Transcript: Nightly Business Report – September 13, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

Republicans promise to release what they call big, bold tax reform by the
end of the month. Get ready for the biggest D.C. tax hustle in a

Sanders introduces a Medicare-for-all bill. Its chance of passage is low,
but the talk is becoming more mainstream.

HERERA: Software ban. A Russian company`s software is ordered off the
U.S. government`s computers. But it`s still being used by millions of

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
September 13th.

MATHISEN: Good evening, everyone, and welcome.

The Dow, Nasdaq, and the S&P 500 all closed at records for the second
straight day. We have more on that in just a moment.

But we begin tonight in our nation`s capital, where there are new
developments on an issue of critical concern to investors like you — tax
reform. Today, the Republicans sent out a save the date notice for
September 25th, when they plan to release the core elements of what they
call big, bold tax reform.


REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: This is the beginning of the
process. It`s the beginning of a very important process to achieve for the
first time in a generation overhauling our tax system and giving middle
class families a much deserved break.


MATHISEN: And as the GOP prepares for its legislative push, the president,
encouraging lawmakers to work quickly, made clear what he wants to see in
the proposal.


fair. Cut taxes substantially. It will be the largest tax decrease in the
history of our country for the middle class.

Encourage companies to hire and grow in America. And by doing that, we`re
going to have to reduce the taxes for companies. Right now, we`re at 35
percent, and really much higher when you add state taxes in.


MATHISEN: Ylan Mui reports tonight from Washington.


reform is starting to come into focus. Republican leadership announcing
today that they plan to release an updated framework for tax reform with
the White House during the week of September 25th. President Trump has
already begun reaching out to Democrats. But OMB Director Mick Mulvaney is
skeptical that any of them will come on board.

vote for something the president likes? That`s a real concern of mine,
that Democrats might be committed in their own mind for political reasons
that they simply cannot give the president a victory in his first year in
office, maybe ever in office.

MUI: Lawmakers hope to pass a budget in October and that will allow them
to unlock the special rules that let them pass tax reform in the Senate
with just 50 votes. Today, Mr. Trump met with the problem solvers caucus
at the White House to talk about tax reform. They`re a moderate,
bipartisan group in the House.

And I spoke with their Democratic leader, Representative Josh Gottheimer,
about why he thinks President Trump wants to engage with their group, not
just on tax reform but also issues like immigration and infrastructure.

REP. JOSH GOTTHEIMER (D), NEW JERSEY: The president realizes that you get
a lot more done working together. And there`s a bunch of us who want to
sit at the table, roll up our sleeves and get to work on issues like tax
reform, on infrastructure, in making sure there is bipartisan support for
DACA legislation. And now, he`s got to push it ahead and get it done.

MUI: Asks if he thinks the GOP timeline for tax reform is realistic,
Gottheimer said, no, but hope does spring eternal here in Washington.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui, on Capitol Hill.


HERERA: Not only do Americans care about taxes, but, of course, also
health care. And today, more than a dozen Democratic senators stood with
Vermont Senator Bernie Sanders as co-sponsors of his bill for a government-
run single payer health care system.


SEN. BERNIE SANDERS (I), VERMONT: We say the function of a rational health
care system is to provide quality care to all in a cost effective way, and
not to continue a system which allows insurance companies and drug
companies to make hundreds of billions of dollars in profits each year.


HERERA: The proposal would be phased in over four years. In the first
year, the eligibility age would be lowered to 55 and include all children
under 18. In the second year, 45-year-olds would be eligible. In the
third year, 35. By the fourth year, Senator Sanders says, everyone would
be covered by what he calls Medicare-for-all.

MATHISEN: But what would expanding Medicare-for-all look like? How much
would it cost? And who would pay how much?

Ipsita Smolinski joins us now to discuss. She`s health care policy analyst
at Capitol Street.

Ipsita, welcome. Good to have you with us.

I`m going to ask you a simple, and it`s not about political practicality.
We can set that aside. Is this a practical idea, a single-payer, Medicare-

an idea that came up 40, 50, 60 years ago, then possibly. The problem with
proposing it today is that we have Medicare. We have Medicaid. We have
Tricare. We have about 150 million Americans on insurance from their

So, what we have right now is a patchwork system. And introducing this on
top is, of course, expensive, but it`s also just difficult — it`s
difficult to do. But I think 40, 50, 60 years ago, it may have been doable
before these other programs came about in a big way.

HERERA: But does it become part of the conversation and perhaps part of a
workaround, this patchwork type of system?

SMOLINSKI: Well, I think it`s — it`s a possible solution. I think the
costs are troubling, $30 trillion. Some of the estimates are that high.
We haven`t seen any estimates for how it would be paid for.

And it`s alluring. If you`re somebody with insurance, don`t have to pay
co-pays, you don`t have to pay deductibles. But then there`s also a flip
side to that. Do we turn into Canada or the U.K., where there could be a
gatekeeper function from a set of government officials who are saying, yes,
you can have that knee replacement, or no, you can`t have that surgery?

So, there at some point would have to be an effort to contain costs. And I
think consumers who like their choice right now with whatever insurance
they have, if they are lucky enough to have it, might not like that.

MATHISEN: But don`t private insurance companies have gatekeepers too that
decide what drug is on the formulary or what kind of surgery is indicated
and what they`ll pay for it?

SMOLINSKI: They do. They absolutely do have prior authorization. And I
think that`s what you would see with this type of a program too.

Again, if we`re looking out four, five, 10 years, if they actually happens,
which I don`t think it will. But because you mentioned health insurers, I
will say that there are some insurers that could like this type of an idea
from a business perspective. That is, you have insurers that right now
work with the government through Medicare Advantage and provide plan
benefits to Medicare beneficiaries. They`re also paid by the government
for their services.

I think some insurers like Aetna (NYSE:AET), United, Humana (NYSE:HUM),
that operate in M.A. or Medicare Advantage could potentially, if this
program is tweaked for everybody`s buy-in, could be actually profitable for
health insurers.

MATHISEN: All right. Ipsita, thanks very much, I`m sure it`s a discussion
that will continue over the months and maybe years. Ipsita Smolinski with
Capitol Street.

HERERA: Higher prices at the pump helped to lift the latest gauge on
inflation. Producer prices rebounded in August by 0.2 percent, thanks to a
9.5 percent increase in the cost of gas. Economists say that even though
gas prices could rise further in September, a reversal is expected because
of the glut of supply on the market.

MATHISEN: And as we reported at the top of the broadcast, there was a Wall
Street hat trick as the three major indexes eked out big enough gains to
close at record levels. Energy shares gained on a rise in oil prices when
offset a decline in technology stocks. The Dow Jones Industrial Average up
39 to 22158, Nasdaq added five, and the S&P 500 rose about two points,
enough for an all-time closing high.

HERERA: The Department of Homeland Security today ordered federal agencies
to stop using software made by Kaspersky Labs. This over concerns about
that company`s ties to Russian intelligence.

But as Andrea Day reports, there are still thousands of businesses and
millions of consumers still using that software.


trusts Kaspersky as a vendor.

issues brewing for years. Does Kaspersky, the Russian cybersecurity giant,
have direct ties to the Russian government?

The U.S. government now banning the software from all of its federal
agencies, saying, quote: The department is concerned about ties between
certain Kaspersky officials and Russian intelligence. The risk that the
Russian government could capitalize on access provided by Kaspersky
products to compromise federal information and information systems directly
implicates U.S. national security.

Agencies have 90 days to remove the software.

Michael Borohovski is a former government contractor.

BOROHOVSKI: Well, the problem is that Kaspersky is arguably the best
antivirus software out there. Everybody is basically using Kaspersky.

DAY: The General Services Administration, or GSA, has already taken the
security firm off its list of approved government vendors.

Founder Eugene Kaspersky worked in Russian military intelligence, even
graduated from a KGB-run school. According to the company, Kaspersky
software is used by 270,000 businesses, including those in energy, oil, and

BOROHOVSKI: In a lot of those sensitive systems, those machines that
they`re going to be running on are going to be air-gapped from the rest of
the Internet anyway, which quite literally means they`re running on their
own local network. As a result, it almost doesn`t matter if there`s a, you
know, open back door to the Kremlin.

DAY: At home, at least 400 million consumers around the globe use the
software to protect their computers. That according to Kaspersky.

Last week, the software was taken off shelves at Best Buy (NYSE:BBY). So,
what does it mean for you, now that the government has banned the software?

BOROHOVSKI: I would be very surprised if Kaspersky continues a few years
from now to have significant market penetration.

DAY: Kaspersky tells us, quote: Given that Kaspersky Labs doesn`t have
inappropriate ties with any government, the company is disappointed with
the decision but also is grateful for the opportunity to provide additional
information in order to confirm that these allegations are completely
unfounded. No credible evidence has been presented publicly by anyone or
any organization, as the accusations are based on false accusations and
inaccurate assumptions.

Kaspersky Labs has never helped nor will help any government in the world
with its cyber espionage or offensive cyber efforts. And it`s
disconcerting that a private company can be considered guilty until proven
innocent due to geopolitical issues. Kaspersky Labs ardently believes a
deeper examination of the company will substantiate that these allegations
were without merit.

(on camera): And this isn`t the first time that Kaspersky has shot down
the theory. According to Borohovski, the best course now would be to
uninstall the software and replace it with a different brand.



MATHISEN: Still ahead, why paying for a smartphone is becoming a lot like
leasing a car.


HERERA: Are you still paying for cable television? A lot of people are
going without it. They are the so-called cord cutters. And it`s happening
at a much faster rate than previously thought.

Julia Boorstin takes a look at the growing trend in a changing TV industry.


giants, watch out. EMarketer now predicting more people will drop the TV
bundle than previously expected, projecting the number of people who don`t
have cable or satellite TV will grow 33 percent this year, to about 22
million. That`s about 7 million more people than it previously projected.

EMarketer isn`t referring to the number of subscribers but rather
individuals without access to a pay TV bundle. So, if a group of four
roommates decides not to pay for cable, that`s one subscription lost and
four cord cutters.

PAUL VERNA, PRINCIPAL ANALYST, EMARKETER: We see the trend accelerating.
We see more and more people have more options to get the programming they
want without having a traditional relationship with a cable or satellite

BOORSTIN: These new stormy forecasts come on the heels of Comcast`s CEO
Brian Roberts reassuring investors about the company`s warning that it
could lose as many as 150,000 video subscribers this quarter. Roberts is
saying the trend is stable, just 50,000 net subscribers lost in the last 12

And Comcast (NASDAQ:CMCSA) (NYSE:CCS), along with all the other media
giants, is working to keep consumers in the bundle and to reach them
outside of it. Comcast (NASDAQ:CMCSA) (NYSE:CCS) incorporating YouTube
into its X1 cable service and looking at ways to segment its video

And today at Goldman Sachs` media conference, Viacom (NYSE:VIA) CEO Bob
Bakish said his team is working on a new entertainment bundle in the $20
range, looking to launch it by December.

ROBERT BAKISH, CEO, VIACOM: There`s clear data to suggest that a lower
price point that doesn`t include sports has consumer appeal. That`s
indisputable. What there hasn`t been is product in the marketplace yet in
the U.S., I have said it before, will say it again, we are highly confident
that a product will exist at this price point in the U.S. in this calendar

BOORSTIN: Twenty-First Century Fox`s Lachlan Murdoch was more upbeat,
saying they see no signs of subscriber declines accelerating while they
also see huge potential in new digital bundles. On top of those
traditional and digital bundles, Murdoch predicts that every media company
will also go direct to consumer, as they try to compensate for those
declines that EMarketer is predicting.

For NIGHTLY BUSIENSS REPORT, I`m Julia Boorstin in Los Angeles.


HERERA: As you`re aware, Comcast (NASDAQ:CMCSA) (NYSE:CCS), which Julia
just mentioned, is the parent company of CNBC, which produces this program.

MATHISEN: Dolby Labs spikes thanks to, what else, Apple (NASDAQ:AAPL), and
that`s where we begin tonight`s “Market Focus”.

During Apple`s product launch yesterday, the tech giant said a number of
its new devices would support Dolby`s video technology. Apple
(NASDAQ:AAPL) said the tech called Dolby Vision would provide the highest
resolution possible and make online content even better. And with that,
shares of Dolby Labs rose 9.5 percent to $59.07.

With the holiday shopping season just around the corner, Target (NYSE:TGT)
is getting its hiring strategy in place for the busy period. The retailer
said it was planning to pull in about 100,000 seasonal workers this year.
That is up from $70,000 or so in 2016. Target (NYSE:TGT) shares rose by
nearly 3 percent today to $59.51.

And tobacco giant Philip Morris raised its quarterly dividend nearly 3
percent to a $1.07 a share, the yield on the stock just above 3.5 percent.
Philip Morris shares fell a fraction to $116.86.

HERERA: Medicaid coverage provider Centene (NYSE:CNC) will buy privately
held Fidelis Care for nearly $4 billion. Centene (NYSE:CNC) said that deal
will expand its participation in government-backed healthcare. Shares of
Centene (NYSE:CNC) rose 8 percent to $98.16.

After the bell, Dow Jones reported that Tenet Healthcare (NYSE:THC) is
exploring a possible sale. That news sent shares of Tenet spiking in the
extended session, but shares finished the regular day down more than 5
percent to $16.24.

And a rise in customer spending wasn`t enough to offset slowing foot
traffic at Cracker Barrel. The restaurant and gift shop chain reported
lower than expected sales but it did beat analysts` earning estimates. The
company said it expects the environment to remain challenging in the months
ahead. Shares rose 1 percent to $150.28.

MATHISEN: The CEO of Equifax (NYSE:EFX) issued an apology today in an op-
ed in “USA Today”. Richard Smith described the breach that has impacted
143 million Americans as the most humbling moment in Equifax`s 118-year
history. Mr. Smith said he is devoting extraordinary resources to make
sure it doesn`t happen again.

But the apology did little to help the stock price. It was off more than
14 percent in the session today.

Equifax (NYSE:EFX) is one of three nationwide credit reporting agencies
that track and rate the financial history of U.S. consumers.

HERERA: And consumers are taking advantage of their wireless carriers`
equipment installation plans with brand-new mobile devices costing up to
$1,000. Buying a smartphone outright isn`t always an option so many are
paying for them in installments. But is that costing them more in the long

Connie Gugliemo is the editor in chief of CNET and she joins us now to talk
about that.

Connie, thank you so much for joining us.

Let`s start first of all with whether or not leasing is the best option for

CONNIE GUGLIEMO, EDITOR-IN-CHIEF, CNET: So, let`s start right off the bat
with some vocabulary. Leasing programs are like car leasing programs,
where you are leasing it but not really owning it. And so, you`re paying a
monthly premium.

What the carriers and Apple (NASDAQ:AAPL) have done is started these
installment plan programs where you take the cost of the phone, divide it
by 24 months, two years, and then they let you pay it out over 24 months.
Usually, Apple (NASDAQ:AAPL) doesn`t offer or charge you any interest. So,
zero interest installment plans.

MATHISEN: So, at the end of that period, you own the phone.

GUGLIEMO: That`s right.

MATHISEN: So the $1,000 phone is going to cost me $1,000 when I`m all said
and done there. It`s not going to cost me $1,150 or whatever it would be
if they were charging a financing factor.

GUGLIEMO: Well, so, there`s caveats to everything. So, Apple
(NASDAQ:AAPL) does take the cost of the phone, they divide it over that
two-year period. And then they add a little bit of a service charge. Why?
Because they`re offering you what they call their Apple (NASDAQ:AAPL) Care
Plus. It`s a plan that lets you, if you break your phone or drop and crack
the screen, replace it. And it gives you an extended warranty over the
one-year limited warranty you get.

So, their plan is actually slightly more than the actual cost of the phone.
The carriers also take those 24-month periods, divide it overt cost. There
might be some hidden costs but generally speaking, there`s zero interest.

HERERA: OK. So, say, you don`t do it with Apple (NASDAQ:AAPL) necessarily
but you do it with Verizon (NYSE:VZ) or AT&T (NYSE:T). I mean, what is the
incentive for the carrier to basically underwrite that? Is it that you use
— that they charge you for other issues or other things, or not?

GUGLIEMO: Well, let`s look at phones. You mentioned it right at the
outset, sticker shock. Phones today are costing anywhere from $700 up to
$1,150 now for the top end iPhone. So, some people might pause before they
say I want to spend that much money on a phone.

HERERA: Right.

GUGLIEMO: So, this gives you a way to spread out the cost or that pain.
And it allows you, say you want a certain model and you want a higher end
model, it lets you make that aspirational purchase that you might not have
been able to do because, again, the sticker shock.

MATHISEN: Very quickly, what happens if I cancel, I change carriers before
I`ve paid off the whole phone?

GUGLIEMO: Yes, you might be on the hook, probably, for continuing to pay
it all off. But again, at the end you own it. So then you can go onto
eBay (NASDAQ:EBAY) or one of the iPhone retail sites and sell it, because
it is your property.

HERERA: OK. Thanks, Connie, and I`ll get your last name right this time.
Thank you so much for joining us.

GUGLIEMO: My pleasure.

HERERA: Connie Gugliemo with CNET.

Coming up, what does it take to get the power turned back on in Florida?
We are going to show you.


MATHISEN: Low mortgage rates are enticing borrowers to apply for new
loans. According to Mortgage Bankers Association, weekly mortgage app
volume rose 10 percent last week applications to buy a new home or hire,
along with applications to refinance existing home loans, experts say
volume would have been even higher if not for the impact of Hurricanes Irma
and Harvey.

HERERA: And those two powerful hurricanes left a lot of homes in Texas and
Florida flooded. That could lead to the rise in the number of mortgage

Diana Olick explains.


Harvey hit Houston homes hard and could do the same to the mortgages on
those homes. The staggering damage to properties could cause as many as
300,000 borrowers to become delinquent on their loans, and 160,000 could
become seriously delinquent. That is, more than 90 days past due, which is
when banks initiate foreclosures.

This all from Black Knight Financial Services, which compared mortgaged
properties in Harvey`s FEMA-designated disaster areas to those in Hurricane
Katrina`s. The numbers are now four times higher than originally
predicted. Mortgage delinquencies in Louisiana and Mississippi disaster
areas spiked 25 percentage points after Katrina.

The same could happen in Houston. Homeowners will get some federal relief.
But if rebuilding costs more than the principal in their homes, they could
decide to walk away.

SVENJA GUDELL, CHIEF ECONOMIST, ZILLOW: It`s obviously a really difficult
decision for a lot of homeowners to simply leave their home and uproot
their families and move somewhere else. And I think, you know, only time
will tell at this point how the whole process will work with submitting
towards insurance, getting your costs covered, and what you have to pay out
of pocket versus what help you can actually get when it comes to fixing up
your home again.

OLICK: Turning to Florida and Irma, you cannot use the same comparison,
because Irma was more of a windstorm and not that much of a long term flood
disaster as Harvey and Katrina. That said, there are over 2 million
mortgaged properties in Irma-related FEMA disaster areas, more than four
times that of Katrina and twice as many as Harvey. Total unpaid mortgage
balances for Irma areas is $370 billion.

(on camera): Borrowers in Florida also have much less home equity than
those in Houston because they were hit harder in the housing crash. If the
math doesn`t work for them as well, they could also walk away.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


MATHISEN: Early estimates from Wall Street economists suggest that
Hurricanes Harvey and Irma will have a negative impact on third quarter
U.S. growth numbers. Goldman Sachs (NYSE:GS) trimmed its estimates by 0.8
percent. Other firms have taken down theirs as well, but still have growth
for the quarter coming in at roughly 2 percent, maybe a little higher.

Most economists see fourth quarter numbers moving up, getting a lift as the
rebuilding begins.

HERERA: Getting the power back on in Florida is key to getting that
state`s economy moving again. Millions are still in the dark following
Hurricane Irma.

But as Jackie DeAngelis reports, turning on the lights is a massive


Power companies in Florida being put to the test by Irma. Across the
state, about 6.5 million customers without electricity initially. Crews
working swiftly to bring that number down to about 3.5 million today.

CHRIS RIMEL, DUKE ENERGY: Irma was basically an equal opportunity
destroyer. There`s parts of our southern territory in the Central Florida
that we`re going to have to actually rebuild part of that. That`s going to
take a lot longer than a simple restoration.

DEANGELIS: Chris Rimel and his team at Duke Energy (NYSE:DUK) knew they`d
be challenged. Florida`s second biggest power provider is working 24/7 to
reduce Duke`s outages from 1.5 million to a little more than 800,000 on

RIMEL: We`ve told people they`re going to be back in power by midnight on
Sunday, this coming Sunday. Those pockets in the south, maybe a little
longer. It`s a 24/7 operation and probably won`t stop for some time.

DEANGELIS: While some communities never lost power or got it back quickly,
it will be harder to restore in the more damaged areas. Flood zones need
to drain before crews can go in. Some systems will need to be entirely

RIMEL: In the southern tier of what we call our central Florida territory,
a maelstrom of things happened there that basically destroyed their
infrastructure. We have to go in there with new poles, new lines, and
completely rebuild that part. It`s going to take us a little bit longer to
attack that.

DEANGELIS (on camera): Residents have been patient. But it`s hard to get
back to normal when you can`t turn on the lights.

AMENIA PAYNE, OCOEE, FLORIDA RESIDENT: I`ve lost power for five days. I`m
glad I`m getting it back today. I`m not impatient. I`m happy that
everyone`s out here now, as you can see, getting it together.

DEANGELIS (voice-over): Local crews in Florida also got help from
thousands of teams in other states. It was a massive storm and it`s an
equally massive undertaking to get Florida back in business.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis in Ocoee, Florida.


MATHISEN: And finally tonight, dozens of celebrities came together last
night to raise money for hurricane relief. The Hand In Hand benefit raised
more than $44 million. Some of the donations include $5 million from Apple
(NASDAQ:AAPL) and $1 million each from Albertson`s and Merck (NYSE:MRK).
According to Nielsen, more than 15.5 million viewers tuned in across the
big four broadcast networks.

HERERA: And that does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue
Herera. Thanks so much for joining us.

MATHISEN: And thanks from me as well, I`m Tyler Mathisen. Have a great
evening, everybody. And we`ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2017 CNBC, Inc.


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply