WEBVTT - P&L: Trump Faces Difficulty in Forming Russia Strategy 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.280 for you and your money, whether you're at the grocery 0:00:16.320 --> 0:00:19.360 store or the trading floor. Find the Bloomberg P L 0:00:19.480 --> 0:00:28.200 Podcast on iTunes, SoundCloud and at Bloomberg dot com. I 0:00:28.240 --> 0:00:31.040 am so glad that we are able to talk a 0:00:31.120 --> 0:00:34.760 little bit about what's going on between Russia and Turkey 0:00:34.760 --> 0:00:36.879 and what the potential implications are. This is something that's 0:00:36.880 --> 0:00:38.760 been very much on my mind, as well as a 0:00:38.760 --> 0:00:41.120 lot of people's minds. I'm pleased to bring in Richard Kahn, 0:00:41.200 --> 0:00:44.519 managing partner at your Asia Advisors, who is an expert 0:00:44.600 --> 0:00:47.960 on Russian relations and has extensive experience kind of deciphering 0:00:48.040 --> 0:00:50.320 some of the tea leaves. So, Richard, you know, what's 0:00:50.320 --> 0:00:53.760 your take on the sort of steps that have been 0:00:53.760 --> 0:01:00.240 taken since the assassination of the Russian ambassador to Turkey. Well, 0:01:00.440 --> 0:01:05.840 I think the reactions have to date been quite predictable. 0:01:06.280 --> 0:01:12.240 Russia and Turkey have some time ago sort of moved 0:01:12.280 --> 0:01:16.240 beyond the official position that there and uh, you know, 0:01:16.319 --> 0:01:19.880 basically in a state of proxy war, uh, neither the 0:01:20.000 --> 0:01:24.200 Syria being on opposite side. That had really changed, And 0:01:25.120 --> 0:01:30.720 this recent terrorist incident underscores the alliance that they have 0:01:31.560 --> 0:01:37.320 and which Russia basically is allowing and supporting the efforts 0:01:37.120 --> 0:01:42.200 of Syria to deal with sing of Turkey to deal 0:01:42.280 --> 0:01:46.600 with their problems on the Syrian border with Kurdish groups 0:01:46.640 --> 0:01:52.960 that are within Syria and which are supporting Kurdish terrorist 0:01:53.000 --> 0:01:59.560 activities within Turkey. And for the perspective of Russia, Russia 0:01:59.640 --> 0:02:03.880 received from this deal the support, if you will, don't 0:02:03.880 --> 0:02:08.360 know Turkey in um um basically the agenda that Russia 0:02:08.400 --> 0:02:13.880 has in supporting assad in Syria. So it's uh. It 0:02:13.919 --> 0:02:21.480 makes um sort of uh. Scenarios that or will envisioned 0:02:21.840 --> 0:02:25.600 look quite simplistic when you when you consider how the 0:02:25.600 --> 0:02:28.520 official positions really do not match with what is taking 0:02:28.520 --> 0:02:32.040 place on the ground, and this the terrorist activity really 0:02:32.120 --> 0:02:35.680 underscores those themes. Well, Richard. One thing that's taking place 0:02:36.160 --> 0:02:39.040 on the ground and indeed under the sea is energy. Right. 0:02:39.080 --> 0:02:43.200 The Russian government putting together a proposal and it has 0:02:43.320 --> 0:02:47.640 passed to carry Russian natural gas under the Black Sea 0:02:47.840 --> 0:02:51.240 to Turkey. Can you explain a little bit about the 0:02:51.240 --> 0:02:55.440 the sort of strategy, energy strategy and the energy relationship 0:02:55.480 --> 0:03:00.960 between Turkey and Russia. Well, this is in one of 0:03:00.960 --> 0:03:05.320 the foundations for their relationship and the reason why even 0:03:05.360 --> 0:03:09.000 after they're shooting down by you know, by the urgon 0:03:09.080 --> 0:03:14.119 regime of Russian planes a year or ago, aggression plane 0:03:14.160 --> 0:03:17.240 a year or so ago, that Putin nonetheless wanted to 0:03:17.240 --> 0:03:21.600 find a way to move forward. There's been tremendous competition 0:03:21.760 --> 0:03:27.239 in terms of how Russian oil would head towards Europe, 0:03:27.440 --> 0:03:31.400 and certainly Turkey has you know, wanted it to pass 0:03:31.440 --> 0:03:37.000 through uh their borders and and receive some compensation for that. 0:03:37.960 --> 0:03:42.840 So it's been, um, it's been a relationship of practicality 0:03:42.960 --> 0:03:46.080 between Putin and Urtagon, and I would expect at the 0:03:46.160 --> 0:03:48.680 stage that the you know, they're going to continue to 0:03:48.680 --> 0:03:51.640 signal that nothing is going to come between them. How 0:03:51.680 --> 0:03:54.320 does the US factor into this? You know that President 0:03:54.320 --> 0:03:56.840 elect Donald Trump is expected to have a closer relationship 0:03:57.240 --> 0:04:00.400 or at least a better relationship with Vladimir put the 0:04:00.440 --> 0:04:05.040 Russian head of Russia than previous administrations. Um, what will 0:04:05.040 --> 0:04:08.360 that look like and what would be gained potentially from 0:04:08.360 --> 0:04:12.480 a close relationship between the nations for these of the 0:04:13.000 --> 0:04:16.120 situations we're describing right now in Turkey and Syrious. I 0:04:16.160 --> 0:04:18.680 think part of the challenge that the Trump team are 0:04:18.720 --> 0:04:20.920 going to have is figuring out what they really want 0:04:21.000 --> 0:04:27.160 to do um and how to become more relevant to 0:04:27.160 --> 0:04:31.599 to the resolution of these situations. Of Trump has historically been, 0:04:31.720 --> 0:04:36.839 you know, quite critical of the Obama administration for their handling, 0:04:36.839 --> 0:04:38.440 and so that they'll get a chance now to come 0:04:38.480 --> 0:04:40.799 up with a game plan. By the way, I should 0:04:40.800 --> 0:04:42.480 just say perhaps part of the game plan it has 0:04:42.480 --> 0:04:45.080 to do with Twitter, because President elect Trump did say 0:04:45.120 --> 0:04:48.120 today there were terror attacks in Turkey, Switzerland, and Germany 0:04:48.120 --> 0:04:50.360 and it is only getting worse. The civilized world must 0:04:50.440 --> 0:04:54.839 change thinking. So that was his contribution. Yes, that has 0:04:54.880 --> 0:04:58.159 been his contribution. And obviously it's it's the old story. 0:04:58.200 --> 0:05:03.320 It's one thing to be an outsider criticizing. What's always 0:05:03.360 --> 0:05:08.920 challenging when you have someone actually succeed in gaining power. 0:05:09.240 --> 0:05:12.240 At that point they need to govern and he's going 0:05:12.279 --> 0:05:15.680 to have to come up with solutions, then go further 0:05:15.760 --> 0:05:19.560 than just identify problems as being terrorists related, which this 0:05:19.680 --> 0:05:23.000 instant it certainly seems they are, and but to then 0:05:23.080 --> 0:05:27.239 move from there to a relationship, so particularly with Russia, 0:05:27.680 --> 0:05:32.200 that reflects his instincts to men's senses, and try to 0:05:32.240 --> 0:05:34.760 come up come up with solutions that's going to be 0:05:34.839 --> 0:05:38.320 I think far more complex than he you may may 0:05:38.360 --> 0:05:42.240 recognize at this stage. Russia, while perhaps being willing to 0:05:42.279 --> 0:05:44.960 show a little bit of leg uh you know, it 0:05:45.320 --> 0:05:49.560 is not is not instantly going to aband and they're 0:05:49.560 --> 0:05:54.000 not going to instantly decide, you know, to abandon all 0:05:54.040 --> 0:05:57.880 long health positions. And because those positions just is hours 0:05:58.120 --> 0:06:02.960 are have been based on on real concerns and on 0:06:03.080 --> 0:06:06.400 the strategic interests and so but that doesn't mean that 0:06:06.440 --> 0:06:09.400 he should not try. I certainly look forward to seeing 0:06:10.440 --> 0:06:17.240 his efforts to UM utilize the prospect of lifting sanctions 0:06:17.320 --> 0:06:21.039 to tackle UM in a fresh way. The problems that 0:06:21.080 --> 0:06:24.440 we faced was Russia and Ukraine, and obviously to see 0:06:24.480 --> 0:06:26.560 if we can do some things to benefit the region 0:06:26.720 --> 0:06:30.640 in Syria and and you know all the refugees there, 0:06:30.680 --> 0:06:33.600 so you know, these are these would be noble things 0:06:33.640 --> 0:06:36.719 to accomplish, and I suspect that that somewhere in his mind, 0:06:36.800 --> 0:06:40.080 but uh, tactically to do that is going to be 0:06:40.120 --> 0:06:44.320 extremely difficult. And then coming up with an overarching strategy 0:06:45.120 --> 0:06:48.400 will be even more complex, I think for for Trump 0:06:48.440 --> 0:06:53.440 and his advisors. Richard, the Turkish economy contracted for the 0:06:53.480 --> 0:06:57.279 first time in seven years during the third quarter that 0:06:57.400 --> 0:07:03.039 was revealed last week. This sputtering economy also includes a 0:07:03.200 --> 0:07:08.159 collapse in private domestic consumption, dropping more than three percent 0:07:08.839 --> 0:07:11.880 year over a year. What's the future of the Turkish economy, 0:07:11.920 --> 0:07:16.320 Let's say the next six months, give me about thirty seconds. Well, 0:07:16.360 --> 0:07:19.840 it looks it looks awfully gloomy, doesn't it. You know, 0:07:19.920 --> 0:07:24.600 it's as we spoke of on previous occasions. You know, 0:07:24.680 --> 0:07:29.960 these these terroristic activities obviously have a dramatic impact on tourism. 0:07:30.240 --> 0:07:32.520 I can tell you we were planning to fly through 0:07:32.760 --> 0:07:37.680 istanbul Uh within the last half year, and my wife 0:07:37.800 --> 0:07:40.600 certainly commented to me that even a connection, there was 0:07:40.640 --> 0:07:44.400 something that caused her, you know, some concern, and I 0:07:44.440 --> 0:07:48.560 don't blame her. Ultimately, the tourism industry drives many nations, 0:07:48.600 --> 0:07:52.080 in Turkey is certainly among those, so I would expect 0:07:52.160 --> 0:07:56.320 to see an ongoing decline in tourism just because of 0:07:56.360 --> 0:07:59.920 these terrorist incidents. Thanks very much. Richard Kahan is managing 0:08:00.040 --> 0:08:03.840 partner at Eurasia Advisors, telling us about the relationship between 0:08:03.840 --> 0:08:18.800 Turkey and Russia. One of the latest nominees of President 0:08:18.800 --> 0:08:22.160 elect Donald Trump to his cabinet is Representative Mick Mulvaney 0:08:22.480 --> 0:08:27.280 to oversee the office and charged of the US budget. 0:08:27.320 --> 0:08:29.720 This is going to be a hot spot for debate 0:08:29.800 --> 0:08:32.840 and frankly for policy. I want to bring in Billy House, 0:08:32.880 --> 0:08:35.679 who covers the White House, for Bloomberg, to talk a 0:08:35.679 --> 0:08:40.440 little bit about what this pick means for the budget 0:08:40.480 --> 0:08:44.760 of the United States going forward. Billy Uh. Representative Mick 0:08:44.840 --> 0:08:48.200 mulvaney is not known for being a fiscally liberal on 0:08:48.280 --> 0:08:52.160 any level, and yet a lot of President Elect Trump's 0:08:52.200 --> 0:08:55.760 policies would really require a certain expansion of the budget. 0:08:55.920 --> 0:08:58.360 Do you expect there to be some kind of fight 0:08:58.640 --> 0:09:03.120 that's being set up ahead, Well, that's absolutely a possibility. 0:09:03.360 --> 0:09:07.520 Mc mulvany, a South Carolina congressman, has been one of 0:09:07.559 --> 0:09:12.640 the most aggressive, pugilistic advocate advocates for cutting government spending, 0:09:12.679 --> 0:09:16.360 particularly military spending. And as we know, the President elect 0:09:16.400 --> 0:09:18.520 has said he's going to bolster the military. So there's 0:09:18.559 --> 0:09:20.920 one key area right off the back that you gotta wonder, 0:09:21.480 --> 0:09:24.240 how did these two guys. Mesh mulvaney has made a 0:09:24.240 --> 0:09:28.680 career out of going after military spending and uh. Uh 0:09:28.920 --> 0:09:30.920 so it remains to be seen how they're going to 0:09:31.000 --> 0:09:34.439 get together on that. Billy. What's his relationship with the 0:09:34.480 --> 0:09:40.880 Speaker of the House of Paul Ryan. Uh, it's strained. Uh. 0:09:40.960 --> 0:09:43.880 Mulvaney was part of the group of outspoken fiscal conservatives 0:09:43.880 --> 0:09:46.840 known as the House freedm Coccus, who basically forced the 0:09:46.840 --> 0:09:52.079 previous speaker out of office, John Bayner. Um. The relationship 0:09:52.120 --> 0:09:54.640 has been a little better with Paul Ryan. Paul Ryan 0:09:54.640 --> 0:09:56.520 has only been Speaker for a little more than a year, 0:09:56.559 --> 0:09:59.600 but already there had been growing streams on on some 0:09:59.760 --> 0:10:03.959 of the promises that this group thought Ryan had made 0:10:04.120 --> 0:10:06.760 and did not see through in this early part of 0:10:06.760 --> 0:10:09.600 his tenure. Uh. There's some tension there, and there'll be 0:10:09.640 --> 0:10:14.080 some tension as they discussed uh financial things together as 0:10:14.440 --> 0:10:17.680 now as a member of the administration and the Speaker. So, Billy, 0:10:17.800 --> 0:10:19.920 one thing that I'm looking at is if you have 0:10:20.120 --> 0:10:24.160 this fiscal conservative who has come out aggressively in favor 0:10:24.200 --> 0:10:27.440 of cutting the budget um, and then you have President 0:10:27.480 --> 0:10:31.920 elect Trump who is looking for fiscal expansion infrastructure spending. 0:10:32.760 --> 0:10:35.120 This is adding up to a lot of cuts and 0:10:35.160 --> 0:10:37.080 a lot of difficult decisions that have to be made 0:10:37.440 --> 0:10:41.160 in the upcoming months. Where do you what units of 0:10:41.600 --> 0:10:46.360 the government do people expect to get cut the most, Well, 0:10:46.360 --> 0:10:49.200 that's the good question. Uh. And is it cuts really 0:10:49.400 --> 0:10:52.160 or is it hopes that the tax cuts generate that, 0:10:52.240 --> 0:10:55.400 you know, revenue that could help pay for these things. So, 0:10:56.320 --> 0:10:58.080 but you know, I just have to say the logic 0:10:58.160 --> 0:11:01.320 of tax cuts generating revenue. Uh. You know a lot 0:11:01.360 --> 0:11:03.160 of people wonder about that. In other words, that the 0:11:03.200 --> 0:11:06.120 logic that tax cuts will be sufficient to ignite the 0:11:06.120 --> 0:11:10.679 economy enough too then subsequently provide even greater tax revenues 0:11:10.880 --> 0:11:15.280 going forward, correct exactly. And it's dubious that that could 0:11:15.280 --> 0:11:19.240 occur very fast, much less occur at all. Uh. There 0:11:19.320 --> 0:11:23.000 is some talk of repatriation of corporations who have located 0:11:23.000 --> 0:11:26.240 outside of the country, allowing them to come back with 0:11:26.600 --> 0:11:29.560 either no penalty or less penalty, and that way bringing 0:11:29.600 --> 0:11:32.400 back maybe a portion of the tax money they would 0:11:32.400 --> 0:11:35.360 have had paid. That could help boost them. But you're right, Uh, 0:11:35.880 --> 0:11:39.640 Mint Mulvaney's gonna go after an agency spending and and 0:11:39.840 --> 0:11:42.760 cuts and and and Paul ryan Is wants to go 0:11:42.800 --> 0:11:46.040 after entitlement spending and cuts. But at the same time, 0:11:46.080 --> 0:11:48.480 and as you've pointed out, the President elect and said, 0:11:49.240 --> 0:11:52.600 he doesn't only go after entitlements like Medicare and and 0:11:52.760 --> 0:11:56.959 uh social Security. So uh, it really is who gets 0:11:57.000 --> 0:11:59.640 to who's going to control this agenda, and nobody knows 0:11:59.760 --> 0:12:01.960 right now. Well, part of that agenda has to do 0:12:02.000 --> 0:12:05.520 with immigration policy, and I was reading some past notes 0:12:05.720 --> 0:12:10.720 about a representative Congressman Multveney, and he has been a 0:12:10.800 --> 0:12:14.160 supporter of amnesty that puts some at odds with Senator 0:12:14.200 --> 0:12:16.960 Jeff Sessions, who was slated to be the head of 0:12:17.000 --> 0:12:19.600 the Attorney General, head of the Justice Department. And indeed, 0:12:19.600 --> 0:12:22.080 he's got a quote I remember he said there are 0:12:22.160 --> 0:12:25.840 jobs that American citizens will not do. He says, we 0:12:25.880 --> 0:12:29.440 have businesses in his district that rely on migrant legal 0:12:29.600 --> 0:12:34.199 migrant workers and a lot of them are in this state. Absolutely. 0:12:34.240 --> 0:12:36.560 I mean, in February he even did a town hall. 0:12:37.160 --> 0:12:39.200 He learned Spanish to be able to do this town 0:12:39.200 --> 0:12:42.880 hall partly in Spanish, correct in his district. So he's 0:12:42.920 --> 0:12:45.120 open to that. And and that again is another area 0:12:45.160 --> 0:12:48.840 where he clashes with at least what has been you know, 0:12:49.000 --> 0:12:53.120 said during the campaign by Mr Trump himself. Uh, it's 0:12:53.280 --> 0:12:57.720 it's another wrinkle, another piece of the emerging Trump administration 0:12:57.880 --> 0:13:00.520 that seemed to not all fit together. And it's and 0:13:00.520 --> 0:13:05.120 it's representative because the executive orders that have been used 0:13:05.160 --> 0:13:09.720 by President Obama on immigration policy. Uh, those are entered 0:13:09.760 --> 0:13:14.600 into the federal registry. Right, that's actually correct. But Mr 0:13:14.640 --> 0:13:19.800 Mulvaney has also been critical though of Obama's unilaterally making 0:13:19.920 --> 0:13:24.440 changes to the system. So in a functional way, he's 0:13:24.440 --> 0:13:27.959 opposed some of the Obama administration efforts, even though made 0:13:28.280 --> 0:13:31.320 generally he kind of agrees with the ideas. Billy, is 0:13:31.400 --> 0:13:35.600 this typical for an incoming administration to have so many 0:13:35.760 --> 0:13:38.920 different key members of the cabinet that frankly are at 0:13:39.040 --> 0:13:44.720 odds with each other. It's it's usually president reflects, cabinet 0:13:44.760 --> 0:13:50.680 reflects the philosophy of the president. Here we have multi philosophies, 0:13:50.760 --> 0:13:54.319 different viewpoints, and you know, maybe that's a good thing 0:13:54.360 --> 0:13:57.080 when they get together. They ever do, will get together. 0:13:58.120 --> 0:14:01.120 But it's certainly confusing, and it's certainly confusing to those 0:14:01.160 --> 0:14:04.800 on Capitol Hills who will have to put the president 0:14:04.920 --> 0:14:09.600 in his administration's visions into actual legislation and therefore, center 0:14:09.600 --> 0:14:12.920 for Joey leader, Mitch McConnell, and Paul Ryan, who has 0:14:12.960 --> 0:14:16.199 his own he's not a potty plant. Have to come 0:14:16.240 --> 0:14:18.240 to grips with what they all mean when they all 0:14:18.240 --> 0:14:20.840 talk about things. What we're gonna look forward to more 0:14:20.840 --> 0:14:24.840 of your reporting. Many thanks. Billy House, Congressional reporter for 0:14:24.960 --> 0:14:29.320 Bloomberg News, joining us from Washington, d c our Nation's capital, 0:14:29.360 --> 0:14:32.480 home to a Bloomberg one and one oh five point 0:14:32.520 --> 0:14:45.680 seven h D two. All right now to give us 0:14:45.720 --> 0:14:49.560 a look at some of the pointees for President elect 0:14:49.600 --> 0:14:53.000 Donald Trump's future cabinet. I want to bring in Tyler Cowen. 0:14:53.360 --> 0:14:56.400 He is a Bloomberg View columnist. He's also professor of 0:14:56.400 --> 0:14:59.840 economics at George Mason University, writes for the blog mar 0:15:00.000 --> 0:15:05.000 General Revolution, and his books include Averages Overpowering America Beyond 0:15:05.120 --> 0:15:08.760 the Age of the Great Stagnation. Tyler Cowen, thank you 0:15:08.800 --> 0:15:11.200 for being with us. Go ahead, set out your thoughts 0:15:11.280 --> 0:15:16.040 here about the nominees, the appointees for President elect Donald 0:15:16.080 --> 0:15:20.920 Trump's cabinet and what skills they might bring to their 0:15:21.000 --> 0:15:23.920 jobs that are different than the skills we may be 0:15:24.080 --> 0:15:27.640 used to in these positions. Overall, I think Trump is 0:15:27.680 --> 0:15:30.480 taking a lot of chances with these picks. But that's 0:15:30.520 --> 0:15:34.160 based on an understanding of Washington gridlock. If in most 0:15:34.200 --> 0:15:37.240 cases your agency heads don't get that much done anyway, 0:15:37.600 --> 0:15:40.360 arguably you should take a lot of chances. So he's 0:15:40.360 --> 0:15:44.040 picked people who have some credibility and influence with him, 0:15:44.280 --> 0:15:47.120 who are good communicators, who in some cases, such as 0:15:47.160 --> 0:15:50.440 Ben Carson, are pretty famous, and said, you know, narrow 0:15:50.480 --> 0:15:54.560 expertise isn't always the main thing. So my overall assessment 0:15:54.720 --> 0:15:57.119 is this is actually going to end up being effective, 0:15:57.160 --> 0:15:59.640 whether or not you agree with Trump's use. Okay, Tyler, 0:15:59.720 --> 0:16:01.400 you know, I read your column and I thought it 0:16:01.440 --> 0:16:04.800 was fascinating the expect Trump's appointees to have a big impact. 0:16:05.080 --> 0:16:06.760 And the reason why I thought it was so interesting 0:16:06.840 --> 0:16:09.680 is because it raises a question of what matters more 0:16:09.760 --> 0:16:12.960 for a cabinet member their ability to be famous and 0:16:13.000 --> 0:16:15.160 to have a big persona and to be a Sylvester 0:16:15.280 --> 0:16:19.240 Saloon with the big name recognition and good media presence, 0:16:19.760 --> 0:16:24.480 or the knowledge, experience and capability of crafting legislations or 0:16:24.560 --> 0:16:28.880 legislation or policies that will be effective. Well, again, this 0:16:28.960 --> 0:16:30.960 is a gamble. But if the people at the top 0:16:31.000 --> 0:16:33.920 of the agencies or appointments know that they don't know 0:16:33.960 --> 0:16:36.920 all of the details, they can assign that two subordinates, 0:16:36.960 --> 0:16:38.840 so there's a chance they think they know more than 0:16:38.880 --> 0:16:40.960 they really do, and then you're in for a lot 0:16:41.000 --> 0:16:43.640 of trouble. But again keep in mind, in a gridlocked world, 0:16:44.280 --> 0:16:47.880 arguably an administration should be willing to take more chances. Well, 0:16:48.000 --> 0:16:52.400 so you know, it raises yet another question just about 0:16:52.440 --> 0:16:56.040 whether these uh, these cabinet members will delegate. I mean, 0:16:56.040 --> 0:16:59.320 do we have any sense of whether first of all, 0:16:59.400 --> 0:17:02.440 they will be able to delegate their sort of have 0:17:02.480 --> 0:17:06.159 the nature to delegate some of the the tasks, and 0:17:06.200 --> 0:17:10.560 also whether some of the institutional Washington crowd will stick around. 0:17:11.800 --> 0:17:13.800 That's hard to assess, But keep in mind a lot 0:17:13.840 --> 0:17:16.840 of the picks they have more business experience and military 0:17:16.920 --> 0:17:20.280 experience than It's difficult, and those are areas where you 0:17:20.320 --> 0:17:22.800 do have to learn to delegate to be effective. So 0:17:22.840 --> 0:17:25.400 again I'm not saying you have to like Trump's ideas 0:17:25.480 --> 0:17:28.080 or his picks. I'm saying, don't assume this is some 0:17:29.359 --> 0:17:32.280 strategy list, you know, stabbing in the dark way to 0:17:32.320 --> 0:17:35.040 approach the problem. I think it's actually pretty well thought out. 0:17:35.600 --> 0:17:38.840 Tyler One, if you could use an example of Larry 0:17:38.960 --> 0:17:43.000 Cuddlow as a contender to chair the Council of Economic 0:17:43.160 --> 0:17:47.280 Advisors and how that fits into your perspective. Well, let 0:17:47.280 --> 0:17:49.480 me first just say I know Larry, so my view 0:17:49.520 --> 0:17:51.359 here may be biased, but I've seen a lot of 0:17:51.800 --> 0:17:55.040 professional economists criticize him for not being a member of 0:17:55.080 --> 0:17:58.040 the guild in the in a proper way. Larry is 0:17:58.080 --> 0:18:00.240 a very smart guy. He's a very clear to sucker. 0:18:00.320 --> 0:18:04.000 He has tremendous television experience in terms of being both 0:18:04.000 --> 0:18:07.439 a communicator and someone Trump will listen to. You know, 0:18:07.520 --> 0:18:10.280 that may end up being much more important. So I'm 0:18:10.320 --> 0:18:13.840 actually pretty optimistic about that pick. Is there any pick 0:18:13.880 --> 0:18:16.679 that you're less optimistic about? Well, the one that worries 0:18:16.720 --> 0:18:20.600 me most is Michael Flynn as National Security Advisor. The 0:18:20.640 --> 0:18:23.399 notion of him controlling the flow of information to Trump 0:18:23.440 --> 0:18:26.200 on foreign policy. H That to me is the worst 0:18:26.240 --> 0:18:30.520 of the picks. Is there any criteria that you would 0:18:30.560 --> 0:18:34.879 suggest has changed because we now live in a Twitter 0:18:35.000 --> 0:18:39.560 in chief environment. Well, most of the picks are surprises, 0:18:39.600 --> 0:18:41.960 and it wasn't just drawing into the pool and picking 0:18:41.960 --> 0:18:45.920 all the normal people from the Washington establishment. Uh So, 0:18:45.960 --> 0:18:48.360 I think Trump in general is saying, look, the whole 0:18:48.400 --> 0:18:51.640 world has changed. I won that shock you all. You've 0:18:51.680 --> 0:18:53.720 all got to realize that's not the last thing to 0:18:53.800 --> 0:18:57.320 have changed. Here's the next step of surprises. Have you 0:18:57.359 --> 0:19:00.320 ever seen this type of cats in a bag approach 0:19:00.440 --> 0:19:03.919 to cabinet members with lots of different views represented at 0:19:03.960 --> 0:19:06.040 all sizes and kind of thrown together come up with 0:19:06.080 --> 0:19:10.160 a coherent policy. Not in my lifetime now, So this 0:19:10.280 --> 0:19:14.639 is uh something different. Okay, good, alright, son' say Tyler, 0:19:14.640 --> 0:19:17.159 I just wanted to press you a little bit because, um, 0:19:17.200 --> 0:19:21.880 this all sounds rhetorically, you know, great, and it knits together. 0:19:22.080 --> 0:19:25.040 But if you were going out to hire someone to 0:19:25.280 --> 0:19:30.480 run one of these large government agencies and departments, wouldn't 0:19:30.520 --> 0:19:37.760 you want expertise previously running something like that. My personal 0:19:37.800 --> 0:19:40.760 picks would be more along the line of traditional expertise. 0:19:40.920 --> 0:19:43.879 But keep in mind Trump views himself as a disruptor 0:19:44.359 --> 0:19:46.840 in a way that I personally would not endorse. I've 0:19:46.920 --> 0:19:50.720 used stability as a higher priority. So given Trump's underlying 0:19:50.800 --> 0:19:54.480 preference for disruption, these are what disruption picks look like. 0:19:54.800 --> 0:19:56.960 But what I, as a whole make the same choices? No, 0:19:57.640 --> 0:20:00.560 Tyler Cowen, thank you so much for joining Tell Collin 0:20:00.680 --> 0:20:04.280 Bloomberg View columnist. He's also professor of economics at George 0:20:04.480 --> 0:20:19.080 Mason University and writes for the blog Marginal Revolution. Since 0:20:19.160 --> 0:20:23.280 the Fellow reserved A raised rates, interest rates on new 0:20:23.359 --> 0:20:27.119 credit cards have increased by about a half a percentage point. 0:20:27.760 --> 0:20:31.240 They were previously about fifteen point eight percent. Now they 0:20:31.280 --> 0:20:34.520 average more than sixteen and a quarter percent. Here to 0:20:34.560 --> 0:20:39.320 tell us more about consumer credit is Needy Verma, Senior 0:20:39.560 --> 0:20:45.240 director of Research and Consulting with TransUnion, joining us from Chicago. Needy, 0:20:45.320 --> 0:20:47.359 thank you very much for being with us. Tell us 0:20:47.359 --> 0:20:51.280 about this consumer credit market forecast for seventeen. What does 0:20:51.280 --> 0:20:55.119 it look to find? Good morning, Thanks for having me 0:20:55.200 --> 0:20:58.320 here about this time of the year. We predict what 0:20:58.400 --> 0:21:01.240 will happen in the marketplace in the next four quarters 0:21:01.280 --> 0:21:04.439 to come in two thousand seventeen, to look into credit 0:21:04.480 --> 0:21:07.920 performance as well as average debt levels for US borrowers. 0:21:08.480 --> 0:21:11.040 And as you've already seen the rise in interest rate 0:21:11.119 --> 0:21:14.919 that we saw last week, um that combination of the 0:21:14.960 --> 0:21:17.480 interest rate rise and more to be expected in two 0:21:17.520 --> 0:21:22.000 thousand seventeen, along with what we've seen as more and 0:21:22.040 --> 0:21:25.440 more subprime borrowers in the consumer learning market. We're expecting 0:21:25.480 --> 0:21:29.440 those two factors are going to spur delinquency rates UM 0:21:29.640 --> 0:21:34.159 spurs linquistator, it rises into doound seventeen four, specifically auto 0:21:34.200 --> 0:21:37.560 loans releases as well as credit cards UM. If you 0:21:37.640 --> 0:21:41.159 look at the percent of sub prime accounts who have 0:21:41.280 --> 0:21:44.080 a credit card UM in the US at the end 0:21:44.119 --> 0:21:46.040 of third quarter of tow Down sixteen, that's really the 0:21:46.119 --> 0:21:48.719 highest level that we've seen since the end of two 0:21:48.760 --> 0:21:51.480 thousand and ten. When you look at auto finance for 0:21:51.520 --> 0:21:54.520 that factor, it's the highest point since the conclusion of 0:21:54.560 --> 0:21:58.160 two thousand thirteen. So we believe that with these anticipated 0:21:58.600 --> 0:22:02.359 further rises in prime rate, along with the combination of 0:22:02.920 --> 0:22:06.280 subprime consumer participation in the market, we are going to 0:22:06.320 --> 0:22:08.840 see rising delinquency rates for auto as well as credit 0:22:08.840 --> 0:22:11.280 cards in two thousand seventeen. So who's going to suffer 0:22:11.280 --> 0:22:13.360 the losses from this? Will there be losses? I mean, 0:22:13.440 --> 0:22:15.480 is it going to be the captive auto lenders or 0:22:15.520 --> 0:22:20.480 will it be uh, perhaps big investment firms. I think 0:22:20.480 --> 0:22:23.280 from an auto finance perspective, we do believe that independent 0:22:23.359 --> 0:22:26.800 lenders have the highest share of sub prime accounts, so 0:22:26.920 --> 0:22:31.200 definitely those lenders will be needed to be well prepared UM, 0:22:31.240 --> 0:22:33.520 you know, just to make sure their underwriting strategies are 0:22:33.520 --> 0:22:37.960 maintaining a good balance between expected losses, credit access and 0:22:38.040 --> 0:22:40.840 investor returns and what have you. Who are the independent 0:22:40.920 --> 0:22:42.720 lenders you're talking about, who are the biggest in this space? 0:22:43.280 --> 0:22:45.520 These are going to be your independent lenders who only 0:22:45.560 --> 0:22:50.679 do auto finance like sentendera auto essentially outside of banks, 0:22:50.680 --> 0:22:54.720 credit unions and captives, everybody else is just lending auto 0:22:54.760 --> 0:22:57.240 finance in the market. Those are those are considered your 0:22:57.240 --> 0:23:00.560 independent lenders. How fast will the past a long be 0:23:01.080 --> 0:23:04.000 for increased interest rates? We've gotten hints that the Federal 0:23:04.040 --> 0:23:06.520 Reserve could raise interest rates as much as three times 0:23:06.520 --> 0:23:11.439 in Yeah. Well, well, I can't speak for what to 0:23:11.560 --> 0:23:14.359 anticipate in terms of rate rises. What I can share 0:23:14.400 --> 0:23:17.679 is that our forecast includes about a fifty basis points 0:23:17.760 --> 0:23:21.080 rise between Q four two thousand sixteen, which we've already 0:23:21.119 --> 0:23:24.840 seen that UM as well as two thousands seventeen UM. 0:23:24.960 --> 0:23:28.080 And then I think importantly we do understand there's an 0:23:28.080 --> 0:23:31.159 impact from primary there's also an impact from contribution of 0:23:31.200 --> 0:23:34.560 subprime borrowers gaining access in the market. I think it's 0:23:34.600 --> 0:23:37.359 really important to not only look at the trajectory which 0:23:37.400 --> 0:23:39.119 is going to be rising. But also look at the 0:23:39.200 --> 0:23:43.639 levels itself. You look at the levels of auto loan delinquencies. 0:23:43.760 --> 0:23:46.280 You know, we we reached the peak even at one 0:23:46.280 --> 0:23:49.280 point six percent, which is quite low considering where we 0:23:49.320 --> 0:23:53.520 saw saw mortgage ellinquencies. Mortgage relinquencies peaked at seven point 0:23:53.560 --> 0:23:56.480 two at the beginning of two thousand and ten. We 0:23:56.600 --> 0:23:59.800 never really saw those peaks in autos. So in in overall, 0:24:00.200 --> 0:24:02.920 I think where we look at the levels for card delinquency, 0:24:03.600 --> 0:24:05.600 which is expected to be one point four percent at 0:24:05.600 --> 0:24:07.520 the end of two thousand seventeen, it was as high 0:24:07.560 --> 0:24:11.760 as three both levels are still quite manageable despite the 0:24:11.800 --> 0:24:14.760 fact there is more access available to subprime borrowers. And 0:24:14.800 --> 0:24:17.119 I think that's really a factor to take into a 0:24:17.200 --> 0:24:21.000 pound with very positive economic forces such as your better 0:24:21.040 --> 0:24:24.960 employment picture, rising median household income um, we see increasing 0:24:24.960 --> 0:24:26.840 in personal spending as a result of that. So those 0:24:26.840 --> 0:24:28.800 are some of the offsets that we do need to 0:24:28.880 --> 0:24:32.439 keep in mind along with the anticipated rise in prime rates. Right. 0:24:32.480 --> 0:24:34.320 You know, one thing, as you speak media, I was 0:24:34.400 --> 0:24:37.280 thinking to myself, well, you know you talk about rates 0:24:37.600 --> 0:24:40.320 rising and how that tightens credit conditions. It makes it 0:24:40.400 --> 0:24:44.680 more challenging for people to UH to to refinance at 0:24:44.720 --> 0:24:46.520