What China wants from Trump - Axios
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What China wants from Trump

Greg Ruben / Axios

Axios' Mike Allen broke the news last week that President Trump plans to host Chinese President Xi Jinping at Mar-a-Lago next month "for a lowering-the-temperature summit with vast economic and security implications."

Xi is entering the most sensitive period of his time in office, the year in which he's poised to secure a second five year term as head of the Communist Party. The transition is a volatile and tense period, and he does not want all of the complications that would come with an unstable relationship with the U.S. To get a preview of the talks I spoke with Richard McGregor, who wrote "The Party," a seminal book on China's Communist Party. The takeaway: China does not want (for the moment) to upend the status quo.

McGregor says the Chinese leaders were initially quietly delighted that Americans had chosen as president a man easily portrayed as the ignorant product of a fatally flawed democracy. But they soon seemed unsettled, in large part due to Trump's unpredictability, hostility to China, embrace of nationalists like Steve Bannon on his senior staff, and his protocol-breaking phone call with Taiwan's president.

Here's what Xi wants from Trump, according to McGregor:

  1. Don't upend the status quo with North Korea: China's worst nightmare is that the regime would collapse and be subsumed by South Korea, which would make for a U.S.-ally on their border. It needs North Korea as a buffer state. Contra Washington conventional wisdom, the Chinese can't just snap their fingers and tell the North Koreans what to do. China and North Korea deeply distrust each other. So the Chinese hope Trump's tough talk is just bluster.
  2. Avoid a confrontation in the South China Sea: Xi will likely deliver to Trump a quiet warning on the South China Sea. During his confirmation hearing, Rex Tillerson told Senators China needed to stop its island building there. The Chinese want Trump to understand they will defend their interests if the U.S. pushes back. (See our Facts Matter on the South China Sea.)
  3. Stick to "One China": Regarding Taiwan, they want Trump to stick with the "One China" policy. Xi was furious when Trump took a call from Taiwan's president, and wouldn't speak with him over the phone until Trump agreed to support the status quo. (See our Facts Matter on the One China policy.)
  4. No trade war: The Chinese, like everyone else, don't know what Trump might do on trade. They are closely following the reports about the tussle within the White House between nationalists (especially Bannon and Wilbur Ross) and the Goldman Sachs wing, led by Trump's chief economic advisor, Gary Cohn. As Axios revealed: trade in automobiles is the big sleeper issue.
  5. The big picture: Xi wants a stable international environment that allows China to continue to develop and accumulate wealth and power. They abhor the prospect of military disruptions and interruptions to trade, with Xi going to Davos this year to sell China as an apostle of the open international order to all the folks Bannon would call "globalists." McGregor says China's ideal state for America is "slow and steady bourgeois decline." Anything too chaotic — Trump's MO, basically — hurts China.

Behind the scenes: The Chinese ambassador in Washington — Cui Tiankai, a silky operator — has been focusing intensely on the White House rather than the State Department, particularly cozying up to Jared Kushner and Ivanka Trump. One source says Cui has been dealing mostly with Kushner, and has been AWOL at State. Tillerson — who travelled last week to South Korea, Japan, and China, with mixed results — should be responsible for that relationship. But he's still got no Asia lead installed at State (and, in fact, doesn't even have a Number Two there).

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The Senate health bill is out. Here's your speed read

J. Scott Applewhite / AP

You can read it here, and a summary here. The highlights:

  • Ends the Affordable Care Act's mandates and most of its taxes.
  • Phases out its Medicaid expansion over three years, ending in 2024.
  • Limits Medicaid spending with per capita caps, or block grants for states that choose them. The spending growth rate would become stricter in 2025.
  • States could apply for waivers from many of the insurance regulations — though not protections for people with pre-existing conditions and coverage for young adults.
  • The ACA's tax credits would be kept in place, unlike the House bill — but their value would be reduced.
  • Funds the ACA's cost-sharing subsidies through 2019, but then repeals them.

Want more? Keep reading.

  • There's a stabilization fund to help states strengthen their individual health insurance markets.
    • $15 billion a year in 2018 and 2019, $10 billion a year in 2020 and 2021.
    • There's also a long-term state innovation fund, $62 billion over eight years, to help high-cost and low-income people buy health insurance.
  • The ACA tax credits continue in 2018 and 2019.
  • After that, they'd only be available for people with incomes up to 350 percent of the poverty line.
  • The "actuarial value" — the amount of the medical costs that insurance would have to cover — would be lowered to 58 percent, down from 70 percent for the ACA's benchmark plans. That's likely to reduce the value of the tax credits.
  • All ACA taxes would be repealed except for the "Cadillac tax" for generous plans, which would be delayed.
  • Medicaid spending growth rate under per capita caps would be same as House bill until 2025. Then it switches to the general inflation rate, which is lower than House bill.
  • States would be able to impose work requirements for people on Medicaid, except for the elderly, pregnant women and people with disabilities.
  • Children with complex medical needs would be exempt from the per capita caps.
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Don't expect House to water down Russia sanctions

Pablo Martinez Monsivais / AP

The New York Times reported Wednesday that the White House has been "quietly lobbying House Republicans to weaken a bill overwhelmingly passed by the Senate last week that would slap tough new sanctions on Russia for its meddling in the 2016 election and allow Congress to block any future move by President Trump to lift any penalties against Moscow."

Meanwhile, Democrats and some sources in the corporate sector are speculating that a procedural delay is merely cover by House leaders to slow-walk and ultimately water down the bill.

Not so fast: three House Republican sources involved in the process tell me the House bill is shaping up to look very similar to the Iran-Russia sanctions bill that passed the Senate. And it's likely to move pretty fast. House Speaker Paul Ryan wants tough sanctions on Russia, as does Foreign Affairs Committee chairman Ed Royce, who is driving the process.

  • A GOP aide close to issue told me there could be minor technical fixes to the bill that even some Senate staffers who worked on the original privately acknowledge need to be made. The bill would then be sent back to the House and if Chairman Royce gets his way it will proceed quickly to the floor and to the President's desk.
The big question: will President Trump risk using his veto pen on this legislation if it passes as originally written? Most GOP sources I've spoken to doubt it. While Secretary of State Rex Tillerson has said the administration needs more flexibility to over the Russia-Ukraine conflict — and believes the new sanctions package is unhelpful to that end — Trump can't risk getting his veto overridden by Congress. It looks like there'd be more than enough votes to do so, given the Senate voted 98-2 in favor of the original sanctions package.
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Ex-CIA officer charged with selling top secret docs to China

Vincent Yu / AP

Thomas Mallory, a former CIA officer, has been arrested and charged in federal court with selling top secret documents to Chinese intelligence officials, per The Washington Post.

What allegedly went down: Originally contacted by a supposed recruiter for a Chinese think tank, Mallory realized he was in contact with Chinese intelligence officials before traveling to Shanghai in March and April. He then provided a Chinese intelligence operative with three documents — one labeled top secret — in May. Around the same time, he wrote his Chinese contact: "Your object is to gain information, and my object is to be paid for it."

The potential consequences: Mallory will have a preliminary hearing this week, but he faces up to life in prison.

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Fed: U.S. banks could withstand global recession

Matt Rourke / AP

The Federal Reserve's stress test results are in and, according to their calculations, the 34 largest U.S. banks would be strong enough to withstand a global or U.S. recession if one were to hit right now.

Why we care: The banks weren't prepared for the 2008 financial crisis. Right now they are, according to the Fed. Plus, the stress test will reassure investors.

The test: To see if banks with more than $50 billion in assets have a large enough capital buffer to keep lending in the case of "severely adverse" scenarios resulting in billions of dollars in losses. The next part of the stress testing will be out June 28, and will reveal which banks have "passed" and "failed" their tests.

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Destroying Jon Ossoff: the adman's view

I've been speaking with Bob Honold, a Republican strategist hired by the NRCC to craft TV and digital ads for the Georgia House special election, in which the GOP's Karen Handel beat Democrat Jon Ossoff.

His key takeaways from the most expensive House race in American history:

  • "The energy on the left was considerable — and the $25 million sent to Ossoff was a product of that energy that posed a huge problem," he says. "That unprecedented amount of money put the race squarely in jeopardy."
  • "Many factors were necessary to win — including a great campaign by Karen Handel and her team...[but] without the enormous amount allotted by the NRCC [more than $7 million], and without the specific and methodical ways we spent it on TV and digital – we would not have won. The same can be said for the incredible work done by CLF (Congressional Leadership Fund)."

The ad-by-ad path to defeating Ossoff:

  1. During the jungle primary they identified him with unpopular party leader Nancy Pelosi, and portrayed him as just another liberal. (The Pelosi branding became a centerpiece of the GOP strategy throughout the race, and is part of the reason her leadership is under new jeopardy.) The Republicans also used Ossoff's own TV ad against him to highlight the fact that he did not support repealing Obamacare, and remind voters that Ossoff does not live in the district.
  2. Also during the jungle primary – Republicans used residents of the district to accuse Ossoff of lying about his credentials, and they again reinforced the branding of him as a Pelosi liberal who'd raise taxes and weaken the military.
  3. Straight after the primary, they ran a contrast ad — framing Ossoff as a carpetbagging Hollywood/Pelosi liberal and Handel as a "proven fighter for Georgia."
  4. National security played a surprisingly heavy role in the messaging given Ossoff had never taken a vote that could be used against him. Republicans used the fact that he'd supported Obama's Iran deal to brand him as "naive" and soft on terrorism.
  5. Doubling down on the "Ossoff is too risky" national security messaging because Republican internal polling showed it was damaging him. Honold believes the issue helped to disqualify Ossoff to many independents and motivated Republicans who were previously considering staying home.
  6. When early voting began, Republicans aired a get-out-the-vote ad on Fox News and History Channel and on targeted digital/mobile destinations. Republican internal polls showed some of the voters who didn't like Trump — and were considering either staying home or voting for Ossoff as a protest vote — also happened to be motivated by a disgust for what they viewed as extreme behavior by liberal protesters. Republicans ran an ad titled "Childish Radicals" that played to that disgust — and used the controversial image of Kathy Griffin holding up Trump's severed head.
  7. The closing argument: Republicans used a formula that had worked earlier in the campaign, filming voters from the district and repeating the key branding words for Ossoff — "childish," "naïve" and "inexperienced." And — of course — there was Nancy Pelosi.

Last word: "The massive investment made by the NRCC and the strategic message progression executed by Honold destroyed Ossoff," says Guy Harrison, another top Republican strategist and former NRCC executive director.

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Majority of new HIV cases are in southern states

Overall transmission of HIV continues to decline in the U.S., but new interactive maps and data released Wednesday reveal disparities in infection rates in the country.

"Where you live really matters when it comes to how heavily your community is impacted and your risk for infection," lead researcher Patrick Sullivan from Emory University told Axios. Sullivan and his team created the maps using federal, state and local data that show patterns of HIV transmission pinpointed to a specific area.


Note: Values for many counties are omitted from the data to protect privacy in places with small populations.
Data: AIDSVu; Chart: Chris Canipe / Axios

Key findings:

  • While the southern U.S. only hosts 37% of the population, in 2015 these states accounted for 52% of all new HIV diagnoses and for 49% of all deaths among people with HIV.
  • The 5 cities with the highest rates of new diagnoses are all in the South: Miami, Jackson, New Orleans, Atlanta and Baton Rouge.
  • African Americans account for 45% of all new transmissions of HIV despite making up 12% of the population.
  • New diagnoses among youth aged 13 to 24 rose by 2% between 2014 and 2015.
  • Opioid abuse and intravenous drug use are expected to boost the rate of HIV infection unless preventative steps are taken.

CDC statistics: In 2015, 39,513 people were diagnosed with HIV infection in the U.S. Because HIV testing has remained stable or increased in recent years, the 18% overall decrease in diagnoses from 2008 and 2015 "suggests a true decline in new infections." However, the CDC said progress has been uneven and Sullivan said he agreed that there are disparities in the infection rates.

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Trump's tape saga ends

Evan Vucci / AP

Never mind.

Forty-one days after teasing the possibility of tapes of conversations with his former FBI director, Trump today admitted it was all a bluff.

  • Trump undid his tweet with a pair of tweets: "With all of the recently reported electronic surveillance, intercepts, unmasking and illegal leaking of information, I have no idea ... whether there are 'tapes' or recordings of my conversations with James Comey, but I did not make, and do not have, any such recordings."
  • Even his friends can't understand why Trump would antagonize Comey, or add Nixonian atmospherics to an already problematic situation.
  • The month of mystery was classic Trump, who relishes the theatrics of a big reveal, at least as much as he did during his reality-show days. It was also a classic Trump mistake: an unforced error that set in motion a new, more dangerous phase of the investigation.

So today's pièce de résistance was injecting the idea today that perhaps someone else had made tapes.

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Report: Uber commissions probe into handling of India rape

Jeff Chiu / AP

Uber has reportedly tasked law firm O'Melveny & Myers with investigating how a former executive obtained the medical records of a woman who was raped by a driver in India in 2014, Reuters reports, citing anonymous sources. O'Melveny & Myers is also representing Uber in a lawsuit filed last week by the victim for invasion of privacy, Axios has learned, so it's no surprise it's looking into the allegations.

A spokesperson for Eric Alexander, the executive in question who was fired last week after reporters inquired with Uber about the allegations, told Reuters that he got the documents through legal means and denied ever questioning whether the rape was a ploy by a competitor.

The details: The investigation will cover allegations that the records were obtained through bribes, and examine what then-CEO Travis Kalanick knew about how the records were obtained. Accounts of the situation from current and past employees vary greatly. Uber declined to comment.

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On health care, moderates quiet while conservatives yell

J. Scott Applewhite / AP

Only hours after the release of the Senate health care bill, four conservative senators put out a statement saying they can't support the bill in its current form. As of now, moderates have held their fire, saying they need to finish reading and analyzing the bill.

Why this matters: The best way for a member to ensure they get the changes they want is to threaten to withhold their support. Moderates haven't done that yet; conservatives have. That means the bill could very well move to the right over the next few days.

The assumption: "Moderates always cave," one senior GOP aide told me. "I don't know if conservatives will cave. That's the pickle."

Yes, but: Moderates could get more wins after the Congressional Budget Office releases its analysis of the bill next week, and the leadership sees how much extra money it has to put into things like the opioid crisis and market stabilization.

What conservatives are saying:

  • From the joint statement by Sens. Ted Cruz, Mike Lee, Rand Paul and Ron Johnson: "It does not appear this draft as written will accomplish the most important promise that we made to Americans: to repeal Obamacare and lower their healthcare costs."
What moderates are saying:
  • Sen. Susan Collins: "I very much want to see the CBO assessment of the impact on coverage, the impact on insurance premiums and the impact of the changes in Medicaid."
  • Sen. Cory Gardner: "Gotta get through [the bill] and digest it."
  • Sen. Shelley Moore Capito: "When I get a chance to sit down and look at it, hopefully later this afternoon," she'll be looking at the Medicaid provisions and opioid funding in particular.
  • Sen. Rob Portman: "I look forward to examining this new proposal carefully and reviewing the analysis by the Congressional Budget Office when it is available. If the final legislation is good for Ohio, I will support it. If not, I will oppose it."
  • Sen. Dean Heller: "As I have consistently stated, if the bill is good for Nevada, I'll vote for it and if it's not – I won't."
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Obama to Trump: your health care plan IS mean

AP

Barack Obama wrote an emotional Facebook post Thursday outlining the consequences that would occur if the Senate's health bill was passed, and took a jab at President Trump, who called the bill "mean" in a meeting with GOP senators last week:

Obama's bottom line: "Simply put, if there's a chance you might get sick, get old, or start a family – this bill will do you harm. And small tweaks over the course of the next couple weeks, under the guise of making these bills easier to stomach, cannot change the fundamental meanness at the core of this legislation."

Key excerpts:

  • "I hope that our Senators, many of whom I know well, step back and measure what's really at stake, and consider that the rationale for action, on health care or any other issue, must be something more than simply undoing something that Democrats did."
  • "We didn't fight for the Affordable Care Act for more than a year in the public square for any personal or political gain – we fought for it because we knew it would save lives, prevent financial misery, and ultimately set this country we love on a better, healthier course."
  • "I still hope that there are enough Republicans in Congress who remember that public service is not about sport or notching a political win, that there's a reason we all chose to serve in the first place, and that hopefully, it's to make people's lives better, not worse."
  • "The Senate bill, unveiled today, is not a health care bill. It's a massive transfer of wealth from middle-class and poor families to the richest people in America."
  • "This debate has always been about something bigger than politics. It's about the character of our country – who we are, and who we aspire to be. And that's always worth fighting for."