at 4:00 eastern, so please stick around. >> "journal editorial report" is now. ♪ ♪ david: welcome to the "journal editorial report," i'm dade asman in for -- david asman in for paul gigot. the infamous dossier alleging russian ties to donald trump, "the washington post" first reported tuesday that payments were filtered through a u.s. law firm which then hired the opposition research company fusion gps, fusion in turn tapped former british spy christopher steele the compile the allegations which are based largely onion mouse russian sources. -- on anonymous russian sources. of kim strassel spelled out just

this scenario in a column written last july. quote: what if it was the democratic national committee or hillary clinton's campaign? what if that money flowed from a political entity on the left to a private law firm, to fusion, to a british spook and then to russian sources? kim joining us now along with "wall street journal" columnist and deputy editor dan henninger and columnist bill mcgurn. kim, how did you know? [laughter] >> good sources. "the wall street journal" always has good sources. david: i'll say. but you spelled it out exactly. was there anything that surprised you in the revelations this week? >> no. it didn't surprise me other than the fact that now we have a lot of people in the democratic party claiming that they didn't know any of this. somebody had to have arrangedded this. but -- arranged this. but i think the import of this is that we've had the story or the press has had the story

completely backward for the last year. all the allegations have been that it was donald trump's campaign playing footsie with russians. we still have no evidence of that but, rather, concrete evidence that it was democrats playing footsies with russians and enabling them to enroil our election and upset our democracy. david: bill, i'm wondering, do you think this was done by design; that is, the clinton campaign or the clinton team knew that all these shenanigans were going on, and they figured, okay, let's deflect it to trump, and the press will go along with it? >> yeah, i'm not sure a they knew about it. the most qualified candidate in history, of course, had no idea this was going on under her own roof. to me, the bigger question is we've laid out the part where the dnc and the campaign are basically funding an opposition project with help from the russians. the other part that's even more damning, i think, is what was the fbi's role. david: right.

>> because the fbi, the question is did they use this to get fisa warrants to start spying on trump -- said david that's the question. >> it's the big question. and they apparently were going to pay christopher steele until his name surfaced and they backed out of that. so i think there's a lot of questions at some point jim comey's going to have to go back there. the fbi has been stonewalling just like the hillary people and fusion on this. and this week they sort of announced a breakthrough. david: well, dan, first of all, this is more than just shenanigans, by the way. i mean, laws may have been broken here based on who paid what for -- who paid whom for what. but also, to bill's point about the fbi, i mean, if the fbi actually used this kind of phony dossier -- god knows how much of it, if anything, is true in there -- but that they used that as a basically for fisa warrants, for wiretapping for lack of a better word on the

trump campaign, that's a scary scenario. >> it is. it would suggest that the fbi was manipulated by the russians, by putin -- david: and by the dnc. >> well, by the dnc which itself was being manipulated. so i think this has to be opened up in open congressional hearings. i firmly believe that there are a lot of democrats in washington who knew this was going on, who knew this story was going to break, you know? for debbie wasserman schultz who was the head of the dnc at that point to say she had no idea it was going on, let's understand something. that law figure, perkins coy -- which contracted and paid fusion -- would not have made those payments without the permission of their climates, a, the democratic national committee and, b, hillary clinton's campaign. and these were big payments. so it's really implausible for them to deny that this was going on. david: kim, does anybody inside the beltway believe hillary when she says she didn't know about it or debbie wasserman schultz when she said -- i mean,

somebody knew about it because somebody paid fusion gps, right? >> i think everyone obviously at least had the suspicion that this was the case, that it might have been the party and it might have been the campaign. because that's the only way also to explain the efforts that congressional democrats have been making to protect fusion from having to give up this name. and, look, i think that that's another really important unanswered question here, is that the only reason this came out this week is because fusion was trying to appease house investigators that want to get ahold of its banking records. and house republicans are still trying to get those. and that could be another big bombshell -- david: right. >> -- in here, to see who else was paying fusion at the same time. is there russian money going in there? there could be a lot more to unwrap here as we dig into this. david: well, dan, there is no -- there is a lot more to unwrap not only in this story, but the

other story, uranium one. we now know that the kremlin, while they were trying to get -- while the russians were trying to get 20% of our your rain yum reserves, they were involved in tremendous racketeering schemes, kickbacks, bribes in order to do that, and the fbi knew about this before the deal was signed. >> yeah. the fbi had an informant who had penetrated the russian operation for about five years, and the justice department this week has given permission for this informant to speak confidentially to at least three congressional committees that are trying to get to the bottom of how the united states confirmed or allowed the russian company to gain control of 20% of the united states' uranium. david: and, bill, the fbi comes in play here again because it was robert mueller who was head of the fbi when, apparently, they let this deal happen that probably shouldn't have, because it was involved in iraq tiering. iraq tiering. should -- sessions recused

himself from russia. should mueller do the same? [inaudible conversations] >> i don't think it's a, necessarily a stain on his integrity of what he did, but he clearly is not in the position to be looking at the fbi given his -- david: so he should resign -- >> i think he should -- [inaudible conversations] i also think further to kim's point about why this came out, i think we have to give some credit to devin nuñes and the house intelligence committee who's taken all sorts of incoming. and this stuff came out because he pursued it, and there's still a subpoena in court looking for the other things. and he gets almost no credit. he's been much maligned. and now i think we learned why, because they're a little afraid of what he's going to find out. david: a lot more to come on both of these stories. when we come back, the house passes a budget blueprint clearing the way for the gop's final push on tax reform. but with some key sticking points remange, can the --

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let's plan for income that lasts all our years in retirement. prudential. bring your challenges. ♪ ♪ >> we're really unified on what we want to do. we want tax cuts for the middle class. we want tax cuts for businesses to produce jobs. this is great unity. david: president trump this week declaring great unity in the republican party when it comes to tax cuts. the house narrowly tonighting the senate's budget blueprint on -- adopting the senate's budget blueprint clearing the way to deliver a tax package to the president's desk before the end of the year. but with battles brewing over state and local tax deductions, a new foreign minimum tax and maybe even a higher tax bracket for those making over a million bucks, can republicans keep their eye on the prize and get a clean bill with across-the-board tax cuts over the finish line? let's ask economist art laffer. he served as an adviser to

president ronald reagan. allart, good to see you. >> good to see you, david. david: why not just clean, across-the-board tax cuts? >> that's what they should do, but congress -- it's all these different views and everything, and everyone wants to get their little piece in, so it really becomes a complicated mess. but you're right, we should have one simple tax, corporate tax rate from 35% to 15%, get rid of everything else, pass that. then go to these other items. a lot of those are good as well, by the way, david, they really are. inheritance tax should be gotten rid of, expensing of capital purchases should be done. but i think you should pass the big engine of growth here is the corporate tax cut, and that should be just by itself. david: and, you know, there were a couple of new taxes mentioned. that's what scares me a little bit. >> i know. david: there was a higher tax bracket that may or may not happen on the wealthy, there's something called a foreign minimum tax, details about which

are still not exactly known. are we adding more to the tax code instead of subtractingsome. >> i don't think so. i don't think that's going to happen. there's no taste, i don't think, no appetite for raising the highest rate. it makes no sense east, i mean, you can't hate job creators and love jobs. and if you want middle class prosperity, you've got to make the employers happy to hire these people, to give them jobs that they otherwise wouldn't have had, to raise the wages that we all want for the middle class. that also requires the cooperation of the upper class and lower. i mean, you know, we're all in this stuff together. as kennedy said, a rising tide raises all boats, and this is a kennedy-esque tax bill that is really wonderful. david: i'm wondering if all republicans know that because when they first came out with their tax plan a couple of weeks ago, they had a line saying it won't be any less progressive, and it's progressivity that has widened that divide between the

richest and the poorest whereas across-the-board tax cuts lift all boats, as you say. >> of course they do, and i don't know why they pander to some sort of political ideology, but they do. if they want bernie sanders' votes, that's what they should say. if i noticed the vote there, you say it was really close, and it was four votes difference, that's true. but i'm willing to to bet there were a bunch of republicans who voted against that who would have switched being in fair if the vote had gotten closer. but 100% of the democrats voted against it which is just shocking. this is a kennedy tax cut, a pro-growth thing to help the people of america, and every democrat votes against it? that's unconscionable. they know better, and they proposed cutting the corporate rate themselves, and yet they still just hold on to this obstinate, just anti-trump position, and it'll come back and bite 'em you know where. [laughter] david: well, since, art, since there's going to be no democrat voting in favor -- >> none. david: -- why then is it necessary for some in the gop to

pander to their notions of progressivity? >> i don't know. i mean, it just doesn't make any sense. if a republican thinks the democrats are going to vote for him because of one little addition to this bill that's pandering, i think they're very mistaken. this is an all-out political war, and the winner in 2018 and 2020 will get the bacon and will carry the issues home. i personally think the democrats are putting themselves at great risk in 2018. they've got a lot of exposure in the senate, and i think they could well lose a lot of seatses in the house as well. so they are at risk doing this type of obstructionist type of policy. so i don't know why they're doing it. i mean, being -- i spent half my life as a democrat and as a republican, and clinton, i voted for him twice, i'm a kennedy democrat. i don't know why the democrats don't go back to their roots and vote for this bill and get america growing and going again. it's what they should be doing, and i don't know why they just

oppose it. i think they're going to pay a very heavy price for that. david: let's be optimistic -- >> oh, i am, it'll pass. david: i know that very well and assume that it'sen done before the end of the year and retroactive to -- [laughter] will the economy grow fast enough in 2018 for the republicans to pull out a win in the midterm elections? >> yes, i think it will. i already think there's a lot of signs of positivity in the economy. if you look at the stock market, it's risen quite substantially. if you look at the growth rate in gdp, i mean, it's not good by any means, but it's a lot better than it has been over the last 16 years. it's just a lot better. so you're seeing a lot of signs of improvement. and i think trump's doing a great job with the executive orders and dismantling aca, and i think if this bill passes, we could have a very sound 2018 and a very nice stock market. and that will inure very much to the benefit of the republicans in the elections in 2018.

david: by the way, stock market hasn't been doing too badly in the past year -- >> that's what i mean, yeah. david: it's been up to record levels. art laffer, great to see you. we needed your optimism. we needed a shot of optimism here, and we got it -- >> well, you got it, and i think it's going to be great, and i'm really looking forward to a very long, big boom in america. david: thank you very much. >> thank you, david. david: when we come back, watch out, changes to our 401(k)s could be another sticking point to the tax bill. so what should we expect when gop leaders release details next week? ♪ ♪ dynamic performance, so you can own the road. aggressive styling, so you can break away from everyone else. the bold lexus is. experience amazing.

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♪ ♪ david: a battle over 401(k)s, another issue that could derail republicans as they push forward on tax reform. though gop leaders were

reportedly considering limiting the amount of tax-free dollars you could put into your own accounts, the president appeared to take that off the table this week tweeting, quote: there will be no change to your 401(k). this has always been a great and popular middle class tax break that works, and it stays. so what should we expect when the house unveils details of its plan next week? we're back with dan henninger, kim strassel and "wall street journal" editorial page writer, kate odell. dan, what will the plan look like, and will we see any changes in 401(k)s? >> i don't think we're going to see too many, that's sort of horse trading before this begins. this is what people should focus on. what they should focus on when this bill is released next week is, essentially, what president trump himself has been emphasizing over and over, speeches out in the country, he just did it earlier on our program, and that is two things; a tax cut for the middle class and, secondly, reducing the

corporate tax rate to 20%. art laffer said 15, but i think it's going to be 20. the point on the corporate side is so that businesses reinvest money back into the economy, capital investment to create jobs and raise wages. that's your real benefit for the middle class. those are the two things they're going to try to do. now, they're operating within certain senate rules on how much money they can afford to lose over a ten-year period. and a lot of this horse trading like the millionaires' tax and so forth is intended to try to get them under that cap. david: so, kate, should we just ignore all the stuff i was talking about with art laffer, the millionaires' tax and a foreign investment tax, etc. it's just noise? eventually it'll come out to a clean version of tax cuts like dan described? >> here i think the 401(k) story has gotten a lot more attention than it deserves. as for the millionaires' tax, i think that's something we should watch closely. when the details come out, it

eventually comes into something that -- david: like the amt tax. >> exactly. so i definitely think that a 44% top rate could have the practical effect of moving the top rate back to 50, where it was when reagan brought it down to 28. and i would also note with what art was saying is that high marginal rates are enjoying a renaissance on the right. one thing that's going to be part of this plan is an expanded child tax credit which is expensive, does nothing for growth, and republicans will have to find money to pay for it. david: so, kim, is it conceivable that our tax code could be worse in terms of raising the top rate? >> well, yes. and this is a terrible idea that republicans are contemplating, especially because they're doing it a largely to give themselves cover from democratic complaints that this bill is somehow tailoredded to the rich. -- tailoredded to the rich. the thing is no matter what they do with this bill, they could

put an 80% tax rate on the highest earners, and democrats would still make that claim. david: yeah. >> what they ought to be doing and letting guide their decision is what is best for the economy. and, i mean, they're also dealing within the complicated parameters that, as dan said, they do need to find some way of paying for the other bad policy like the childcare tax credit. they'd be wiser off getting rid of some of those giveaways, lowering rates for everybody, and then as dan said, making sure that that's how people in the middle class benefit from a growing economy. david: but, dan, is it possible that if they put in the wealth tax -- and i call it a wealth tax because it starts out as a millionaires' tax, but as kate said, eventually it hits a lot more people, people making 250,000 or whatever. is it possible that that could actually get in there and that it could stall economic growth? >> it could get in there. i don't know whether it could stall economic growth, and here's why, david.

for one thing, by putting in a millionaires' tax like this, they're expanding the camp. i'll explain. -- the swamp. one of the biggest problems was something known as gucci gulch referring to tax lawyers who create loopholes for rich people. david: that's true. >> and if you raise the tax, the super rich are going to hire lawyers to figure out ways to create loopholes, and you're back to where you were when we started. david: exactly. the millionaires find ways to get out of them. >> right, and who doesn't, somebody who earns a million dollars for one year because they cashed in on a lifetime of thrift, they get hit because they can't afford what everyone else can afford. david: one would think that somebody like donald trump could make that point, kim. >> well, maybe we'll see him do it. i'd like to give the president a little bit of credit here on tax reform. he got hit a lot because of his comments on 401(k)s with various people like bob corker

saying, you know, just let us do our job, you do yours. i mean, i think he does have some say, by the way, in a bill that republicans are asking him to sign. but he has been out there unlike on health care which he botched. but he has been out there trying to connect this to the average american family saying, you know, corporate rate, we lower them, that's going to come out better for you in terms of higher wages. david: right. >> you know, lower these rates and it's going to be good for the economy, more jobs. he can do that, and he should be making that case as well that you just mentioned about the importance of maintaining a good tax code here and how that helps americans. david: well, i've got both fingers crossed. let's hope it happens. coming up next, president trump calling his meeting with republicans on capitol hill this week a, quote, love fest, but that's probably not the term at least two gop senators would use to describe the relationship. our panel's take on

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♪ ♪ >> we have great unity. if you look at what happened yesterday at the meeting, we had, i guess, virtually every senator including john mccain, we had a great conversation yesterday, john mccain and myself, about the military. i think we had a -- i called it a love fest. it was almost a love fest. maybe it was a love fest. david: great unity, a love fest, that was president trump describing tuesday's lunch with senate republicans on capitol hill, but just hours before that

lunch tennessee senator bob corker fired up his war of words with the president calling trump, quote, utterly untruthful. and just hours after the lunch arizona senator jeff flake announced he will not seek re-election, took to the senate floor to denounce the president's behavior. take a listen. >> reckless, outrageous and undignified behavior has become excused and countenanced as telling it like it is. when it is actually just reckless, outrageous and undying undignified. and when such behavior emanates from the top of our government, it is something else. it is dangerous to a democracy. david: and we are back with dan henninger, kim strassel and bill mcgurn. some would say this is the essence of a true democracy, that you have dust-ups like this every general ration or -- generation or so. what do you think? >> i would say if paris is well worth the math, tax reform is

well worth president trump not p responding to every insult, you know, in a tweet or something at least until after the vote. look, the good news, i think, in all this for someone like me that cares about the output is i don't think either corker or flake are john mccains. in other words, i don't think that their personal pique with the president is going to translate into a no no vote on tax reform. i think corker said so explicitly, and i can't imagine jeff flake voting against tax reform either. david: all right. well, kim, the gop establishment has never liked outsiders. donald trump is many things, he is clearly an outsider. he prides himself on that. but they attacked ronald reagan, they viewed him as an outsider even though he was a politician, even a abroad, i mean, maggie thatcher was attacked by the establishment of the torrey party, the conservative party in england. is that what's going on here, or is there something else? >> well, there's no question that donald trump's arrival in the party has put a lot of

strain on that party. you know, in terms of policies, by the way, and policy differences not to mention his style, president trump's style. jeff flake, when he was on the floor, mentioned two issues in particular, immigration and trade, on which he vastly differs with the president and where trump's positions are a lot more populist than traditional republicans like flake. i think the question that has to be asked of guys like jeff flake though is in light of the influence of president trump now exercising on the party, do you bow out like jeff flake did, or do you stay in the party and try to pull it back in the direction that you'd like to see it go. now, jeff flake had to make his own decision. he's decided that he's done with the senate. but there are other republicans that are pushing back, and that is why you see this ongoing tension and these feuds. david: well, dan, to kim's point, clearly, i mean, jeff flake is a very likable guy. when you're called likable, when that's the first thing people

say about you, you don't have a lot of weight, and he didn't have a lot of political weight inside and, frankly, in arizona either. was this just a matter of him pulling out not necessarily because of trump, but because of his own political situation? >> i think it was a lot of both, and i think people, people like senator flake, senator corker get blown over by these trump tweets. others like thom tillis said, look, i buy a box of popcorn, go up in the stands and watch. it's not going to change, right? but this is anish -- there is an issue i think the president himself should be aware of. i was very struck in the fox poll that came out this week, trump's approval had dropped from 42% in september to 38% this month. that's a four-point drop -- david: although i should mention that that poll ended before these revelations came out about hillary and the democratic party or and uranium one. >> but his disapproval -- should not be falling like that. you've got a strong economy, a strong stock market. david: true. >> he's right that the republicans now are determined

to pass tax reform. he's done a lot on the deregulatory front. he's right that he has accomplished a fair number of things. his approval rating should not be -- and i think it is almost entirely attributed to these tweet storm fights with people like senator corker. it is a complete distraction, david. david: bill, what will the republican party look like at the end of the trump administration or at least the first four years? will he succeed? because, clearly, he's trying to shake things up inside the beltway. >> right. david: will he succeed or will they succeed? >> well, i think the big question is on policy. i think dan's right. he has a lot of achievements. i supported donald trump over hillary clinton mostly because of just the supreme court pick. he's been pleasantly surprising in a lot of other ways. i think he has an excellent cabinet. i think the regulatory effort is very good. they missed the ball on obamacare, but if he gets tax reform through, i think he gets to a lot of place -- i think for a lot of people watching donald trump it's kind of like watching

a drunk staggering home, and he might fall in a swimming pool here or get hit by a car, but he's actually kind of getting where he wants -- david: oh, he sure is. >> and if he gets tax reform, i think the whole debate changes because it's not just the political achievement, it's a way to reverse the economic decline under obama. david: kim, quickly, let me just ask we talked about substance of issues will the republican party look different at the end of four years of a donald trump administration? >> well, how does it not? [laughter] but, i mean, look, i think one thing that's important here is that these tweet fests aside and the fights, for the most part most senators and most house members on the republican side now are, in fact, taking the thom tillis approach as, like, you can't stop him from doing it, we've tried. we're going to put our noses to the grindstone and instead try to get things done, watch the show. and that's, i think, the way they're going to have to approach this.

david: all right, gang, thank you very much. still ahead, president trump takes on the opioid crisis, but critics are saying it's not enough. enough. ou enough. ou retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered.

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what do you think? i think it's time to think about jardiance. ask your doctor about jardiance. and get to the heart of what matters. ♪ ♪ >> this epidemic is a national health emergency. as americans, we cannot allow this to continue. it is time to liberate our communities from this scourge of drug addiction. we can be the generation that ends the opioid epidemic. we can do it. [applause] david: president trump taking action on the opioid crisis this week, declaring a public health emergency, opening the spigot for more tax dollars to treat addiction and overdoses. but is this declaration enough to combat an end themmic that claims tens of -- epidemic that claims tens of thousands of lives each year?

so, kate, is president trump targeting the right causes of this crisis? >> well, let's start with what he did on thursday which is, basically, to declare it a public health emergency which is distinct from a national emergency which opens up fema -- david: and, by the way, democrats say it's not enough, what he did. >> right, exactly. this order is not accompanied by new funding, though congress could decide to appropriate it. i think we need to think seriously before throwing more money at this problem. basically, this is a multifacetedded social crisis that includes overprescribing. doctors need to get more educated on how to prescribe opioids for appropriate durations of time, but it's also moved on to heroin and fentanyl, and we don't have much information about what kind of treatment works best. there are a number of layers to this issue. david: dan, about 250 million prescriptions, opioid prescriptions, are made every year by doctors. i'm told by dr. see gal and other doctors who have looked into this that's way too much.

it's so easy for doctors just to write an opioid prescription very often for more pills needed for a particular injury or illness. is that a place to start? >> yeah. and president trump's directive is going to start with better education for prescribers instead of prescribing 30 days' worth of oxycontin if you have a dental, you might only need three or four pills, and that's one of the problems, for sure. people with intense or chronic pain do want relief. the problem with the opioids is that it also gives everybody a kind of a high, you know? that's the addiction. you get adirected. fdi -- addicted. fdi, the national institute of mental health are working hard to create significant pain redelivers that don't also give people this -- relievers that don't give people this high. that's the medical side. the social side is people who are just using this stuff like heroin and fentanyl for fun, and they don't want a lot of them to be helped. david: bill, there's another

side to all of this, and you look at a state like colorado which has an increase in opioid deaths of over 900%, a huge increase in deaths, and it's also a state that has done more than most states in liberalizing drug laws. is that a coincidence? >> i don't think it is. i think it points to two broader issues. donald trump gave a great speech on this. it was very humane and compassionate -- david: talked about his own brother's alcohol addiction. >> i think all of us know someone in our lives who has been lost to addiction or reclaimed his or her life from addiction. so there was a measure of hope in that. second, though, to kate's point i think, there's kind of a false, a false sense out there that the choices between cracking down in law and treatment, right? and that the answer is just to find the right treatment. but sally satel, one of our friends -- david: a psychiatrist -- >> psychiatrist from harvard,

she's pointed out the rubber really meets the road in treating people because some people reject treatment. a lot of addicts reject treatment, or they go in for a little period of time, and then they drop out. now, there's a way to do things. there's a way some of the drug courts, for example, will expunge your record if you complete rehabilitation and they have different steps, but as she points out, if this is going to be successful, we're going to have to address the issue of sort of benign paternalism and coercive treatment for people that refuse it. david: kate, everything gets embroiled in politics these days, and this issue's no different. the media spin is that the problem is really because of a conspiracy between politicians and drug companies, and there was an appointee who got embroiled in the middle of all of this, the man who was going to be trump's drug czar, damn marino, was accused by "60 minutes" and "the washington post" of being in collusion with drug companies. what did you think of all that?

>> right. this story was really long on innuendo and short on facts. what basically happened was that a bill that passed last year -- long after the opioid crisis started -- basically put some safeguards on drug enforcement processes that were basically cutting off all shipments. so, basically, if you were shipping to a pharmacy that was obviously involved in suspicious behavior, dea was also cutting off all of your shipments even if many of them were legitimate. so this was hitting wholesalers, and congress was trying to find a better balance. i would just note how disingenuous it is to suggest that republicans are conspiring to deepen this social problem. david: everything is political these days. thank you very much. when we come back, is xi jinping the new mao tse-tung? as president trump prepares for his first asia trip, a look at the chinese leader's latest power grab and what that

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♪ ♪ david: well, just as president trump gets set to kick off his first trip to asia, chinese communist party this week affirmed president xi jinping's status as the most powerful ruler since mao tse-tung, handing him even greater control over the world's second largest economy and setting the stage for him to dominate politics in that country for decades to come. in a tweet late wednesday, president trump said he called xi to congratulate him on his, quote, extraordinary elevation. the two men also discussing north korea and trade on that call. let's bring in author and asia analyst gordon chang. gordon, i'm old enough to remember mao tse-tung, but he was an absolute dictator. he killed millions of people. is that what's to come here?

>> well, in some ways, it is. xi jinping believes in a state-dominated economy. that's inconsistent with the notions of reform and opening up which was deng xiaoping's policy, mao's successor. xi jinping, obviously, believes in mao, he talks about him, he makes pilgrimages to mao places in china. this is not a good thing. and the important issue here is he's made himself powerful because there is no obvious successor that was chosen at the 19th communist party congress, and that means we could go back to the terrible in-fighting of the first years of the people's republic. david: a lot of people, including myself, by the way, gordon, thought if yo liberalized -- you liberalized the economy in china, that the political system would become liberalized as well, and this seems to contradict that. >> well, it certainly does. and what we have seen over the five years in xi jinping's first

term is you have state monopolies being created, recreated -- david r david so he is going back on the free market changes, he's renationalizing, getting the government back into things that it had gotten out of. >> yeah. there are fewer opportunities for foreign companies, they're trying to restrict that in china right now. and that really is a reversal of all the progress that we saw in those three decades. so for us, this is going to be a very interesting period. you have president trump going there, and i think that what he's doing is essentially going to say to shi gin ting now that you're in control, you have no excuse not to do certain things that we want -- david: what do you think about the president's sort of congratulatory note to president xi? >> i wouldn't do that. this was not a democratic selection of a leader. this really was a coronation on the part of a one-party, leninist state. i just would have stayed away

from that entirely. david: but at the same time, you know, he's always negotiating, president trump. and you remember that moment when -- right before he hit syria with the tomahawk missiles, he actually had the president of china with him at dinner, and he kind of told him over a chocolate cake what he was planning to do that night. i think he wants to get the message to the president of china you can't get away with everything. >> yeah. and that was a very effective display of american diplomacy, because you had trump saying to xi jinping, look, i just attacked your ally, and you can't do anything about it. and i think that unnerved not only xi jinping, but the chinese political establishment. and that was really a good thing because we saw china move in a better direction for a few months after that. i think they had thought they were able to corral trump, and after that demonstration of american power i think that they lost their confidence on. that. david: there's another demonstration of american power going on right now off the coast of korea. we have three carrier groups -- this is unprecedented. i was talking to a general about

this who said two is extraordinary, but when you have three there, it really shows you mean business. that's obviously focused on north korea, but there's also a message to china, isn't there? >> well, there certainly is because our diplomacy with regard to north korea has rightly been focused on china, because china has overwhelming leverage -- david: forgive me, but the message is also kind of, you know, we are the biggest presence in the pacific. you may be there, you may be right there, but they only have, i believe, two carriers themselves. >> they've got one which is really a training carrier. you know, three american carriers permits three, you know, 24/7 operations, 365 days a year. and that certainly is a message not only to the north koreans, but as you say, to the chinese that the united states is willing to use force to solve this. david: is their economy as a result of the government getting back involved in stuff that it probably shouldn't be, is their economy going to spiral down? >> eventually it will, and now you have a systemic debt crisis on the horizon, because in 2016

there was an unprecedented increase in debt and an unprecedented pace of increase. so, you know, this is something that everyone is starting to talk about. even the governor of the chinese central bank talked about a minsk moment, the moment when asset values collapse. we had one in, you know, just before the crisis, right before what we call the lehman moment. china is heading to the lehman moment when everything falls apart. david: gordon chang, thank you very much. we have to take one more break. when we come back, hits and misses of the week. muck i. ♪ it's easy to think that all money managers are pretty much the same. but while some push high commission investment products, fisher investments avoids them. some advisers have hidden and layered fees. fisher investments never does. and while some advisers are happy to earn commissions from you whether you do well or not, fisher investments fees are structured so we do better when you do better.

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singled out because of their views, silenced during election cycles, and yet the obama irs refused to take responsibility. the irs has now been made to settle in court and also to offer its sincere apology to those it abused. this is good news, exactly the kind of accountability and responsibility people expect out of washington. david: bill, what have you got? >> david, a hit to vice president pence who announced this week that the state department will stop funding humanitarian aid efforts for vulnerable religious minorities exclusively through the u.n. from this day forward, he said, the president and the white house are going to work with usaid and religious groups in the middle east in the places like that. these groups have been denied funding often from the u.n. and so forth. they're very effective. vice president says those days are over, so a big hit to the vice president for ending this and for america to deliver aid in a way that's going to matter to these communities. david: kate?

>> this is a hit for senate republican leadership which is picking up the pace on judicial confirmations. the democrats have done everything possible to obstruct these confirmations, and republicans are finally able to get moving. so i think we can expect several confirmations next week including my home state of michigan's joan larson who is slated to head to the sixth circuit. david: dan, it's time for a miss. have you got one for us? >> i've got one. [laughter] i'm giving a miss to michael moore who is, in fact, the loud-mouthed anti-conservative activist, did a documentary back in 2004 attacking george w. bush. well, he has created his own one-man show for broadway bashing donald trump and telling his own life story. it's what we call in the business a vanity project. well, it flopped. it just closed on broadway, bye-bye, michael. david: i heard he got no more than 50 percent of an audience -- >> box office. yeah, it was terrible. david: that's it for this week's show. thanks to all of you for

watching. i'm david asman, catch me weekdays at 4 p.m. on "after the bell" on the fox business network. paul is back next week. we hope to see you then. ♪ ♪ >> lou: good evening, everybody. we are coming to you from the swamp, washington d.c. and i can tell you we come here rarely and only for the most important of reasons and that is to speak today with president trump. president trump promised voters to drain the swamp, but he's finding the swamp fill would with creatures that are more cunning and elusive and more dangerous than he expected when he was campaigning for the job he how holes. washington d.c., corruption of all kinds is high onhe