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Speaker 3: So you're the richest man of the world, you get
Speaker 3: on your jet, you come to Washington to save the day.
Speaker 4: You're gonna cut two trillion dollars. That's part of the DOGE.
Speaker 4: Elon Musk. If you're Elon Musk, do you bring your
Speaker 4: son to the party.
Speaker 3: He brought his son to the meeting. He walked in
Speaker 3: the meeting with Senator John Thunne with his young boy
Speaker 3: sitting on his shoulders. And what a story he's going
Speaker 3: to have to tell someday.
Speaker 4: Huh, this is not really a department. Has anyone mentioned that?
Speaker 1: Yet?
Speaker 3: DOGE stands for not only the coin but the Department
Speaker 3: of Government Efficiency, and there is no department.
Speaker 4: It's kind of a well, it's a panel, I guess.
Speaker 3: So connecting the dots between the DOGE and actual legislation
Speaker 3: might be a longer walk than some are thinking. Then again,
Speaker 3: this is Trump's town Trump's Congress and a lot of
Speaker 3: lawmakers looking to make him happy. So what Elon Muskin
Speaker 3: Vivek Ramaswami have to say must carry some weight, right,
Speaker 3: let's find out from our panel. I mentioned Jeanie Shanzay No, yeah,
Speaker 3: she's here today, Bloomberg Politics contributor, Democratic analyst, senior democracy
Speaker 3: fellow with the Center for the Study of the Presidency
Speaker 3: in Congress, and Shape and Fay is back, Republican strategist,
Speaker 3: founder of Lighthouse Public Affairs. Great to see you both here.
Speaker 3: I'm just gonna bet both of you would bring your
Speaker 3: young child to Washington if you were the richest person
Speaker 3: in the world.
Speaker 4: Shape in Fay.
Speaker 3: Does anyone listen to what comes out of this not
Speaker 3: department but panel?
Speaker 1: I think so.
Speaker 5: Listen. Donald Trump is about to do what conservatives have
Speaker 5: been trying and talking about doing for decades. Right, He's
Speaker 5: going to disrupt the government, and I think a lot
Speaker 5: of the ideas and a lot of the ways to
Speaker 5: implement these policies are going to come out of the
Speaker 5: Department of Government Efficiency. Like you said, However that looks right,
Speaker 5: whether it has teeth or not, is really going to
Speaker 5: be up to the legislature. But again Republicans won. I
Speaker 5: think Donald Trump is heading into the White House in
Speaker 5: January what they mandate to do the thing that he
Speaker 5: said he was going to do and disrupt some of
Speaker 5: these government institutions that are no longer serving Americans. And
Speaker 5: I think that's exactly what they're going to do. And
Speaker 5: Elon and Vivic are going to be sort of tip
Speaker 5: of the spear of that.
Speaker 3: Well, it's a tall order, Genie, when you start getting
Speaker 3: down of the math here, I mean two trillion dollars.
Speaker 3: My god, it would be impossible to do that without
Speaker 3: starting to eat into entitlements, and so far there's been
Speaker 3: no appetite to do that, not just on Capitol Hill,
Speaker 3: but in Washington through the presidential campaigns would go near
Speaker 3: Social Security and Medicare. In fact, the president was going
Speaker 3: to lift taxes on some of these benefits. Right, So
Speaker 3: how does this come together in the form of law.
Speaker 6: Yeah, First of all, Joe I would take that. Very
Speaker 6: cute kid, and it's going to soften the blow when
Speaker 6: they have to make these tough decisions. I think Alon
Speaker 6: Musk is onto something as usual. Very cute kid, but
Speaker 6: you know the reality is I said before I will
Speaker 6: repeat again. They need somebody like Maya McGuinness to hold
Speaker 6: their feet to the fire. You know. The fact is
Speaker 6: is that when you look at the federal budget, sixty
Speaker 6: two percent of it is mandatory spending. And you're absolutely right, both,
Speaker 6: you know, the Democrats and then President the Trump they
Speaker 6: ran through this campaign saying things like they won't touch
Speaker 6: social Security, won't touch Medicare, won't touch all of these things.
Speaker 6: And so substantial cups, particularly in the two trillion dollar range,
Speaker 6: would be in possible if you don't start to have
Speaker 6: a serious conversation about that. That said, I think Democrats
Speaker 6: have to be very very careful here. The idea is right,
Speaker 6: and the notion that you need to cut, the notion
Speaker 6: that you need to streamline the federal government is exactly right.
Speaker 6: And so Democrats can't get caught in this trap of
Speaker 6: you know, looking the other way and saying all of
Speaker 6: these ideas are wrong. They have to be reformers as well,
Speaker 6: and they have to hold these people's feet to the
Speaker 6: fire when they talk about these cuts.
Speaker 7: But they should.
Speaker 6: Support smart streamlining and cuts as well. They just obviously
Speaker 6: are not going to talk about, you know, destroying the
Speaker 6: Department of Education overall.
Speaker 4: You know, bringing the kid.
Speaker 3: We call that pulling a shirley around here at balance
Speaker 3: of power. You both know it's a long story. Would
Speaker 3: you show them the picture of the cute child before
Speaker 3: you deliver the bad news?
Speaker 4: Shape and faith. Senator Marsha Blackburn.
Speaker 3: Thinks that she's got this worked out. I will be
Speaker 3: introducing legislations you just put this on Twitter that coincides
Speaker 3: with Doge's plan. My Doge Act will freeze federal hiring,
Speaker 3: begin the process to relocate agencies out of the DC swamp,
Speaker 3: she says, and establish a merit based salary system for
Speaker 3: the federal workforce.
Speaker 4: Did something like that pass?
Speaker 5: Listen? I think those are all great ideas, and I
Speaker 5: think it will bring this federal government closer to the
Speaker 5: people that it's supposedly serving. And you know, those of
Speaker 5: us on the right believe that it has stopped serving
Speaker 5: Americans for a long time. Are they achievable? They are
Speaker 5: very ambitious goals, and Democrats have in the past, you know,
Speaker 5: been really entrenched on behalf of government employees and benefits
Speaker 5: and sort of the DC culture in our nation's capital.
Speaker 5: So I do think there's going to be a fight
Speaker 5: right in the Senate. Democrats can certainly hold up legislation
Speaker 5: and work to get compromises and shape the bills and
Speaker 5: the House. Of course, it's majority rules pretty much, so
Speaker 5: there shouldn't be too much of an issue there as
Speaker 5: long as the Republicans hold on to their slim majority.
Speaker 5: But I do think those are ambitious gold like you said,
Speaker 5: and I do think there will be some fights. There
Speaker 5: will be definitely some public affairs battles over I think
Speaker 5: probably a lot of these ideas and a lot of
Speaker 5: other things, particularly coming out of DOGE, just because you know,
Speaker 5: change is scary for a lot of people, and changes
Speaker 5: certainly scary for the establishment and incumbents, so it's gonna
Speaker 5: I do think there are gonna be some battles. I
Speaker 5: do think some of that stuff does have a chance
Speaker 5: and a shot. I mean, moving moving an agency out
Speaker 5: of d C. Right, that's probably a lot easier than
Speaker 5: you know, a hiring freeze or changing civil service rules
Speaker 5: and regulations. But I think they're all the right ideas,
Speaker 5: and I think I think there's gonna be a fight,
Speaker 5: and I think it's a worthy discussion to have regardless.
Speaker 3: How about bringing people back to work in the office
Speaker 3: five days a week, Genie, This is actually one of
Speaker 3: the few specific suggestions that we've heard from Musk and Ramaswami,
Speaker 3: not only out of fairness, they say, in the spirit
Speaker 3: of productivity.
Speaker 4: But also might thin the herd a little bit.
Speaker 3: A lot of people don't want to come back to
Speaker 3: work five days a week, and that might result in
Speaker 3: a lower head count.
Speaker 6: What do you think it can Absolutely and we've seen that,
Speaker 6: you know, throughout the country and in other organizations. We've
Speaker 6: also seen and they've talked about enticing people to retire early,
Speaker 6: so retirement packages that also can work. The problem is
Speaker 6: they have to curb their enthusiasm when they talk two
Speaker 6: trillion dollars in cuts. You know, you could cut out
Speaker 6: the entire workforce almost and it wouldn't approach that. And
Speaker 6: so it is the you know, scope of what they're
Speaker 6: talking about that they may not be able to reach.
Speaker 7: I wouldn't count against them.
Speaker 6: These are two guys who have been insanely successful in
Speaker 6: their other aspects of their professional lives. But the reality
Speaker 6: is this process is still very unclear. They are not,
Speaker 6: as you said, part of the government. You know, I
Speaker 6: loved when Donald Trump said this was like the Manhattan Project. Okay,
Speaker 6: you know, that's that is a lofty goal. But you
Speaker 6: know what is the process? These cuts, for the most part,
Speaker 6: would have to go through Congress. You're talking about a
Speaker 6: House with maybe even just a one seat majority at
Speaker 6: some points, you're talking about a Senate and a House
Speaker 6: that already the GOP is disagreeing. Do we start with
Speaker 6: tax cuts? Do we start with Donald Trump's non tax cuts?
Speaker 6: So the priorities, So, how do you do this? And
Speaker 6: do this in a two year period, because of course
Speaker 6: Donald Trump said they will shut down DOGE by July.
Speaker 6: I think it's twenty twenty six, So a lot to
Speaker 6: do in a short period of time. Worthy goal, but
Speaker 6: you know, the devil is in the details here, and
Speaker 6: we haven't heard any of these details yet.
Speaker 3: Yeah, as always, Okay, So the other specific idea that
Speaker 3: we had, beyond the broadcut two trillion, we had bring
Speaker 3: people back in the office five days a week, the
Speaker 3: federal workforce, and then do away with daylight savings. Now,
Speaker 3: this is something that's come up before. Ask ed Marky
Speaker 3: about it his pet issue. I think Marco Rubio signed
Speaker 3: on to that bill as well. Look, I don't know
Speaker 3: if we're going to favor Sun in the Morning or
Speaker 3: sun later in the day here Chhape and Faye. But
Speaker 3: would that actually make a difference.
Speaker 5: I do think it would make a difference. What that
Speaker 5: difference is, I think is anybody's guess. If if it
Speaker 5: stays sunnier or a lighter out during the day for us,
Speaker 5: I think that's I would I would support it. And
Speaker 5: of course time zones, you know, can cause difficulty. But
Speaker 5: you know, I don't know that this is the fight
Speaker 5: that they really want to get into. Considering some of
Speaker 5: the earlier things that we talked about that are going
Speaker 5: to be fights that I think are real will have
Speaker 5: an immediate and real substantial impact on making the government
Speaker 5: more efficient. I don't know if this one will do that,
Speaker 5: but again I think people could support it if it
Speaker 5: will help that personally.
Speaker 4: Yeah, I look, this has come up before.
Speaker 3: As I mentioned, Genie ed Markey made a cause around
Speaker 3: this whole idea.
Speaker 4: You're an educator.
Speaker 3: This actually was a big part of the reason why
Speaker 3: we do this, so kids weren't going to school in
Speaker 3: the dark in the morning. I feel like I'm setting
Speaker 3: up some kind of online poll here.
Speaker 4: If you like it.
Speaker 3: Late in the morning or in the afternoon, we can
Speaker 3: all weigh in on that later.
Speaker 4: But is this something we should be spending time talking about.
Speaker 7: Uh, probably not.
Speaker 6: You know, I do recall like in high school, Joe Matthew,
Speaker 6: I'd have to you and I growing up in Connecticut,
Speaker 6: I had to get.
Speaker 7: On that bus. It was pitch black.
Speaker 5: It was very pitch black.
Speaker 6: Yeah, yeah, so you know there is you know, but
Speaker 6: I think am I correct Joe that some of our
Speaker 6: colleagues in the more vacation spots, they're not keen.
Speaker 7: On this idea.
Speaker 6: So there's a plus minds here. But to Japin's point,
Speaker 6: the reality is this probably isn't going to get you
Speaker 6: near where you need to be to addrust the serious
Speaker 6: problems in our budget deficits. So yes, you know, for
Speaker 6: the kids, we can think about it, but you know,
Speaker 6: I think we need to look elsewhere.
Speaker 7: Entitlements and titlements and titlements.
Speaker 3: In a series of posts on X, both entrepreneurs Musk
Speaker 3: and Ramaswami went there must declaring Americans want the United
Speaker 3: States to quote abolish the annoying time changes unquote. Ramaswami
Speaker 3: described the practice as inefficient and easy to change.
Speaker 4: Unquote.
Speaker 3: Here's my question for you, Chapin, and you guys can
Speaker 3: you imagine being Chapin and Genie and have to answer
Speaker 3: the questions that Joe has every day about.
Speaker 4: This wacky stuff. Does Elon Musk get bored?
Speaker 3: I mean, really, where's Elon Musk six months down the
Speaker 3: road here when he's got a rocket company, He's got X,
Speaker 3: He's got a lot of stuff going on.
Speaker 5: Japin, listen, maybe his son can carry this argument and
Speaker 5: that could be his pet issue, the daylight issue. Well,
Speaker 5: that that might be the way to get it done.
Speaker 5: I do not think he gets bored. I think these
Speaker 5: are very talented, smart, thoughtful men, and they care right
Speaker 5: now about government efficiency and I think that they're going
Speaker 5: to do their best at trying to do, you know,
Speaker 5: U execute Trump's vision of this, and I think they
Speaker 5: are the two people that can do it. I mean
Speaker 5: Elon Musk is literally a rocket scientist, right, and it
Speaker 5: is doing things that we, you know, didn't think possible
Speaker 5: a year ago. So I think he had I think
Speaker 5: these are the exact right people to be looking at
Speaker 5: government right. One of the problems in government is that
Speaker 5: is not innovative most of it. Right, There's there's no innovation.
Speaker 5: The Department of Education, it's one of the one. You know,
Speaker 5: agencies where there's just an innovation is frowned upon, right,
Speaker 5: So continuity of government is good. Innovation and change every
Speaker 5: now and then is better.
Speaker 3: Doad's Day with gd Shanzano and Chape and Fay. Our
Speaker 3: great panel will have a lot more to talk about
Speaker 3: coming up.
Speaker 2: You're listening to the Bloomberg Balance of Power podcast Ken
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Speaker 4: It's Doge Day.
Speaker 3: The Big Buzz today inside the Beltway Elon Musk the
Speaker 3: viik Ramaswami meeting with lawmakers today to walk through their
Speaker 3: plan that is bringing more questions than answers at the moment.
Speaker 3: Where the cuts will come from, how it will become law.
Speaker 3: It's something that Speaker Mike Johnson was asked about earlier today.
Speaker 8: Here he is, we do have to scale back the
Speaker 8: size and scope, but government it serves the people. It
Speaker 8: unleashes the free market again. Our policy changes will be
Speaker 8: a part of that. But I think that if we
Speaker 8: can make some dramatic changes in downsizing the scale and
Speaker 8: scope of these things will go a long way.
Speaker 9: And two specific examples, planned parenthood and PBS are in
Speaker 9: congressional control.
Speaker 10: Are you planning to act both of those?
Speaker 8: I would like to, that's for sure for both of those. Yeah,
Speaker 8: we got to build consensus to have the votes to
Speaker 8: do that.
Speaker 4: And just like that, we're right back to cutting big bird.
Speaker 3: Let's get into it with Jack Fitzpatrick, our appropriations expert
Speaker 3: at Bloomberg Government. He's on Capitol Hill today as well
Speaker 3: for an important series of meetings with these two individuals.
Speaker 4: Jacket's great to have you back.
Speaker 3: I see Senator Marshall Blackburn has raised her hand to
Speaker 3: begin potentially drafting some legislation that would include the findings
Speaker 3: or recommendations of this panel. But that's the point here, right,
Speaker 3: It's not a department, it is a panel, and there's
Speaker 3: no clear path for any of these ideas to become law.
Speaker 11: Yeah, there's a lot of interest you mentioned, Senator Blackburn.
Speaker 11: Senator Joni Ernst started the Senate caucus, the Doge Caucus,
Speaker 11: Aaron Bean, Republican from Florida, and the House started a
Speaker 11: House caucus. A lot of people want to be involved.
Speaker 11: There's a lot of enthusiasm and there were big promises
Speaker 11: made regarding two trillion dollars in cuts, but this is
Speaker 11: basically a think tank or an advisory board, and Republicans
Speaker 11: are happy to hear their ideas, but there are a
Speaker 11: lot of limitations on how you put those ideas into law.
Speaker 11: If you want to cut huge dollars from the federal budget,
Speaker 11: you're probably looking at Social Security or Medicaid. Medicare or
Speaker 11: Medicaid not easy things to legislate. You can't just pull
Speaker 11: it from the annual budget.
Speaker 10: So there have been some.
Speaker 11: Warnings from key members. Susan Collins, who's the incoming Appropriations chair,
Speaker 11: said she wants to hear their ideas. She respects them,
Speaker 11: but this is not business. This is government and it
Speaker 11: works differently than private enterprise.
Speaker 3: Well, Jack, this is your wheelhouse. You specialize in appropriations.
Speaker 3: If one were to cut two trillion dollars out of
Speaker 3: government spending, what would it mean for our budget?
Speaker 4: What would it mean for the economy?
Speaker 11: It would be huge, you know. The two trillion dollar
Speaker 11: number comes from Elon Musk. At that Madison Square Garden event,
Speaker 11: he was asked, how much can you cut from the
Speaker 11: annual budget, which was six point seventy five trillion dollars
Speaker 11: last year, So cutting almost a third of federal spending
Speaker 11: would be wild. It would require massive overhauls of popular
Speaker 11: entitlement programs.
Speaker 4: You know this.
Speaker 11: They've talked about finding efficiencies in Department of Defense contracting.
Speaker 11: That doesn't do it. So we should acknowledge upfront some
Speaker 11: of the campaign promises and rhetoric were not realistic. But
Speaker 11: if we do take them at their word that they're
Speaker 11: being very ambitious. The things you'd have to look at
Speaker 11: are popular entitlement programs like Social Security, Medicare. Social Security
Speaker 11: has to be bipartisan. You can't do that through reconciliation.
Speaker 11: So there are some huge stumbling blocks, and the reality
Speaker 11: check is probably going to be difficult when they actually
Speaker 11: start talking about legislating any of.
Speaker 3: This, which brings us to your column earlier today, the
Speaker 3: headlines schoolhouse doge mus get Ramaswami talk cuts on Capitol Hill.
Speaker 3: Your point here not only is talk cheap jack, but
Speaker 3: maybe everybody needs to go back to school here on
Speaker 3: how a bill is written.
Speaker 11: Yeah, well, look, they can rewrite some of the things
Speaker 11: on how a bill is written. The expanding use of
Speaker 11: budget reconciliation to get around the Senate filibuster is as
Speaker 11: significant as it has ever been. Republicans are talking about
Speaker 11: how many spending cuts can we find to offset the
Speaker 11: impact of extending tax cuts. So there's some reality to
Speaker 11: Republicans saying we're going to do something significant. We're going
Speaker 11: to cut a lout of spending. They're not going to
Speaker 11: do it with Democrats, but two trillion dollars and the
Speaker 11: idea of waiting into major entitlement reform does not seem
Speaker 11: realistic because they've talked so much about it already and
Speaker 11: no one has taken action lately.
Speaker 4: Well, so what of the old timers say here?
Speaker 3: And I say that with all due respect, you talk
Speaker 3: to the appropriations experts, including the chairman, Tom Cole. Does
Speaker 3: you want to see everybody go back to schoolhouse Rock?
Speaker 4: What does he think of these ideas?
Speaker 11: They've offered some reminders that Congress controls the power of
Speaker 11: the purse. You don't set up a think tank or
Speaker 11: an advisory board and then just put Elon Musk and
Speaker 11: vivik Ramaswami in charge of the federal budget. So there's
Speaker 11: a warning there. Cole also said earmarks don't add up
Speaker 11: to that much money anyway, So we're not touching those,
Speaker 11: We're not getting rid of that. Susan Collins said she
Speaker 11: is very interested in looking at telework and getting federal
Speaker 11: employees back in person or saving money on federal leases.
Speaker 11: So there are some ideas, there's some enthusiasm, but a
Speaker 11: lot of warnings that ideas are one thing, but it's
Speaker 11: still Congress that makes the decisions regarding federal spending.
Speaker 3: Well, the two most specific ideas that we've heard would
Speaker 3: include one you just mentioned, bringing workers back into the
Speaker 3: office five days a week, knowing that a lot of
Speaker 3: federal workers are still doing the work from home. Bit
Speaker 3: also eliminating daylight savings time. That seemed to be a
Speaker 3: cause that both Elon Musk and Vivek Ramaswami wanted to endorse.
Speaker 3: In terms of the first one, though, you seem to
Speaker 3: think that's something that actually has enough support in Washington.
Speaker 3: Would it result in a lower head count because many
Speaker 3: federal workers do not want to return to the office.
Speaker 11: You know, that's something that Republicans have brought up, but
Speaker 11: they've gone back and forth because on one hand, it
Speaker 11: may result in people leaving and not being replaced and
Speaker 11: you have a smaller workforce through attrition, but also Republicans themselves,
Speaker 11: including relevant appropriators. Steve Walmack has brought this up, has said,
Speaker 11: you know, we could save a lot of money by
Speaker 11: embracing some telework not paying as much through the General
Speaker 11: Services Administration on federal leases, telework can be used as
Speaker 11: an efficiency, and Republicans, though they're interested in cracking down
Speaker 11: on inappropriate telework and excessive locality pay for people who
Speaker 11: don't actually live in DC.
Speaker 10: They have to choose a direction.
Speaker 11: Are you bringing back everybody full time or are you
Speaker 11: looking for savings through efficient telework Sometimes so that's another
Speaker 11: area where they have to make some more specific decisions
Speaker 11: rather than just identifying this issue.
Speaker 3: Got it, Jack, It's great to have you back. Good
Speaker 3: to see Jack Fitzpatrick. With a busy day on Capitol Hill.
Speaker 3: We didn't even get to the fun deadline that is looming.
Speaker 3: By the way, December twentieth, we're fifteen days out and
Speaker 3: there is still no deal on top lines on how
Speaker 3: to avoid a shutdown. So the logic at this point
Speaker 3: is we kick the can into early next year, so
Speaker 3: we could kick the can again presumably until March. That
Speaker 3: is the buzz at the moment here on Capitol Hill,
Speaker 3: as Elon Musk continues his stride across the Capital with
Speaker 3: the vik Ramaswami, I'm drawn to a quote in this
Speaker 3: morning's punch Bowl tip sheet, a senior Republican talking with
Speaker 3: punch Bowl about this idea. Two people, they say, who
Speaker 3: know nothing about how the government works, pretending they can
Speaker 3: cut a trillion dollars, both with decent pulpits to preach
Speaker 3: from and the ear of an unpredictable president disaster. The
Speaker 3: only good thing is at some point the'll over promise
Speaker 3: and get bounced by Trump. But until then, disaster, said
Speaker 3: this senior Republican aid gives you a sense of what
Speaker 3: we're heading for in the new year. As we had
Speaker 3: the voice of Rosemary Becky, a conversation we've been looking
Speaker 3: forward to as we try to bring you voices of experts,
Speaker 3: people with experience that might have seen these movies before.
Speaker 3: Tax Attorney with Brownstein, former Tax Council to the Senate
Speaker 3: Finance Committee.
Speaker 4: Rosemary is great to have you.
Speaker 3: Welcome to Bloomberg TV and Radio. Will doge results in
Speaker 3: a smaller government.
Speaker 9: So it quite possibly could there could be some great
Speaker 9: recommendations that come out of it to make our government
Speaker 9: a little bit smaller.
Speaker 3: Well, two trillion dollars, of course is a lot smaller.
Speaker 3: And I wonder if this falls into the category of
Speaker 3: a lot of things involving Donald Trump, that the opening
Speaker 3: salvo is just that, and that at some point there
Speaker 3: will be maybe some spending cuts that they can take
Speaker 3: credit for.
Speaker 4: Is that how this goes?
Speaker 7: Yeah?
Speaker 9: And so how this process is all going to play
Speaker 9: out is initially the DOGE is going to be set
Speaker 9: up as an advisory committee, and I think your prior
Speaker 9: guest talked a little bit about this and show it
Speaker 9: will be set up as an advisory committee to OMB
Speaker 9: and it will provide recommendations as the President puts forward
Speaker 9: his budget for twenty twenty six.
Speaker 3: So how does it play out then when it comes
Speaker 3: time to actually crafting a budget. I mentioned the stopgap.
Speaker 3: We're going to go through this kicking the can. But
Speaker 3: at some point, likely by March, I think is the
Speaker 3: conventional wisdom on Capitol Hill, there will.
Speaker 4: Be a budget crafted.
Speaker 3: Dare I say using regular order? But I don't want
Speaker 3: to get too crazy here, but we'll actually have Donald
Speaker 3: Trump's fingerprints on them. Is that how he implements what
Speaker 3: we hear from Musk and Ramaswami.
Speaker 9: Yeah, no, absolutely, and show this advisory committee will make
Speaker 9: recommendations to OMB and ultimately it'll be up to the
Speaker 9: President and OMB to put together a budget proposal that
Speaker 9: they'll send up to Capital Hill.
Speaker 7: And then it's up to wallmakers right to.
Speaker 9: Craft a budget and to go through the appropriations process
Speaker 9: and show, you know, hard to say at this point
Speaker 9: you know which recommendations will be taken into account, and
Speaker 9: it may be some recommendations are held back or further
Speaker 9: developed as they look at other budgets spending proposals like
Speaker 9: a tax bill. Maybe you saved some of the proposals
Speaker 9: for that exercise.
Speaker 4: Sure, that was really the genesis of this.
Speaker 1: Right.
Speaker 3: When the idea of extending or making permanent the Trump
Speaker 3: tax cuts came about, everyone cried deficit spending, bigger deficits,
Speaker 3: maybe higher inflation. And then we heard this idea about
Speaker 3: the doge. Is it the answer to higher deficiles.
Speaker 9: It's it's certainly part of a process to pay for
Speaker 9: the tax bill, right is looking for ways to cut
Speaker 9: spending as an offset to cutting those taxes. It will
Speaker 9: cost in order to extend all of the twenty seventeen
Speaker 9: expiring provisions. It's going to cost a net number of
Speaker 9: four point six trillion dollars, and so hopefully you can
Speaker 9: use some government savings to pay for that process and
Speaker 9: the extension of those tax cuts.
Speaker 3: You believe Donald Trump actually wants to cut spending. Did
Speaker 3: his first administration show us a pattern there?
Speaker 9: Oh?
Speaker 7: Absolutely.
Speaker 9: I look, I think that people are looking for real change,
Speaker 9: They're looking to see our economy expand to create jobs,
Speaker 9: and so I do think that they are going to
Speaker 9: be looking at cutting government spending. And as I said before,
Speaker 9: I think that you know, it'll be part of just
Speaker 9: the general budget process, and we could see some of
Speaker 9: those additional cuts appear as part of a tax bill
Speaker 9: or other budget processes.
Speaker 3: Rosemary, you started your government career at the IRS, which
Speaker 3: gives you unique perspective on everything we're talking about here, including,
Speaker 3: by the way, Donald Trump's new pick to run the IRS,
Speaker 3: which I want to ask you about. But this agency
Speaker 3: is at the center of so much strife in Washington.
Speaker 3: Many Republicans wanted to pull back the funding that the
Speaker 3: Biden administration had given, saying that you'd have armed agents
Speaker 3: knocking on your doors. Are you concerned about the image
Speaker 3: the way that IRS has been framed by people. What is,
Speaker 3: in fact an agency that's willfully underfunded.
Speaker 9: I'm not concerned about it because I think that it's
Speaker 9: a perfect example of where there's inefficiencies and an agency
Speaker 9: that hasn't run well and hasn't served the taxpayers well.
Speaker 9: And so I think what President Trump is looking to
Speaker 9: do is to bring in a fresh set of eyes
Speaker 9: and to take another look at ways to make that
Speaker 9: agency more efficient.
Speaker 6: And again, you.
Speaker 9: Know, just automating that agency isn't the answer. We really,
Speaker 9: you know, need taxpayer services and people to help taxpayers.
Speaker 9: I think that's where the real frustration is at with Americans.
Speaker 3: Well, we do have a name, Billy Long, former congressman
Speaker 3: from Missouri, named yesterday by Donald Trump to lead the
Speaker 3: Internal Revenue Service. I'm a little bit confused to here, Rosemary.
Speaker 3: You might think this is a great pick or not,
Speaker 3: But don't we have an IRS commissioner already?
Speaker 9: We do, and he has a five year term and
Speaker 9: he is confirmed by the Senate. I suspect there will
Speaker 9: be a lot of pressure for him to lead his position,
Speaker 9: and which case, then you know, this nomination could move forward.
Speaker 3: What can mister Long, assuming he gets this job, do
Speaker 3: then to make the IRSM or efficient agency, one that
Speaker 3: works better, one that Republicans will not be allergic to.
Speaker 9: I think it's about making sure that agents are trained properly,
Speaker 9: that automation isn't actually running the agency.
Speaker 7: I think that there is so much that can be
Speaker 7: done in.
Speaker 9: Terms of again providing real service to taxpayers and helping
Speaker 9: people get their questions answered. I feel like at time
Speaker 9: and time again you're hearing about people getting notices and
Speaker 9: being frustrated with the process because there's no one that
Speaker 9: can answer their questions and help them with notices that
Speaker 9: they receive it in the mail. So I do think
Speaker 9: there's a real opportunity to take a hard look at
Speaker 9: this agency and make some change.
Speaker 3: What do you expect in terms of the tax debate here?
Speaker 3: And it's you know, it's funny. We've been talking about
Speaker 3: tax reform and reforming the tax code, Rosemary for a
Speaker 3: lot of years. Remember when it was going to fit
Speaker 3: on a postcard. What will this debate look like when
Speaker 3: it comes to extending the Trump tax cuts and will
Speaker 3: it include all of the exemptions that he rolled out
Speaker 3: on the campaign trail? No taxes on tips, no taxes
Speaker 3: on overtime. I could keep going. I haven't even mentioned
Speaker 3: salt yet. What will the final product look like?
Speaker 9: You know, the final product is probably going to be
Speaker 9: a combination of extending the twenty seventeen tax cuts as
Speaker 9: well as making good on a lot of the campaign promises.
Speaker 9: And I think what we're also going to see is
Speaker 9: maybe looking again at different ways to pay for that again,
Speaker 9: whether it's through tariffs or through cutting further cutting government spending.
Speaker 9: But there's going to be some trade offs and it's
Speaker 9: going to be a really hard process. I mean, you're
Speaker 9: talking about members who are definitely concerned about deficits and debt,
Speaker 9: and so that's all got to be taken into account
Speaker 9: during this process.
Speaker 3: Just quickly, one more as we get ready for the
Speaker 3: confirmation process or whatever we're going to call this for
Speaker 3: Billy Long, assuming there is a change here at the
Speaker 3: top of the irs, because it can't result in a firing.
Speaker 3: As you've pointed out, this former congressman spent a long
Speaker 3: time dealing with the pandemic era tax credit. I want
Speaker 3: to be exact about this, the employee retention tax credit,
Speaker 3: which has been very controversial. A lot of lawmakers tried
Speaker 3: to shut down. Will that make it problematic for him
Speaker 3: to get this job.
Speaker 7: I don't think it'll make them problematic.
Speaker 9: I think it's certainly he'll have to answer questions about it.
Speaker 9: You know, it is certainly a program that needs to
Speaker 9: be taken looked at and reevaluate it and frankly probably
Speaker 9: they need to learn from from that experience. So so
Speaker 9: that'll all be his affirmation process.
Speaker 3: I'm glad you could join us. Rosemary Becky, tax attorney
Speaker 3: with Brownstein. We thank you for the insights. As always
Speaker 3: here on Balance of Power. We'll follow the beat on
Speaker 3: Billy Long for you in the future of the irs.
Speaker 2: You're listening to the Bloomberg Balance of Power podcast.
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Speaker 3: Thanks for joining us on the Fastest Show in Politics.
Speaker 3: Thursday edition of Balance of Power. We're live in Washington,
Speaker 3: where it's been a pretty busy day around Here is
Speaker 3: Doge Day on the Fastest Show in Politics. That means
Speaker 3: the Departments of Government efficiency. Yes, we're following the coin
Speaker 3: as well. It's actually doing pretty well. As Elon Musk
Speaker 3: and the vek Ramaswami meet with lawmakers today, we're told
Speaker 3: they're going to be holding a news conference or at
Speaker 3: least making a statement a bit later on following their meetings,
Speaker 3: and we'll hear what they have to say, knowing that
Speaker 3: Elon Musk has promised to find a way to cut
Speaker 3: some two trillion dollars out of the federal budget while
Speaker 3: we're at it. By the way, fifteen days from now,
Speaker 3: we will not have a federal budget. The government will
Speaker 3: run out of money. So there's also an effort underway
Speaker 3: to try to craft the stopgap to get us through
Speaker 3: the new year here without a government shut down. One
Speaker 3: of the big stories that we've been talking about with
Speaker 3: regard to geopolitics are eyes on China and the intersection
Speaker 3: with politics, policy and technology is the tip for tat
Speaker 3: that we have been seeing when it comes to access
Speaker 3: to some of the most advanced technology and in this
Speaker 3: case many cases at least chips from companies like in
Speaker 3: Nvidia that are helping to create this new age of
Speaker 3: artificial intelligence. China ratcheting up trade tensions with the ban
Speaker 3: on rare earths this tip for tat that not a
Speaker 3: lot of people saw bringing equity to the situation. But
Speaker 3: Gregory Allen, who runs the wadwani Ai Center at the
Speaker 3: Center for Strategic and International Studies, embarked on a great
Speaker 3: project because we talk a lot here on Bloomberg about
Speaker 3: the impact of these export controls and what they will
Speaker 3: mean for our relationships and our economies, but nowhere do
Speaker 3: we really get answers on what that impact will be.
Speaker 3: And that's what Gregory Allen set out to find. It's
Speaker 3: great to see you, welcome back. Nice to see you
Speaker 3: at the table here at Bloomberg.
Speaker 10: It's wonderful to be back.
Speaker 3: This is a big, squishy story, so we can go
Speaker 3: on a lot of different directions here, and you're a
Speaker 3: real expert. So I want to start with the most
Speaker 3: recent turn in this Tit for tat With China, we're
Speaker 3: trying to keep technology out of their hands and they're
Speaker 3: trying to keep rare earth's out of ours.
Speaker 4: But we don't buy all of that from China.
Speaker 10: To me, no, So China is a really strong supplier
Speaker 10: in the world's rare earth market. Most of their strength
Speaker 10: is actually as a refiner, not as a miner So
Speaker 10: while they have really strong market share in most of
Speaker 10: the mining in terms of owning the mines around the
Speaker 10: world that produce rare earths, where they really dominate is
Speaker 10: in refining capacity. And what we've seen with the most
Speaker 10: recent round of export controls coming out of China, so
Speaker 10: this is their restricting sales to America is on gallium
Speaker 10: and germanium. But I would say it's actually not nearly
Speaker 10: as strong as what the United States has done to China.
Speaker 10: And there's two reasons for that. The first of which
Speaker 10: is gallium and germanium are natural byproducts of aluminum and
Speaker 10: zinc mining, which means just about anybody who right now
Speaker 10: today is mining aluminum or zinc could get into the
Speaker 10: business of alium or germanium if they wanted to. Fascinating
Speaker 10: now once they have all that or they're going to
Speaker 10: have to find a refinery to ship it to. And
Speaker 10: right now, China dominates the world of refining. So the
Speaker 10: question is, are these export controls that China has put
Speaker 10: in place scary enough that somebody in the West is
Speaker 10: actually going to start putting the money into building local
Speaker 10: refining capacity for these metals, and that could take a
Speaker 10: year or two to set up, and then China might
Speaker 10: flood the market later to sort of destroy that investment.
Speaker 4: Is that a nimby story, is it?
Speaker 3: I mean, we're actually hearing Democrats warm up to the
Speaker 3: idea of opening new nuclear power plants to help to
Speaker 3: provide power for AI data centers, for instance. It sounds
Speaker 3: like everything is being considered.
Speaker 10: Again, well, I think in the United States' this case,
Speaker 10: we don't necessarily need it to happen in the United States.
Speaker 10: Of course, there's folks who would love for that to
Speaker 10: be the case for the jobs or for the strategic positioning,
Speaker 10: et cetera. But what we really need more than we
Speaker 10: need American sources are just non Chinese? Are those or Africa?
Speaker 10: In terms of where the medals are, that's actually almost
Speaker 10: everywhere here. I'm talking specifically about gallium and germanium again
Speaker 10: anywhere processing facilities.
Speaker 3: Right, we're paying for this trans continental railroad. Maybe that's
Speaker 3: the next source for these.
Speaker 10: So that's the point is you could put these refining
Speaker 10: sources anywhere, and some developing countries such as Indonesia, which
Speaker 10: are strong in mining certain metals, have expressed an interest
Speaker 10: in getting into the refining market. The problem is on
Speaker 10: the investor side, because they're asking themselves, if we put
Speaker 10: up the money for a refinery, is China just going
Speaker 10: to flood the market to press prices so that our
Speaker 10: refinery goes out of business. So they're going to be
Speaker 10: looking for long term purchase agreements with US customers that
Speaker 10: are going to ensure that they're still going to have access.
Speaker 4: Fascinating.
Speaker 10: There's one other thing here that I think is really
Speaker 10: worth pointing out, and this is a research done by
Speaker 10: your colleague in Bloomberg, Gerard de Pippo, who has pointed
Speaker 10: out that there's really a lot of circumvention of Chinese
Speaker 10: export controls going on right now because US purchases from
Speaker 10: China have obviously plummeted in the wake of these export controls,
Speaker 10: but Chinese exports to Europe have surged, and Chinese exports
Speaker 10: from Europe to the United States have also served. And
Speaker 10: so China is getting a little bit of a taste
Speaker 10: of its own medicine when it comes to working to
Speaker 10: evade export control.
Speaker 3: Nice had tip to Gerard his team is doing amazing
Speaker 3: work over there. China wants to have its own industry.
Speaker 3: It wants to get the chip making equipment that we
Speaker 3: don't want it to have. What's so, when you put
Speaker 3: the walls around China's chip manufacturing capacity, how far behind
Speaker 3: the US is it and how could it catch up?
Speaker 10: So there's multiple ways you can think about this. The
Speaker 10: first is in the types of equipment. What do you
Speaker 10: need to actually put in the chip fabrication facility to
Speaker 10: operate that facility. The one that's best known is the
Speaker 10: lithography equipment. This is sort of using light to print
Speaker 10: the design on the chip. But there's also advanced deposition equipment,
Speaker 10: advanced etching equipment, and China's positioning differs in these different
Speaker 10: categories of equipment. They're dramatically behind in lithography equipment. In
Speaker 10: some sub niches of deposition and etching equipment, they're still good,
Speaker 10: although they're quite a bit behind the global state of
Speaker 10: the art, as represented by what the United States companies
Speaker 10: can do, what the Japanese companies can do, what the
Speaker 10: Dutch companies can do.
Speaker 3: How can China get that equipment American made equipment potentially
Speaker 3: through other countries. There's a lot of ways to backdoor
Speaker 3: this stuff, as we have seen.
Speaker 10: Yes exactly, and of course the American equipment companies. The
Speaker 10: point that they're making is Hey, if other countries are
Speaker 10: going to sell this, we want to be able to
Speaker 10: sell it too. So that's why they're really concerned about
Speaker 10: the export controls occurring in a unilateral basis, because then
Speaker 10: there's no strategic impact on China and there's a loss
Speaker 10: of sale by US companies. And so in earlier tranches
Speaker 10: of export controls, what you've seen is US firms actually
Speaker 10: increasing their shipments of semiconductor manufacturing equipment coming out of
Speaker 10: the countries to which they have outsourced some of their manufacturing.
Speaker 10: So it's no longer a US export. It is now
Speaker 10: a Malaysian export, even though it's coming from a US company.
Speaker 10: The most recent tranch of export controls, designed by the
Speaker 10: Bide Administration expands the usage of the foreign Direct Product rule,
Speaker 10: which is a little bit esoteric category of export control law,
Speaker 10: but it should put a real stop to all of
Speaker 10: that category of stuff there now, wherever it's made in
Speaker 10: the world, if it includes US content, export controls are
Speaker 10: going to apply, or Dutch or Japanese local export controls
Speaker 10: are going to apply.
Speaker 3: You're so good at this that when you consider some
Speaker 3: of the impacts more broadly speaking, here, you're actually trying
Speaker 3: to find the impact this has economically financially. How about
Speaker 3: for the companies themselves, whether you're an Nvidia or an
Speaker 3: Applied Materials.
Speaker 4: Every time there's a quarterly.
Speaker 3: Conference call, we hear that demand is off the scale
Speaker 3: and we can't even can't keep up with the backlog.
Speaker 4: So what does it matter to them if China's not buying?
Speaker 10: So it's worth saying here, you know that it's a
Speaker 10: little bit different for different markets. Now. In the case
Speaker 10: of semiconductor manufacturing equipment, it's often described in the press
Speaker 10: as a ban, but what it really is is a
Speaker 10: ban on advanced semiconductor manufacturing equipment. You can still sell
Speaker 10: the old stuff, and it's also a ban of selling
Speaker 10: all types of equipment to those chip fabs in China
Speaker 10: that are producing advanced chips, the types of chips that
Speaker 10: would compete with an Nvidia, for example. So what we've
Speaker 10: seen is not a reduction in demand from China. In fact,
Speaker 10: demand from China is exploding right now. But what you
Speaker 10: have seen is a major change in the composition of demand,
Speaker 10: buying more of the older types of machines that they're
Speaker 10: still allowed exactly.
Speaker 3: So does that help the intels or the AMDs, or
Speaker 3: those who are not quite at the point of an
Speaker 3: Nvidia with prohibitively advanced technology.
Speaker 10: Yes, indeed, So what it really does is it changes
Speaker 10: what China is setting its sights on in terms of
Speaker 10: chip manufacturing. You know, if you think about a most
Speaker 10: advanced in Nvidia chip, that's you know, being manufactured at
Speaker 10: five nanometers, soon at three nanometers, those really really small,
Speaker 10: really precise components at the bleeding edge. Now what China
Speaker 10: can't buy is the equipment you use to manufacture five
Speaker 10: nanime or three and animeters. So what you've seen is
Speaker 10: a surge of increasing chip production capacity at what we
Speaker 10: call legacy nodes nineteen animeters, forty eight animeters, twenty four
Speaker 10: and animeters or twenty eight animeters. These are the types
Speaker 10: of chips that go into your washing machine, into your
Speaker 10: hair dryer, to a certain extent, into your car, and
Speaker 10: China is looking to become the new juggernaut of legacy chips. Now,
Speaker 10: for the US equipment suppliers, it's been a bonanza because
Speaker 10: they're continuing to get all the dollars, but what they're
Speaker 10: selling is the older equipment. That's at least what we've
Speaker 10: seen so far but the expert controls that came out
Speaker 10: this Monday really are designed to sort of change the story.
Speaker 4: Those old fashioned chips go into weapons too, don't they.
Speaker 10: Oh yes, absolutely, which has.
Speaker 4: Been quite a bit of demand for Russia.
Speaker 3: Gregory Allen, It's a great conversation and great to see
Speaker 3: you again. I appreciate the work so much, Director of
Speaker 3: the juadwani Ai Center at the Center for Strategic and
Speaker 3: International Studies CSIS.
Speaker 4: You're always welcome here. I appreciate your research and sharing
Speaker 4: your work with a scriptory.
Speaker 7: It's good to see you.
Speaker 4: Thanks for listening to the Balance of Power podcast.
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