1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,600 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Dropping 5 00:00:32,640 --> 00:00:34,240 Speaker 1: by the Studio of New York City on Police To 6 00:00:34,240 --> 00:00:36,879 Speaker 1: say is John Riding, rd Q Economics, Chief economist and 7 00:00:36,920 --> 00:00:40,760 Speaker 1: founding partner. Good morning to John. Eight thirty that GDP 8 00:00:40,920 --> 00:00:44,560 Speaker 1: print comes, what's the guide? Well, our view is slumber 9 00:00:44,640 --> 00:00:46,440 Speaker 1: is going to come in around three and a half percent. 10 00:00:46,520 --> 00:00:48,840 Speaker 1: But I think the thing number to focus on within 11 00:00:48,880 --> 00:00:52,720 Speaker 1: the report is how strong the capital spending numbers are, 12 00:00:52,880 --> 00:00:55,800 Speaker 1: and that is going to be the driver as we 13 00:00:55,880 --> 00:00:57,160 Speaker 1: go forward. And I think it's going to be a 14 00:00:57,200 --> 00:01:02,920 Speaker 1: fairly solid number on business equipment spending, which is key 15 00:01:03,040 --> 00:01:06,600 Speaker 1: for productivity growth going forward and raising the potential GDP 16 00:01:06,720 --> 00:01:09,560 Speaker 1: growth rate rather than just the cyclical GDP growth rate. 17 00:01:09,600 --> 00:01:12,560 Speaker 1: Then we've got these really noisy aspects like inventories and 18 00:01:12,680 --> 00:01:16,559 Speaker 1: the impact of net net exports. What are you expecting there, John, Well, 19 00:01:16,720 --> 00:01:19,479 Speaker 1: the trade deficit is going to continue to widen, and 20 00:01:19,840 --> 00:01:22,160 Speaker 1: we we had something of a bit of an artificial 21 00:01:22,200 --> 00:01:25,720 Speaker 1: narrowing in the second quarter on amongst other things, high 22 00:01:25,800 --> 00:01:31,000 Speaker 1: sorry being exports in an attempt to beat the terrorists. UM. 23 00:01:31,040 --> 00:01:34,080 Speaker 1: But as we UH so, that trade GAPP is gonna 24 00:01:34,600 --> 00:01:37,600 Speaker 1: widen because we've got a strong economy that's close to 25 00:01:37,640 --> 00:01:40,040 Speaker 1: full employment. And if we're gonna have a capital spending boom, 26 00:01:40,040 --> 00:01:41,880 Speaker 1: where are we going to get the capital equipment from? 27 00:01:42,120 --> 00:01:46,119 Speaker 1: The US actually runs a deficit now on capital goods 28 00:01:46,200 --> 00:01:49,400 Speaker 1: because so as we invest more in the U S 29 00:01:49,440 --> 00:01:51,880 Speaker 1: economy in the short run, that deficit is going to widen, 30 00:01:52,160 --> 00:01:53,400 Speaker 1: and I think it's going to be a little bit 31 00:01:53,480 --> 00:01:56,080 Speaker 1: offset by higher inventories. But that's why we like to 32 00:01:56,120 --> 00:01:59,600 Speaker 1: put aside those swing factors and focus on what one 33 00:01:59,640 --> 00:02:04,000 Speaker 1: might an economic GDP identity terms C plus I consumer 34 00:02:04,040 --> 00:02:08,640 Speaker 1: spending plus fixed investment spending UM, And that to me 35 00:02:08,720 --> 00:02:10,760 Speaker 1: is the number to keep an eye on as we 36 00:02:11,040 --> 00:02:13,400 Speaker 1: uh both in the past and go forward, as you 37 00:02:13,440 --> 00:02:15,880 Speaker 1: try and look through the noise and get a better 38 00:02:15,919 --> 00:02:19,920 Speaker 1: handle on underlying growth. Neil cash Calorie of the Minneapolis 39 00:02:19,919 --> 00:02:22,079 Speaker 1: Fed out with an alped in the Wall Street Journal 40 00:02:22,160 --> 00:02:25,600 Speaker 1: saying the Fed should take a pause. What's the argument 41 00:02:25,600 --> 00:02:28,880 Speaker 1: against that now? Well, I think the argument against it 42 00:02:28,880 --> 00:02:31,080 Speaker 1: it is where we are in the economy. You know, 43 00:02:31,200 --> 00:02:35,720 Speaker 1: we important to remember that we have growth rates, and 44 00:02:35,760 --> 00:02:38,600 Speaker 1: the growth rates have been rising, and we have levels 45 00:02:38,600 --> 00:02:41,280 Speaker 1: of the economy, and the level of the economy relative 46 00:02:41,320 --> 00:02:44,760 Speaker 1: to its potential is pretty high. So the FEDS achieving 47 00:02:44,800 --> 00:02:48,120 Speaker 1: its subjectives. We have a troop sent inflation rate, we 48 00:02:48,200 --> 00:02:52,720 Speaker 1: have full employment possible, and the trajectory is too strong 49 00:02:52,840 --> 00:02:56,160 Speaker 1: employment growth still and the declining and employment rates. So 50 00:02:56,560 --> 00:03:00,360 Speaker 1: we the FED is going to seek to norm alize, 51 00:03:00,400 --> 00:03:03,360 Speaker 1: to renormalize interest rates, and you do that when the 52 00:03:03,400 --> 00:03:05,919 Speaker 1: economy is strong, not not when the economy is weak. 53 00:03:06,120 --> 00:03:08,760 Speaker 1: So to take a pause, the problem then comes is 54 00:03:08,919 --> 00:03:11,400 Speaker 1: how do you restart if you need to restart? Did 55 00:03:11,440 --> 00:03:14,200 Speaker 1: Neil Coush Curry, John, thanks so much for mentioning that out. 56 00:03:14,280 --> 00:03:18,679 Speaker 1: But did Neil couch Curry not study his data dependent 57 00:03:18,840 --> 00:03:22,280 Speaker 1: history and that every central bank at all times is 58 00:03:22,320 --> 00:03:26,960 Speaker 1: ex post they have to wait to see GDP before 59 00:03:27,000 --> 00:03:32,440 Speaker 1: they pause. Right, Well, I I think the absolutely data dependent. 60 00:03:33,040 --> 00:03:35,040 Speaker 1: But there's you know, there's a third element to which 61 00:03:35,080 --> 00:03:37,840 Speaker 1: is the financial stability element. Now, we were at levels 62 00:03:37,840 --> 00:03:41,040 Speaker 1: of the equity market that maybe three four or five 63 00:03:41,120 --> 00:03:42,960 Speaker 1: years ago. We wouldn't have imagined that we would have 64 00:03:43,000 --> 00:03:46,800 Speaker 1: gotten this far. And everything's worrying about the delta from 65 00:03:46,880 --> 00:03:50,080 Speaker 1: the um, you know, from the high, but we have 66 00:03:50,200 --> 00:03:52,240 Speaker 1: to look at the high we're coming from. And we 67 00:03:52,320 --> 00:03:55,960 Speaker 1: also have to look at you know, Joe Fellman in 68 00:03:56,040 --> 00:03:59,160 Speaker 1: your TV show earlier was talking about Amazon and what 69 00:03:59,520 --> 00:04:01,040 Speaker 1: you know, you try talking about the missus and he's 70 00:04:01,080 --> 00:04:02,960 Speaker 1: talking about but yeah, but look at the absolute numbers 71 00:04:02,960 --> 00:04:06,120 Speaker 1: of revenue growth, look at the absolute number of profit growth. 72 00:04:06,680 --> 00:04:08,640 Speaker 1: Turned to you know, one of my favorite functions on 73 00:04:08,640 --> 00:04:11,360 Speaker 1: Bloomberg E a go, which gives you the earnings analysts 74 00:04:11,920 --> 00:04:14,480 Speaker 1: analysis children thirty companies on the S and P five 75 00:04:14,960 --> 00:04:19,520 Speaker 1: reported better than eight percent revenue growth better than earnings growth. 76 00:04:19,760 --> 00:04:22,760 Speaker 1: We have to remember if it's a little better or 77 00:04:22,800 --> 00:04:24,600 Speaker 1: a little worse. We also have to remember to look 78 00:04:24,600 --> 00:04:27,720 Speaker 1: at the absolute magnitudes. And thus magnitudes are strong, and 79 00:04:27,760 --> 00:04:30,280 Speaker 1: that's an environment in which I think monastery policy and 80 00:04:30,360 --> 00:04:33,360 Speaker 1: interest rates should be renorted. And John, I did a 81 00:04:33,440 --> 00:04:37,400 Speaker 1: seventeen year regression of Amazon, and we're above the trend, 82 00:04:37,680 --> 00:04:40,440 Speaker 1: no question about that. But you'd be shocked how we're 83 00:04:40,520 --> 00:04:46,279 Speaker 1: not that far above the trend. Negative in the pre market. Yeah, 84 00:04:46,279 --> 00:04:49,599 Speaker 1: it's it's a better company on a company that big. 85 00:04:49,600 --> 00:04:51,839 Speaker 1: That's real money. So John, let's talk about that. Because 86 00:04:51,880 --> 00:04:54,360 Speaker 1: we had several Federal Reserve official always including I believe 87 00:04:54,400 --> 00:04:58,720 Speaker 1: Loretta Mesta and Rich Clarada, came out this week discussing 88 00:04:58,839 --> 00:05:01,960 Speaker 1: the market, saying that essentially it won't inflict the pain 89 00:05:02,000 --> 00:05:04,440 Speaker 1: on the economy that some people think. Are you in 90 00:05:04,480 --> 00:05:09,960 Speaker 1: that camp? I am, because the economy hasn't grown into 91 00:05:10,640 --> 00:05:12,800 Speaker 1: the level of the market as it weren't from the 92 00:05:12,839 --> 00:05:15,920 Speaker 1: consumer demand side. So, like one of the points that 93 00:05:16,160 --> 00:05:20,320 Speaker 1: has been made by h vicecheck Clarity essay was the 94 00:05:20,360 --> 00:05:23,760 Speaker 1: savings rate. Now, the savings rate turns out it's double 95 00:05:24,080 --> 00:05:26,320 Speaker 1: what we thought the savings rate was on the numbers 96 00:05:26,360 --> 00:05:30,360 Speaker 1: mentioned measured last year by you know, by the GDP report. 97 00:05:30,760 --> 00:05:36,640 Speaker 1: So when the equity market declines and that reduces wealth, 98 00:05:37,000 --> 00:05:42,279 Speaker 1: that impacts spending if people feel they're going to be 99 00:05:42,320 --> 00:05:45,240 Speaker 1: short of their financial objectives. Now I I think that 100 00:05:45,279 --> 00:05:47,839 Speaker 1: the equity market have to go down a long way 101 00:05:48,400 --> 00:05:53,599 Speaker 1: from here to put that phenomenon into play. The idea 102 00:05:53,600 --> 00:05:55,440 Speaker 1: what we need to raise the savings rate. Turns out, 103 00:05:55,640 --> 00:05:58,400 Speaker 1: you know, the savings rate is at a much higher 104 00:05:58,520 --> 00:06:00,920 Speaker 1: level than we than we pre obviously thought. So I 105 00:06:01,360 --> 00:06:04,480 Speaker 1: don't think that the equity market feeds back onto the 106 00:06:04,520 --> 00:06:08,200 Speaker 1: real economy here. And I do think that the Feds right, 107 00:06:08,240 --> 00:06:11,400 Speaker 1: that the underlying fundamentals of the economy right now are 108 00:06:11,640 --> 00:06:14,919 Speaker 1: are quite strong. And uh, you know, we're just not 109 00:06:15,000 --> 00:06:18,080 Speaker 1: used to volatility that we have some market volatility here. 110 00:06:18,480 --> 00:06:20,719 Speaker 1: Can we do the fun bit now? Yeah? Can we 111 00:06:20,760 --> 00:06:23,000 Speaker 1: do the fun bit? I missed this on TV. Did 112 00:06:23,000 --> 00:06:25,560 Speaker 1: you miss this? It's because you were preparing for one 113 00:06:25,560 --> 00:06:28,679 Speaker 1: of your other propermi So, John Riding is a massive 114 00:06:28,760 --> 00:06:31,920 Speaker 1: Preston North End fan. Explain it to our American audience. 115 00:06:31,960 --> 00:06:34,120 Speaker 1: You want to explain that to American audience? Job, because 116 00:06:34,160 --> 00:06:38,200 Speaker 1: I can't explain it to them. Preston at End is 117 00:06:38,240 --> 00:06:40,640 Speaker 1: one of the oldest football clubs where soccer teams, who'd 118 00:06:40,640 --> 00:06:45,159 Speaker 1: say in the US, founded in eighteen eighty um, one 119 00:06:45,200 --> 00:06:47,840 Speaker 1: of the first team to win the Football League when 120 00:06:47,839 --> 00:06:53,160 Speaker 1: I started hundred and thirty years ago. And it's my hometown. 121 00:06:55,040 --> 00:06:57,440 Speaker 1: I am. I'm very close club. I sponsor one of 122 00:06:57,480 --> 00:07:01,600 Speaker 1: the players there, Seawan McGuire are who also plays for 123 00:07:01,640 --> 00:07:06,720 Speaker 1: the Republic of Ireland's national team. Very cool, that's Preston 124 00:07:06,760 --> 00:07:10,480 Speaker 1: North End and and you get a shirt. You get 125 00:07:10,520 --> 00:07:13,600 Speaker 1: a Preston North End Jersey with Keane on the bag 126 00:07:13,800 --> 00:07:17,400 Speaker 1: and three number three, and this was your ice hockey number. 127 00:07:17,440 --> 00:07:20,400 Speaker 1: There was way back high school, high school, high school, 128 00:07:20,400 --> 00:07:25,520 Speaker 1: that you're gonna wear this in the gym. John, I'm 129 00:07:25,560 --> 00:07:28,120 Speaker 1: looking at the size of it. They got an x L. 130 00:07:28,680 --> 00:07:32,160 Speaker 1: That's not no. No, it needs to have a few 131 00:07:32,160 --> 00:07:39,240 Speaker 1: more exes that Carol b nice, it needs Yes, there 132 00:07:39,240 --> 00:07:42,880 Speaker 1: needs to be a few more cut What do I 133 00:07:42,960 --> 00:07:45,240 Speaker 1: frame it? I think you should frame this. I think 134 00:07:45,240 --> 00:07:47,800 Speaker 1: it's great. I think John Rinding and I should sign it. 135 00:07:47,880 --> 00:07:49,400 Speaker 1: I should say that on the back of my chair 136 00:07:49,440 --> 00:07:52,280 Speaker 1: at the World headquarters. They have from a wonderful fan 137 00:07:52,400 --> 00:07:56,320 Speaker 1: up in Montreal, a generous fan, a real Montreal Canadians jersey. 138 00:07:56,680 --> 00:07:58,720 Speaker 1: And that's where the number three comes from. The number 139 00:07:58,720 --> 00:08:02,880 Speaker 1: three was wonderful defenseman named J. C. Trumble who died 140 00:08:02,960 --> 00:08:06,200 Speaker 1: way too young. Well, he was my hero when I 141 00:08:06,280 --> 00:08:10,000 Speaker 1: was at Williams. Well, you have a lot of fans 142 00:08:10,040 --> 00:08:11,920 Speaker 1: in in Preston. I said that, shure, it came from 143 00:08:11,920 --> 00:08:16,360 Speaker 1: the club. And obviously than desfined yourself in the northwest 144 00:08:16,400 --> 00:08:19,560 Speaker 1: of England. For some reason, they would be more than 145 00:08:19,640 --> 00:08:24,120 Speaker 1: happy to host you. Well, thank you one sport, Manchester 146 00:08:24,160 --> 00:08:27,040 Speaker 1: United or Liverpool when you can support press exactly. I mean, 147 00:08:27,320 --> 00:08:29,760 Speaker 1: you know, is this Tom's new club? Because it was 148 00:08:29,800 --> 00:08:32,880 Speaker 1: west Ham live from the Preston North End Interactive Studio. 149 00:08:33,400 --> 00:08:35,200 Speaker 1: We cant do that. We could do that Good Morning 150 00:08:35,240 --> 00:08:38,920 Speaker 1: Interactive Brokers. We could go which you can't do the 151 00:08:38,920 --> 00:08:41,439 Speaker 1: show from what happens in football this weekend. I mean 152 00:08:41,440 --> 00:08:43,360 Speaker 1: when there's a small World Series game out in l 153 00:08:43,400 --> 00:08:47,400 Speaker 1: A Hailey from Rodeo Drive just emails in says, yeah, 154 00:08:47,400 --> 00:08:49,560 Speaker 1: I looked at the weather seventy five degrees. It's like 155 00:08:50,080 --> 00:08:52,280 Speaker 1: Pet Carroll. They're not going to be freezing at Fenway Park, 156 00:08:52,320 --> 00:08:55,240 Speaker 1: are they. They won't be needing heaters. It's like they 157 00:08:55,280 --> 00:08:59,360 Speaker 1: had the other night and they dug out. Okay over 158 00:08:59,360 --> 00:09:03,480 Speaker 1: there now, I was just reaching for my exciting. I 159 00:09:03,760 --> 00:09:05,719 Speaker 1: am very excited, but I think a lot going on 160 00:09:05,880 --> 00:09:07,800 Speaker 1: what happens. Let me do this and we'll come back 161 00:09:07,840 --> 00:09:11,520 Speaker 1: and talk about John's viewing habits for Saturday in Premiere 162 00:09:11,559 --> 00:09:15,079 Speaker 1: Like John wrighty, thank you as always for your wisdom 163 00:09:15,120 --> 00:09:29,960 Speaker 1: on economics and guiding me toward Preston North End. Well, 164 00:09:30,000 --> 00:09:32,640 Speaker 1: we would like to welcome Dallas FED President Robert Kaplan. 165 00:09:32,720 --> 00:09:36,280 Speaker 1: He is joining us from Mexico City this morning. His district, 166 00:09:36,320 --> 00:09:39,000 Speaker 1: of course, very tightly integrated with Mexico. But I've got 167 00:09:39,000 --> 00:09:42,960 Speaker 1: to start with the markets today, Mr President, You've heard 168 00:09:43,240 --> 00:09:46,040 Speaker 1: over the last few minutes where we are today back 169 00:09:46,080 --> 00:09:48,360 Speaker 1: down again. A lot of people are saying this is 170 00:09:48,400 --> 00:09:50,679 Speaker 1: the Fed's fault. What do you make of what's been 171 00:09:50,679 --> 00:09:55,960 Speaker 1: going on in markets lately? Well, I'll avoid in this 172 00:09:56,000 --> 00:10:00,840 Speaker 1: position commenting too much on market changes other than the say, uh, 173 00:10:00,960 --> 00:10:03,760 Speaker 1: some amount of volatility in the markets, and up and 174 00:10:03,840 --> 00:10:07,360 Speaker 1: down I think is typical. The one thing I would 175 00:10:07,360 --> 00:10:10,400 Speaker 1: comment on as I watch earnings reports, and I talked 176 00:10:10,440 --> 00:10:12,720 Speaker 1: about thirty c e o s a month, And I 177 00:10:12,760 --> 00:10:16,720 Speaker 1: think this story is consistent. Input costs or higher across 178 00:10:16,800 --> 00:10:22,000 Speaker 1: the board, labor materials, steal aluminum, and I think companies 179 00:10:22,040 --> 00:10:26,080 Speaker 1: are struggling for whether they can pass those increases on 180 00:10:26,280 --> 00:10:30,200 Speaker 1: in price increases or whether they're facing margin erosion. And 181 00:10:30,280 --> 00:10:33,360 Speaker 1: I see in the corporate earnings reports very consistent story 182 00:10:33,400 --> 00:10:35,839 Speaker 1: from what I'm hearing from companies. Well, is there a 183 00:10:35,920 --> 00:10:38,559 Speaker 1: level change, a percent move, or something that would cause 184 00:10:38,600 --> 00:10:41,280 Speaker 1: you to believe that maybe the FED should slow down 185 00:10:41,320 --> 00:10:45,840 Speaker 1: take a pause, not move in December. What I'm looking 186 00:10:45,920 --> 00:10:50,000 Speaker 1: for is what impact and what this all indicates about 187 00:10:50,040 --> 00:10:53,480 Speaker 1: the strength of the underlying economy and and also the 188 00:10:53,520 --> 00:10:57,280 Speaker 1: impact on financial conditions. So it's not a market move 189 00:10:57,360 --> 00:11:01,240 Speaker 1: up or down per se, it's it's still ill. Uh, 190 00:11:01,400 --> 00:11:04,480 Speaker 1: what is my outlook for the economy and what is 191 00:11:04,520 --> 00:11:08,320 Speaker 1: my assessment of financial conditions in the economy that might 192 00:11:08,360 --> 00:11:11,920 Speaker 1: impact of future growth prospects. Well, if it's not you, 193 00:11:12,040 --> 00:11:14,080 Speaker 1: if it's not the Fed, some say it is a 194 00:11:14,080 --> 00:11:17,160 Speaker 1: weaker outlook for growth, particularly with earnings going into two 195 00:11:17,240 --> 00:11:21,240 Speaker 1: thousand nineteen. Of you that yesterday new vice chairman Rich 196 00:11:21,280 --> 00:11:24,360 Speaker 1: claire to seemed to disagree with in his speech, have 197 00:11:24,480 --> 00:11:27,920 Speaker 1: you changed your forecast in any way up or down 198 00:11:27,960 --> 00:11:31,480 Speaker 1: going into two thousand nineteen. So, Mike, as you know 199 00:11:31,679 --> 00:11:35,640 Speaker 1: from our previous conversations all year this year, I've been 200 00:11:35,640 --> 00:11:37,719 Speaker 1: saying two thousand eighteen was going to be a very 201 00:11:37,760 --> 00:11:41,520 Speaker 1: strong year. We've got a substantial amount of fiscal stimulus, 202 00:11:41,960 --> 00:11:45,120 Speaker 1: not just a tax agreement, but also the budget bill 203 00:11:45,480 --> 00:11:49,240 Speaker 1: which increased government spending. And we've been forecasting all year 204 00:11:49,320 --> 00:11:53,280 Speaker 1: that two thousand nineteen growth would be weaker than two 205 00:11:53,320 --> 00:11:56,640 Speaker 1: thousand eighteen, and that two thousand twenty would be a 206 00:11:56,640 --> 00:12:00,440 Speaker 1: little bit weaker still as fiscal stimulus where is off 207 00:12:01,000 --> 00:12:03,920 Speaker 1: and we still got this head wind of an aging 208 00:12:04,040 --> 00:12:07,880 Speaker 1: population and slowing workforce growth. So my my outlook is 209 00:12:07,920 --> 00:12:12,439 Speaker 1: pretty consistent. But I've been expecting some moderation of growth 210 00:12:12,840 --> 00:12:15,880 Speaker 1: because I've been believing that the fiscal stimulus is gonna 211 00:12:15,880 --> 00:12:17,920 Speaker 1: wane as we head to the end of this year 212 00:12:17,960 --> 00:12:20,199 Speaker 1: and into next year. One of the other big stories 213 00:12:20,240 --> 00:12:22,320 Speaker 1: people have been talking about is, of course Donald Trump's 214 00:12:22,320 --> 00:12:25,800 Speaker 1: criticisms of j. Powell and the FED. Jetty Yellow very 215 00:12:25,840 --> 00:12:29,440 Speaker 1: strong in the Financial Times today saying Trump does have 216 00:12:29,600 --> 00:12:32,960 Speaker 1: the potential to undermine the FED? How much should we 217 00:12:33,000 --> 00:12:38,240 Speaker 1: worry about that? So? UH, I think people outside the 218 00:12:38,280 --> 00:12:42,200 Speaker 1: FED UH, as appropriate, should be feel free to comment 219 00:12:42,280 --> 00:12:45,079 Speaker 1: on this. I think in my position I won't comment 220 00:12:45,160 --> 00:12:48,520 Speaker 1: on it other than to say my job is to 221 00:12:48,720 --> 00:12:53,160 Speaker 1: do UH economic analysis and make judgments on monetary policy 222 00:12:53,520 --> 00:12:57,320 Speaker 1: without regard to political considerations or political influence, and I 223 00:12:57,360 --> 00:13:00,680 Speaker 1: think criticism comes with the territory. So I think my 224 00:13:00,800 --> 00:13:03,559 Speaker 1: mission and our mission at the FETE is the same. Well, 225 00:13:03,640 --> 00:13:06,520 Speaker 1: you being set up for to be the fall guy 226 00:13:06,640 --> 00:13:11,880 Speaker 1: for any kind of economic shortfall. So I think it's 227 00:13:12,000 --> 00:13:16,240 Speaker 1: very important that I not worry about that. I think 228 00:13:16,240 --> 00:13:19,000 Speaker 1: we're in a very challenging situation that you and I 229 00:13:19,040 --> 00:13:22,959 Speaker 1: have talked about before. We've got healthy growth in the 230 00:13:23,040 --> 00:13:28,240 Speaker 1: United States, but fiscal stimulus is part of that growth. Uh, 231 00:13:28,280 --> 00:13:31,720 Speaker 1: it's gonna wane in nineteen and twenty and the and 232 00:13:31,760 --> 00:13:34,200 Speaker 1: the trick is how to get the judgment and the 233 00:13:34,240 --> 00:13:40,319 Speaker 1: balance right between moving toward a neutral stance but avoiding 234 00:13:40,840 --> 00:13:45,920 Speaker 1: being predetermined or rigid in in what that destination ultimately 235 00:13:46,000 --> 00:13:48,000 Speaker 1: is and the pace of it. And so I think 236 00:13:48,040 --> 00:13:51,080 Speaker 1: that's still the challenge. And that's a that's complicated enough 237 00:13:51,120 --> 00:13:55,520 Speaker 1: with worry without me worrying about other extraneous factors. Let's 238 00:13:55,559 --> 00:13:57,520 Speaker 1: talk about the Baige Book suggests a lot of concern 239 00:13:57,640 --> 00:14:01,240 Speaker 1: about tariffs in the American business. What impact are you 240 00:14:01,320 --> 00:14:08,200 Speaker 1: seeing or forecasting? So it's unusual for me to talk 241 00:14:08,240 --> 00:14:12,800 Speaker 1: to a CEO that is not seen cost increases pretty 242 00:14:12,840 --> 00:14:19,160 Speaker 1: much across the board, labor, costs, materials, Uh, It's it's typical. 243 00:14:19,280 --> 00:14:21,880 Speaker 1: The only question c e o s have is as 244 00:14:22,000 --> 00:14:25,240 Speaker 1: can they pass those increases on in terms of prices. 245 00:14:25,560 --> 00:14:28,600 Speaker 1: In some industries they are doing that. In other industries. 246 00:14:29,000 --> 00:14:32,240 Speaker 1: Given the dynamics of the industry, they can't. And I 247 00:14:32,280 --> 00:14:36,560 Speaker 1: think the Beige book is very consistent, and so that's 248 00:14:36,600 --> 00:14:40,560 Speaker 1: why if the tariff situation intensifies, my guess is input 249 00:14:40,640 --> 00:14:44,720 Speaker 1: cost pressures are going to intensify also. UH. And it's 250 00:14:44,760 --> 00:14:48,760 Speaker 1: not having a big effect on headline GDP growth, but 251 00:14:48,840 --> 00:14:52,200 Speaker 1: it's having a very big effect on companies and industries 252 00:14:52,600 --> 00:14:55,960 Speaker 1: and their ability to manage their costs well. Can companies 253 00:14:55,960 --> 00:15:00,680 Speaker 1: in your district race prices depends on the industry. Uh, 254 00:15:00,760 --> 00:15:04,600 Speaker 1: In certain industries they can, and and in particular, if 255 00:15:04,640 --> 00:15:08,840 Speaker 1: it's a consumer facing industry, UH, they may not have 256 00:15:08,960 --> 00:15:13,600 Speaker 1: pricing power and they may suffer margin erosion. And there's 257 00:15:13,640 --> 00:15:17,320 Speaker 1: a whole range of consumer facing industries, including by the way, 258 00:15:17,360 --> 00:15:21,440 Speaker 1: the home builders who really aren't able effectively. They're finding 259 00:15:21,480 --> 00:15:24,880 Speaker 1: to pass on cost increases and they're either gonna see 260 00:15:25,240 --> 00:15:29,080 Speaker 1: UH volume declines because of sticker shock on the part 261 00:15:29,080 --> 00:15:31,480 Speaker 1: of the consumer, or they're gonna have to find a 262 00:15:31,520 --> 00:15:34,640 Speaker 1: way to to moderate their costs because they just don't 263 00:15:34,680 --> 00:15:37,640 Speaker 1: have pricing power. We're getting closer to the neutral rate. 264 00:15:37,680 --> 00:15:40,160 Speaker 1: You've pegged it like it's about two seven five to 265 00:15:40,320 --> 00:15:44,360 Speaker 1: three percent. How close are you to possibly making a 266 00:15:44,440 --> 00:15:51,000 Speaker 1: policy mistake. So I've said that the estimate of the 267 00:15:51,000 --> 00:15:55,240 Speaker 1: neutral rate, it's a concept, it's imprecise, it's uncertain, it's 268 00:15:55,280 --> 00:15:57,520 Speaker 1: part of the mosaic I look at. And I've said 269 00:15:57,600 --> 00:15:59,640 Speaker 1: it could be it could be two and a half 270 00:15:59,680 --> 00:16:02,280 Speaker 1: to three, two and three quarters, it could be two 271 00:16:02,320 --> 00:16:04,720 Speaker 1: and three quarters to three. We're gonna have to make 272 00:16:04,760 --> 00:16:09,360 Speaker 1: that judgment over the next year as as the economy unfolds. 273 00:16:09,400 --> 00:16:15,000 Speaker 1: But to your point, I'm very sensitive, uh, to not 274 00:16:15,120 --> 00:16:18,960 Speaker 1: being rigid or predetermined about the pace at which we 275 00:16:19,080 --> 00:16:22,840 Speaker 1: get there. And the reason is, again, I expect GDP 276 00:16:22,960 --> 00:16:25,000 Speaker 1: growth in two thousand and eighteen to be strong, but 277 00:16:25,080 --> 00:16:29,240 Speaker 1: I expect it to moderate as this fiscal stimulus starts 278 00:16:29,280 --> 00:16:33,000 Speaker 1: to wane in nineteen and twenty. And we've still got 279 00:16:33,000 --> 00:16:36,480 Speaker 1: to deal with the headwinds of slowing workforce growth due 280 00:16:36,560 --> 00:16:40,120 Speaker 1: to aging and sluggish productivity. So I think getting this 281 00:16:40,240 --> 00:16:43,600 Speaker 1: balance right is going to require me to keep an 282 00:16:43,640 --> 00:16:48,360 Speaker 1: open mind, not be two predetermined or pre judge and 283 00:16:48,560 --> 00:16:51,400 Speaker 1: uh and so I think that's the challenge of this 284 00:16:52,040 --> 00:16:54,640 Speaker 1: and uh and so we'll have to make these judgments, 285 00:16:54,640 --> 00:16:57,600 Speaker 1: and I will make these judgments as we head along 286 00:16:57,640 --> 00:17:00,680 Speaker 1: this path. I, speaking of judgments, effective FED funds are 287 00:17:00,720 --> 00:17:03,000 Speaker 1: again trading at the top of their range right at 288 00:17:03,040 --> 00:17:06,440 Speaker 1: ioe ER right now as they were in June. How 289 00:17:06,480 --> 00:17:09,160 Speaker 1: much of a problem is that? And do you anticipate 290 00:17:09,200 --> 00:17:12,400 Speaker 1: we will see in November or in December an adjustment 291 00:17:12,440 --> 00:17:17,440 Speaker 1: to the ioe R rate. So we'll have to see. Uh, 292 00:17:17,680 --> 00:17:20,880 Speaker 1: it's always possible we'll have to make more technical adjustments. 293 00:17:21,400 --> 00:17:24,359 Speaker 1: And part of what we're judging as we wind down 294 00:17:24,400 --> 00:17:27,840 Speaker 1: the balance sheet is what is the demand for reserves 295 00:17:28,040 --> 00:17:31,800 Speaker 1: in the banking system and in the economy and uh, 296 00:17:31,880 --> 00:17:33,720 Speaker 1: And I think we're gonna have to be open minded 297 00:17:33,800 --> 00:17:37,280 Speaker 1: to learning from this. There's no textbook on how you 298 00:17:37,400 --> 00:17:41,200 Speaker 1: normalize interest rate policy and wind down a balance sheet, 299 00:17:41,480 --> 00:17:44,240 Speaker 1: and so I think it's critical to be open to learning. 300 00:17:44,600 --> 00:17:46,479 Speaker 1: And I think we're doing that right here. And so 301 00:17:46,600 --> 00:17:49,760 Speaker 1: it's possible we'll have to make more technical adjustments in 302 00:17:49,800 --> 00:17:52,359 Speaker 1: the months ahead. Would that be something that could be 303 00:17:52,359 --> 00:17:55,080 Speaker 1: done in November? We we don't expect any kind of 304 00:17:55,160 --> 00:17:57,720 Speaker 1: rate move because it's a non press conference meeting, but 305 00:17:57,960 --> 00:18:01,360 Speaker 1: something like that, would you feel free to approve an 306 00:18:01,359 --> 00:18:05,600 Speaker 1: ioe ER adjustment. I don't want to pre judge what 307 00:18:05,600 --> 00:18:07,960 Speaker 1: we're gonna do. But I think it's one of one 308 00:18:08,000 --> 00:18:10,440 Speaker 1: of the things that Yeah, I I think it's important 309 00:18:10,440 --> 00:18:14,280 Speaker 1: to keep an open mind in each meeting about about 310 00:18:14,280 --> 00:18:17,320 Speaker 1: addressing this if it needs to be addressed. No FED 311 00:18:17,359 --> 00:18:21,160 Speaker 1: district more closely tied to Mexico than yours. You are 312 00:18:21,240 --> 00:18:23,320 Speaker 1: in Mexico, CD, you give us a feel for what 313 00:18:23,400 --> 00:18:27,119 Speaker 1: you think about the incoming Mexican administration. What are you 314 00:18:27,160 --> 00:18:31,600 Speaker 1: expecting in the economic relationship between the two countries. Well, 315 00:18:32,440 --> 00:18:36,160 Speaker 1: on the positive side, UH, I think it's been important 316 00:18:36,200 --> 00:18:38,600 Speaker 1: for the United States and for both countries from Mexico 317 00:18:38,640 --> 00:18:43,240 Speaker 1: and the United States to move forward getting an UH 318 00:18:43,280 --> 00:18:47,480 Speaker 1: the trade agreements in this hemisphere updated and resolved, and 319 00:18:47,520 --> 00:18:50,399 Speaker 1: I think it removes an enormous uncertainty. But it also 320 00:18:51,080 --> 00:18:55,080 Speaker 1: and from our research at the Dallas Bed, improves US 321 00:18:55,160 --> 00:18:58,959 Speaker 1: competitiveness and allows us to add US jobs. And so 322 00:18:59,040 --> 00:19:01,640 Speaker 1: we're glad that's get being done. That's good for both countries. 323 00:19:02,080 --> 00:19:07,159 Speaker 1: There's a lot of uncertainty about the privatization and modernization 324 00:19:07,200 --> 00:19:10,159 Speaker 1: of this country and a lot of the reforms that 325 00:19:10,240 --> 00:19:12,159 Speaker 1: have been done over the last five years, and I 326 00:19:12,160 --> 00:19:15,399 Speaker 1: think the jury is still out as to whether those 327 00:19:15,440 --> 00:19:18,600 Speaker 1: reforms will continue or whether they'll be put on hold 328 00:19:18,720 --> 00:19:21,040 Speaker 1: or slow down. And that's the part we don't know. 329 00:19:22,040 --> 00:19:27,680 Speaker 1: UH next to two point oh going to change anything. UH, 330 00:19:27,760 --> 00:19:30,960 Speaker 1: it'll it'll create some changes. I think the most important 331 00:19:31,000 --> 00:19:33,560 Speaker 1: thing about NAFTA two point oh or the North American 332 00:19:34,280 --> 00:19:37,919 Speaker 1: Trade Agreement is that it's that it's going to get resolved. 333 00:19:38,520 --> 00:19:41,840 Speaker 1: I think you could quibble about certain provisions, whether it's 334 00:19:41,880 --> 00:19:46,120 Speaker 1: going to help improve US competitiveness and our global competitiveness, 335 00:19:46,119 --> 00:19:49,280 Speaker 1: But I think the most important headline is that removing 336 00:19:49,280 --> 00:19:51,920 Speaker 1: the uncertainty is good for the United States and it's 337 00:19:51,960 --> 00:19:57,040 Speaker 1: good for Mexico. We talked about input costs UH and 338 00:19:57,119 --> 00:20:01,639 Speaker 1: global competitiveness. Getting this agreement is important to the United 339 00:20:01,680 --> 00:20:05,919 Speaker 1: States because seventy of the imports from Mexico or intermediate 340 00:20:05,920 --> 00:20:10,040 Speaker 1: goods part of integrated supply chains and logistic arrangements that 341 00:20:10,119 --> 00:20:12,240 Speaker 1: we think make the US more competitive and allow the 342 00:20:12,320 --> 00:20:15,640 Speaker 1: US to add jobs. And so that parts the critical part. 343 00:20:16,040 --> 00:20:18,160 Speaker 1: Back to rates for a moment, We have a question 344 00:20:18,240 --> 00:20:21,719 Speaker 1: from a viewers. It wasn't strong enough in asking you 345 00:20:21,800 --> 00:20:24,240 Speaker 1: about a potential pause when you look at the interest 346 00:20:24,320 --> 00:20:27,879 Speaker 1: rate sectors of the economy, autos and particularly housing and 347 00:20:27,880 --> 00:20:31,240 Speaker 1: the impacts of higher rates and even the lack of 348 00:20:31,840 --> 00:20:36,080 Speaker 1: tax deductions in the high tax states. Does that lead 349 00:20:36,119 --> 00:20:38,120 Speaker 1: you to think maybe you've gone too far or you're 350 00:20:38,119 --> 00:20:42,560 Speaker 1: getting really close to it. No, Listen, I watch housing 351 00:20:42,760 --> 00:20:45,199 Speaker 1: very carefully, and I talked to home builders. We have 352 00:20:45,240 --> 00:20:47,600 Speaker 1: a number in our district and a couple of number 353 00:20:47,640 --> 00:20:49,879 Speaker 1: of national home builders do a lot of business in 354 00:20:49,920 --> 00:20:52,960 Speaker 1: Texas because it's growing so fast. And you may know, 355 00:20:53,640 --> 00:20:56,040 Speaker 1: and we've been watching this closely at the Dallas fed 356 00:20:56,440 --> 00:20:59,640 Speaker 1: new home sales in Dallas and Houston, which are two 357 00:20:59,640 --> 00:21:02,200 Speaker 1: of the asses growing cities in the United States, new 358 00:21:02,240 --> 00:21:04,960 Speaker 1: home sales have been sluggish, and in fact they've been weak, 359 00:21:05,440 --> 00:21:08,000 Speaker 1: and so we we're doing a lot of work at 360 00:21:08,040 --> 00:21:12,840 Speaker 1: our district trying to understand how that slowing fits in 361 00:21:13,000 --> 00:21:16,520 Speaker 1: with overall economic growth. And one of the conclusions I 362 00:21:16,520 --> 00:21:19,919 Speaker 1: would come to is there's all there's a the input costs, 363 00:21:20,200 --> 00:21:24,280 Speaker 1: labor shortages, higher input costs, and yes, higher mortgage rates 364 00:21:24,480 --> 00:21:28,240 Speaker 1: are all part of the story. And so we're watching 365 00:21:28,280 --> 00:21:31,199 Speaker 1: this carefully. It's been weak for the last three months. 366 00:21:31,840 --> 00:21:34,879 Speaker 1: I'm not ready to say that it's an indicator of 367 00:21:34,960 --> 00:21:37,119 Speaker 1: the of the weakening in the economy, but I can 368 00:21:37,160 --> 00:21:39,679 Speaker 1: tell you we're watching it very carefully, and again it 369 00:21:39,760 --> 00:21:43,520 Speaker 1: comes in the context of my own base case expectation 370 00:21:43,920 --> 00:21:46,840 Speaker 1: the growth was going to weaken as we headed into 371 00:21:46,920 --> 00:21:50,159 Speaker 1: night two thousand nineteen. So I'm just watching what this 372 00:21:50,280 --> 00:21:55,920 Speaker 1: tells us if anything about about the trend in GDP growth. 373 00:21:56,560 --> 00:21:59,280 Speaker 1: New Vice Chair Clarena is gonna ahead yet another FED 374 00:21:59,359 --> 00:22:02,920 Speaker 1: sub committee on communication. What can we expect? What's wrong 375 00:22:03,000 --> 00:22:04,960 Speaker 1: with the way you communicate now? And how would you 376 00:22:05,040 --> 00:22:09,880 Speaker 1: fix it? Well, I'm and I'm on that subcommittee, uh 377 00:22:09,960 --> 00:22:14,520 Speaker 1: with Vice Chair Clarata. Uh. I wouldn't put it that 378 00:22:14,560 --> 00:22:18,800 Speaker 1: there's something wrong. I think a good organization is constantly 379 00:22:19,359 --> 00:22:24,560 Speaker 1: re reviewing its communications, it's frameworks, uh, the way it operates. 380 00:22:24,680 --> 00:22:28,360 Speaker 1: I think that's healthy. Uh. And I think I think 381 00:22:28,359 --> 00:22:31,440 Speaker 1: the FED is moving toward doing that, and I would 382 00:22:31,480 --> 00:22:34,560 Speaker 1: hope doing it on some regular basis. And I think 383 00:22:34,600 --> 00:22:38,320 Speaker 1: that's wise and as an as an as an institution 384 00:22:38,680 --> 00:22:41,720 Speaker 1: where it's critical that we keep our independence. I think 385 00:22:41,760 --> 00:22:45,320 Speaker 1: part of keeping your independence is earning it by revisiting 386 00:22:45,600 --> 00:22:49,640 Speaker 1: the way you conduct yourself, including communication and your frameworks. 387 00:22:49,920 --> 00:22:52,240 Speaker 1: So I think us doing that is a good thing. 388 00:22:52,440 --> 00:22:55,160 Speaker 1: We speaking of communication in our FT interview, Jennet Yellen 389 00:22:55,400 --> 00:22:58,240 Speaker 1: talks about how there was internal dissent in the Open 390 00:22:58,280 --> 00:23:01,760 Speaker 1: Market Committee over Keilly, A group calling itself the Three Amigos, 391 00:23:02,040 --> 00:23:06,400 Speaker 1: which included j Powell, worried that it would trigger financial instability. 392 00:23:06,520 --> 00:23:09,480 Speaker 1: How united is the committee now on the policy path 393 00:23:09,560 --> 00:23:15,240 Speaker 1: that now Chairman Paul has set. So there's debate around 394 00:23:15,240 --> 00:23:18,119 Speaker 1: the committee, and I hope there will be debate. I 395 00:23:18,160 --> 00:23:21,280 Speaker 1: think debate and disagreement is one of the things I've 396 00:23:21,280 --> 00:23:24,160 Speaker 1: been very impressed by at the Federal Open Market Committee. 397 00:23:24,400 --> 00:23:27,639 Speaker 1: And I don't think you want a situation where we 398 00:23:27,720 --> 00:23:33,400 Speaker 1: all agree completely, and we've got a number of us 399 00:23:33,400 --> 00:23:36,080 Speaker 1: all I'll speak for myself believe that we should be 400 00:23:36,119 --> 00:23:40,200 Speaker 1: gradually and patiently moving toward a more neutral stance. I mean, 401 00:23:40,280 --> 00:23:42,320 Speaker 1: we don't need to have our foot on the accelerator. 402 00:23:42,640 --> 00:23:44,960 Speaker 1: But not everybody agrees with that, and there's a lot 403 00:23:44,960 --> 00:23:49,040 Speaker 1: of disagreement as to the pace and where neutral is. 404 00:23:49,240 --> 00:23:51,840 Speaker 1: And I think that disagreement is healthy. And when I 405 00:23:51,880 --> 00:23:54,200 Speaker 1: go to an f O m C meeting, I state 406 00:23:54,280 --> 00:23:57,480 Speaker 1: my case and my arguments, but I listened very carefully 407 00:23:57,760 --> 00:24:00,760 Speaker 1: to the others around the table, and and I'm open 408 00:24:00,840 --> 00:24:03,240 Speaker 1: being persuaded and changing my views. And I think that's 409 00:24:03,280 --> 00:24:06,720 Speaker 1: a good dynamic, and I hope it continues, all right. 410 00:24:06,800 --> 00:24:09,440 Speaker 1: Robert Kaplan, president of the Dallas FED, coming to us 411 00:24:09,440 --> 00:24:22,480 Speaker 1: today from our Mexico City of Bureau. Nancy cortis Transit. 412 00:24:22,640 --> 00:24:28,320 Speaker 1: She's rational correspondent for CBS. Nancy, the news flow is 413 00:24:28,359 --> 00:24:34,320 Speaker 1: exceptionally volatile. Is there any reporting from CBS that these 414 00:24:34,359 --> 00:24:41,920 Speaker 1: suspicious packages, these bombs will affect the elections. I think 415 00:24:42,240 --> 00:24:45,320 Speaker 1: we don't have any reporting right now that would indicate 416 00:24:45,400 --> 00:24:49,920 Speaker 1: that these particular packages will affect the election one way 417 00:24:50,000 --> 00:24:51,800 Speaker 1: or the other. I do know that they're sort of 418 00:24:52,680 --> 00:24:56,720 Speaker 1: gripping the country right now. We can now report that 419 00:24:56,840 --> 00:25:01,280 Speaker 1: there is a twelve package the has been discovered that 420 00:25:01,440 --> 00:25:04,760 Speaker 1: was addressed to James Clapper, the former Director of National 421 00:25:04,800 --> 00:25:09,200 Speaker 1: Intelligence UM. Consistent with the other packages, this one was 422 00:25:09,359 --> 00:25:14,440 Speaker 1: in New York City. Uh. We also know that there's 423 00:25:14,440 --> 00:25:19,119 Speaker 1: a package that UM may have been sent to another 424 00:25:19,240 --> 00:25:23,000 Speaker 1: member of Congress that is being investigated. UH. So this 425 00:25:23,080 --> 00:25:26,440 Speaker 1: is an ongoing situation. There are sure to be many 426 00:25:26,480 --> 00:25:29,560 Speaker 1: more developments before Face the Nation on Sunday. And he 427 00:25:29,600 --> 00:25:32,040 Speaker 1: mentioned John Dickerson hosting He's going to be sitting down 428 00:25:32,040 --> 00:25:35,959 Speaker 1: with UM the House Speaker, Paul Ryan. He's also talking 429 00:25:36,000 --> 00:25:39,760 Speaker 1: with Chris Coons, Senator of Delaware UM and this is 430 00:25:39,760 --> 00:25:42,880 Speaker 1: an ongoing situation. We know that the that the FBI 431 00:25:43,119 --> 00:25:47,399 Speaker 1: is looking at one postal sorting facility in Opelaca, Florida, 432 00:25:47,440 --> 00:25:51,600 Speaker 1: where some of these packages may have been processed and 433 00:25:51,600 --> 00:25:53,800 Speaker 1: and then sent on their way, But we don't think 434 00:25:53,800 --> 00:25:57,680 Speaker 1: that that's the only facility they're looking at. Can we just, Nancy, 435 00:25:58,040 --> 00:26:00,480 Speaker 1: we just focus on the election for us a little 436 00:26:00,480 --> 00:26:03,200 Speaker 1: bit longer and get your thoughts on what is going 437 00:26:03,240 --> 00:26:06,560 Speaker 1: on in Texas. Uh, I know you've been following that 438 00:26:06,720 --> 00:26:12,080 Speaker 1: race because of Representative Beto O'Rourke uh, trying to unseat 439 00:26:12,119 --> 00:26:16,320 Speaker 1: Republican Texas Senator Ted Cruz. Yes, and I was in 440 00:26:16,320 --> 00:26:19,800 Speaker 1: Texas earlier this week, went to a couple of a 441 00:26:19,880 --> 00:26:22,760 Speaker 1: work events. He was trying to do some counter programming 442 00:26:22,800 --> 00:26:24,919 Speaker 1: because it was the same day that President Trump was 443 00:26:24,960 --> 00:26:29,600 Speaker 1: coming into town to campaign with crews, and so, uh 444 00:26:29,640 --> 00:26:30,800 Speaker 1: he knew that there was going to be a lot 445 00:26:30,800 --> 00:26:34,080 Speaker 1: of attention to that. So uh A Roorke held eight 446 00:26:34,080 --> 00:26:37,000 Speaker 1: events of his own, going back and forth to different 447 00:26:37,000 --> 00:26:41,040 Speaker 1: early voting sites and really drawing pretty remarkable crowds. Taking 448 00:26:41,080 --> 00:26:44,480 Speaker 1: pictures with hundreds of people who lined up to UH 449 00:26:44,520 --> 00:26:46,440 Speaker 1: to get a chance to meet him. So certainly there's 450 00:26:46,480 --> 00:26:49,960 Speaker 1: a lot of energy surrounding his candidacy. Whether there are 451 00:26:50,080 --> 00:26:53,320 Speaker 1: enough voters who share his views in the state of 452 00:26:53,359 --> 00:26:56,000 Speaker 1: Texas to get him elected is still an open question. 453 00:26:56,040 --> 00:26:59,399 Speaker 1: He's obviously trailing in the polls. Um. There was a 454 00:26:59,520 --> 00:27:03,439 Speaker 1: great of enthusiasm surrounding President Trump's visit as well, you know, 455 00:27:03,480 --> 00:27:07,520 Speaker 1: as they're watching this line of thousands of people sneaking 456 00:27:07,600 --> 00:27:10,400 Speaker 1: for hours as they tried to get in to see 457 00:27:10,400 --> 00:27:13,200 Speaker 1: the President of the United States. This is a state 458 00:27:13,280 --> 00:27:17,040 Speaker 1: that the President won by nine points. UM and UH 459 00:27:17,080 --> 00:27:20,000 Speaker 1: and Ted Cruz, there's no question has an advantage there. 460 00:27:20,040 --> 00:27:23,439 Speaker 1: But we're seeing interesting early voting numbers. Obviously, this is 461 00:27:23,440 --> 00:27:27,440 Speaker 1: a race that has really energized the elector there. Well, 462 00:27:27,480 --> 00:27:29,359 Speaker 1: you know, I'm sure you saw the reports in the 463 00:27:29,400 --> 00:27:32,119 Speaker 1: Houston Chronicle earlier in the weeks saying that quote a 464 00:27:32,200 --> 00:27:35,480 Speaker 1: shocking number of people turned out to vote on Monday. 465 00:27:35,880 --> 00:27:39,320 Speaker 1: They said it looked like more like a Black Friday 466 00:27:39,480 --> 00:27:43,560 Speaker 1: shopping morning than it did a line up for a vote. 467 00:27:44,280 --> 00:27:48,639 Speaker 1: It shattered early voting records for a midterm election in 468 00:27:49,440 --> 00:27:52,200 Speaker 1: in Texas, not just in Houston but across the state. 469 00:27:52,280 --> 00:27:55,320 Speaker 1: And but uh, you know, it's you have to be 470 00:27:55,400 --> 00:28:00,280 Speaker 1: careful about drawing conclusions from early voting because sometimes times 471 00:28:00,320 --> 00:28:02,800 Speaker 1: all that means is that one side is very energized 472 00:28:02,840 --> 00:28:04,639 Speaker 1: and they do a lot of their voting and early voting, 473 00:28:04,640 --> 00:28:06,879 Speaker 1: and there aren't that many people left the cast a 474 00:28:06,880 --> 00:28:09,800 Speaker 1: ballot in the general election. It could also be that 475 00:28:09,880 --> 00:28:12,959 Speaker 1: all the really enthusiastic people come out of the beginning 476 00:28:12,960 --> 00:28:16,240 Speaker 1: of early voting and then there's less, uh, there's less 477 00:28:16,240 --> 00:28:19,800 Speaker 1: at the end. So it is a noteworthy phenomenon and 478 00:28:19,800 --> 00:28:21,720 Speaker 1: we're keeping an eye on it, but it's too soon 479 00:28:21,800 --> 00:28:24,640 Speaker 1: to say what it means for that race. Nancy, Thanks 480 00:28:24,680 --> 00:28:27,040 Speaker 1: for the bravy. Nancy quartis with incredible news flow. She 481 00:28:27,280 --> 00:28:42,560 Speaker 1: is the chief Congressional correspondent at CBS. A place to 482 00:28:42,560 --> 00:28:44,640 Speaker 1: site now for the Trump administration's views on the g 483 00:28:44,760 --> 00:28:47,200 Speaker 1: d P Report, which joined now in Bloomberg Television and 484 00:28:47,240 --> 00:28:50,480 Speaker 1: on radio by Mick Mulvigny, US Office and Management and 485 00:28:50,600 --> 00:28:52,800 Speaker 1: Budget Director. Hey Make, it's great to catch out with 486 00:28:52,800 --> 00:28:55,040 Speaker 1: you again. Thanks for joining the program. Let's start with 487 00:28:55,080 --> 00:28:57,800 Speaker 1: that GDP. Thanks, Let's start with that GDP. Now shall 488 00:28:57,840 --> 00:29:00,640 Speaker 1: we um, it looks solid and everyone's asked the same question. 489 00:29:00,680 --> 00:29:04,040 Speaker 1: Makes so I'll ask you to view isn't sustainable? Yeah, 490 00:29:04,200 --> 00:29:05,880 Speaker 1: we really do think that it is. Again, you look 491 00:29:05,920 --> 00:29:07,560 Speaker 1: at some of the technicals, you get down deep in 492 00:29:07,600 --> 00:29:10,920 Speaker 1: the numbers. This is a sustainable growth cycle that we 493 00:29:10,960 --> 00:29:14,080 Speaker 1: are in. It's a supply driven growth cycle that we're in. 494 00:29:14,240 --> 00:29:16,240 Speaker 1: And one of the things that we draw attention to 495 00:29:16,240 --> 00:29:19,240 Speaker 1: a try draw attention today is how mild the inflation 496 00:29:19,320 --> 00:29:21,200 Speaker 1: numbers were and what came out this morning one point 497 00:29:21,240 --> 00:29:24,000 Speaker 1: six percent, well below what people expected, but not what 498 00:29:24,040 --> 00:29:26,160 Speaker 1: we expected here at the White House. We've been telling 499 00:29:26,200 --> 00:29:28,560 Speaker 1: people for the last year that this is a different 500 00:29:28,560 --> 00:29:31,040 Speaker 1: type of demand, a different type of growth cycle driven 501 00:29:31,080 --> 00:29:33,400 Speaker 1: by the supply in the market, which would typically put 502 00:29:33,480 --> 00:29:35,960 Speaker 1: less pressure on inflation. So we really do feel like 503 00:29:35,960 --> 00:29:39,000 Speaker 1: we're in that that goldilocks moment where we're getting good 504 00:29:39,000 --> 00:29:41,480 Speaker 1: g d P growth, but we don't have the inflation 505 00:29:41,520 --> 00:29:44,160 Speaker 1: that traditionally might have seen with this type of market. Um, 506 00:29:44,200 --> 00:29:46,600 Speaker 1: maybe it takes pressure off of the Fed to raise rates, 507 00:29:46,600 --> 00:29:48,800 Speaker 1: as they've indicated that they want to do. So m 508 00:29:48,960 --> 00:29:50,920 Speaker 1: all things seem to be pointing in the right direction 509 00:29:51,000 --> 00:29:52,960 Speaker 1: right now, and this is a group of economist some 510 00:29:53,040 --> 00:29:54,800 Speaker 1: moll straight make the ice space so every day they 511 00:29:54,840 --> 00:29:57,840 Speaker 1: just don't believe. This story carries on into I'm looking 512 00:29:57,840 --> 00:30:00,720 Speaker 1: at the projections from the medium project of the Economist 513 00:30:00,720 --> 00:30:03,200 Speaker 1: week track here at Bloomberg on the Street, and the 514 00:30:03,200 --> 00:30:05,880 Speaker 1: expectation is that GDP spies the two point five percent. 515 00:30:07,360 --> 00:30:10,200 Speaker 1: Where were you on that, Mick and how bigs the spread? Sure, 516 00:30:10,200 --> 00:30:12,520 Speaker 1: we were still our projections are still roughly in that 517 00:30:12,640 --> 00:30:15,560 Speaker 1: three percent three percent range for the next couple of years. 518 00:30:15,560 --> 00:30:18,640 Speaker 1: We do think that is that's that's sustainable. Keep in mind, 519 00:30:18,640 --> 00:30:19,880 Speaker 1: and I don't know who you're talking to, but a 520 00:30:19,920 --> 00:30:22,040 Speaker 1: lot of folks are just heavily invested in seeing that 521 00:30:22,160 --> 00:30:25,479 Speaker 1: number not come in at three percent, especially folks who 522 00:30:25,480 --> 00:30:27,800 Speaker 1: are tied at the previous administration wanted you and me 523 00:30:28,000 --> 00:30:29,960 Speaker 1: to believe that one point nine percent was the best 524 00:30:30,000 --> 00:30:32,680 Speaker 1: you could do forever. Keep in mind Paul Krugman said 525 00:30:32,720 --> 00:30:34,600 Speaker 1: one time, I think that you could make him complete 526 00:30:34,600 --> 00:30:36,880 Speaker 1: dictator of the country, and he couldn't get you up 527 00:30:36,880 --> 00:30:38,880 Speaker 1: but a couple of tents of a percentage point um. 528 00:30:38,920 --> 00:30:41,200 Speaker 1: Now there's a lot of folks who again missed this time. 529 00:30:41,240 --> 00:30:43,440 Speaker 1: The three point five percent is higher than a lot 530 00:30:43,440 --> 00:30:45,880 Speaker 1: of folks expected. That inflation number is lower than a 531 00:30:45,920 --> 00:30:48,560 Speaker 1: lot of folks expected. But again at the administration, it's 532 00:30:48,640 --> 00:30:50,680 Speaker 1: right where we thought we would be given the policies 533 00:30:50,720 --> 00:30:52,720 Speaker 1: we put in place over the first seven quarters. So 534 00:30:52,840 --> 00:30:54,719 Speaker 1: make right where we thought we would be on GDP. 535 00:30:54,920 --> 00:30:57,320 Speaker 1: The economy is at booming. We can't argue against that. 536 00:30:57,640 --> 00:31:03,640 Speaker 1: Tax revenue essentially flat in fist, go why tax revenues flat? 537 00:31:03,640 --> 00:31:05,160 Speaker 1: It's up a little bit. We still took in record 538 00:31:05,360 --> 00:31:07,880 Speaker 1: revenues last year. It's down on the corporate side, which 539 00:31:07,920 --> 00:31:10,520 Speaker 1: you would expect given the lower rates at the beginning 540 00:31:10,560 --> 00:31:12,560 Speaker 1: of the of the dynamism that would come from a 541 00:31:12,640 --> 00:31:15,560 Speaker 1: from a tax cut, but individual tax receipts set all 542 00:31:15,600 --> 00:31:18,000 Speaker 1: time records. Keep in mind that the budget deficit that 543 00:31:18,040 --> 00:31:20,160 Speaker 1: we rolled out, and I think it was seven eight 544 00:31:20,440 --> 00:31:23,080 Speaker 1: a couple of weeks ago, was actually seventy billion dollars 545 00:31:23,200 --> 00:31:26,120 Speaker 1: less than the Congressional Budget Office estimated as recently so 546 00:31:26,120 --> 00:31:28,480 Speaker 1: I think June or July in the summertime. So revenues 547 00:31:28,520 --> 00:31:31,400 Speaker 1: continue to to to sort of meet our expectations. It's 548 00:31:31,400 --> 00:31:33,680 Speaker 1: the spending side of the ledger right now that's driving 549 00:31:33,720 --> 00:31:36,120 Speaker 1: a lot of that deficit. All of that deficit actually 550 00:31:36,360 --> 00:31:39,240 Speaker 1: um and it's the discretionary part of that spending that's 551 00:31:39,240 --> 00:31:41,520 Speaker 1: contributing greatly to that. One of the reasons you saw 552 00:31:41,560 --> 00:31:45,200 Speaker 1: the President speak so strongly about reducing discretionary spending at 553 00:31:45,200 --> 00:31:47,880 Speaker 1: the Cabinet meeting last week. So, now the deficits of problem, 554 00:31:48,000 --> 00:31:50,400 Speaker 1: but the revenues really are not. What's what's leading us 555 00:31:50,400 --> 00:31:52,320 Speaker 1: down that that deficit path right now, it's the spending 556 00:31:52,360 --> 00:31:54,680 Speaker 1: side of the ledger Many people might sit here and say, well, 557 00:31:54,680 --> 00:31:56,600 Speaker 1: that's rich and this is just a classic example of 558 00:31:56,600 --> 00:31:59,520 Speaker 1: politicizing the deficit and making adount spending. It's pretty clear 559 00:31:59,560 --> 00:32:02,960 Speaker 1: the income tax receipts on coming out outside of the 560 00:32:02,960 --> 00:32:05,560 Speaker 1: consumer income side of the agenda. What do you say 561 00:32:05,600 --> 00:32:08,680 Speaker 1: back to that, that's gonna take some time for those 562 00:32:08,720 --> 00:32:11,040 Speaker 1: those tax cuts in the corporate text cuts to sort 563 00:32:11,040 --> 00:32:15,920 Speaker 1: of to kick in when you lower corporate rates. Yeah, 564 00:32:15,960 --> 00:32:18,000 Speaker 1: in the first couple of quarters, receipts are going to 565 00:32:18,040 --> 00:32:20,480 Speaker 1: be less than you expected. But all of our projections 566 00:32:20,560 --> 00:32:22,840 Speaker 1: long term or that when you get to year seven, eight, nine, ten, 567 00:32:22,920 --> 00:32:25,160 Speaker 1: and then outside of what we call the budget window, 568 00:32:25,200 --> 00:32:27,920 Speaker 1: and in DC we budget by tenuring increments outside of 569 00:32:27,960 --> 00:32:30,560 Speaker 1: the budget window. You're talking about corporate receipts that far 570 00:32:30,640 --> 00:32:32,960 Speaker 1: exceed what we expected before the tax cuts. So yeah, 571 00:32:33,000 --> 00:32:36,160 Speaker 1: we did expect corporate rates, corporate collections to come down. 572 00:32:36,200 --> 00:32:38,800 Speaker 1: That's exactly what happened. But again, all of the money 573 00:32:38,800 --> 00:32:40,840 Speaker 1: that comes in and again to us, a dollar a dollar, 574 00:32:40,880 --> 00:32:43,120 Speaker 1: whether we take it from you or your employer. Money 575 00:32:43,160 --> 00:32:45,360 Speaker 1: to us is just a dollar. Those receipts are at 576 00:32:45,360 --> 00:32:48,000 Speaker 1: all time highs. Is the Republican Party still the poty 577 00:32:48,280 --> 00:32:51,880 Speaker 1: of fiscal responsibility? Make well, well, we'll find out. That's 578 00:32:51,880 --> 00:32:54,240 Speaker 1: certainly the president of fiscal responsibility. That's why you saw 579 00:32:54,280 --> 00:32:56,600 Speaker 1: him unveiled the the Nickel Plan, which was his idea. 580 00:32:56,640 --> 00:32:58,560 Speaker 1: By the way, it was not not me pushing that 581 00:32:58,640 --> 00:33:01,480 Speaker 1: on him. He understands the the the import of the deficit. 582 00:33:01,680 --> 00:33:04,360 Speaker 1: He understands that the imports of the discretionary side of 583 00:33:04,400 --> 00:33:06,240 Speaker 1: a ledger. So when he sat down last week with 584 00:33:06,240 --> 00:33:08,800 Speaker 1: the cabinet and said, look, everybody's gotta cut five percent 585 00:33:08,840 --> 00:33:11,239 Speaker 1: from last year, he was deadly serious. So uh, as 586 00:33:11,280 --> 00:33:13,240 Speaker 1: far as the President is concerned, yeah, he's still very 587 00:33:13,240 --> 00:33:16,240 Speaker 1: fiscally responsible. We encourage Congress when they get back after 588 00:33:16,280 --> 00:33:18,280 Speaker 1: the election to follow that lead. Let's talk about the 589 00:33:18,320 --> 00:33:21,240 Speaker 1: cot to spending shown we each agency five percent. Does 590 00:33:21,280 --> 00:33:24,680 Speaker 1: that include defense spending as well? Make it does? Actually, 591 00:33:24,720 --> 00:33:26,440 Speaker 1: I think the number he actually set the number for 592 00:33:26,480 --> 00:33:28,400 Speaker 1: defense at seven hund billion, which is about a two 593 00:33:28,400 --> 00:33:30,560 Speaker 1: and a half per set reduction for defense. So I 594 00:33:30,600 --> 00:33:33,280 Speaker 1: think he's treating that slightly separately. But again, everyone will 595 00:33:33,320 --> 00:33:35,840 Speaker 1: do more with less than they had last year in 596 00:33:35,920 --> 00:33:39,680 Speaker 1: our budget. Also, you might see some agencies state Department, 597 00:33:39,720 --> 00:33:43,400 Speaker 1: for example, education, actually have reductions that exceed five percent. 598 00:33:43,480 --> 00:33:47,000 Speaker 1: So now the president has spending in his mind and 599 00:33:47,040 --> 00:33:48,440 Speaker 1: it is a focus of his right now, and you're 600 00:33:48,440 --> 00:33:50,560 Speaker 1: gonna see that trickle down through the budgets from the 601 00:33:50,600 --> 00:33:52,680 Speaker 1: various cabinet agencies. I just wonder whether that's going to 602 00:33:52,720 --> 00:33:55,640 Speaker 1: be enough. I'm looking at interest payments of five billion plus, 603 00:33:55,760 --> 00:33:58,320 Speaker 1: I'm looking at a deficit of seven billion, and most 604 00:33:58,320 --> 00:34:02,800 Speaker 1: people expect those numbers to get worse. No bets. Uh yeah, well, 605 00:34:02,960 --> 00:34:05,680 Speaker 1: and certainly, Uh, we're very cognizant of what happens with 606 00:34:05,680 --> 00:34:08,239 Speaker 1: the interest rates because we're the largest borrower in the world, 607 00:34:08,280 --> 00:34:10,160 Speaker 1: so interest rates grew up. We're very interest rates sensitive. 608 00:34:10,200 --> 00:34:12,560 Speaker 1: I think that five billion dollar number doesn't kick in 609 00:34:12,600 --> 00:34:14,160 Speaker 1: for a couple of years out. I think we're someplace 610 00:34:14,200 --> 00:34:15,960 Speaker 1: in the in the low threes this year. But uh, 611 00:34:16,440 --> 00:34:18,520 Speaker 1: but the right we are getting in that direction. Yes, 612 00:34:18,560 --> 00:34:20,440 Speaker 1: we are absolutely concerned about it, which is one of 613 00:34:20,480 --> 00:34:23,200 Speaker 1: the reasons the presidents I think the last three budgets 614 00:34:23,200 --> 00:34:25,840 Speaker 1: are the last two budgets the President's offered some of 615 00:34:25,880 --> 00:34:29,120 Speaker 1: the greatest broadest spending reductions ever. Keep in mind, if 616 00:34:29,160 --> 00:34:31,600 Speaker 1: Congress had passed our budget two years ago, we'd be 617 00:34:31,600 --> 00:34:33,480 Speaker 1: well on our way to a balanced budget. We didn't 618 00:34:33,480 --> 00:34:35,920 Speaker 1: do that. Congress shows not to do that. That's fine. Um, 619 00:34:35,960 --> 00:34:38,120 Speaker 1: they have a chance now to put this five percent 620 00:34:38,160 --> 00:34:40,799 Speaker 1: reduction in place beginning with this year spending plans. So 621 00:34:40,800 --> 00:34:42,719 Speaker 1: it's slightly confusing to a lot of paper. In the 622 00:34:42,760 --> 00:34:45,480 Speaker 1: same way we talk about fiscal responsibility and kind of 623 00:34:45,520 --> 00:34:49,279 Speaker 1: spending by five, we're also talking about another tax cut. 624 00:34:49,520 --> 00:34:52,279 Speaker 1: Can you make sense of that for us? Sure? I 625 00:34:52,320 --> 00:34:54,920 Speaker 1: think the President really wants to do more, even more 626 00:34:55,000 --> 00:34:58,280 Speaker 1: for the middle class. Um. The tax cuts and reform 627 00:34:58,320 --> 00:35:00,719 Speaker 1: package that we've passed last year was huge boon to 628 00:35:00,760 --> 00:35:02,600 Speaker 1: the middle class, especially in terms of things like the 629 00:35:02,640 --> 00:35:04,960 Speaker 1: child care tax credit. But if the President can figure 630 00:35:05,000 --> 00:35:07,880 Speaker 1: out a way in a fiscally responsible manner to to 631 00:35:08,239 --> 00:35:11,719 Speaker 1: give another ten percent reduction to the middle class. That's 632 00:35:11,760 --> 00:35:13,719 Speaker 1: good for the economy, it's good for people. It helps 633 00:35:13,800 --> 00:35:16,680 Speaker 1: build on what we've seen, which is house home take 634 00:35:16,760 --> 00:35:19,520 Speaker 1: home pay is up dramatically. I think, uh, it's up 635 00:35:19,560 --> 00:35:21,520 Speaker 1: like three in the last seven quarters. And that's on 636 00:35:21,520 --> 00:35:24,320 Speaker 1: a real basis. UM. So the lower taxes of the 637 00:35:24,360 --> 00:35:27,279 Speaker 1: middle class, raise their wages, raise their bonuses, um. And 638 00:35:27,320 --> 00:35:29,279 Speaker 1: it just helps build the middle class, which you know 639 00:35:29,440 --> 00:35:30,960 Speaker 1: means a lot to the president. But it's in the 640 00:35:31,000 --> 00:35:34,080 Speaker 1: tacit admission from this administration that we kind of fold it. 641 00:35:35,160 --> 00:35:37,200 Speaker 1: I'm sorry to hear your questions and the tacit admission 642 00:35:37,200 --> 00:35:39,600 Speaker 1: by this administration that we kind of fold another tax 643 00:35:39,680 --> 00:35:43,640 Speaker 1: cut in America. No, no, no, and um. And you know, 644 00:35:43,680 --> 00:35:45,200 Speaker 1: I think I've talked about this before in terms of 645 00:35:45,360 --> 00:35:48,040 Speaker 1: they're being different types of deficits. There's some deficits they 646 00:35:48,080 --> 00:35:51,080 Speaker 1: come from wealth transfer payments, which don't contribute very much 647 00:35:51,080 --> 00:35:53,360 Speaker 1: to growth. There's deficits that might come, for an example, 648 00:35:53,400 --> 00:35:56,320 Speaker 1: by government from government investment of things like infrastructure research 649 00:35:56,360 --> 00:35:59,080 Speaker 1: that has some return on that investment. And there's there's 650 00:35:59,120 --> 00:36:01,439 Speaker 1: the tax that deficits as they come from letting you 651 00:36:01,520 --> 00:36:04,000 Speaker 1: and me and everybody watching this program keep more of 652 00:36:04,040 --> 00:36:07,040 Speaker 1: their own money through tax reductions. That's the most efficient 653 00:36:07,080 --> 00:36:09,600 Speaker 1: allocation of resource. We do think that's the help the 654 00:36:09,600 --> 00:36:12,240 Speaker 1: thing that helps us grow the economy. And again we've 655 00:36:12,239 --> 00:36:14,799 Speaker 1: been right. So everybody who says you couldn't do this, 656 00:36:15,320 --> 00:36:17,040 Speaker 1: now you should be asking them the question, why is 657 00:36:17,040 --> 00:36:18,799 Speaker 1: it that you were wrong and Trump was right. We've 658 00:36:18,840 --> 00:36:21,040 Speaker 1: got the three percent you didn't say was achievable. It 659 00:36:21,080 --> 00:36:22,480 Speaker 1: looks like you'll have it for at least the next 660 00:36:22,480 --> 00:36:25,200 Speaker 1: couple of quarters. What what was wrong with what those 661 00:36:25,200 --> 00:36:28,239 Speaker 1: folks said coming into this administration that we were able 662 00:36:28,320 --> 00:36:30,759 Speaker 1: to to to to prove right on I agree with you. 663 00:36:30,800 --> 00:36:32,480 Speaker 1: Many economist said we couldn't get to three. We go 664 00:36:32,560 --> 00:36:34,000 Speaker 1: to three. In fact, we had a full handle in 665 00:36:34,040 --> 00:36:36,560 Speaker 1: the previous quote. I think when many people will disagree 666 00:36:36,600 --> 00:36:38,040 Speaker 1: with you is that it's come with a big price. 667 00:36:38,280 --> 00:36:40,799 Speaker 1: It's come with a much much bigger fiscal deficit. And 668 00:36:40,840 --> 00:36:43,040 Speaker 1: the spending plans that we've heard this week just want 669 00:36:42,960 --> 00:36:46,560 Speaker 1: to touch the sides. Um Again. This the spending plans 670 00:36:46,560 --> 00:36:48,759 Speaker 1: that we were roll out I think are fiscally responsible. Um. 671 00:36:48,840 --> 00:36:51,680 Speaker 1: So again, keep in mind who spends the money, Congress 672 00:36:51,760 --> 00:36:53,920 Speaker 1: spends the money. That's whey the constitution works. We can 673 00:36:53,960 --> 00:36:55,719 Speaker 1: send our budgets to the Hill, and we have done 674 00:36:55,760 --> 00:36:57,560 Speaker 1: that for the last two years. Do it again this year. 675 00:36:57,960 --> 00:36:59,880 Speaker 1: We'd like Congress to pay close for attention to it. 676 00:36:59,880 --> 00:37:02,759 Speaker 1: And now that I think everybody knows. People don't realize this. 677 00:37:02,800 --> 00:37:04,600 Speaker 1: But if you watch the cabinet meeting last week, you 678 00:37:04,640 --> 00:37:06,759 Speaker 1: saw the President talk about it in public. But as 679 00:37:06,800 --> 00:37:09,160 Speaker 1: soon as the door closed. Ordinarily that would be when 680 00:37:09,160 --> 00:37:10,719 Speaker 1: the President turns to me and says, Mick, tell us 681 00:37:10,719 --> 00:37:12,560 Speaker 1: about the budget. But he didn't do that. This year. 682 00:37:12,600 --> 00:37:15,040 Speaker 1: The President talked about this himself for twenty minutes. Back 683 00:37:15,080 --> 00:37:17,360 Speaker 1: I didn't say a word. This is the president's idea. 684 00:37:17,480 --> 00:37:20,640 Speaker 1: The president now has spending in his sights, and we're 685 00:37:20,640 --> 00:37:23,440 Speaker 1: going to bring the full force the administration behind getting 686 00:37:23,480 --> 00:37:26,200 Speaker 1: some fiscal responsibility. Keep on, how we did so well 687 00:37:26,280 --> 00:37:28,040 Speaker 1: with the budget back in the nineteen nineties was we 688 00:37:28,040 --> 00:37:30,279 Speaker 1: didn't really cut spending. We grew the economy in the 689 00:37:30,320 --> 00:37:34,200 Speaker 1: late nineteen nineties and had fiscal restraint. Revenues grew faster 690 00:37:34,360 --> 00:37:36,560 Speaker 1: than expenses. That's what we're trying to get back to. 691 00:37:36,719 --> 00:37:38,080 Speaker 1: So make it just saves to me that we've going 692 00:37:38,120 --> 00:37:39,839 Speaker 1: back to the all politics, that what's going to happen 693 00:37:39,880 --> 00:37:42,319 Speaker 1: after the midterms is the classic cogument, the classic blame 694 00:37:42,360 --> 00:37:45,239 Speaker 1: game between the Democrats and Republicans, just not to deal 695 00:37:45,320 --> 00:37:47,160 Speaker 1: with what's in front of them right now, which is 696 00:37:47,160 --> 00:37:52,640 Speaker 1: a debt problem. Um. Again, the political atmosphere is pretty hyperparison. 697 00:37:52,640 --> 00:37:54,439 Speaker 1: There's no question about that. I don't think I'm making 698 00:37:54,480 --> 00:37:56,360 Speaker 1: news when I say that it would be curious to 699 00:37:56,400 --> 00:37:58,600 Speaker 1: see what gets done in the Lane Duck. All I 700 00:37:58,600 --> 00:38:00,400 Speaker 1: can say to your answers on spending was I think 701 00:38:00,400 --> 00:38:02,799 Speaker 1: the President has laid down the marker. President said, look, 702 00:38:03,000 --> 00:38:05,280 Speaker 1: I want I want a five percent across the board reduction. 703 00:38:05,320 --> 00:38:07,719 Speaker 1: I want defense even to do less or do more 704 00:38:07,760 --> 00:38:09,200 Speaker 1: with less than they had less year. I don't know 705 00:38:09,239 --> 00:38:12,280 Speaker 1: how any president of the United States could could spend 706 00:38:12,320 --> 00:38:15,640 Speaker 1: a could send a stronger fiscally conservative message. He makes 707 00:38:15,640 --> 00:38:17,520 Speaker 1: always try to catch you. Thanks for dropping bond. A 708 00:38:17,520 --> 00:38:19,680 Speaker 1: busy morning for you, guys, I'm sure, and some solid 709 00:38:19,760 --> 00:38:21,800 Speaker 1: numbers for the U. S. Economy once again in the 710 00:38:21,800 --> 00:38:24,440 Speaker 1: previous court. Thank you very much, Mick mc vulvaney. The 711 00:38:24,560 --> 00:38:27,840 Speaker 1: U S Office a bunchet office, a management and budget director, 712 00:38:27,920 --> 00:38:36,280 Speaker 1: joining us from outside the White House. Thanks for listening 713 00:38:36,360 --> 00:38:40,920 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 714 00:38:40,920 --> 00:38:46,160 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 715 00:38:46,719 --> 00:38:50,080 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 716 00:38:50,080 --> 00:38:53,480 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.