A little bit volatile. Thats the word to use, right . Thats like down 500 at one point . Steep drop. I went out, i went and you know did my tilling in the garden. And i came back in, 15 minutes later and it was, it was you did exercise, that was historic event. Its tuesday, february 6th. With us we have former treasury official and morning joe economic analyst Steve Rattner to explain what happened yesterday. He knows everything about it. Im sure he is, what happened and whats going to happen. Hes going to tell us exactly what we should do. President of the counsel on forng relations and author of the book a world in disarray richard haas. A associate editor of commentary magazine, noah rothman and National Political reporter Heidi Przybilla is with us and Pulitzer Prizewinning historian john meechum. Could be another highly volatile day for the market. Stocks fell sharply. The numbers were stunning. The dow shed 1500 points. The index fell below the 25,000 mark. Erasing all of its gains for 2018. The s p 500 pulled back more than 4 . Its biggest oneday decline since august of 2011 and the nasdaq fell more than 3. 5 . So steve, heres, heres, things are so much different right now. Were investors sit waiting for the new day to start. At least in america. You saw what was coming. Understood, lehman was going down. You understood we had a bubble that was about to pop. Right now youre talking to the smartest minds in the world. Still cant tell you exactly why yesterday happened. Was it because of an overheating economy . We both were talking about, somebody talking about a possible 5 First Quarter gdp. Is it because of rising debt . Is it because the tax cuts . The fear that thats going to overheat the economy . Or is it just a natural pullback . Which dare i say, being in froth of stocks as much as i am, it seems to be time for a natural pullback. My, i go to three stock advisers, blood, sweat and tears, and they tell me what goes up must come down. And its time, it was time for this correction, wasnt it . Yes. Thats certainly one of the reasons. And in fact we have our chart thats going to illustrate that for you. Which is to basically show you that. We have had the 6 03 were in charts. Weve had a long bull market going back to march of 2009. Just over this fiveyear period, the market has basically doubled. So when you see this pullback up here, it doesnt really seem that unexpected, unusual, inappropriate. Given the breadth of the market rise over this long period of time. But the fact is, that the market of all the reasons you threw out, probably the one thats easiest to understand is that the market doesnt actually always love good news. Good news is sometimes bad news for the market. And whats bothering the market at the moment is signs that wages are starting to accelerate in fridays unemployment report, although theres a bit of volatility around this, you can see that wage growth has started to accelerate. Wages are now 2. 8 higher than they were a year ago and its good news for main street, we want wages to be higher. But what bothers the market is higher wages means a potentially overheated economy. And it can mean rising Interest Rates. And so if you look at whats been happening in the treasury market on my very last chart, youll see that longterm treasuries, tenyear treasuries, after having sat at around 2. 4 for a long time, have been speaking upward. Like that. And they got as high as about 2. 85 the day before yesterday. Higher Interest Rates are the enemy of the market. Because it gives people another place to put their money and earn a high return. And nobody likes, obviously likes higher Interest Rates. But again money has been basically free for the past 15, 16 years. Interest rates have been historically low. And so rising Interest Rates have to be coming at some point. The market will go down. But that actually gives the fed more option down the road, doesnt it . Well eventually if we have another crisis. In the short run what the markets is expect something that the fed will increase Interest Rates somewhat faster than they otherwise would have. Thats kind of the enemy of the stock market. Thats sort of the nub of it floating around all that you have program shrinking, you have all kinds of different Commodity Traders in the market and on a lot of uncertainty. Thats the main thing today. Is so weve had two really bad days. Going in to what happens today. When they ring the bell. I guess the uncertainty of, of traders not even knowing what happened and why it happened, and if its going to happen today, certainly puts a lot of people like you in uncomfortable position, whereas people like me will make their disposable income at the dog track, were a little more relaxed. Well but remember that, weve had a hell of a run, right. Even after the last two days, the market is basically back to where it was on january 1st. For people, im just talking about donald trump, for instance, donald trump saw what happened yesterday. It undercuts his one of his strongest arguments for why hes a great president. I, you know look at markets. Look at the markets, such great confidence. He doesnt know whats going to happen. It could go down another 1,000 points, it could go up. I think the one thing we can say with confidence is we will not be seeing tweets from donald trump about the stock market for a little while. Which is a good thing. But heres the serious point. If you believe whats driving the market the wrong way at the moment is a economy thats getting clo he is to overheating, in terms of wages growing, Interest Rates growing, the tax cuts that were just passed, fuelled the fire. The atlanta fed which tries to track this on a kind of realtime basis, they think First Quarter gdp could be over 5 . That sounds like good news, it is good news, except for the stock market. And except for the fact that i would be shocked if it was actually 5 . Richard, another thing is happening right now. We started to hear over the past couple of days, after the republicans passed tax cuts, when you already had an economy that was at full employment, after you had an economy that was already growing, that had wages going up, moderately, but rages going up, the republicans really passed a tax cut as a stimulus, at the worst possible time. Right. But add to that the added debt and the news that weve been hearing over the past several days that trump and the government was going to have to borrow more money, what 1 trillion more this year. Youve been talking about the danger of debt for some time. I have as well it seems that the markets may just be spooked by all the debt thats out there. Its one thing to stimulate the economy, cut taxes like we had to do a decade ago, coming out of a crisis. Something very different to do what we did when things are already going pretty well. Its taken the accelerator, which was already pressed, and putting it down to the floor. The shortrun thing, is what steve was talking about. The longerterm thing is well have to borrow a lot more money, its going to force us to raise rates, not to slow an economy, but simply to attract the chinese, the japanese, who are the two largest foreign holders of american debt to continue buying it at the rate when youre borrowing 20 trillion, the difference between historically low Interest Rates and 5 , 6 Interest Rates, is crushing for the country. It adds so much more to our deficit. Its a bad cycle. Because the debt, you have to buy more of it and it gets more expensive. So its a twofer, one that works against you. People begin to lose confidence in our ability to perform, to manage the dollar, thence thats again a really bad cycle. Its a bad cycle. Ed idea that a time of process parent, were going to have a 1 trillion budget deficit again this fall is something that we should all be really worried about. So President Trump did not publicly comment yesterday on the market drop. But the white house did release a statement. Saying the president s focus is on our longterm economic fundamentals, which remain exceptionally strong. With strengthening u. S. Economic growth. Historically low unemployment, and increasing wages for american workers. The president s tax cuts and regulatory reforms will further enhance the u. S. Economy, and continue to increase prosperity for the American People. Heidi, what are you hearing on capitol hill . And what do you make of the president s statement . Capitol hill, capitol hill republicans have long been uncomfortable with this president taking credit like he is for the stock market. This is not something weve seen previous president s do, exactly for the reason of what we saw yesterday. Now we dont know whether this is some kind of a shortterm adjustment or like joe says, whether well continue to see something akin to a bear market. And i think the question now, for republicans is,ed a a time when theyre really trying to hang their hat completely on this tax cut and the benefits of the tax cut going into 2018, to what extent will analysts now make a connection between that and to investor anxiety about the debt. Because if you remember, there was one group that was almost unified in being skeptical of this tax plan and that was economists. There were economists sending in letters saying look, at some point concern about the debt and the debt itself can become a drag on economic growth. Weve seen this before, in 2001, george w. Bush elected president. And you had republicans spending more money than ever before. Discretionary domestic spending exploding. Military spending exploding. Record tax cuts, you could go down the list. A 7 trillion Medicare Part d expansion for a program that they already knew was going to be going bankrupt in time. And now you have republicans back in after swearing they wouldnt do this and what are we doing . Record, record amounts of money spent on defense spending. Discretionary, domestic spending not really cut. Donald trump promising not to touch entitlements and a 1. 5 trillion tax cut. Its again, it looks like were in a situation where were going to overheat the economy and create a bubble and everybody is going to look back down the road and go, well, gee, we should have seen this coming. And particularly with debts and deficit. Im very frustrated that republicans pushed the dessert forward and put the peas to the end. The window for that sort of thing has closed, its an election year, were coming up on primaries, nobody likes to cut discretionary spending, thats pretty much done. What ive hearing from what youve said and what heidi said, theres an opportunity for donald trump if he wanted to play possible list, saying wages are up, investors are scared, the tax cuts are putting money in your pockets, the fat cats in washington hate this, but this is for you. Im not sure they can make that argument because theyve been leaning so heavily into the stock market rise. It sounds like theres an opportunity for somebody politically savvy and not afraid to buck norms in washington. Except for the fact youre right, hes gone all in with the monocle on monopoly. Thats his focus group. Hes taken credit for the stock market. So doesnt he take credit for bad news . But he also keeps, hes been going out saying look at your 401 k s, lieu how well theyre doing. I dont know if you want to look at them now. Were looking at the losses from yesterday and comparing it to all the years i forgot just how bad 1987 was. In terms of percentages. It was like 22 . Historically, though, this was far more mild. But once investors start to get spooked, sometimes that fear can feed on itself, cant it . Well yeah. Steve has forgotten more about this than i know. Its an irrational. Largely irrational market if you look at the genuine fate and course of the middle class in america, historically speaking, this is not a comfortable moment. Theres a, u. S. A. Today study from a couple of years ago that suggested that it takes 130,000 to live a classic post world war ii middle class life. And middle class definitions are like pornography, you know it when you see it. Its hard to define. But the way a lot of experts have looked at it is every grownup has a car. You save a little bit of money. And 130,000 is more than twice, well more than twice the annual Household Income for a family of four. Im convinced that that gap, that 70,000 gap or so, is one of the reasons trump is president. And so minute to minute, even season 0 to season news from the markets, is to me, politically and culturally less important than trying to figure out how do you get to a place where people feel confident that they wont be living hand to mouth. Let me ask you a couple of other, about a couple of other quick stories which were going to be talking about in blocks down the road. First of all, yesterday the president suggested the democrats were treasonous for not standing when he was at the state of the union. Of course there have democrats during the age of obama, several examples strutted out yesterday of democrats calling republicans treasonous or traitors or hostagetakers and of course we republicans in the past accused during the clinton age of people being treasonous for not renaming post offices. I guess what im saying is, congressmen sometimes take the insults to a pretty low level. We are the ones that cane each other on the house floor after all. But it is highly unusual for the president of the United States in his office, to suggest that, that the opposing party is treasonous because they do whatever the opposing party has done at state of the unions for as long as there have been state of the unions. The way you set it up is perfect. Because basically,ing early 1960s, you had in dallas, john birchers, oneworld antiu. N. Conspirators. Attacking adlaai stevenson. You had them spitting on lady bird johnson. That was the rabble, even then the extreme and outside the mainstream. Heres the president of the United States practicing, speaking in the language of what richard who have sthofstetter c paranoid style. Maybe we should get 1 every time we had to say this is unprecedented. 1963, i think thats a good time to go back to when talking about the fears. Of you have a president of the United States that is using the word treason which is punishable by death under the u. S. Code. And obviously there are fears of what that may lead some of his more unhinged followers to do. Unhinged followers on both sides of the political aisle. This is not just about people who support donald trump. But there are people that have no guardrails and they hear this from a leader and violence can happen. Just like when he calls the media enemies of the people. Or when he suggests that congressmen must be stopped. Must be stopped. I think that was in a tweet yesterday. Only a couple of months. After an unhinged liberal shot the republican majority whip. Its, i do think the cold war is a place to look at this. There was obviously oklahoma city. There was obviously a lot of violent language around directed against president obama. I think the last time you had this level of rhetoric. Really is the birch, the john birch world reacting against what was the american consensus at that time. Even then, to be clear, you didnt have the president of the United States doing it. And so, he was the target, john kennedy was the target. Lyndon johnson was the target. So here we are again. And they didnt have his party in power protecting him. Thats a key point. John, you raised hofstetter the paranoid style of american politics in 1964. The origins of this is cultural dispossession, political powerlessness. The sense that everything is running away from you and that american virt yues have ceased exist and therefore you are at liberty to do a lot things that would otherwise be proscribed. Were seeing it with the republican style. We use the term unprecedented in a lot of ways in this moment that are probably inappropriate. But this feels really unprecedented, no . It is. And mika, i want to you get out your pen, it will be fun. Are you going to bore me . Chester arthur once said oh lord. Theres an even more relevant, i think hofstetter essay, he used a phrase called psuedo conservative. Beginning in the early 50s, beginning with mccarthy. He argued that what was happening with the right in america was not classic conservatism, which is understanding of the world that you manage change as best you can. Russell kirk wrote about that in the 50s. Yeah. So basically his argument was that the conservative tradition had been hijacked by a different kind of radical. People who were on the radical, people on the right who were as radical in their way as people on the far left. And i think that thats where, thats where we are. Harry truman once said. Ill leave you with harry truman that he always hoped that the Political Parties would each have liberals and conservatives in them. That not all the liberals would be in one party and not all the conservatives in another, then you would just have as he put it, two armed opposing camps. And thats exactly what we have right now. And we could go through whether we wanted to start at watergate or whether we wanted to start it during well our vietnam or watergate or what happened with robert bork, you could go back a long way and find extreme statements on both sides. I remember on this show, calling out glenn beck and calling out mitt romney for remaining silent when glenn beck was calling the United States, barack obama, a racist and becoming incensed by it but what is so unique now, is exactly what noah said. The republicans have gotten to power, talking about this conspiracy. That, that is leveled against them culturally, academically, politically, legally, you name it right . And so now at the tip of that, john, at the top of the piyramid of that conspiracy, is one Robert Mueller. You step back to look at that pyramid. That, that pyramid of stacked conspiracy, you find Robert Mueller, republican, rod rosen stein, republican. The attorney general, republican. The supreme court, republican. 54, they wouldnt like to be called that but thats exactly what they are the house of representatives, republican. Congress, republican. And the administration, republican. To know his point. You would have to go back, god, probably to 1932, before fdr was elected to find a time when