We’re doing this for the country and we’re getting tough on our trading partners, so it’s worth the pain.’”


Acting CIA watchdog up for top job resigns

ASPEN, Colo. — The acting watchdog at the CIA, who has been accused of retaliating against whistleblowers, is resigning.

Christopher Sharpley, whose confirmation as CIA inspector-general was stalled in the Senate, sent a memo to employees at the CIA’s IG office, saying he was stepping down.

CIA spokesman Ryan Trapani said Friday that after three decades of public service, Sharpley had decided to continue his career outside the agency.

The CIA’s announcement did not say why Sharpley decided to step down, but two attorneys representing former CIA whistleblowers say the allegations that he retaliated against whistleblowers played a key role in his departure.


EPA staff worried about toxic chemical exposure — for Pruitt

Then-EPA Administrator Scott Pruitt’s staff sought to protect him from exposure to toxic formaldehyde from an office desk last year, emails show — just months before his top political aides blocked the release of a report on health dangers from the same chemical.

In the spring of 2017, as Pruitt was finishing the more than $9,500 redecoration of his office, a top career official in the administrator’s office noticed a California warning that one of the ornate desks their boss wanted contained formaldehyde, which the state classifies as a carcinogen. It’s unclear whether Pruitt ultimately ordered that desk as part of the renovation — which included artwork from the Smithsonian, framed photographs of Pruitt and President Donald Trump and a standing "captain’s" desk — but the documents show that his staff took steps to protect Pruitt from exposure to the chemical.

After seeing the warning, acting deputy chief of staff Reginald Allen reached out to Wendy Cleland-Hamnett, the career official then serving as acting head of EPA’s toxic chemicals office, according to emails released to the group American Oversight under the Freedom of Information Act and shared with POLITICO.

"Sorry to bother you with this but we need some help. The desk the Administrator wants for his office from Amazon has a California Proposition 65 warning. What I am asking is can someone in your area tell us whether it is OK to get this desk for the Administrator related to the warning?" Allen wrote April 7 to Cleland-Hamnett and another career official in the office, referring to a California state chemicals law.

Cleland-Hamnett replied explaining that the desk was likely made of compressed wood in which formaldehyde is frequently used as a glue. Although an EPA regulation limiting formaldehyde emissions from such products had been put on hold by the Trump administration, the state of California regulates formaldehyde in such products, meaning the air emissions from the desk were "likely to be fine," Cleland-Hamnett wrote.

However, she suggested letting the desk sit somewhere other than the administrator’s office to air out for a few days. Administrative personnel appeared to make plans to have the desk assembled at a warehouse and left there for a week, when the highest concentrations of formaldehyde are usually emitted.

The email exchange about the desk last spring took place just months before top aides to Pruitt took steps to block a health assessment produced by another division within the agency that found the levels of formaldehyde that many Americans breathe in daily are linked with leukemia, nose-and-throat cancer and other ailments. The chemicals industry has fought the assessment, which could prompt federal and state regulators to issue new restrictions on the chemical, and could lead to class-action lawsuits.

POLITICO reported last month that Pruitt aides, including chief of staff Ryan Jackson and Richard Yamada, a top official in the agency’s Office of Research and Development, blocked the report from going through necessary internal review steps, effectively preventing it from being made public.

Austin Evers, executive director of American Oversight, the watchdog group that obtained the emails, said the emails fit into the pattern of perk-seeking that led to Pruitt’s downfall.

“You can add ‘EPA chemical safety science’ to the list of taxpayer funded benefits that Scott Pruitt kept for himself. The irony would be comical if this wasn’t so dangerous. Months before Scott Pruitt blocked the EPA’s report on the dangers of formaldehyde to public health, he got the benefit of EPA’s safety experts looking out for his own health," Evers said in a statement.

Cleland-Hamnett retired last year. Allen, who had objected to other spending and travel by Pruitt, was reassigned to a job outside the agency this spring, E&E News reported at the time.

Emily Holden contributed to this report.


Charlotte to host 2020 Republican National Convention

The Republican National Committee has officially selected Charlotte, N.C., as the site of its 2020 Republican National Convention.

The decision, made Friday at the group’s annual summer meeting in Austin, Texas, marks the end of a year-long search for the place the party will likely tap President Donald Trump for a second term.

"We look forward to seeing the Queen City take center stage as the Republican Party re-nominates President Donald Trump and Vice President Mike Pence to continue fighting for the American people," RNC Chairwoman Ronna McDaniel said in a statement.

An RNC panel earlier in the week recommended Charlotte over Las Vegas, citing its large number of hotel rooms, major airport and demonstrated fundraising ability.

"Charlotte has so much to offer, and we are excited to bring delegates to a city that has demonstrated its southern hospitality, showcased its vibrant energy, and proven that possibilities are endless," RNC Site Selection Chairman Ron Kaufman said in a statement.

However, not everyone was on board.

The Charlotte City Council narrowly approved plans to host on Monday, with some members concerned over the largely Democratic city’s resistance to a GOP presence.

The last time the city hosted a political convention was in 2012, when Democrats gathered there to renominate former President Barack Obama.

However, Charlotte Mayor Jennifer Roberts painted the situation as evidence of the city’s "belief in acceptance."

"I believe this convention conveys a positive message supporting our city’s belief in acceptance and inclusion," Roberts tweeted Friday. "This is our opportunity to, once again, put Charlotte in the international spotlight to demonstrate the democratic process and two-party system that we deeply value."

The RNC has yet to set a date for the convention. The DNC’s event, which will likely take place in Houston, Miami Beach or Milwaukee, will take place from July 16 to 20.


Republicans soften ZTE ban in concession to Trump

Republicans have agreed to water down legislation designed to punish Chinese telecom giant ZTE, delivering a victory to President Donald Trump, according to a person close to negotiations in Congress.

Lawmakers reconciling House and Senate versions of a must-pass defense bill chose to go with the House approach of excluding ZTE from U.S. government contracts but leaving it free to do business with private companies in the United States. The Senate-passed version of the defense bill would have restored a full U.S. ban on ZTE that the Trump administration imposed but then lifted.