WEBVTT - Trump Must Offset Higher Spending, MacGuineas Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:50.199 of course on the Bloomberg Carl Weinberg joins us now 0:00:50.240 --> 0:00:53.880 chief economist at High Frequency Economics, and Carl, I read 0:00:53.880 --> 0:00:56.440 your notes regularly and with great interest, and you wrote 0:00:56.480 --> 0:00:59.320 in a recent one here every country in this edition 0:00:59.360 --> 0:01:00.960 of of Your Globe a lout look boils down to 0:01:01.000 --> 0:01:03.920 a discussion of yield curve prospects. This is the overarching 0:01:03.960 --> 0:01:08.080 theme here. Absolutely absolutely. I mean, we have quantitative easing 0:01:08.120 --> 0:01:10.959 issues in Europe. The ECB is out of sovereign bonds 0:01:11.000 --> 0:01:13.959 to buy. That's a problem. Uh. Negative bond yields are 0:01:14.120 --> 0:01:18.399 unnatural and without the support of ECB buying are I 0:01:18.400 --> 0:01:21.360 don't think they can persist. In the UK, we have 0:01:21.920 --> 0:01:25.800 everywhere we have rising inflation concerns, although they really aren't. 0:01:25.880 --> 0:01:29.280 Inflation figures out there at the core that suggested an 0:01:29.280 --> 0:01:32.399 inflation problem, the markets perceiving it as such. And of 0:01:32.440 --> 0:01:34.240 course we have the FED on the move, and the 0:01:34.240 --> 0:01:38.360 correlations between long term bond yields abroad and what happens 0:01:38.400 --> 0:01:41.080 to US treasury markets is close to a pent so 0:01:41.160 --> 0:01:44.240 steepening yeld curbs everywhere out there, and the world doesn't 0:01:44.240 --> 0:01:46.720 need this right now except maybe here in the United States. 0:01:46.800 --> 0:01:48.360 We'll talk about the FED here in just a minute. 0:01:48.400 --> 0:01:49.880 I want to ask you what you heard from Mario 0:01:49.960 --> 0:01:52.680 Draggy last week. I remember a few meetings back, the 0:01:52.720 --> 0:01:55.480 conversation really centered on scarcity, what what the e c 0:01:55.600 --> 0:01:57.880 B was going to buy? How is that conversation shifted? 0:01:58.120 --> 0:02:02.320 Mario is so slippery in his In his comments this week, 0:02:02.440 --> 0:02:06.640 he talked about, you know, continued, continued bond purchases, you know, forever, 0:02:06.800 --> 0:02:09.400 and that's certainly possible, but he nowhere in his statement 0:02:09.440 --> 0:02:12.400 that he used the word sovereign bond or public sector 0:02:12.440 --> 0:02:15.400 purchase program. And the reality is they're out of public 0:02:15.400 --> 0:02:17.720 sector bonds to buy. They're now buying at the short end. 0:02:17.720 --> 0:02:20.079 In Germany because there aren't enough long bonds for them 0:02:20.080 --> 0:02:22.760 to buy as they step away, as they taper their 0:02:22.800 --> 0:02:27.120 public sector purchasing program. As far as I'm concerned, quantitative 0:02:27.160 --> 0:02:30.280 easing is dead alright because Bind Corporates is not QUI. 0:02:30.560 --> 0:02:32.680 It changes the price of a single security, but not 0:02:32.720 --> 0:02:35.840 the whole YO curve. Good morning everyone, Carl Weinberg with me, 0:02:35.880 --> 0:02:39.079 and there David gur in Washington. What a day David 0:02:39.120 --> 0:02:41.840 to be in Washington. Had no idea the scoring was 0:02:42.160 --> 0:02:48.720 keeping creeping up on us. Carl, I I look at 0:02:48.760 --> 0:02:51.400 all that's going on. There still has to be a 0:02:51.400 --> 0:02:53.880 measurement of g d P. What is your colleague, Jim 0:02:53.960 --> 0:02:57.000 say about the run rate of US g d P 0:02:57.120 --> 0:02:59.320 as we go to this big Fed decision and then 0:02:59.320 --> 0:03:01.960 on from there. You know, Tom, we have the very 0:03:02.040 --> 0:03:04.520 very near term, the current quarter which is certainly shaping 0:03:04.600 --> 0:03:07.440 up to be disappointing, but we have a medium term 0:03:07.480 --> 0:03:09.560 growth running at about two and a quarter up to 0:03:09.600 --> 0:03:14.280 two and three percent according to Jim Mosullivan's forecast. High Frequency, 0:03:14.320 --> 0:03:17.240 you know, is looking at what the Trump administration has promised, 0:03:17.400 --> 0:03:19.519 and we're a little bit more skeptical than the market 0:03:19.560 --> 0:03:21.560 that we're going to get everything that has been in 0:03:21.600 --> 0:03:24.520 the president's rhetoric. So Jim's added a half a percent 0:03:24.560 --> 0:03:26.760 to GDP growth in the second half of this year 0:03:26.800 --> 0:03:29.120 to account for something getting in there in terms of 0:03:29.120 --> 0:03:32.200 infrastructure and so forth. But so far, and let me 0:03:32.240 --> 0:03:34.680 say that this way, probably like many members of the 0:03:34.760 --> 0:03:38.040 f O m C, there's no hard basis to change 0:03:38.080 --> 0:03:40.600 the forecast for GDP based on what we've seen out 0:03:40.600 --> 0:03:43.320 of the Trump administration so far. We'll see if we 0:03:43.320 --> 0:03:45.080 get all the principles in place here. Because of the 0:03:45.120 --> 0:03:47.280 snow for that for that two day meeting, maybe it'll 0:03:47.280 --> 0:03:49.840 have to be done telephonically. But Carl, let me ask 0:03:49.880 --> 0:03:51.400 you about something I read in the Times this morning, 0:03:51.440 --> 0:03:53.560 Benjum and apple Bomb writing about the potential here for 0:03:53.600 --> 0:03:56.840 a collision between the FED share and the President when 0:03:56.880 --> 0:03:59.800 it comes to UH growth, when it comes to what 0:03:59.840 --> 0:04:01.560 the FED is intending to do. What are we going 0:04:01.560 --> 0:04:02.960 to see an impact if indeed they are on this 0:04:03.000 --> 0:04:06.040 slow motion track for collision. Yeah, I think you've You've 0:04:06.080 --> 0:04:08.200 really hit the nail on the head, David. We're looking 0:04:08.320 --> 0:04:11.840 at a FED that has its mandate, and its mandate 0:04:12.080 --> 0:04:17.360 is full employment and price stability, and as certainly Stanley Fisher, 0:04:17.400 --> 0:04:20.160 FED vice chairman has said numerous times where we are 0:04:20.240 --> 0:04:23.719 right now, we're just about at that point at nearly 0:04:23.760 --> 0:04:26.040 four and a half percent unemployment and two and a 0:04:26.120 --> 0:04:29.720 half percent price increases, that we've achieved our objectives. The 0:04:29.760 --> 0:04:32.800 Fed has achieved its objectives. The President wants to see 0:04:32.839 --> 0:04:36.960 more growth, wants to see lower unemployment. And that's that's 0:04:36.960 --> 0:04:39.839 a conflict. And I think that it's going to be 0:04:40.120 --> 0:04:42.360 certainly one of those you know, foot on the accelerator, 0:04:42.400 --> 0:04:44.760 foot on the brake kind of challenges. To see where 0:04:44.760 --> 0:04:49.279 we were when they raise rates Wednesday. Nothing happens, right, 0:04:49.839 --> 0:04:52.919 it's when when when do you presume it begins to 0:04:53.000 --> 0:04:58.279 actually have an effect where higher FED funds yelling rates 0:04:58.560 --> 0:05:03.800 dampen the growth of the growth if you will. Yeah, well, 0:05:03.839 --> 0:05:06.240 monetary policy takes a while to work. We know that. 0:05:06.600 --> 0:05:09.479 And just in the traditional textbook sort of thing, you know, 0:05:09.560 --> 0:05:12.000 monetary policy could take a year or eighteen months to 0:05:12.040 --> 0:05:15.560 affect the economy, but it will affect the financial market sooner. 0:05:15.839 --> 0:05:17.640 And this is you know what we're all sitting on 0:05:17.680 --> 0:05:19.800 the edges of our seat waiting to see. You know 0:05:19.880 --> 0:05:22.520 that the stock market and could look at this, and 0:05:22.520 --> 0:05:24.200 the bond market could look at this and say, gee, 0:05:24.200 --> 0:05:26.159 this is really bad. The feed is hiking rates. You 0:05:26.200 --> 0:05:28.640 know that's going to cause a recession. Or they could 0:05:28.640 --> 0:05:30.200 look at them at this and say, well, the FET 0:05:30.240 --> 0:05:32.599 is hiking rates because the economy is good and we 0:05:32.600 --> 0:05:34.919 should be stronger. And I have no way of predicting 0:05:34.920 --> 0:05:37.240 how the market's going to go for this, but financial 0:05:37.320 --> 0:05:40.360 conditions are where you'll see the first impact of FED policy, 0:05:40.640 --> 0:05:43.800 not necessarily in real investment activity. Any chance they go 0:05:43.880 --> 0:05:46.320 by more than a quarter point here, well, it's not 0:05:46.400 --> 0:05:49.240 in our thinking, and we haven't gotten anything to suggest 0:05:49.320 --> 0:05:52.680 that they're talking in those terms. But you know, anything 0:05:52.800 --> 0:05:56.479 is possible. We're an unexplored territory. At the unemployment rate 0:05:56.480 --> 0:05:59.680 where it is right now, pushing rapidly towards that four 0:05:59.720 --> 0:06:02.440 and a half percent floor that everybody thinks is where 0:06:02.480 --> 0:06:05.599 the bottom has to be, and showing no sign of stopping. 0:06:05.839 --> 0:06:08.359 Look at the strong labor market. Anything is possible. But 0:06:08.440 --> 0:06:10.719 it's not an hour thinking. Help us get out front 0:06:10.800 --> 0:06:12.799 of the event of the week, which is a scoring 0:06:12.839 --> 0:06:15.520 if you will, the Trump Care whatever you wanna call it, 0:06:15.920 --> 0:06:17.600 and also the event of the week, which is David 0:06:17.640 --> 0:06:20.680 Gurrow talking with Alice Rivlin, how does it. How does 0:06:20.760 --> 0:06:26.080 Carl Weinberg use the Congressional Budget Office day to day, Well, 0:06:26.120 --> 0:06:29.039 not very much in this particular instance. You know, they're 0:06:29.040 --> 0:06:31.640 going to be one of many pieces of input into 0:06:31.640 --> 0:06:35.200 a legislative process that only has part of its feet 0:06:35.279 --> 0:06:37.400 on the floor with economics on the same floor as 0:06:37.440 --> 0:06:40.640 economic fundamentals. So at the end of the day, what 0:06:40.720 --> 0:06:43.040 the CBO comes up with is going to be political. 0:06:43.160 --> 0:06:46.080 They are going to be other points of view. Um So, 0:06:46.400 --> 0:06:48.680 I think it's just one more piece into the conversation 0:06:49.200 --> 0:06:51.520 factory in just sort of what this legislation would mean 0:06:52.320 --> 0:06:55.160 for the US economy. If we were to see Obamacare 0:06:55.200 --> 0:06:57.359 removing something new put in what effect would that have 0:06:57.880 --> 0:07:00.440 on the US economy? Well, David, you raised the ten 0:07:00.520 --> 0:07:02.599 squin jillion dollar question, which is what's going to be 0:07:02.640 --> 0:07:05.520 put in place on it simply pulling it out In 0:07:05.600 --> 0:07:08.040 the legislation that's currently in front of us, there are 0:07:08.040 --> 0:07:10.600 a number of unknown unknowns. I know you're gonna be 0:07:10.640 --> 0:07:13.720 talking later about long term sustainability and social security and 0:07:13.760 --> 0:07:17.760 medicare There are media tax consequences because taxes on high 0:07:17.840 --> 0:07:21.280 ink tax tax taxes imposed on high income individuals the 0:07:21.320 --> 0:07:24.120 upper end of the income distribution will be eliminated as 0:07:24.200 --> 0:07:26.720 part of that, and that not only has an impact 0:07:26.760 --> 0:07:29.800 on the economy and on the fiscal budget, but also 0:07:29.960 --> 0:07:33.840 on the overall view of the fiscal hawks within the 0:07:33.880 --> 0:07:36.320 Republican Party who will want to see at some point 0:07:36.560 --> 0:07:40.160 these reductions and taxation paid for. So there are just 0:07:40.280 --> 0:07:42.960 a lot of really great areas and where this conversation 0:07:43.000 --> 0:07:46.240 goes from here, regardless of what CBO says this week, Well, 0:07:46.320 --> 0:07:49.160 let's to talk about here Krol Weinberg high frequency economics 0:07:49.720 --> 0:07:52.400 with us as well, David gurn Washington. David, what are 0:07:52.400 --> 0:07:54.720 you doing down there? I mean you have you have 0:07:54.840 --> 0:07:58.200 vice chair Revative well I adore and folks founded the 0:07:58.280 --> 0:08:00.720 CBO with a lot of courage. Yeah, I mean, I 0:08:00.800 --> 0:08:02.200 just a great opportunity to talk to you about that 0:08:02.240 --> 0:08:03.680 and about the FED as well. And I'm gonna be 0:08:03.680 --> 0:08:06.240 talking with Michael Hayden, the former director of the CIA 0:08:06.440 --> 0:08:08.680 as well today. And uh, you know, we're looking ahead 0:08:08.720 --> 0:08:10.760 to this visit tomorrow that scheduled at least chancel Arangla 0:08:10.800 --> 0:08:13.120 Merkel is supposed to be here. If all goes according 0:08:13.120 --> 0:08:14.840 to plan, I'll be outside the White House. They're anchoring 0:08:14.840 --> 0:08:17.560 our coverage of her visit, but of course with the snow, 0:08:17.560 --> 0:08:19.680 will see what happens, you know, if indeed she'll get here, 0:08:19.720 --> 0:08:21.680 and if the news conference that they've scheduled with her 0:08:22.000 --> 0:08:24.920 and present actually happens. I just saw twelve to twenty 0:08:24.920 --> 0:08:27.280 four inches, Rob Carol and giving some dates here, but 0:08:27.560 --> 0:08:30.560 a lot of different inches. I believe David gur Reagan 0:08:30.600 --> 0:08:34.640 gets forty eight inches. Yeah, that's called a vechan exactly, 0:08:34.679 --> 0:08:37.760 it's a hockey goals now it just drops within six 0:08:37.840 --> 0:08:42.800 gates of American airlines. Carl, you want to comment on this, Tom, 0:08:43.000 --> 0:08:45.960 The reason they invented weather forecasting was to make economic 0:08:46.000 --> 0:08:49.800 forecasters look speed ice. Rob Caroline is the best, and 0:08:49.840 --> 0:08:52.599 we'll have reports to Mr Caroline our lack of a 0:08:52.720 --> 0:08:56.400 stereo weather guy through the morning, Carl Weinberg, Where this 0:08:56.480 --> 0:08:59.800 with high frequency economics? Greg Villiers just published as no 0:09:00.080 --> 0:09:03.960 moments ago and he goes to the gridlock in Washington. 0:09:04.320 --> 0:09:07.520 How can we have gridlock in Washington if I have 0:09:07.559 --> 0:09:12.720 a Republican Senate, a Republican House, and a Republican president. Wait, 0:09:12.760 --> 0:09:16.480 look way, look gridlock? Did you like that? David like that? 0:09:17.559 --> 0:09:21.120 At e c alright? The you know, I'm not a 0:09:21.160 --> 0:09:23.240 political analyst, But you don't have to be a political 0:09:23.280 --> 0:09:26.120 analyst to see that the Republican Party is really several 0:09:26.120 --> 0:09:29.920 parties right now, with several different specific groups. The fiscal Hawks, 0:09:29.960 --> 0:09:32.240 the Tea Party gang have their point of view, the 0:09:32.240 --> 0:09:34.400 Conservatives have their point of view, and then there are 0:09:34.640 --> 0:09:37.560 sub blends of each of the others um and they're 0:09:37.559 --> 0:09:39.880 not united behind the President, who seems to be yet 0:09:39.920 --> 0:09:43.400 another ilk of Republicans. So having all the different control 0:09:43.440 --> 0:09:45.720 of all the different houses is no issurance of success 0:09:45.800 --> 0:09:48.240 right now. And I think that's best illustrated on the 0:09:48.240 --> 0:09:51.000 health care debate, where we have a real question marks 0:09:51.040 --> 0:09:52.800 as to how to move forward and what we're supposed 0:09:52.840 --> 0:09:55.440 to be accomplishing. Carl, I think what Greg Value is 0:09:55.440 --> 0:09:58.199 getting at is that the markets were very enthusiastic after 0:09:58.240 --> 0:09:59.760 the election. They thought there was a high chance that 0:09:59.840 --> 0:10:01.719 some thing was many things we're gonna get done and 0:10:01.760 --> 0:10:04.040 get done quickly. It seems like there's been a bit 0:10:04.080 --> 0:10:06.960 of a reevaluation here, so less from the political perspective 0:10:07.000 --> 0:10:08.880 or from the market's perspective. Have you seen that happen? 0:10:09.280 --> 0:10:12.320 But we haven't seen it yet, David, But my colleague 0:10:12.360 --> 0:10:16.120 Jim O'Sullivan, Chief US economists that High Frequency Economics hasn't 0:10:16.160 --> 0:10:19.520 really budged his forecast very much for the economy since 0:10:19.559 --> 0:10:21.920 the election day. We've he's added half a percent to 0:10:22.000 --> 0:10:24.440 GDP growth in the second half of this year on 0:10:24.720 --> 0:10:26.520 the view that something's going to get done on the 0:10:26.520 --> 0:10:29.760 fiscal side, But overall his view of the economy remains 0:10:29.840 --> 0:10:31.640 the same. The economy is strong, it was going to 0:10:31.760 --> 0:10:36.080 remain strong with or without the Trump agenda, and it's 0:10:36.120 --> 0:10:37.800 not going to move that much in the near term. 0:10:37.880 --> 0:10:40.040 But then if what we're going to get here, and 0:10:40.120 --> 0:10:43.160 Frankie it's more than just a domestic question, is a 0:10:43.360 --> 0:10:45.920 drop in the new confidence. Part of this is the 0:10:45.960 --> 0:10:49.400 animal spirits of confidence, of belief in what we've got. 0:10:49.960 --> 0:10:52.719 Is what we're really going to see here is a 0:10:52.880 --> 0:10:58.200 decline and that buoyancy since November eight. Absolutely, Tom, that's 0:10:58.240 --> 0:11:01.880 the way that Jim sees the UH see this working 0:11:01.880 --> 0:11:05.680 out the resolution between consumer confidence and business confidence that's 0:11:05.679 --> 0:11:09.280 so high and economic indicators that are substantially lower than that. 0:11:09.520 --> 0:11:11.240 At the end of the day, we think the confidence 0:11:11.280 --> 0:11:14.040 indicators work their way back down towards the reality that 0:11:14.120 --> 0:11:16.520 the economy is delivering and not the other way around. 0:11:16.640 --> 0:11:18.480 How about buoyancy in oil prices. What are you and 0:11:18.559 --> 0:11:20.800 Jim seeing when it comes to energy prices. We had 0:11:20.800 --> 0:11:23.559 that DA we report last week on stockpiles, crewed stockpiles 0:11:23.559 --> 0:11:27.440 that record highs. You see that changing pretty pretty brave 0:11:27.559 --> 0:11:31.040 David talking about buoyancy as as prices are actually sinking 0:11:31.600 --> 0:11:35.800 as more as we speak. I've been expecting oil prices 0:11:35.840 --> 0:11:39.080 to go back down to fifty range for some time now. 0:11:39.320 --> 0:11:42.040 The inventories are so high. You've got the sixty six 0:11:42.120 --> 0:11:44.440 days of inventories in the O E C D countries 0:11:44.480 --> 0:11:47.800 and normal is about fifty four. So that's twelve days 0:11:47.920 --> 0:11:51.439 or half a billion barrels of oil sitting around and 0:11:51.480 --> 0:11:53.640 waiting to be dumped on the market. You have tidle 0:11:53.679 --> 0:11:56.559 oil producers coming back on. There's no way prices can 0:11:56.600 --> 0:11:59.480 go anyway but down, and that's been our outlook. It's 0:11:59.480 --> 0:12:01.800 a problem the emerging world that produces this. It's a 0:12:01.800 --> 0:12:05.520 problem for Opeque, it's a problem for Russia. Something to 0:12:05.520 --> 0:12:08.880 think about, David and Tom. As interest rates go up, 0:12:09.160 --> 0:12:12.600 the ability to finance these inventories go down. So one 0:12:12.640 --> 0:12:15.480 of our background views has been that as interest rates 0:12:15.520 --> 0:12:17.959 go up, we're going to see liquidation of these inventories 0:12:18.080 --> 0:12:21.160 and even more downward pressure arm prices. We need to 0:12:21.559 --> 0:12:24.160 very quickly here turn to something more important. Are you 0:12:24.160 --> 0:12:28.160 gonna put chains on your car as you moved north 0:12:28.280 --> 0:12:30.880 from New York City? I am up in Rhinebeck, New 0:12:30.960 --> 0:12:33.160 York Way north of the city. We're expecting two ft 0:12:33.160 --> 0:12:35.120 of snow and I've got a four wheel drive vehicle 0:12:35.160 --> 0:12:37.559 that goes to anything. Did you lose three fingers on 0:12:37.640 --> 0:12:41.560 your left hand freezing? When you know years ago there's 0:12:41.559 --> 0:12:45.319 always one piece of one rear tire chain that doesn't work. 0:12:46.080 --> 0:12:48.680 You need to get out a blowtorch. I haven't. I 0:12:48.720 --> 0:12:50.800 haven't had that experience. I haven't had chain since I 0:12:50.840 --> 0:12:52.360 lived in Italy and I had to get my off 0:12:52.640 --> 0:12:55.360 Romeo sportster into the Alps. Is a Southern Is a 0:12:55.400 --> 0:13:00.240 Southern boy ever enjoyed chain, slush and salt? David on this. 0:13:00.400 --> 0:13:03.280 I have never applied chains to a vehicle, but I've 0:13:03.280 --> 0:13:08.439 seen them in action. Very good. We have chains coming up, folks. 0:13:08.440 --> 0:13:10.319 We're gonna get a real What are you gonna get 0:13:10.320 --> 0:13:12.559 carl up north? More than two feet? They're saying two 0:13:12.640 --> 0:13:14.920 feet at least up where I am. That's what the 0:13:14.920 --> 0:13:17.880 local forecasters are saying, and of course in the mountains, 0:13:17.880 --> 0:13:19.560 it's probably gott to be more than that. Right at 0:13:19.559 --> 0:13:22.240 the front of the cat Skills Storm Surveillance Center here 0:13:22.280 --> 0:13:24.280 for us, we'll have much where Rob carroll and will 0:13:24.320 --> 0:13:27.160 give us some perspective. And this is what Rob does best, 0:13:27.240 --> 0:13:30.400 is these nor easters for those of you globally nor easters, 0:13:30.440 --> 0:13:32.280 and I'm not gonna employ to the weather guy here, 0:13:32.280 --> 0:13:34.600 but they have a life of their own. In any 0:13:34.679 --> 0:13:38.240 forecasts are always with a big asterisk, like maybe we 0:13:38.320 --> 0:13:40.960 sort of know what's gonna go on. But Rob Carollin 0:13:41.040 --> 0:13:45.000 will give us perspective through today and whenever the snow 0:13:45.040 --> 0:13:46.840 st gonna get some milk and bread, Tom, you're gonna 0:13:46.880 --> 0:13:49.000 run out. Oh yeah, we've already done that. We've stuck. 0:13:49.280 --> 0:13:54.199 We're down at Whole Foods. Everybody's stuck in twa water, milk, eggs, 0:13:54.240 --> 0:13:58.199 twelve cane bed in the cal David in the produced 0:13:58.240 --> 0:14:01.959 down at Columbus Circle with the kill It was this 0:14:02.080 --> 0:14:07.079 big hole with the killer people that taken the Colchip's yeah, 0:14:07.160 --> 0:14:10.120 Colin of the twins, he's stuck up at fourteen bags 0:14:10.480 --> 0:14:13.360 of kil Chip. It's a storm coming. We'll have more 0:14:13.360 --> 0:14:30.840 for your Bloomberg Radio Worldwide Time Keenan New York, David 0:14:30.880 --> 0:14:37.600 Guru at the one FM News Bureau in Washington, and 0:14:37.640 --> 0:14:39.920 you have a special guest, David. Yeah. The backdrop from 0:14:39.920 --> 0:14:42.080 my visit here, obviously is the ongoing debate on Capitol 0:14:42.160 --> 0:14:45.880 Hill about the new healthcare legislation, and we await eagerly 0:14:45.920 --> 0:14:48.720 the report from the CBO, the score from the CBO, 0:14:49.040 --> 0:14:51.720 to see what that organization has to say about that 0:14:51.760 --> 0:14:53.400 piece of legislation might be. Again, its joints me here 0:14:53.400 --> 0:14:56.200 in the studio. She's the president of the Committee for 0:14:56.280 --> 0:14:58.880 Responsible Federal Budget. Great to have you here, mine. Let 0:14:58.880 --> 0:15:00.840 me just start. We'll talk about death sits all that 0:15:00.880 --> 0:15:02.960 in just a sect. But what's the role of the 0:15:02.960 --> 0:15:05.520 CBO as you see it? You've heard the commentary about 0:15:05.520 --> 0:15:08.120 it in recent weeks, some members the administration calling its 0:15:08.120 --> 0:15:10.800 integrity into into questions. How do you regard the CBO, 0:15:10.840 --> 0:15:13.080 how do you use the CBO? And how novel is this? 0:15:13.200 --> 0:15:16.160 How different is it to hear its integrity called into question? 0:15:16.680 --> 0:15:19.720 So the CBO plays an incredibly important role, I believe 0:15:19.800 --> 0:15:22.520 because in a in a town, and in an environment 0:15:22.520 --> 0:15:24.600 where things have become more and more partisan, more and 0:15:24.600 --> 0:15:27.000 more political, and they're we're seeing kind of the ongoing 0:15:27.200 --> 0:15:32.240 under mining of impartial institutions. To me, the Congressional Budget 0:15:32.280 --> 0:15:34.440 Office is the one that I hold up as this 0:15:34.520 --> 0:15:38.400 is an institution that is not political, that is analytical, 0:15:38.760 --> 0:15:40.520 and the scores that it puts out. Of course they're 0:15:40.560 --> 0:15:43.640 not perfect because they are doing major projections of major 0:15:43.720 --> 0:15:49.240 economic and policy pieces of legislation, but they are unbiased 0:15:49.240 --> 0:15:52.200 in their work, which is so important and critical at 0:15:52.200 --> 0:15:55.000 a time when you have a hard time trusting the 0:15:55.000 --> 0:15:57.280 two parties take on something and you really just want 0:15:57.320 --> 0:15:59.600 to know what the numbers are. So I would say 0:16:00.000 --> 0:16:02.640 CBO is one of I think the most important players 0:16:02.760 --> 0:16:06.160 in keeping us honest and not political, and I've been 0:16:06.240 --> 0:16:08.520 really disappointed, I have to say, and what I think 0:16:08.560 --> 0:16:11.960 is a strategy of undermining their credibility. Instead of saying 0:16:12.240 --> 0:16:14.040 we want numbers that are going to add up, or 0:16:14.080 --> 0:16:16.000 if they give us a score that says this cost 0:16:16.040 --> 0:16:17.840 more than we're supposed to, how do we go back 0:16:17.840 --> 0:16:21.960 and improve the legislation. So I hope um that the 0:16:21.960 --> 0:16:25.360 politics of undermining CBO will stop as quickly as possible. 0:16:25.760 --> 0:16:27.520 Last week we had Gary Cohen, the head of the NBC, 0:16:27.560 --> 0:16:29.520 speaking he said that we care about the deficit, we 0:16:29.560 --> 0:16:32.360 care about revenue that from the administration. Do you take 0:16:32.400 --> 0:16:34.320 him at face value? Have you seen evidence of that 0:16:34.400 --> 0:16:37.280 here in these first six weeks of this administration. Well, 0:16:37.320 --> 0:16:39.640 it's hard to see the evidence because the policies haven't 0:16:39.680 --> 0:16:41.960 come out yet. Um. What I'm looking at is who's 0:16:41.960 --> 0:16:45.200 saying what an administration? And I was very encouraged by 0:16:45.360 --> 0:16:48.400 Director Cohen's remarks about how they don't want to make 0:16:48.400 --> 0:16:51.440 the deficit worse over the next ten years. Um, and 0:16:51.520 --> 0:16:53.720 let me just set the stage on that the deficit 0:16:53.840 --> 0:16:55.720 is going to be made much worse than the next 0:16:55.720 --> 0:16:58.760 ten years. If we do nothing, we're on track to 0:16:58.800 --> 0:17:01.360 borrow nine trillion dollar over the next ten years. So 0:17:01.400 --> 0:17:03.160 I interpreted his point of saying we're not going to 0:17:03.240 --> 0:17:05.399 make that worse. I'd like to nudge them in a 0:17:05.400 --> 0:17:07.520 different direction, which is we're actually going to make that better. 0:17:08.040 --> 0:17:11.480 But I thought his remarks are very encouraging, particularly because 0:17:11.480 --> 0:17:13.800 we've heard about a lot of policies that could and 0:17:13.920 --> 0:17:17.520 would worsen the fiscal situation, whether it's healthcare if they 0:17:17.560 --> 0:17:20.200 do get a bad score and proceed without worrying about that, 0:17:20.640 --> 0:17:22.680 or tax or form if it were to lose revenue 0:17:22.760 --> 0:17:24.760 or infrastructure if it wouldn't be very expensive and not 0:17:24.800 --> 0:17:27.560 paid for. So I thought he'd put an important marker 0:17:27.600 --> 0:17:29.640 down and was really pleased to see those cards. Help 0:17:29.680 --> 0:17:32.560 me with the text credits. I mean, folks, I don't 0:17:32.600 --> 0:17:35.000 want to get into the weeds on this debate, but 0:17:35.119 --> 0:17:38.120 basically they want to shift the tax credits, and there's 0:17:38.119 --> 0:17:42.320 an uproar that they're of minimal value to our truly 0:17:42.400 --> 0:17:45.680 poor and needy people. My help us with your analysis 0:17:45.680 --> 0:17:48.800 of tax credits. So what we're doing is we're switching 0:17:48.840 --> 0:17:52.240 the way that we're creating the subsidies within our healthcare program. 0:17:52.240 --> 0:17:54.920 And there's always going to be subsidies, because for instance, 0:17:54.920 --> 0:17:57.480 the young are going to subsidize the old, the rich 0:17:57.480 --> 0:17:59.520 are going to subsidize the poor. The question is to 0:17:59.560 --> 0:18:02.240 what ex sent those will be true and what structure 0:18:02.359 --> 0:18:05.240 we're using. This new replacement plan is going to be 0:18:05.280 --> 0:18:08.280 dependent on tax credits, and there was a big fight 0:18:08.320 --> 0:18:11.959 whether those tax credits should be refundable and whether they 0:18:11.960 --> 0:18:14.200 should be refundable meaning that you would get them even 0:18:14.240 --> 0:18:17.000 if you didn't pay income taxes, and advanceable meaning you 0:18:17.000 --> 0:18:19.280 would get them in advance and they ended up creating 0:18:19.280 --> 0:18:21.960 a plan that would include those, so those would help 0:18:22.000 --> 0:18:26.240 people who are above the qualifying lines from Medicaid, but 0:18:26.320 --> 0:18:28.800 on the much poorer side of the spectrum. There's been 0:18:28.840 --> 0:18:31.640 a lot of pushback from the Conservatives, in particular because 0:18:31.680 --> 0:18:34.480 they see that as a new form of entitlement spending. 0:18:34.760 --> 0:18:37.240 And one of their purposes to repeal Obamacare in the 0:18:37.240 --> 0:18:40.040 first place was they didn't like the entitlement nature of it. 0:18:40.080 --> 0:18:42.840 They wanted to change that, so they're unhappy with those 0:18:42.840 --> 0:18:45.520 refundable tax credits. This we could get what's called the 0:18:45.560 --> 0:18:48.320 skinny budget. We had a broad overview from the White 0:18:48.359 --> 0:18:50.320 House of what it wants. It's a budget to be 0:18:50.400 --> 0:18:52.880 a couple of weeks back. Of course, the headline figure 0:18:52.880 --> 0:18:55.520 there was that fifty four billion dollars in additional defense spending. 0:18:55.560 --> 0:18:58.880 The administrations say they'd offset that with cuts to other programs. 0:18:58.920 --> 0:19:00.520 How difficult is that going to be? You listen to 0:19:00.600 --> 0:19:02.440 the President speak to the Joint Session of Congress. He 0:19:02.480 --> 0:19:04.879 talked about doing away with the sequester. Is if it 0:19:04.880 --> 0:19:07.400 could be done so easily by waiving a wand how 0:19:07.400 --> 0:19:09.720 hard is that going to be? Uh? And what do 0:19:09.720 --> 0:19:11.720 you make there? Over the desire to increase the defense 0:19:11.760 --> 0:19:16.000 budget rather than uh, you know, cutting other programs. So 0:19:16.080 --> 0:19:17.920 the first point about the skinny budget is it's going 0:19:17.960 --> 0:19:21.960 to be really, really really skinny. Um emaciated in some 0:19:22.080 --> 0:19:24.560 ways because normally when a new president comes in, they 0:19:24.600 --> 0:19:27.120 do do a much smaller budget because they haven't had time. 0:19:27.160 --> 0:19:29.439 Director Mulvaney hasn't been in place to put together a 0:19:29.440 --> 0:19:31.880 full budget. But this one is only going to look 0:19:31.880 --> 0:19:35.920 at the discretionary portion of the budget defense and domestic discretionary, 0:19:36.280 --> 0:19:39.000 nothing on revenue, nothing on entitlements, and it may only 0:19:39.000 --> 0:19:40.960 be for one year, so it really doesn't meet the 0:19:41.000 --> 0:19:43.600 full picture of the budget. In terms of the priorities 0:19:43.600 --> 0:19:46.640 we're hearing about this budget, the increase in defense will 0:19:46.640 --> 0:19:49.679 be paid for for cuts and domestic discretionary. What I 0:19:49.680 --> 0:19:52.160 applaud them for is that they're paying for it. If 0:19:52.160 --> 0:19:54.080 you want to do more of something, how are you 0:19:54.119 --> 0:19:56.600 going to pay for it? That's very important. Now many 0:19:56.600 --> 0:19:58.560 people disagree with the priorities, and I think they are 0:19:58.640 --> 0:20:01.320 legitimate disagreements on both side. I leave it to the 0:20:01.359 --> 0:20:03.760 security experts whether we need more or less in defense, 0:20:04.280 --> 0:20:06.440