1 00:00:02,600 --> 00:00:05,320 Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the 2 00:00:05,360 --> 00:00:08,399 Speaker 1: top stories in the coming week from our Daybreak anchors 3 00:00:08,400 --> 00:00:10,480 Speaker 1: all around the world, and straight ahead on the program. 4 00:00:10,560 --> 00:00:13,640 Speaker 1: Fed Chair J Powell heads for Capitol Hill. I'm Tom 5 00:00:13,680 --> 00:00:16,520 Speaker 1: Busby in New York. I'm Stephen card in London, Whereishi 6 00:00:16,520 --> 00:00:19,080 Speaker 1: Stanaka is hoping to build on an improvement in ties 7 00:00:19,120 --> 00:00:21,520 Speaker 1: with his European neighbors as he heads to France for 8 00:00:21,560 --> 00:00:25,239 Speaker 1: a summit with President and Nanionncom. I'm Joe Matthew in Washington, 9 00:00:25,320 --> 00:00:28,280 Speaker 1: where we're preparing for President Biden to drop his new budget. 10 00:00:28,320 --> 00:00:30,840 Speaker 1: I Ran Curtis in Hong Kong. We look at President 11 00:00:30,920 --> 00:00:36,280 Speaker 1: she touting intense changes to China's governance. That's all straight 12 00:00:36,280 --> 00:00:40,680 Speaker 1: ahead on Bloomberg Daybreak Weekend on Bloomberg eleven, FREEO, New York, 13 00:00:40,760 --> 00:00:44,400 Speaker 1: Bloomberg ninety nine one, Washington, d C, Bloomberg one oh 14 00:00:44,440 --> 00:00:48,919 Speaker 1: six one, Boston, Bloomberg nine sixty, San Francisco, DAB, Digital 15 00:00:49,000 --> 00:00:52,480 Speaker 1: Radio London, Sirius XM one nineteen and around the world 16 00:00:52,560 --> 00:00:55,920 Speaker 1: on Bloomberg Radio dot com and via the Bloomberg Business App. 17 00:00:59,600 --> 00:01:01,680 Speaker 1: Good day to you. I'm Tom Busby, and we begin 18 00:01:01,720 --> 00:01:05,400 Speaker 1: today's program with Federal Reserve Chair Jay Powell, the FED head. 19 00:01:05,680 --> 00:01:08,800 Speaker 1: We'll be giving a semi annual monetary policy report to 20 00:01:08,840 --> 00:01:12,039 Speaker 1: Congress this week. Also a look at the strength of 21 00:01:12,120 --> 00:01:15,000 Speaker 1: the US labor market with the February jobs report. This 22 00:01:15,080 --> 00:01:17,360 Speaker 1: is coming Friday. Now. Joining me now to talk about 23 00:01:17,400 --> 00:01:22,440 Speaker 1: all of that. Bloomberg's International and Economics policy correspondent Michael McKee. Michael, 24 00:01:22,640 --> 00:01:26,080 Speaker 1: thank you for being here. Lovely to be here. All right. 25 00:01:26,760 --> 00:01:31,000 Speaker 1: Inflation still soubornly high, borrowing rates keep going higher, consumers 26 00:01:31,000 --> 00:01:33,560 Speaker 1: are worried despite the strength and the job market and 27 00:01:33,600 --> 00:01:37,080 Speaker 1: the stock market as apparently stalled. What will Chairmer and 28 00:01:37,080 --> 00:01:40,600 Speaker 1: Powell's message to be to lawmakers. Well, higher for longer 29 00:01:40,720 --> 00:01:43,040 Speaker 1: is going to be the shorthand version of what he's 30 00:01:43,040 --> 00:01:46,319 Speaker 1: going to be saying. The question is how high and 31 00:01:46,560 --> 00:01:50,080 Speaker 1: for how long the latest data have, As you mentioned, 32 00:01:50,080 --> 00:01:53,960 Speaker 1: I've been particularly great. We have seen strength in the 33 00:01:54,040 --> 00:01:58,640 Speaker 1: labor market and strength in wages, and consumers have been 34 00:01:58,640 --> 00:02:00,800 Speaker 1: spending a lot of money, which all would be good 35 00:02:00,800 --> 00:02:03,160 Speaker 1: in a normal period, but with inflation where it is, 36 00:02:03,480 --> 00:02:05,640 Speaker 1: the FED would like to see some sort of slowdown 37 00:02:05,720 --> 00:02:09,320 Speaker 1: in demand. So the question is, did the latest numbers 38 00:02:09,360 --> 00:02:12,680 Speaker 1: that we've gotten push the Fed. Will it push the 39 00:02:12,720 --> 00:02:16,120 Speaker 1: Fed to do fifty basis points instead of twenty five 40 00:02:16,160 --> 00:02:18,960 Speaker 1: basis points on March twenty second? And how long do 41 00:02:19,000 --> 00:02:22,760 Speaker 1: they think they need to leave rates high? We had 42 00:02:22,960 --> 00:02:25,960 Speaker 1: some Fed speakers saying at least through the end of 43 00:02:25,960 --> 00:02:31,120 Speaker 1: the year. We'll see where the chairman is on that. Yeah, 44 00:02:31,120 --> 00:02:33,960 Speaker 1: we had several top FED officials talking about being open 45 00:02:34,000 --> 00:02:37,440 Speaker 1: to bigger interest rate hikes if necessary. Here's what Minneapolis 46 00:02:37,480 --> 00:02:40,160 Speaker 1: Fed President Neil cash Carey had to say about that 47 00:02:40,320 --> 00:02:42,840 Speaker 1: this week. There's a lot of attention to the next 48 00:02:42,880 --> 00:02:45,280 Speaker 1: meeting in March. Is it going to be twenty five 49 00:02:45,360 --> 00:02:47,600 Speaker 1: or is it going to be fifty? I'm open minded 50 00:02:47,720 --> 00:02:50,200 Speaker 1: at this point about whether it's twenty five or fifty 51 00:02:50,200 --> 00:02:53,520 Speaker 1: basis points. To me much what's much more important than 52 00:02:53,560 --> 00:02:56,640 Speaker 1: whether it's twenty five or fifty is what we signal 53 00:02:57,160 --> 00:03:01,200 Speaker 1: in what's called the plot. I've got my own dot plot, 54 00:03:01,320 --> 00:03:04,280 Speaker 1: and it's all about inflation and trying to combat it. 55 00:03:04,480 --> 00:03:07,480 Speaker 1: How bad is inflation right now or how does the 56 00:03:07,520 --> 00:03:10,280 Speaker 1: FEDS c inflation right now? And why does the scene 57 00:03:10,280 --> 00:03:12,840 Speaker 1: to be getting worse? To you, ask anybody on the street, 58 00:03:12,880 --> 00:03:15,959 Speaker 1: anybody in the store, You know, it just keeps getting worse. Well, 59 00:03:15,960 --> 00:03:20,119 Speaker 1: the problem is nothing moves in a straight line. Inflation 60 00:03:20,200 --> 00:03:22,839 Speaker 1: has come down significantly. It was around nine percent when 61 00:03:23,160 --> 00:03:26,240 Speaker 1: the FED got started, and now we're in the sixes 62 00:03:26,240 --> 00:03:29,600 Speaker 1: for CPI and the fives for the FEDS indicator PC. 63 00:03:30,280 --> 00:03:32,919 Speaker 1: So we have seen a big drop in inflation. It's 64 00:03:32,960 --> 00:03:37,680 Speaker 1: about halved, but it's still significantly above where the FEDS 65 00:03:37,760 --> 00:03:41,880 Speaker 1: target is, the two percent target. And at this point, 66 00:03:41,920 --> 00:03:47,040 Speaker 1: the easy, low hanging fruit to bring inflation down much 67 00:03:47,040 --> 00:03:49,800 Speaker 1: of that has gone away. We've already seen a decline 68 00:03:49,800 --> 00:03:53,680 Speaker 1: in goods prices, we have seen energy prices come down. 69 00:03:54,120 --> 00:03:57,800 Speaker 1: It's the stuff on the services side, driven in many 70 00:03:57,840 --> 00:04:02,200 Speaker 1: cases by higher wages that's still has to be attacked 71 00:04:02,240 --> 00:04:04,840 Speaker 1: by the Fed. And that's why they're thinking they're going 72 00:04:04,880 --> 00:04:07,560 Speaker 1: to need to be at a higher rate for longer, 73 00:04:07,640 --> 00:04:10,360 Speaker 1: because they need to have the full weight of the 74 00:04:10,400 --> 00:04:15,800 Speaker 1: infest rates they've increased hit decision making in the economy. Now, 75 00:04:15,960 --> 00:04:21,080 Speaker 1: this idea of higher rates for longer to come, will 76 00:04:21,120 --> 00:04:24,240 Speaker 1: it be a tough sell to Congress? I mean there's 77 00:04:24,279 --> 00:04:27,039 Speaker 1: a lot on his plate, Pal's plate. How is he 78 00:04:27,040 --> 00:04:29,040 Speaker 1: going to sell it to these and what's the reception 79 00:04:29,120 --> 00:04:32,919 Speaker 1: going to be first to the House, then to the Senate. Well, 80 00:04:33,720 --> 00:04:36,120 Speaker 1: the FED chairman is always caught between the two political 81 00:04:36,160 --> 00:04:41,080 Speaker 1: parties up on Capitol Hill. Each one will try to 82 00:04:41,120 --> 00:04:45,120 Speaker 1: turn the testimony to try to see if there's some 83 00:04:45,160 --> 00:04:49,240 Speaker 1: support from the FED chair for their political views. In 84 00:04:49,240 --> 00:04:52,559 Speaker 1: this case, it's the Democrats who are worried about infest 85 00:04:52,640 --> 00:04:54,679 Speaker 1: rates being too high for too long because they're worried 86 00:04:54,680 --> 00:04:58,600 Speaker 1: about unemployment going up, and usually when unemployment goes up, 87 00:04:58,640 --> 00:05:03,560 Speaker 1: the lowest on the economic scale suffer the most. The 88 00:05:03,600 --> 00:05:05,720 Speaker 1: answer to that, Paul will say is, we don't think 89 00:05:05,839 --> 00:05:08,520 Speaker 1: we have to have unemployment goal up a lot, because 90 00:05:08,839 --> 00:05:11,480 Speaker 1: the market is a labor market and the economy are 91 00:05:11,520 --> 00:05:15,680 Speaker 1: so strong it can withstand some higher interest rates. Republicans 92 00:05:15,680 --> 00:05:18,520 Speaker 1: will counter that by saying, while the economy is so strong, 93 00:05:19,200 --> 00:05:21,920 Speaker 1: inflation is not coming down fast enough, so you need 94 00:05:21,960 --> 00:05:24,479 Speaker 1: to do more. And Pau will try to steer a 95 00:05:24,600 --> 00:05:28,680 Speaker 1: course between the two of them, protecting the Fed's independence 96 00:05:28,680 --> 00:05:31,440 Speaker 1: and saying we will do what's best for the economy 97 00:05:31,760 --> 00:05:34,880 Speaker 1: in our best judgment and laying out those goals for 98 00:05:34,920 --> 00:05:38,680 Speaker 1: the economy. For his policy for interest rates, I mean, 99 00:05:39,360 --> 00:05:42,720 Speaker 1: he's not going to win against divided Congress is you 100 00:05:42,760 --> 00:05:46,520 Speaker 1: can't ever win up on Capitol Hill. No matter what 101 00:05:46,560 --> 00:05:50,000 Speaker 1: the Fed Chairman says, somebody is going to be unhappy 102 00:05:50,040 --> 00:05:52,880 Speaker 1: with it, and many of them will give speeches rather 103 00:05:52,960 --> 00:05:56,680 Speaker 1: than ask questions because that's what politicians do. One of 104 00:05:56,720 --> 00:06:00,160 Speaker 1: the interesting things to watch is going to be what 105 00:06:00,320 --> 00:06:04,800 Speaker 1: he says about the debt limit. That's going to be 106 00:06:04,880 --> 00:06:08,080 Speaker 1: a question that someone will bring up, and he has 107 00:06:08,640 --> 00:06:12,240 Speaker 1: largely avoided any kind of characterization about what it would 108 00:06:12,240 --> 00:06:14,640 Speaker 1: do to the economy. He says, only there's that's only 109 00:06:14,680 --> 00:06:17,159 Speaker 1: one solution, raise the debt limit, and I'm not going 110 00:06:17,240 --> 00:06:19,520 Speaker 1: to talk about it beyond that. But you can imagine 111 00:06:19,560 --> 00:06:23,000 Speaker 1: that both sides will try to get him to comment 112 00:06:23,120 --> 00:06:26,080 Speaker 1: in some way, and it's also totally out of his purview. 113 00:06:26,120 --> 00:06:30,440 Speaker 1: That is Congress's exactly. Well, it's an economic issue for 114 00:06:30,600 --> 00:06:35,480 Speaker 1: the US, so the Fed chairman has credibility on economic issues, 115 00:06:35,720 --> 00:06:38,440 Speaker 1: so they'll try to get him to The Republicans will 116 00:06:38,480 --> 00:06:41,719 Speaker 1: ask him to say that we need to cut spending 117 00:06:41,800 --> 00:06:45,960 Speaker 1: significantly because we're on an unsustainable fiscal path, which he 118 00:06:46,000 --> 00:06:48,320 Speaker 1: has said before. He just hasn't said that you need 119 00:06:48,360 --> 00:06:52,000 Speaker 1: to do it today, And the Democrats will say, well, 120 00:06:52,080 --> 00:06:55,120 Speaker 1: you're going to crash the economy if you breach the 121 00:06:55,160 --> 00:06:58,800 Speaker 1: debt limit and default, and he doesn't want to get 122 00:06:59,200 --> 00:07:02,919 Speaker 1: in between the two sides. Got it all right, Michael, 123 00:07:02,960 --> 00:07:05,919 Speaker 1: Let's start to this Friday's February jobs report in the 124 00:07:05,960 --> 00:07:08,200 Speaker 1: state of the US labor market. Boy, we have a 125 00:07:08,240 --> 00:07:11,360 Speaker 1: real surprise in January, over half a million jobs added, 126 00:07:11,600 --> 00:07:15,080 Speaker 1: the unemployment rate, the Lowison's nineteen sixty nine first time 127 00:07:15,160 --> 00:07:18,200 Speaker 1: jobless claims. The last few weeks we've seen an upside 128 00:07:18,240 --> 00:07:21,760 Speaker 1: surprise there. What are we looking at for the labor 129 00:07:21,840 --> 00:07:25,120 Speaker 1: market for jobs added in February, Well, we're kind of 130 00:07:25,120 --> 00:07:27,920 Speaker 1: in the same position we were a month ago, where 131 00:07:28,800 --> 00:07:33,000 Speaker 1: economists are looking for a significant slowdown from last month. 132 00:07:33,160 --> 00:07:35,840 Speaker 1: They're looking for about the same number that they forecast 133 00:07:35,920 --> 00:07:39,400 Speaker 1: last month, two hundred and twenty thousand and an unemployment 134 00:07:39,480 --> 00:07:42,440 Speaker 1: rate that's unchanged at three point four percent. Both would 135 00:07:42,480 --> 00:07:45,880 Speaker 1: be very strong numbers. It's a little harder to characterize 136 00:07:45,920 --> 00:07:50,400 Speaker 1: the total jobs numbers in that way because of five 137 00:07:50,560 --> 00:07:53,760 Speaker 1: hundred and seventeen thousand jobs in January, but a lot 138 00:07:53,840 --> 00:07:55,440 Speaker 1: of people, a lot of you kind of think that 139 00:07:55,440 --> 00:07:58,360 Speaker 1: that was a function of the weather and some seasonal 140 00:07:58,360 --> 00:08:01,480 Speaker 1: adjustment changes that the bl makes and so that it 141 00:08:01,600 --> 00:08:04,320 Speaker 1: should come down. But at this point there doesn't seem 142 00:08:04,360 --> 00:08:07,440 Speaker 1: to be any significant sign in any of the other 143 00:08:07,520 --> 00:08:12,840 Speaker 1: indicators of labor market strength that would suggest we're seeing 144 00:08:12,880 --> 00:08:15,840 Speaker 1: the kind of results that the FED is expecting a 145 00:08:15,960 --> 00:08:20,280 Speaker 1: rising unemployment rate because demand is falling in the economy. 146 00:08:20,400 --> 00:08:23,440 Speaker 1: This is a completely different time. We're coming out of 147 00:08:23,480 --> 00:08:28,640 Speaker 1: the pandemic recession and employers couldn't find workers for a 148 00:08:28,760 --> 00:08:33,000 Speaker 1: very long time, and in some sectors they still can't, 149 00:08:33,480 --> 00:08:36,199 Speaker 1: and so it seems that at this point companies are 150 00:08:36,240 --> 00:08:39,839 Speaker 1: holding on to workers rather than letting them go as 151 00:08:39,840 --> 00:08:44,120 Speaker 1: they might ordinarily do when the economy slows. And anecdotally 152 00:08:44,160 --> 00:08:46,959 Speaker 1: we hear of tech sector workers being laid off on 153 00:08:47,280 --> 00:08:50,079 Speaker 1: moss at some big companies finding jobs elsewhere. Whether it's 154 00:08:50,080 --> 00:08:52,920 Speaker 1: a autowindustry, yeah, well, the tech industry is those are 155 00:08:53,000 --> 00:08:55,640 Speaker 1: high scaled people generally, and so they can find jobs 156 00:08:55,720 --> 00:08:58,920 Speaker 1: more easily. I remember a CEO of a tech company 157 00:08:58,960 --> 00:09:00,959 Speaker 1: telling me a couple years ago every company is a 158 00:09:01,000 --> 00:09:03,920 Speaker 1: tech company now because we all have websites and we 159 00:09:04,000 --> 00:09:06,959 Speaker 1: all have technology that needs to be maintained. So there 160 00:09:07,000 --> 00:09:09,160 Speaker 1: are jobs out there. It's more the people on the 161 00:09:09,160 --> 00:09:15,200 Speaker 1: lower end construction workers. With housing slowing, there should be 162 00:09:15,400 --> 00:09:18,240 Speaker 1: an impact on construction, but we haven't seen it yet. 163 00:09:18,800 --> 00:09:23,440 Speaker 1: Retail sales, there should be an impact on retail sales workers, 164 00:09:23,480 --> 00:09:26,240 Speaker 1: and we haven't seen it yet. That's what everybody's waiting for, 165 00:09:26,320 --> 00:09:29,079 Speaker 1: is some of those early signs that maybe the economy 166 00:09:29,120 --> 00:09:32,160 Speaker 1: is slowing in companies or don't need as many workers, 167 00:09:32,200 --> 00:09:35,600 Speaker 1: but it hadn't happen yet. Well, speaking of retail sales, 168 00:09:35,600 --> 00:09:38,959 Speaker 1: we heard from some major retailers last week. Most reported 169 00:09:39,040 --> 00:09:42,600 Speaker 1: pretty solid holiday quarterly sales, but just about all of 170 00:09:42,600 --> 00:09:45,320 Speaker 1: them with week outlooks for the full year expecting a 171 00:09:45,360 --> 00:09:47,960 Speaker 1: big pullback in consumer spending, a lot of worries about 172 00:09:47,960 --> 00:09:51,120 Speaker 1: the economy slowing. What does this tell us about retailers, 173 00:09:51,160 --> 00:09:55,720 Speaker 1: about the economy and how retailers see consumers right now. Well, 174 00:09:55,760 --> 00:09:59,160 Speaker 1: I think retailers are like everybody else, reading the headlines 175 00:09:59,400 --> 00:10:03,480 Speaker 1: and listening to everybody talk about the inevitable recession, the 176 00:10:03,480 --> 00:10:08,240 Speaker 1: most the longest awaited recession in history. Perhaps it may 177 00:10:08,240 --> 00:10:13,120 Speaker 1: be the goodot of recessions, and so they're talking at 178 00:10:13,120 --> 00:10:17,680 Speaker 1: this point like they're preparing, they've drawn up the plans 179 00:10:17,760 --> 00:10:19,960 Speaker 1: for dealing with a recession. But they haven't put them 180 00:10:19,960 --> 00:10:24,800 Speaker 1: into practice yet because we haven't seen a pullback significantly 181 00:10:25,240 --> 00:10:28,480 Speaker 1: in consumer spending, and so where you may see it 182 00:10:28,559 --> 00:10:31,040 Speaker 1: first is in retail inventories. They may not buy as 183 00:10:31,120 --> 00:10:34,720 Speaker 1: much stuff ahead of time. The question is how long 184 00:10:35,240 --> 00:10:38,240 Speaker 1: do they hold off, because when you get into June, 185 00:10:39,600 --> 00:10:41,680 Speaker 1: that's about the time that they start ordering for the 186 00:10:41,720 --> 00:10:44,000 Speaker 1: holiday season. And they've got to try to make a 187 00:10:44,040 --> 00:10:46,560 Speaker 1: prediction for the holiday season, and this year I can 188 00:10:46,600 --> 00:10:49,200 Speaker 1: imagine it's going to be very difficult. Well, Michael McKay, 189 00:10:49,200 --> 00:10:52,600 Speaker 1: Bloomberg's International Economics and Policy correspondent, Thank you so much 190 00:10:52,640 --> 00:10:55,600 Speaker 1: for being here, Michael. Coming up on Bloomberg Daybreak weekend, 191 00:10:55,720 --> 00:10:59,360 Speaker 1: Britain's Prime minister meets with France's leader, Emmanuel McCrone. I'm 192 00:10:59,400 --> 00:11:15,960 Speaker 1: Tom Buzzby and this is Bloomberg. This is Bloomberg Daybreak weekend, 193 00:11:15,960 --> 00:11:18,439 Speaker 1: our global look ahead at the top stories for investors 194 00:11:18,440 --> 00:11:20,880 Speaker 1: in the coming week. I'm Tom Busby in New York. 195 00:11:21,200 --> 00:11:24,559 Speaker 1: Up later in our program Biden's next budget and Republican 196 00:11:24,640 --> 00:11:28,440 Speaker 1: pressure for spending cuts. But first after the post breaks 197 00:11:28,440 --> 00:11:31,240 Speaker 1: it agreement on Northern Ireland reach between the EU and 198 00:11:31,240 --> 00:11:34,720 Speaker 1: the UK, the British Prime Minister has another important European 199 00:11:34,800 --> 00:11:38,040 Speaker 1: rendezvous looming as he heads to Paris for a summit 200 00:11:38,080 --> 00:11:41,640 Speaker 1: with Francis Emmanuel Macrone. For more, let's hit to London 201 00:11:41,679 --> 00:11:45,160 Speaker 1: and bring in Bloomberg Daybreak europe banker Stephen Carroll tom 202 00:11:45,280 --> 00:11:48,480 Speaker 1: Rishis Nach's trip to Paris falls neatly after he's resolved 203 00:11:48,520 --> 00:11:51,839 Speaker 1: the biggest beef with his neighbors, disagreements over the post 204 00:11:51,840 --> 00:11:55,000 Speaker 1: Brexit trading grils for Northern Ireland. This Franco British summit 205 00:11:55,040 --> 00:11:57,800 Speaker 1: has meant to relaunch closer ties between the UK and 206 00:11:57,840 --> 00:12:01,040 Speaker 1: France after years of strained relations. To discuss what's on 207 00:12:01,080 --> 00:12:03,880 Speaker 1: the agenda, I'm joined out by Bloomberg opinion columnist Leonel 208 00:12:03,920 --> 00:12:06,160 Speaker 1: Laurent in Paris and tries Raphael with me here in 209 00:12:06,240 --> 00:12:08,640 Speaker 1: London now. I want to just set up our conversation 210 00:12:08,880 --> 00:12:12,199 Speaker 1: with the snippet of a Bloomberg interview with Luke Alice, 211 00:12:12,280 --> 00:12:15,040 Speaker 1: the CEO of the world's largest publicly traded hedge fund, 212 00:12:15,160 --> 00:12:18,480 Speaker 1: Man Group, expressing a sentiment I think many people have 213 00:12:18,640 --> 00:12:21,240 Speaker 1: felt after the UK's deal with the EU last week, 214 00:12:22,240 --> 00:12:25,120 Speaker 1: if we never had to talk about Brexit again, the 215 00:12:25,200 --> 00:12:27,760 Speaker 1: UK would be more investable. I hope that the last 216 00:12:27,760 --> 00:12:31,000 Speaker 1: couple of days gives us a firm place to move 217 00:12:31,040 --> 00:12:34,840 Speaker 1: forward for the relationship with Europe and that will definitely 218 00:12:34,880 --> 00:12:38,840 Speaker 1: improve the way people think about the UK. Okay terres 219 00:12:39,160 --> 00:12:42,040 Speaker 1: Raphael with me in studio. How relieved will Rishi sacB 220 00:12:42,160 --> 00:12:44,320 Speaker 1: that this meeting with Emmanuel Macron doesn't have to be 221 00:12:44,320 --> 00:12:48,600 Speaker 1: about Brexit. Oh, I think it's symbolically very important that 222 00:12:48,679 --> 00:12:51,320 Speaker 1: they're meeting, and the fact that you know, he's just 223 00:12:51,440 --> 00:12:55,680 Speaker 1: got this Winter Framework, the kind of updated, reworked Northern 224 00:12:55,720 --> 00:12:59,000 Speaker 1: Ireland Protocol, makes it more than symbolic, because I think 225 00:12:59,040 --> 00:13:02,359 Speaker 1: it gives him the opportunity to build on that momentum 226 00:13:02,400 --> 00:13:05,560 Speaker 1: and try to uh, you know, reach some kind of 227 00:13:05,720 --> 00:13:11,120 Speaker 1: agreement with Macrol on mutual areas of interest for SUNAC 228 00:13:11,240 --> 00:13:14,000 Speaker 1: that is clearly going to you know, be that list 229 00:13:14,040 --> 00:13:18,680 Speaker 1: would be topped by h stopping migrant votes boats, which 230 00:13:18,760 --> 00:13:21,080 Speaker 1: was one of his five priorities that he set out 231 00:13:21,880 --> 00:13:24,400 Speaker 1: earlier this year. And you know, I don't think there's 232 00:13:24,440 --> 00:13:27,040 Speaker 1: been leone will check me in this. I don't think 233 00:13:27,040 --> 00:13:31,559 Speaker 1: there's been a bilateral h big bilateral since twenty eighteen, 234 00:13:31,800 --> 00:13:35,000 Speaker 1: so so we're really looking at a kind of reset 235 00:13:35,080 --> 00:13:39,439 Speaker 1: of Anglo French relations which have over the I was 236 00:13:39,480 --> 00:13:43,520 Speaker 1: going to say years, but centuries. You had everything from 237 00:13:43,600 --> 00:13:48,480 Speaker 1: the time ward arrival read to alliance. So I think 238 00:13:48,480 --> 00:13:52,640 Speaker 1: it's quite important. And yes, Brexit not top of the 239 00:13:52,679 --> 00:13:55,400 Speaker 1: list for once, Yes, Leonella Ryan Paris. What's in this 240 00:13:55,559 --> 00:13:57,880 Speaker 1: for France? Then, what does a manual Macron want to achieve? 241 00:13:57,920 --> 00:14:02,080 Speaker 1: Basically Macro also wants to kind of get over the 242 00:14:02,120 --> 00:14:05,800 Speaker 1: Brexit period, the Brexit hump, not because France had as 243 00:14:05,800 --> 00:14:08,280 Speaker 1: bad a time as the UK. I mean, the fact 244 00:14:08,400 --> 00:14:11,839 Speaker 1: is that mac Horn was reelected recently, while the UK 245 00:14:11,920 --> 00:14:15,320 Speaker 1: has gone through several prime ministers, but the whole Brexit 246 00:14:15,440 --> 00:14:18,600 Speaker 1: effect has kind of faded. In terms of France's leadership 247 00:14:19,000 --> 00:14:23,080 Speaker 1: in Europe, France is feeling a bit trapped at the 248 00:14:23,160 --> 00:14:27,720 Speaker 1: moment because Germany really seems to be capitalizing the most 249 00:14:27,760 --> 00:14:31,640 Speaker 1: in terms of leadership in the wake of the Ukraine War. 250 00:14:31,920 --> 00:14:34,840 Speaker 1: France is kind of having trouble with German either. The 251 00:14:34,880 --> 00:14:37,320 Speaker 1: relationship there is kind of stuck, and so I think 252 00:14:37,320 --> 00:14:41,560 Speaker 1: it's looking around for friends. And the UK historically has, 253 00:14:41,920 --> 00:14:44,680 Speaker 1: as Terres says, it's been an enemy but also a friends. 254 00:14:44,760 --> 00:14:47,080 Speaker 1: You have a kind of freenemy relationship, but the two 255 00:14:47,080 --> 00:14:52,280 Speaker 1: countries look more alike today than they did around Brexit, 256 00:14:52,520 --> 00:14:55,880 Speaker 1: because they're both kind of service based economies that have 257 00:14:55,960 --> 00:15:02,840 Speaker 1: a proud history of military hitability and intervention. They're both 258 00:15:02,920 --> 00:15:07,960 Speaker 1: kind of looking for their place in this geopolitically risky world. 259 00:15:08,040 --> 00:15:11,320 Speaker 1: They've they've both pledged a support for Ukraine and so 260 00:15:11,360 --> 00:15:13,840 Speaker 1: I think mac Hall's really gonna try to look for 261 00:15:14,280 --> 00:15:18,760 Speaker 1: defense and an industrial policy as his priorities in this meeting. 262 00:15:18,920 --> 00:15:21,360 Speaker 1: So as one of the things that you mentioned it 263 00:15:21,440 --> 00:15:24,720 Speaker 1: their immigration and this migration channel across the English Channel. 264 00:15:25,120 --> 00:15:27,520 Speaker 1: Soonac frames that is being stopping small boats as being 265 00:15:27,520 --> 00:15:30,840 Speaker 1: one of his key policy goals. What would look like 266 00:15:30,840 --> 00:15:35,160 Speaker 1: an advance for Rishi Sonac from this encounter on that issue. Yeah, 267 00:15:35,200 --> 00:15:39,120 Speaker 1: I think there will have to be something concrete that 268 00:15:39,200 --> 00:15:41,720 Speaker 1: he can point to at the end of this meeting 269 00:15:41,960 --> 00:15:45,160 Speaker 1: on small boat And it may be I mean that 270 00:15:45,720 --> 00:15:49,560 Speaker 1: really problems got a lot worse when the UK, you know, 271 00:15:49,800 --> 00:15:52,680 Speaker 1: could no longer be part of the I mean, someone 272 00:15:52,720 --> 00:15:57,360 Speaker 1: could argue defunct Dublin arrangement for returning refugees. But also 273 00:15:57,400 --> 00:16:01,480 Speaker 1: I think access you know, maybe to UM maybe it's 274 00:16:01,480 --> 00:16:05,000 Speaker 1: not direct access, but some way of tapping into EU databases, 275 00:16:05,080 --> 00:16:10,120 Speaker 1: police cooperation, um, you know, that combination of policing returns. 276 00:16:10,120 --> 00:16:12,720 Speaker 1: I mean, this is a it's a really difficult issue. 277 00:16:12,760 --> 00:16:15,080 Speaker 1: I don't think they're going to just somehow snap their 278 00:16:15,120 --> 00:16:17,800 Speaker 1: fingers and come up with a way of stopping the 279 00:16:17,880 --> 00:16:21,200 Speaker 1: migrant boats. But you know, as we saw with the protocol, 280 00:16:21,360 --> 00:16:24,760 Speaker 1: so much depends on good faith negotiations and so much 281 00:16:24,800 --> 00:16:28,480 Speaker 1: depends on the trust between leaders and having a different 282 00:16:28,600 --> 00:16:32,280 Speaker 1: UK Prime minister fronting this I think well has a 283 00:16:32,320 --> 00:16:34,560 Speaker 1: potential to make a difference. I mean, let's not forget 284 00:16:34,560 --> 00:16:36,280 Speaker 1: you know, it was twenty twenty one. We had Jacob 285 00:16:36,320 --> 00:16:39,400 Speaker 1: riesmog tweeting that the French are still sore about Agincourt 286 00:16:39,480 --> 00:16:42,280 Speaker 1: and Trafalgar. We had Liz trust saying, you know, she 287 00:16:42,320 --> 00:16:44,640 Speaker 1: wasn't really sure whether France was a you know, friend 288 00:16:44,760 --> 00:16:48,360 Speaker 1: or foe. So all of that kind of um mood 289 00:16:48,480 --> 00:16:53,280 Speaker 1: music really soured the ability of these bilateral you know 290 00:16:54,040 --> 00:16:57,400 Speaker 1: talks to achieve anything. And you know, as Lionel rightly said, 291 00:16:57,440 --> 00:17:01,120 Speaker 1: the full crumb of that relationship, which is completely off 292 00:17:01,160 --> 00:17:04,680 Speaker 1: the headlines for years, has been the defense and security relationship, 293 00:17:04,760 --> 00:17:09,119 Speaker 1: and that arguably wasn't that affected by Brexit. You know, 294 00:17:09,160 --> 00:17:11,960 Speaker 1: the Lancaster House treaties that were signed in twenty ten 295 00:17:12,040 --> 00:17:15,919 Speaker 1: between Cameron and Sarkoz the sharing of nuclear facilities. You know, 296 00:17:15,960 --> 00:17:20,919 Speaker 1: those were fifty year agreement and I think that the 297 00:17:20,960 --> 00:17:26,560 Speaker 1: other one was was a combined expeditionary force. So things 298 00:17:26,600 --> 00:17:29,119 Speaker 1: have been at a stalemate since twenty sixteen. But the 299 00:17:29,160 --> 00:17:34,240 Speaker 1: security and defense side of things are very much, you know, 300 00:17:34,359 --> 00:17:36,560 Speaker 1: at the heart of that relationship. And you know, the 301 00:17:36,640 --> 00:17:39,600 Speaker 1: Lionel says that these are geostrategic twins in many ways. 302 00:17:39,840 --> 00:17:42,120 Speaker 1: They're the two nuclear powers in Europe. They're the two 303 00:17:42,160 --> 00:17:44,760 Speaker 1: powers that use their military as a key part of 304 00:17:44,800 --> 00:17:48,159 Speaker 1: their foreign policy. You know, they have similar economies. And 305 00:17:50,080 --> 00:17:52,840 Speaker 1: the big change now is there is war in Europe, 306 00:17:53,200 --> 00:17:57,520 Speaker 1: and really I think that just changes everything for both countries. 307 00:17:57,720 --> 00:18:01,159 Speaker 1: And that's made this this um you know, the alliance 308 00:18:01,200 --> 00:18:03,840 Speaker 1: and the partnership and the friendship side of this bilateral 309 00:18:03,840 --> 00:18:09,800 Speaker 1: relationship far more important than the niggling issues between them. 310 00:18:10,080 --> 00:18:13,000 Speaker 1: Whether it's accus, which is obviously, you know, not such 311 00:18:13,040 --> 00:18:14,960 Speaker 1: a small issue. It was quite important to the French 312 00:18:15,280 --> 00:18:18,480 Speaker 1: and the small boats issue, which is hugely politically important 313 00:18:18,480 --> 00:18:22,000 Speaker 1: to sooner. The other issue that the europe is facing 314 00:18:22,000 --> 00:18:24,760 Speaker 1: as a whole, and I include the UK, so we're 315 00:18:24,800 --> 00:18:28,960 Speaker 1: referring geographically the Inflation Reduction Act posing a question about 316 00:18:29,000 --> 00:18:33,120 Speaker 1: subsidies rivaling the US. So far, the US talking about 317 00:18:33,119 --> 00:18:36,040 Speaker 1: its plan to rival at the UK hasn't caught up 318 00:18:36,080 --> 00:18:39,720 Speaker 1: so much yet. Could this be an area perhaps of cooperation. Yeah, 319 00:18:39,720 --> 00:18:42,000 Speaker 1: that's a really interesting question because the EU has come 320 00:18:42,080 --> 00:18:45,520 Speaker 1: up with its own response. Actually, Lionel's written very well 321 00:18:45,520 --> 00:18:50,000 Speaker 1: on that recently, and it's it's it's a complicated response. 322 00:18:50,040 --> 00:18:53,800 Speaker 1: They're different pillars. Parts of it, you know, include easing 323 00:18:53,800 --> 00:18:58,600 Speaker 1: the regulatory environment, but there's also you know, a nod 324 00:18:58,640 --> 00:19:03,000 Speaker 1: to UM, you know, opening the floodgates potentially for more 325 00:19:03,080 --> 00:19:05,800 Speaker 1: state aid and that makes UM the UK nervous because 326 00:19:05,800 --> 00:19:08,320 Speaker 1: it doesn't have its own response. I think, you know, 327 00:19:08,720 --> 00:19:11,000 Speaker 1: it would be interesting to see whether from the readout 328 00:19:11,400 --> 00:19:15,359 Speaker 1: there are any discussions about coordinating, because I think it 329 00:19:15,520 --> 00:19:21,360 Speaker 1: is Sunac ideologically is is you know, would be an 330 00:19:21,359 --> 00:19:24,800 Speaker 1: opponent of this, uh, you know, of of of state 331 00:19:24,840 --> 00:19:28,480 Speaker 1: aid becoming the answer here, and because we know that 332 00:19:28,520 --> 00:19:30,960 Speaker 1: France and Germany, the deeper pockets, will be the ones 333 00:19:31,040 --> 00:19:33,600 Speaker 1: to uh you know, throw more at their industries. At 334 00:19:33,600 --> 00:19:36,600 Speaker 1: the same time, Britain will need to formulate its own response. 335 00:19:36,680 --> 00:19:38,040 Speaker 1: The only other thing I would add is, you know 336 00:19:38,119 --> 00:19:41,760 Speaker 1: Maccolm's European political community, which was something that you know, 337 00:19:41,840 --> 00:19:45,440 Speaker 1: trust signaled support of, is one way that you know 338 00:19:45,480 --> 00:19:50,080 Speaker 1: the two could potentially also find common ground outside the EU. 339 00:19:50,200 --> 00:19:54,000 Speaker 1: SUNAC could potentially throw some support behind that as well. 340 00:19:54,240 --> 00:19:56,280 Speaker 1: Excellent plenty to watch out for. Thank you to our 341 00:19:56,320 --> 00:20:00,480 Speaker 1: powerhouses of Bloomberg Opinion, Leonel Laurent Entorez Raphael for your 342 00:20:00,600 --> 00:20:03,280 Speaker 1: views as we look ahead to some of which of 343 00:20:03,280 --> 00:20:05,720 Speaker 1: course we will be covering here on Bloomberg Radio. I'm 344 00:20:05,760 --> 00:20:08,480 Speaker 1: Stephen Carlin London. You can catch us every weekday morning 345 00:20:08,480 --> 00:20:10,960 Speaker 1: here for Bloomberg Daybreak. You're at beginning at six am 346 00:20:10,960 --> 00:20:14,159 Speaker 1: in London and one am on Wall Streets. Tom, thank you, 347 00:20:14,240 --> 00:20:17,639 Speaker 1: And coming up on Bloomberg Daybreak weekend, President Biden's budget 348 00:20:17,680 --> 00:20:20,520 Speaker 1: proposal is about to come out. How much support can 349 00:20:20,600 --> 00:20:24,359 Speaker 1: he win from Republicans? I'm Tom Busby and this is 350 00:20:24,400 --> 00:20:39,119 Speaker 1: Bloomberg Broadcasting live from the Bloomberg Interactive Broker Studio in 351 00:20:39,200 --> 00:20:43,240 Speaker 1: New York. Bloomberg Elomon FREEO to Washington, DC, Bloomberg ninety 352 00:20:43,320 --> 00:20:46,320 Speaker 1: nine one to Boston, Bloomberg one O six one to 353 00:20:46,440 --> 00:20:50,080 Speaker 1: San Francisco, Bloomberg nine sixty to the country, Sirius XM 354 00:20:50,119 --> 00:20:54,159 Speaker 1: Channel one nineteen to London, DAB digital radio, and around 355 00:20:54,160 --> 00:20:58,040 Speaker 1: the globe the Bloomberg Business app in Bloomberg Radio dot Com. 356 00:20:58,040 --> 00:21:07,639 Speaker 1: This is Bloomberg Daybreak Weekend. I've Tom bust be in 357 00:21:07,720 --> 00:21:09,480 Speaker 1: New York with your global look ahead at the top 358 00:21:09,520 --> 00:21:13,760 Speaker 1: stories for investors in the coming week. President Biden presumably 359 00:21:13,800 --> 00:21:16,919 Speaker 1: putting the finishing touches on his twenty twenty four budget request. 360 00:21:16,960 --> 00:21:20,080 Speaker 1: We're expecting to come out this coming Thursday. Joining us 361 00:21:20,080 --> 00:21:22,880 Speaker 1: now with some insight on what to expect and just 362 00:21:22,920 --> 00:21:26,480 Speaker 1: how tricky this one will be. Bloomberg Sound On host 363 00:21:26,680 --> 00:21:29,920 Speaker 1: Joe Matthew. Thank you Tom. The budget, of course, is 364 00:21:29,960 --> 00:21:32,280 Speaker 1: a blueprint. It's far from a final version of the 365 00:21:32,280 --> 00:21:35,640 Speaker 1: President's been talking about some of his top priorities lately. 366 00:21:35,640 --> 00:21:38,119 Speaker 1: Folks in Congress. They want to eliminate a lot of 367 00:21:38,119 --> 00:21:41,800 Speaker 1: healthcare coverage, so its mega Republicans, increased costs for millions 368 00:21:41,840 --> 00:21:45,159 Speaker 1: of Americans. Joining us now for some insights, Bloomberg Government's 369 00:21:45,200 --> 00:21:49,240 Speaker 1: Jack Fitzpatrick, who specializes in the budget process. He covers 370 00:21:49,280 --> 00:21:51,800 Speaker 1: appropriations and it's great to see it. Jack did we 371 00:21:51,840 --> 00:21:54,040 Speaker 1: get a clue. Where have we been getting clues about 372 00:21:54,080 --> 00:21:56,560 Speaker 1: the president's budget in the recent string of speeches, Like 373 00:21:56,600 --> 00:21:58,040 Speaker 1: the State of the Union, of course would be the 374 00:21:58,080 --> 00:22:00,399 Speaker 1: big one, So this won't actually be much of a 375 00:22:00,400 --> 00:22:03,439 Speaker 1: surprise when he drops it. The big stuff is not 376 00:22:03,480 --> 00:22:06,280 Speaker 1: going to be surprising, but it is. There's some nuance 377 00:22:06,359 --> 00:22:09,199 Speaker 1: here that a lot of the president's top priorities that 378 00:22:09,240 --> 00:22:11,920 Speaker 1: we heard about in the State of the Union, when 379 00:22:11,960 --> 00:22:14,639 Speaker 1: he's gone after Republicans saying well, now they want to 380 00:22:14,640 --> 00:22:16,680 Speaker 1: go after your Medicaid, they used to want to go 381 00:22:16,720 --> 00:22:19,080 Speaker 1: after your Social Security, Medicare, I'm going to stop that. 382 00:22:19,240 --> 00:22:23,040 Speaker 1: A lot of that is what he opposes about things 383 00:22:23,080 --> 00:22:27,320 Speaker 1: that Republicans have brought up. It's not necessarily clear how 384 00:22:27,359 --> 00:22:31,280 Speaker 1: he weaves that into a budget proposal now, I will say, 385 00:22:31,359 --> 00:22:34,600 Speaker 1: even talking to members of Congress over the last week, 386 00:22:34,640 --> 00:22:36,879 Speaker 1: I talked to Brendan Boyle, the top Democrat on the 387 00:22:36,880 --> 00:22:39,960 Speaker 1: House Budget Committee, who said, really, the top stuff he's 388 00:22:39,960 --> 00:22:44,040 Speaker 1: looking for in the budget is protecting and maintaining the 389 00:22:44,119 --> 00:22:47,960 Speaker 1: things that Democrats feel they have already accomplished, whether it's 390 00:22:49,560 --> 00:22:53,480 Speaker 1: an Affordable Care Act, making sure Republicans don't chip away 391 00:22:53,520 --> 00:22:56,520 Speaker 1: at Medicaid, or anything like that, or even making sure 392 00:22:56,560 --> 00:22:59,000 Speaker 1: the money continues to go out in an infrastructure bill. 393 00:23:00,160 --> 00:23:02,720 Speaker 1: This does not appear to be one of those budgets 394 00:23:02,920 --> 00:23:06,480 Speaker 1: where there's one ask that he's making of Congress. That's 395 00:23:06,520 --> 00:23:09,359 Speaker 1: the big thing. It's really almost more about what he 396 00:23:09,440 --> 00:23:12,800 Speaker 1: wants Republicans to not do any things he likes, and, 397 00:23:13,160 --> 00:23:15,760 Speaker 1: like you said, preserving what's already been accomplished in the 398 00:23:15,800 --> 00:23:19,760 Speaker 1: last two years. You mentioned a major entitlement program though, 399 00:23:19,760 --> 00:23:22,360 Speaker 1: and I wonder what we're going to hear about Social Security, Medicare, 400 00:23:22,400 --> 00:23:25,640 Speaker 1: and so on, following this sort of endless debate recently 401 00:23:25,720 --> 00:23:29,879 Speaker 1: with Kevin McCarthy, the new Speaker of the House. Yeah, 402 00:23:29,920 --> 00:23:33,359 Speaker 1: so that has already started to play out through the 403 00:23:33,400 --> 00:23:38,360 Speaker 1: debt limit debate. You've heard Democrats come out and say, 404 00:23:38,640 --> 00:23:40,880 Speaker 1: you know, if we want to get into a conversation 405 00:23:41,240 --> 00:23:45,440 Speaker 1: separate from the debt limit about the solvency of Social Security, 406 00:23:45,760 --> 00:23:49,520 Speaker 1: we could lift the cap on the maximum taxable income 407 00:23:49,600 --> 00:23:53,600 Speaker 1: for Social Security payroll taxes. But really largely it seems 408 00:23:53,640 --> 00:23:56,600 Speaker 1: that Democrats and now Republicans are kind of joining them, 409 00:23:56,760 --> 00:24:01,040 Speaker 1: are saying we're keeping our hands off of this. Republicans 410 00:24:01,160 --> 00:24:05,160 Speaker 1: kind of feel that maybe they either touched the third 411 00:24:05,240 --> 00:24:07,720 Speaker 1: rail or got accused of touching the third rail. But 412 00:24:07,760 --> 00:24:09,320 Speaker 1: when you look back to the State of the Union, 413 00:24:09,880 --> 00:24:13,199 Speaker 1: they clearly are trying to make it as explicit as 414 00:24:13,240 --> 00:24:18,000 Speaker 1: possible that there's not really a social Security and Medicare 415 00:24:18,240 --> 00:24:21,879 Speaker 1: solvency conversation happening on the hill. It will have to 416 00:24:21,920 --> 00:24:26,359 Speaker 1: happen in the next it's i think twelve years before 417 00:24:26,480 --> 00:24:29,160 Speaker 1: one of the deadlines, even shorter before another, but it's 418 00:24:29,200 --> 00:24:31,719 Speaker 1: not happening now. So it'd be a surprise if the 419 00:24:31,760 --> 00:24:36,680 Speaker 1: budget really got into that, and there's no bipartisan will 420 00:24:36,760 --> 00:24:39,840 Speaker 1: to really start those conversations at this point. It's become 421 00:24:39,880 --> 00:24:42,840 Speaker 1: a huge talking point, of course for this president who 422 00:24:42,880 --> 00:24:46,120 Speaker 1: likes to point to Senator Rick Scott's proposal, and we've 423 00:24:46,119 --> 00:24:48,600 Speaker 1: talked about it a lot here on Bloomberg Radio, to Sunset, 424 00:24:48,640 --> 00:24:51,760 Speaker 1: these programs, and that's not what the leadership is saying. 425 00:24:51,840 --> 00:24:54,440 Speaker 1: Kevin McCarthy and Mitch McConnell have both made clear to 426 00:24:54,480 --> 00:24:57,080 Speaker 1: your point that Social Security Medicare are off the table. 427 00:24:57,080 --> 00:24:59,520 Speaker 1: But the President had a lot of fun with this 428 00:24:59,600 --> 00:25:01,040 Speaker 1: at the SA, like at the State of the Union, 429 00:25:01,040 --> 00:25:03,880 Speaker 1: getting Republicans to yell and boo and he's still making 430 00:25:03,920 --> 00:25:06,000 Speaker 1: hay out of this in his speeches. Everybody who says 431 00:25:06,000 --> 00:25:08,600 Speaker 1: we're not going to cut Medicare social Security. When I 432 00:25:08,600 --> 00:25:11,320 Speaker 1: asked them to join us and reject the cuts Medicare, 433 00:25:11,720 --> 00:25:15,679 Speaker 1: wasn't it something? They all stood up. They all stood up, 434 00:25:18,880 --> 00:25:25,000 Speaker 1: and they're all on camera, got all their pictures. Like 435 00:25:25,280 --> 00:25:29,040 Speaker 1: I said, I believe in conversion. Believe in conversion, as 436 00:25:29,080 --> 00:25:31,959 Speaker 1: he said that night. This is interesting though, because Republicans 437 00:25:32,000 --> 00:25:34,680 Speaker 1: think that he's being disingenuous. He's been actually criticized quite 438 00:25:34,720 --> 00:25:36,720 Speaker 1: a bit for it, knowing that that is not a 439 00:25:36,920 --> 00:25:39,280 Speaker 1: real debate at the moment. Jack, right, Well, it's clearly 440 00:25:39,320 --> 00:25:42,080 Speaker 1: not a debate at the moment because anyone who is 441 00:25:42,160 --> 00:25:45,960 Speaker 1: interested in tying Social Security and Medicare changes to the 442 00:25:46,000 --> 00:25:48,360 Speaker 1: debt limit have backed off and said, well, clearly it's 443 00:25:48,400 --> 00:25:52,040 Speaker 1: not happening now. Part of this is the politics of 444 00:25:52,240 --> 00:25:56,879 Speaker 1: using the word cut or slash. If Republicans say we 445 00:25:56,920 --> 00:26:01,000 Speaker 1: should raise the eligibility age, we should other things to 446 00:26:01,040 --> 00:26:05,600 Speaker 1: lower the projected increase in costs, like more means testing, 447 00:26:06,040 --> 00:26:10,520 Speaker 1: which essentially would be cutting for higher earners. They are 448 00:26:10,560 --> 00:26:14,399 Speaker 1: There are Republicans, including you know, at one point last 449 00:26:14,480 --> 00:26:18,159 Speaker 1: year Jody Arrington, the new House Budget Chair, said we 450 00:26:18,640 --> 00:26:20,920 Speaker 1: need to use the debt limit to get some sort 451 00:26:20,920 --> 00:26:24,480 Speaker 1: of policy change or at least process change for major 452 00:26:24,640 --> 00:26:27,600 Speaker 1: entitlement solvency. And the Republicans are going to come into 453 00:26:27,640 --> 00:26:31,560 Speaker 1: that saying we want to reduce the trajectory of spending. 454 00:26:32,560 --> 00:26:34,760 Speaker 1: There are a bunch of examples of lawmakers who have 455 00:26:34,800 --> 00:26:37,000 Speaker 1: said that kind of thing. They don't take kindly when 456 00:26:37,040 --> 00:26:39,320 Speaker 1: you say, oh, so you're going to slash social security? 457 00:26:39,440 --> 00:26:42,280 Speaker 1: Obviously democratic politicians they're going to kill it all together. Yeah. 458 00:26:42,320 --> 00:26:44,400 Speaker 1: Democratic politicians are going to hear that and say, well, 459 00:26:44,400 --> 00:26:47,240 Speaker 1: that's a cut. There's been such a back and forth 460 00:26:47,280 --> 00:26:50,240 Speaker 1: on I didn't say cut, I met I said maybe 461 00:26:50,280 --> 00:26:53,640 Speaker 1: we should change the age of eligibility. That it's it's 462 00:26:53,680 --> 00:26:55,760 Speaker 1: spiraled out of control at this point, and that has 463 00:26:55,760 --> 00:26:59,240 Speaker 1: contributed to the fact that no, clearly the debt limit 464 00:26:59,320 --> 00:27:02,359 Speaker 1: is not going who trigger some sincere debate over the 465 00:27:02,400 --> 00:27:05,320 Speaker 1: solvency of these programs. Whenever that happens, it'll be later, 466 00:27:06,000 --> 00:27:09,439 Speaker 1: and even in the president's budget proposal or separate. It 467 00:27:09,480 --> 00:27:12,439 Speaker 1: does not sound like there's a lot of motivation to 468 00:27:12,600 --> 00:27:15,679 Speaker 1: have a real conversation. So it's a big semantics debate, 469 00:27:15,760 --> 00:27:17,560 Speaker 1: and that's how we got here, right, And we're not 470 00:27:17,600 --> 00:27:19,720 Speaker 1: going to change this apparently anytime soon, at least not 471 00:27:19,800 --> 00:27:22,359 Speaker 1: in this budget debate. The war in Ukraine is another 472 00:27:22,359 --> 00:27:25,719 Speaker 1: big question, Jack Fitzpatrick. This president has been bumping up 473 00:27:25,720 --> 00:27:28,879 Speaker 1: against some Republican members of the House, even some progressive Democrats, 474 00:27:29,359 --> 00:27:31,720 Speaker 1: who have been tiptoeing around the idea of, you know, 475 00:27:31,800 --> 00:27:34,959 Speaker 1: not just no blank checks, but let's have a concerted 476 00:27:34,960 --> 00:27:37,040 Speaker 1: debate over what we're going to be spending. Now. There 477 00:27:37,040 --> 00:27:40,760 Speaker 1: are tens of billions approved last year, right that will 478 00:27:40,800 --> 00:27:43,080 Speaker 1: still likely carry us through this year. So is this 479 00:27:43,600 --> 00:27:45,720 Speaker 1: something that will come up again in this budget debate. 480 00:27:46,080 --> 00:27:48,840 Speaker 1: I don't know exactly when it's going to come up again. 481 00:27:49,040 --> 00:27:51,600 Speaker 1: It is going to come up again in some capacity. 482 00:27:51,640 --> 00:27:54,000 Speaker 1: You're right that there was about forty billion dollars included 483 00:27:54,040 --> 00:27:58,040 Speaker 1: for Ukraine in the December omnibus spending bill that carries 484 00:27:58,080 --> 00:28:02,080 Speaker 1: you for a while. There will be a more regular 485 00:28:02,160 --> 00:28:06,680 Speaker 1: debate on aid to Ukraine. That was a big supplemental 486 00:28:06,920 --> 00:28:10,439 Speaker 1: sort of emergency spending bill. This when they fund the 487 00:28:10,480 --> 00:28:12,879 Speaker 1: State Department. And there will be things in the budget 488 00:28:12,880 --> 00:28:14,840 Speaker 1: proposal that says, here's what we want to go through 489 00:28:14,840 --> 00:28:17,280 Speaker 1: the State Department. Here's the bilateral assistance we want for 490 00:28:17,320 --> 00:28:19,800 Speaker 1: this country. In that country, they have that debate for 491 00:28:19,840 --> 00:28:22,720 Speaker 1: the appropriations bills. It's smaller than a big forty billion 492 00:28:22,760 --> 00:28:25,920 Speaker 1: dollar bill, but there is a debate brewing on to 493 00:28:26,440 --> 00:28:29,120 Speaker 1: what is the extent of the economic assistance we want 494 00:28:29,160 --> 00:28:33,120 Speaker 1: to send Ukraine through the regular State Department aid that 495 00:28:33,200 --> 00:28:37,280 Speaker 1: kind of thing. I will say I spoke within the 496 00:28:37,359 --> 00:28:40,640 Speaker 1: last week or so with Mario Diaz Ballart, who's the 497 00:28:40,640 --> 00:28:43,680 Speaker 1: new House Republican essentially in charge of funding the State 498 00:28:43,720 --> 00:28:47,360 Speaker 1: Department through the Appropriations Committee. He said, you've got to 499 00:28:47,360 --> 00:28:49,960 Speaker 1: be skeptical about funding. House Republicans want to cut a 500 00:28:49,960 --> 00:28:53,120 Speaker 1: lot of spending, even for Ukraine, even for things they 501 00:28:53,200 --> 00:28:56,240 Speaker 1: might support, they are going to be very skeptical. There 502 00:28:56,280 --> 00:28:59,360 Speaker 1: are others like Lindsay Graham in the Senate who does 503 00:28:59,440 --> 00:29:01,920 Speaker 1: not agree with that. There's going to be a debate 504 00:29:01,960 --> 00:29:05,080 Speaker 1: to some degree about regular funding. I would not be 505 00:29:05,120 --> 00:29:08,880 Speaker 1: surprised if within the next year the President says we 506 00:29:08,920 --> 00:29:12,520 Speaker 1: actually also need another big bill for Ukraine. That would 507 00:29:12,520 --> 00:29:14,800 Speaker 1: be an even bigger fight. So there are probably a 508 00:29:14,840 --> 00:29:17,560 Speaker 1: couple fights to come. So on Ukraine. We're not overdoing 509 00:29:17,600 --> 00:29:20,600 Speaker 1: this though in covering this in the media that either 510 00:29:20,640 --> 00:29:23,920 Speaker 1: the Republicans say no more blank checks, they're walking away 511 00:29:23,960 --> 00:29:27,000 Speaker 1: from Ukraine. Is it safe to say a majority of 512 00:29:27,040 --> 00:29:29,880 Speaker 1: Republicans on Capitol Hill still support funding this war effort 513 00:29:29,920 --> 00:29:32,680 Speaker 1: as opposed to the conversation happening at CEPAK For instances, 514 00:29:32,760 --> 00:29:36,680 Speaker 1: to some degree, I think there's a lot of debate, 515 00:29:36,920 --> 00:29:40,480 Speaker 1: but it's a very mainstream Republican position to say, we 516 00:29:40,600 --> 00:29:43,760 Speaker 1: do need to continue sending aid to Ukraine. When you 517 00:29:43,800 --> 00:29:46,880 Speaker 1: get into the finer points of how much defense aid, 518 00:29:47,040 --> 00:29:49,800 Speaker 1: how much economic aid, which a lot of Democrats would 519 00:29:49,800 --> 00:29:53,320 Speaker 1: say is extremely important, Republicans get a bit more skeptical. 520 00:29:53,560 --> 00:29:56,840 Speaker 1: There are differences between House Republicans and Senate Republicans, are 521 00:29:56,840 --> 00:29:58,680 Speaker 1: a difference in how they're going to draft the initial 522 00:29:58,760 --> 00:30:00,440 Speaker 1: bills and what they're going to do and it comes 523 00:30:00,440 --> 00:30:05,880 Speaker 1: to a final vote, it's they're a bit fractured. It's 524 00:30:05,880 --> 00:30:08,960 Speaker 1: hard to pin down the exact Republican position, but yeah, 525 00:30:08,720 --> 00:30:13,080 Speaker 1: the idea that Republicans have walked away from Ukraine, that would, 526 00:30:13,120 --> 00:30:16,280 Speaker 1: at least I can say, that's a minority position, it's 527 00:30:16,360 --> 00:30:20,040 Speaker 1: not the Republican position. Fascinating as ever, you can find 528 00:30:20,080 --> 00:30:22,479 Speaker 1: him on the terminal. Jack Fitzpatrick at Bloomberg Government. It's 529 00:30:22,480 --> 00:30:24,320 Speaker 1: great to see it. Jack, many thanks thanks for having me. 530 00:30:24,440 --> 00:30:26,840 Speaker 1: Tom back to you all right, Thank you, Joe. When 531 00:30:26,880 --> 00:30:29,840 Speaker 1: you can hear Joe Matthew on Sound on New Time 532 00:30:30,080 --> 00:30:33,080 Speaker 1: one to three pm Wall Street Time. Starting Monday on 533 00:30:33,120 --> 00:30:37,120 Speaker 1: Bloomberg Radio and coming up on Bloomberg Daybreak Weekend, China's leader, 534 00:30:37,160 --> 00:30:40,240 Speaker 1: Shi Jin Thing is moving to intensify his control over 535 00:30:40,320 --> 00:30:51,080 Speaker 1: the country. I'm Tom Busby, and this is Bloomberg. This 536 00:30:51,120 --> 00:30:53,960 Speaker 1: is Bloomberg Daybreak Weekend, our global look ahead at the 537 00:30:54,000 --> 00:30:56,680 Speaker 1: top stories for investors in the coming week. I'm Tom 538 00:30:56,720 --> 00:31:00,320 Speaker 1: Busby in New York. China's president, as we've been boarding, 539 00:31:00,360 --> 00:31:03,719 Speaker 1: is spending time these days trying to become even more powerful. 540 00:31:03,760 --> 00:31:05,600 Speaker 1: For a look at why, Let's go to Hong Kong 541 00:31:05,600 --> 00:31:08,680 Speaker 1: and Bloomberg Daybreak Asia host Brian Curtis and his colleague 542 00:31:09,000 --> 00:31:12,400 Speaker 1: Doug Krisner. Tom. The so called Two Sessions are underway 543 00:31:12,440 --> 00:31:15,720 Speaker 1: in Beijing this weekend, as the National People's Congress and 544 00:31:15,840 --> 00:31:21,080 Speaker 1: the Advisory Body the CPPCC president Shi Jinping is consolidating 545 00:31:21,080 --> 00:31:24,720 Speaker 1: the Communist Party's grip on power. Earlier this week, he 546 00:31:24,800 --> 00:31:28,240 Speaker 1: laid out plans for changes to China's bureaucracy, and he 547 00:31:28,280 --> 00:31:31,520 Speaker 1: spoke of more influence on the private sector indeed, and 548 00:31:31,680 --> 00:31:34,760 Speaker 1: he said those changes would be intense. Now the party 549 00:31:34,800 --> 00:31:38,600 Speaker 1: would roll out plans for deepening reform in the financial sector, 550 00:31:38,640 --> 00:31:42,719 Speaker 1: and officials would exercise more control over the science and 551 00:31:42,880 --> 00:31:45,920 Speaker 1: technology industries. Joining us now to talk a little bit 552 00:31:45,920 --> 00:31:49,160 Speaker 1: about what's happening. What's really happening in China is Bloomberg 553 00:31:49,160 --> 00:31:53,360 Speaker 1: opinion columnist Shuley ren So. Shuley, some of this that 554 00:31:53,440 --> 00:31:55,560 Speaker 1: we just talked about runs a little counter to what 555 00:31:55,640 --> 00:31:58,480 Speaker 1: we thought was going to be the main focus, which 556 00:31:58,520 --> 00:32:02,560 Speaker 1: is the targets and the stimulus and the economy going forward. 557 00:32:02,800 --> 00:32:05,600 Speaker 1: Let's talk a little bit about this consolidation of power. 558 00:32:06,000 --> 00:32:09,560 Speaker 1: What is presidency up to. I think he's starting to 559 00:32:09,600 --> 00:32:13,959 Speaker 1: realize that Chinese Communist parties bureaucracy is not quite working. 560 00:32:14,280 --> 00:32:16,600 Speaker 1: I mean, we last year we heard a lot of 561 00:32:17,400 --> 00:32:20,640 Speaker 1: local government debt problem for instance, right, and a lot 562 00:32:20,760 --> 00:32:24,360 Speaker 1: of it is COVID zero controls. And then the government 563 00:32:24,400 --> 00:32:30,600 Speaker 1: stimulus checks into infrastructure building, but a fair chunk is 564 00:32:31,400 --> 00:32:35,040 Speaker 1: inefficiencies in the system. So I think he's trying to 565 00:32:35,120 --> 00:32:41,080 Speaker 1: make this whole gigantic apparalyus working better. On the other hand, 566 00:32:41,080 --> 00:32:44,120 Speaker 1: there is also a power consolidation, right like if he 567 00:32:44,200 --> 00:32:47,520 Speaker 1: won't if he thinks that he is the man who 568 00:32:47,640 --> 00:32:50,880 Speaker 1: will put China a CCP in power for the next 569 00:32:50,880 --> 00:32:54,720 Speaker 1: five hundred years, he needs power or consolidating to him 570 00:32:55,040 --> 00:33:02,200 Speaker 1: into his inner circles military, economical, and the financial. So 571 00:33:02,240 --> 00:33:04,680 Speaker 1: how much of the debt problem for some of the 572 00:33:04,720 --> 00:33:08,040 Speaker 1: regional governments has to do with the property market and 573 00:33:08,080 --> 00:33:13,440 Speaker 1: the implosion in real estate a lot. So before COVID 574 00:33:13,720 --> 00:33:17,360 Speaker 1: local governments they get about forty percent of their income 575 00:33:17,440 --> 00:33:22,240 Speaker 1: from tax local taxes with the arrest thirty percent from 576 00:33:22,320 --> 00:33:26,479 Speaker 1: land sales, and another thirty percent from government from central 577 00:33:26,480 --> 00:33:31,520 Speaker 1: government tax transfers. And then because of the property market ISLAM, 578 00:33:31,760 --> 00:33:34,240 Speaker 1: thirty percent of their income was kind of gone. Right, 579 00:33:34,320 --> 00:33:36,640 Speaker 1: that is a big hit. And I would like to 580 00:33:36,720 --> 00:33:40,960 Speaker 1: go back to talking about the conflict between central and 581 00:33:41,000 --> 00:33:44,080 Speaker 1: the local governments. So basically in the early nineteen nineties, 582 00:33:44,160 --> 00:33:47,480 Speaker 1: the central government realized that it was getting very poor, 583 00:33:47,520 --> 00:33:50,520 Speaker 1: whereas local governments, say like in the Guangdong province or 584 00:33:50,520 --> 00:33:53,480 Speaker 1: in Shanghaiedi, economy was doing much better. So they changed 585 00:33:53,520 --> 00:33:56,760 Speaker 1: the whole phisical system entirely, and then basically like the 586 00:33:56,800 --> 00:34:01,160 Speaker 1: biggest tax revenues such as the vat the value added, 587 00:34:01,200 --> 00:34:03,920 Speaker 1: the taxes, they will all going to the central government, 588 00:34:04,080 --> 00:34:06,120 Speaker 1: and then the central government will they said, okay, how 589 00:34:06,200 --> 00:34:08,719 Speaker 1: much money do I give to the local government As 590 00:34:08,719 --> 00:34:11,680 Speaker 1: a compromise, they were saying, okay, as a local government, 591 00:34:11,760 --> 00:34:14,640 Speaker 1: you can sell land and the revenue from that lend 592 00:34:14,640 --> 00:34:18,360 Speaker 1: sales comes to you. And that's why local governments always 593 00:34:18,400 --> 00:34:22,720 Speaker 1: have incentive to boost it's a real estate market, because 594 00:34:22,760 --> 00:34:26,040 Speaker 1: that boosts their lands sale value and so and so forth. 595 00:34:26,080 --> 00:34:29,800 Speaker 1: And you can see a lot of the economic problems 596 00:34:29,840 --> 00:34:34,040 Speaker 1: that China is facing today comes from the fiscal reform 597 00:34:34,120 --> 00:34:37,400 Speaker 1: in the early nineteen nineties, during which the central government 598 00:34:37,560 --> 00:34:40,520 Speaker 1: was taking the bigger chunk of the tax revenue, leaving 599 00:34:40,520 --> 00:34:43,680 Speaker 1: the local government with less money. Many researchers say that 600 00:34:43,719 --> 00:34:47,040 Speaker 1: this will mean more party officials at the helm in 601 00:34:47,120 --> 00:34:51,120 Speaker 1: a lot of state owned institutions and with huge influence 602 00:34:51,120 --> 00:34:55,040 Speaker 1: on private companies. So I think the big question is 603 00:34:55,040 --> 00:34:59,160 Speaker 1: is this more about loyalty and control or is it 604 00:34:59,200 --> 00:35:03,399 Speaker 1: more about execution and efficiency. It's both. It's just like 605 00:35:03,440 --> 00:35:06,560 Speaker 1: asking President Shijing pings and high Prussian campaign, is it 606 00:35:06,719 --> 00:35:10,200 Speaker 1: more about political control or about getting rid of the 607 00:35:10,280 --> 00:35:12,839 Speaker 1: dirt in the system. I think it's both. Shuli, thanks 608 00:35:12,840 --> 00:35:16,319 Speaker 1: so much for joining us. Bloomberg opinion columnist Shule Ren 609 00:35:16,480 --> 00:35:19,200 Speaker 1: with us, I'm Brian Curtis along with Doug Krisner. You 610 00:35:19,239 --> 00:35:22,240 Speaker 1: can catch us every weekday here for Bloomberg Daybreak Asia, 611 00:35:22,320 --> 00:35:25,280 Speaker 1: beginning at seven am in Hong Kong and six pm 612 00:35:25,440 --> 00:35:28,520 Speaker 1: on Wall Street. Tom, thank you, Brian and Doug. And 613 00:35:28,600 --> 00:35:30,920 Speaker 1: that does it for this edition of Bloomberg Daybreak Weekend. 614 00:35:31,000 --> 00:35:33,640 Speaker 1: Join us again Monday morning at five am Wall Street 615 00:35:33,640 --> 00:35:36,200 Speaker 1: time for the latest on markets overseas and the news 616 00:35:36,239 --> 00:35:39,399 Speaker 1: you need to start your day. I'm Tom Buzbee. Stay 617 00:35:39,480 --> 00:35:42,160 Speaker 1: with us. Top stories and global business headlines are coming 618 00:35:42,239 --> 00:35:43,000 Speaker 1: up right there.