1 00:00:00,240 --> 00:00:04,040 Speaker 1: Runt You by Bank of America Mary Lynch with virtual reality, 2 00:00:04,320 --> 00:00:09,719 Speaker 1: virtually everything will change. Discover opportunities in a transforming world 3 00:00:10,160 --> 00:00:14,440 Speaker 1: VI of a mL dot Com, slash VR, Mary Lynch, 4 00:00:14,520 --> 00:00:28,120 Speaker 1: Pierced Fenner and Smith Incorporated. Ye. Welcome to the Bloomberg 5 00:00:28,160 --> 00:00:32,360 Speaker 1: Surveillance Podcast. I'm Tom Keene with David Gura. Daily we 6 00:00:32,440 --> 00:00:36,080 Speaker 1: bring you insight from the best of economics, finance, investment, 7 00:00:36,120 --> 00:00:42,200 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 8 00:00:42,280 --> 00:00:50,080 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Will 9 00:00:50,120 --> 00:00:51,720 Speaker 1: be Control. As I said, head a public policy at 10 00:00:51,960 --> 00:00:55,639 Speaker 1: CLOM that joins me now at last week, Infrastructure Week, 11 00:00:55,680 --> 00:00:58,520 Speaker 1: this week Workforce Development Week at the White House, they're 12 00:00:58,520 --> 00:01:02,440 Speaker 1: eager to shift focus onto these economic initiatives. Is that working? 13 00:01:02,520 --> 00:01:04,440 Speaker 1: Is that making any kind of a difference with them 14 00:01:04,440 --> 00:01:07,760 Speaker 1: getting uh their agenda back front and center. Yeah, I mean, 15 00:01:08,000 --> 00:01:11,200 Speaker 1: you know, it's um, there's certainly not for lack of trying. Um. 16 00:01:11,319 --> 00:01:13,080 Speaker 1: You know, I think there is a lot of focus 17 00:01:13,080 --> 00:01:16,520 Speaker 1: and fanfare around Infrastructure Week, for example last week and 18 00:01:16,560 --> 00:01:20,679 Speaker 1: then this week with the Apprenticeship Executive Order. But I think, 19 00:01:20,720 --> 00:01:23,760 Speaker 1: you know the reality is that this administration is being 20 00:01:23,800 --> 00:01:27,839 Speaker 1: plagued by the Russia, Um, the Russia investigation, and even 21 00:01:27,880 --> 00:01:30,760 Speaker 1: if there's nothing that is conclusive that comes out of 22 00:01:30,800 --> 00:01:34,120 Speaker 1: that and the President and his administration and campaign are 23 00:01:34,160 --> 00:01:37,440 Speaker 1: completely exonerated, you know it just it is yet another 24 00:01:37,600 --> 00:01:41,560 Speaker 1: headwind um to getting done a very difficult and ambitious 25 00:01:41,600 --> 00:01:45,399 Speaker 1: policy agenda under the best of circumstances. Honestly, so, Um, 26 00:01:45,400 --> 00:01:47,480 Speaker 1: you know, they're the Congress, as you said, there's making 27 00:01:47,560 --> 00:01:51,920 Speaker 1: some progress on healthcare, but certainly I think at this point, um, 28 00:01:52,200 --> 00:01:54,040 Speaker 1: right after the election, they would have assumed that they 29 00:01:54,080 --> 00:01:56,440 Speaker 1: would have been much farther. Has something changed about the 30 00:01:56,520 --> 00:02:00,000 Speaker 1: level of engagement the administration has with business with executives 31 00:02:00,080 --> 00:02:02,040 Speaker 1: in light of perhaps the president's trip to the Middle 32 00:02:02,040 --> 00:02:06,280 Speaker 1: East in Europe were designed to withdraw from the Paris Agreement. 33 00:02:06,600 --> 00:02:09,320 Speaker 1: I remember early on in the administration's tenure it seemed 34 00:02:09,400 --> 00:02:13,720 Speaker 1: like big executives were coming through Washington very regularly. And 35 00:02:13,840 --> 00:02:16,720 Speaker 1: again with these two weeks that we've had theme weeks 36 00:02:16,720 --> 00:02:18,520 Speaker 1: focused on the economy, it doesn't seem like it had 37 00:02:18,560 --> 00:02:20,400 Speaker 1: the star power, for lack of a better term, that 38 00:02:20,639 --> 00:02:22,240 Speaker 1: the past weeks it had. Yeah, And I think that's 39 00:02:22,280 --> 00:02:24,280 Speaker 1: I think that's exactly right. And I think there's UM, 40 00:02:24,600 --> 00:02:27,320 Speaker 1: there's this business counsel that the President has put together, 41 00:02:27,440 --> 00:02:31,840 Speaker 1: and you're to his credit, he started his administration really 42 00:02:31,880 --> 00:02:35,639 Speaker 1: soliciting a lot of feedback from many different stakeholders, including 43 00:02:35,639 --> 00:02:38,960 Speaker 1: folks in corporate America. I mean, it does seem like 44 00:02:39,200 --> 00:02:43,520 Speaker 1: that solicitation has slowed down. And you're right. I mean, 45 00:02:43,520 --> 00:02:45,639 Speaker 1: I think that there are some companies and you've already 46 00:02:45,639 --> 00:02:48,240 Speaker 1: seen some folks even on Twitter and other forms of 47 00:02:48,280 --> 00:02:51,000 Speaker 1: social media, sort of come out against the president UM 48 00:02:51,040 --> 00:02:54,680 Speaker 1: around you know, around the Paris UH Treaty and other 49 00:02:54,919 --> 00:02:58,480 Speaker 1: other more controversial items. So yes, and I think that's 50 00:02:58,560 --> 00:03:01,760 Speaker 1: it's sort of anecdotal. You have seen a slowing down 51 00:03:01,800 --> 00:03:04,600 Speaker 1: of engagement from from corporate America. With that said, I 52 00:03:04,600 --> 00:03:07,799 Speaker 1: think folks are still hopeful that we will see some 53 00:03:07,919 --> 00:03:11,400 Speaker 1: progress under regulation, that we will see some form of 54 00:03:11,840 --> 00:03:16,200 Speaker 1: fiscal stimulus, tax reform, infrastructure. Though as you know, we 55 00:03:16,240 --> 00:03:20,160 Speaker 1: both know, you know, every day is important and UM 56 00:03:20,440 --> 00:03:24,960 Speaker 1: and the legislative calendar is incredibly tight and not in 57 00:03:25,000 --> 00:03:27,600 Speaker 1: the favor of getting these ambitious things done. It strikes 58 00:03:27,600 --> 00:03:29,880 Speaker 1: me you mentioned regulation. When you look at all this 59 00:03:29,960 --> 00:03:32,400 Speaker 1: administration is trying to do, it is on regulation that 60 00:03:32,400 --> 00:03:35,040 Speaker 1: we've gotten the most clarity. Of course, we have the 61 00:03:35,280 --> 00:03:37,960 Speaker 1: House voting on this Financial Choice Act a few days ago, 62 00:03:38,400 --> 00:03:41,240 Speaker 1: passing the House apparently dead on arrival in the Senate. 63 00:03:41,520 --> 00:03:43,960 Speaker 1: But we did get this hundred fifty page document from 64 00:03:43,960 --> 00:03:47,840 Speaker 1: the Treasury Department on regulation with instruction to regulatory agencies 65 00:03:47,880 --> 00:03:51,160 Speaker 1: to reevaluate rules that are in place. Now, when you 66 00:03:51,200 --> 00:03:54,360 Speaker 1: compare that, say to the principles for tax reform, there 67 00:03:54,440 --> 00:03:57,000 Speaker 1: is more detail. Uh, and it seems likely that might 68 00:03:57,080 --> 00:03:59,320 Speaker 1: lead to some change. Yeah, for sure. And um, you 69 00:03:59,320 --> 00:04:02,120 Speaker 1: know we've we've been actually evaluating in our Investment committee 70 00:04:02,120 --> 00:04:05,280 Speaker 1: in other places in PIMCO. You know that report in detail, 71 00:04:05,400 --> 00:04:08,600 Speaker 1: and it was smart because that report, the bulk of 72 00:04:08,640 --> 00:04:13,200 Speaker 1: the recommendations are things that the administration can do without Congress. Um, 73 00:04:13,240 --> 00:04:16,080 Speaker 1: can do through the regulatory channels. But in a big 74 00:04:16,120 --> 00:04:19,520 Speaker 1: butt here. Um. Anyone is familiar with Washington, especially on 75 00:04:19,520 --> 00:04:22,760 Speaker 1: the regulatory side, these things take a long time. They 76 00:04:22,800 --> 00:04:26,640 Speaker 1: have to go through the Administrative Procedures Act Notice for 77 00:04:26,720 --> 00:04:29,600 Speaker 1: public comment. Uh. You know, it's just a long way 78 00:04:29,640 --> 00:04:32,080 Speaker 1: of saying it will take time. So will we see 79 00:04:32,080 --> 00:04:35,200 Speaker 1: some regulatory softening. We are expecting that you will, but 80 00:04:35,320 --> 00:04:37,760 Speaker 1: probably not until the later part of twenty eighteen or 81 00:04:37,760 --> 00:04:40,680 Speaker 1: twenty nineteen. How do you assess the level of engagement 82 00:04:40,960 --> 00:04:44,200 Speaker 1: the White House has with Republicans and Democrats on on 83 00:04:44,320 --> 00:04:46,960 Speaker 1: Capitol Hill right now somewhere invited to the White House 84 00:04:47,000 --> 00:04:48,919 Speaker 1: earlier this week, it seems like the President's making an 85 00:04:48,960 --> 00:04:51,719 Speaker 1: attempt to have overtures to members of Congress to to 86 00:04:51,800 --> 00:04:53,880 Speaker 1: keep them involved in all this. How much do they 87 00:04:53,880 --> 00:04:56,119 Speaker 1: want the White House involved when it comes to tax reform, 88 00:04:56,200 --> 00:04:58,840 Speaker 1: when it comes to healthcare reform? Do they want it 89 00:04:58,880 --> 00:05:01,599 Speaker 1: to be a in glove relationship that they want to 90 00:05:01,600 --> 00:05:03,600 Speaker 1: work closely with the White House? Yeah, I mean, for 91 00:05:03,800 --> 00:05:08,239 Speaker 1: I think they do. UM. But you know, at least 92 00:05:08,279 --> 00:05:10,400 Speaker 1: at the sort of the beginning days of the administration, 93 00:05:10,440 --> 00:05:12,400 Speaker 1: I think there was a lot of hope that, you know, 94 00:05:12,480 --> 00:05:15,800 Speaker 1: unlike maybe the Obama administration, who did not necessarily have 95 00:05:15,920 --> 00:05:18,440 Speaker 1: great relationships on the Hill on both sides of the aisle, 96 00:05:18,760 --> 00:05:21,560 Speaker 1: that this would be sort of a new paradigm um 97 00:05:21,600 --> 00:05:23,400 Speaker 1: again on both sides of the aisle, that this would 98 00:05:23,400 --> 00:05:27,760 Speaker 1: maybe be there'll be some more bipartisanship, biparson comedy ushered 99 00:05:27,800 --> 00:05:30,560 Speaker 1: in by the Trump administration. Unfortunately, we haven't seen that. 100 00:05:31,040 --> 00:05:32,960 Speaker 1: Um and again this has to do with the approval 101 00:05:33,040 --> 00:05:36,080 Speaker 1: rating among of Trump among Democrats, and it's around seven 102 00:05:36,120 --> 00:05:39,039 Speaker 1: percent according to the last Gallop Pole. And as a result, 103 00:05:39,080 --> 00:05:41,640 Speaker 1: there is no political adventive for Democrats to negotiate with 104 00:05:41,640 --> 00:05:45,200 Speaker 1: the administration. Good morning, let be cantral with us. It's 105 00:05:45,240 --> 00:05:46,960 Speaker 1: a really you know, it's sort of like David, It's 106 00:05:47,000 --> 00:05:50,000 Speaker 1: a Friday where it's like briefing Friday. I feel like 107 00:05:50,040 --> 00:05:51,920 Speaker 1: I need to read all weekends just to keep up 108 00:05:51,960 --> 00:05:54,799 Speaker 1: with things. It's good to have Libby Cantra with Pimco 109 00:05:55,320 --> 00:05:57,440 Speaker 1: with us. I I I look at Liberty and I 110 00:05:57,480 --> 00:05:59,160 Speaker 1: have to go back to a guy I believe he 111 00:05:59,320 --> 00:06:01,440 Speaker 1: dark in the door or at your shop a few 112 00:06:01,520 --> 00:06:03,880 Speaker 1: years ago, a guy named el Arian. I think it 113 00:06:03,960 --> 00:06:08,280 Speaker 1: took some courses at Cambridge a while back. Dr el 114 00:06:08,360 --> 00:06:13,640 Speaker 1: Arian believes in the unknown unknowns. That's a really good 115 00:06:13,720 --> 00:06:20,200 Speaker 1: concept for your Washington. What's your unknown unknown within all 116 00:06:20,200 --> 00:06:22,800 Speaker 1: that we're being confronted with, right, I think there's the 117 00:06:22,880 --> 00:06:26,120 Speaker 1: only certainty is uncertainty at this point. I mean there 118 00:06:26,360 --> 00:06:28,400 Speaker 1: every day, as we were talking about before, I mean, 119 00:06:28,440 --> 00:06:32,320 Speaker 1: the the news cycle is just um so replete with 120 00:06:32,839 --> 00:06:36,640 Speaker 1: new developments that on their own would be major stories. Um, 121 00:06:36,680 --> 00:06:39,880 Speaker 1: I think people are becoming a little bit desensitized. You know, 122 00:06:39,920 --> 00:06:42,720 Speaker 1: I do think that the Russiest story. Again, we don't 123 00:06:42,720 --> 00:06:45,279 Speaker 1: have a view on that and how that will turn out, 124 00:06:45,520 --> 00:06:48,800 Speaker 1: but that will continue to play the president you mailed 125 00:06:48,960 --> 00:06:51,520 Speaker 1: you mail. But the issue here is Robert Mueller is 126 00:06:51,560 --> 00:06:55,200 Speaker 1: not going to be desensitized. That's the issue. All of 127 00:06:55,279 --> 00:06:57,760 Speaker 1: us are. But David Garral helped me here. You're the 128 00:06:57,760 --> 00:07:01,159 Speaker 1: Washington next as well. I can't believe Mr Mueller is 129 00:07:01,160 --> 00:07:04,200 Speaker 1: going to be desensitized. No, in my sense of the 130 00:07:04,240 --> 00:07:06,960 Speaker 1: investigation is it since very early stages, and so in 131 00:07:07,080 --> 00:07:09,440 Speaker 1: terms of unknow unknowns, I think a huge X factor, 132 00:07:09,480 --> 00:07:11,240 Speaker 1: Tom is just how long this is going to take. 133 00:07:11,280 --> 00:07:14,560 Speaker 1: And so then we could go to the X files 134 00:07:15,400 --> 00:07:19,559 Speaker 1: and if you see, you know, any leaks into your point, 135 00:07:19,600 --> 00:07:22,600 Speaker 1: if this thing draw is sort of longer dated and 136 00:07:22,880 --> 00:07:26,400 Speaker 1: is into I mean it is going to be. Um. 137 00:07:26,600 --> 00:07:30,160 Speaker 1: It's so your question about engaging with the administration terms 138 00:07:30,160 --> 00:07:33,400 Speaker 1: of members of Congress, it then becomes politically more difficult 139 00:07:33,440 --> 00:07:36,440 Speaker 1: for Republicans to really um take up the mantle for 140 00:07:36,480 --> 00:07:40,240 Speaker 1: the administration. And I think you're already seeing some distancing 141 00:07:40,480 --> 00:07:43,120 Speaker 1: from Republican members but at this point they want to 142 00:07:43,120 --> 00:07:47,040 Speaker 1: see things get done, and for for now, it does 143 00:07:47,120 --> 00:07:50,120 Speaker 1: seem that aligning themselves with the administration still works to 144 00:07:50,160 --> 00:07:52,280 Speaker 1: their advantage, although I don't know how long that will last. 145 00:07:52,320 --> 00:07:55,200 Speaker 1: I mentioned this congressional baseball game glancingly at the top 146 00:07:55,240 --> 00:07:56,880 Speaker 1: of the show, but a line stood out to me 147 00:07:56,920 --> 00:07:59,800 Speaker 1: from some remarks the President made yesterday. He said, Steve Scalise, 148 00:07:59,880 --> 00:08:03,440 Speaker 1: the injured majority whip, in his own way, may have 149 00:08:03,480 --> 00:08:05,600 Speaker 1: brought some immunity to our long divided country. I have 150 00:08:05,640 --> 00:08:07,640 Speaker 1: a feeling that Steve made a great sacrifice, but there 151 00:08:07,680 --> 00:08:10,560 Speaker 1: could be some unity being brought to our country, let's hope. 152 00:08:10,600 --> 00:08:13,240 Speaker 1: So how optimistic are you of that we we we 153 00:08:13,320 --> 00:08:17,720 Speaker 1: have seen in these days since that terrible incident, Republicans 154 00:08:17,760 --> 00:08:20,200 Speaker 1: Democrats sitting together, doing things together. Of course, an interview 155 00:08:20,240 --> 00:08:22,080 Speaker 1: in the middle of that game last night with how 156 00:08:22,120 --> 00:08:25,920 Speaker 1: Speaker Paul Ryan and that Minority leader Nancy Pelosi? Are 157 00:08:25,920 --> 00:08:27,920 Speaker 1: you optimistic it's going to lead to to more comedy 158 00:08:27,960 --> 00:08:30,400 Speaker 1: as you mentioned a few moments ago, And I hope, 159 00:08:30,400 --> 00:08:33,120 Speaker 1: and I think most Americans hope. So I think, you know, 160 00:08:33,160 --> 00:08:36,760 Speaker 1: a big difference between the Washington of today, even versus 161 00:08:36,800 --> 00:08:39,800 Speaker 1: the Washington of ten or fifteen years ago, is that 162 00:08:39,840 --> 00:08:43,479 Speaker 1: it's become political and personal. There are always political divisions, 163 00:08:43,480 --> 00:08:46,640 Speaker 1: there's always some partisanship, but at the end of the day, 164 00:08:46,800 --> 00:08:50,440 Speaker 1: it wasn't necessarily personal among members because they already had 165 00:08:50,480 --> 00:08:53,280 Speaker 1: a foundation a relationship. They would go out to dinner together, 166 00:08:53,320 --> 00:08:56,199 Speaker 1: their staffs to each other. I think that has changed 167 00:08:56,280 --> 00:08:59,520 Speaker 1: with sort of the toxicity of the politics, and it's 168 00:08:59,559 --> 00:09:02,240 Speaker 1: become much more personal. So as a result, these folks 169 00:09:02,240 --> 00:09:04,880 Speaker 1: don't necessarily have as good relationships as I think they 170 00:09:04,960 --> 00:09:07,120 Speaker 1: used to, and so they don't have a foundation for 171 00:09:07,160 --> 00:09:10,720 Speaker 1: a negotiation. UM. So hopefully this type of you know, 172 00:09:10,760 --> 00:09:14,280 Speaker 1: it's tragic event that could have a silver lining. I'm 173 00:09:14,280 --> 00:09:16,679 Speaker 1: just not necessarily optimistic. Want to come back in redex 174 00:09:16,720 --> 00:09:18,840 Speaker 1: healthcare as well. We talked about it earlier today with 175 00:09:18,920 --> 00:09:21,960 Speaker 1: Libby Control, and it's so urgent here and immediate that 176 00:09:22,040 --> 00:09:25,320 Speaker 1: we should do that one more time. Libby cantrol is 177 00:09:25,360 --> 00:09:28,280 Speaker 1: with PIMCO. I guess I want to talk about something 178 00:09:29,120 --> 00:09:34,600 Speaker 1: non inflammatory like healthcare, except let's start with a basic 179 00:09:34,800 --> 00:09:38,599 Speaker 1: why why is it so secret in the Senate? I 180 00:09:38,840 --> 00:09:42,360 Speaker 1: don't understand what does it? Two people know about it, 181 00:09:42,440 --> 00:09:44,559 Speaker 1: and it's it's like in Raiders of the Lost Art, 182 00:09:44,600 --> 00:09:48,640 Speaker 1: it's in the Covenant, eight stories down in the Pentagon. Well, 183 00:09:48,679 --> 00:09:50,520 Speaker 1: I mean, and as we were talking about a little 184 00:09:50,520 --> 00:09:53,440 Speaker 1: bit earlier, this this differs quite a bit from the 185 00:09:53,440 --> 00:09:56,800 Speaker 1: Obamacare process, in which there were hundred hearings of the Senate, 186 00:09:56,840 --> 00:09:59,880 Speaker 1: almost ninety hearings in the House. Um it was you know, 187 00:10:00,200 --> 00:10:03,280 Speaker 1: arguably too public in that everybody had a point of view. 188 00:10:03,480 --> 00:10:05,840 Speaker 1: I think Mitch McConnell, as we were talking about before, 189 00:10:05,880 --> 00:10:07,760 Speaker 1: is trying to thread the needle here, and it is 190 00:10:07,800 --> 00:10:11,080 Speaker 1: a um it is a small needle and a small 191 00:10:11,160 --> 00:10:16,240 Speaker 1: hole because he is trying to pass a bill that 192 00:10:16,360 --> 00:10:19,560 Speaker 1: is fundamentally unpopular with the American public um less than 193 00:10:20,160 --> 00:10:23,720 Speaker 1: approve of the bill. But at the same time, he 194 00:10:23,760 --> 00:10:26,520 Speaker 1: feels like if he doesn't then they are not fulfilling 195 00:10:26,679 --> 00:10:30,960 Speaker 1: an important campaign promise. So this is really difficult politics here. 196 00:10:31,679 --> 00:10:34,640 Speaker 1: I think that the conventional wisdom at this point is 197 00:10:34,679 --> 00:10:37,400 Speaker 1: that Senator McConnell will may just bring up the bill, 198 00:10:37,480 --> 00:10:39,680 Speaker 1: regardless if he has the votes or not, just to 199 00:10:39,720 --> 00:10:42,360 Speaker 1: get some resolution on this. And we can talk about 200 00:10:42,360 --> 00:10:44,840 Speaker 1: this in a little bit, but the sequencing of healthcare 201 00:10:45,000 --> 00:10:47,360 Speaker 1: or the or the passage of healthcare predicates or the 202 00:10:47,360 --> 00:10:50,720 Speaker 1: sequencing of these other things like the budget resolution, like 203 00:10:50,840 --> 00:10:53,640 Speaker 1: tax reform. So they need to dispose of healthcare one 204 00:10:53,640 --> 00:10:55,600 Speaker 1: way or the other in the next few months, or 205 00:10:55,800 --> 00:10:58,760 Speaker 1: then their whole agenda could potentially be hijacked. The issue 206 00:10:58,760 --> 00:11:00,360 Speaker 1: here is the ven diagram of it, all right, and 207 00:11:00,400 --> 00:11:02,840 Speaker 1: I guess the capital is nothing but a giant than diagramy. 208 00:11:02,840 --> 00:11:04,319 Speaker 1: From the House on one side the Senate on the other, 209 00:11:04,360 --> 00:11:06,920 Speaker 1: they meet in the middle. When it comes to healthcare. 210 00:11:07,000 --> 00:11:09,840 Speaker 1: Senate is starting from scratch on its own bill. What's 211 00:11:09,880 --> 00:11:12,320 Speaker 1: the likelihood that that's going to resemble in any form 212 00:11:12,520 --> 00:11:14,079 Speaker 1: what the House has put forward and that the House 213 00:11:14,160 --> 00:11:16,400 Speaker 1: is going to be willing to accept whatever comes up? Well, 214 00:11:16,440 --> 00:11:19,360 Speaker 1: and like like the House that has in terms of 215 00:11:19,400 --> 00:11:23,040 Speaker 1: the Republican caucus, you know, the House has very conservative members, 216 00:11:23,040 --> 00:11:25,880 Speaker 1: has very more moderate members. The Senate has the same dynamic. 217 00:11:26,440 --> 00:11:29,040 Speaker 1: Uh So, I think it just depends on, you know, 218 00:11:29,360 --> 00:11:32,880 Speaker 1: kind of whose fingerprints are on that bill. Um. That 219 00:11:33,040 --> 00:11:36,120 Speaker 1: the hard thing, and again another political headwind here is 220 00:11:36,400 --> 00:11:38,440 Speaker 1: what can pass the Senate may not be able to 221 00:11:38,440 --> 00:11:40,800 Speaker 1: pass the House. However, I think if the Senate is 222 00:11:40,840 --> 00:11:44,280 Speaker 1: able to get a bill out with you know, fifty 223 00:11:44,280 --> 00:11:46,000 Speaker 1: and fifty two votes, right, this is going to be 224 00:11:46,040 --> 00:11:49,800 Speaker 1: a partisan vote, fifty two Republicans in the Senate, so 225 00:11:49,920 --> 00:11:53,080 Speaker 1: fifty six percent. You have to get of your caucus 226 00:11:53,080 --> 00:11:55,200 Speaker 1: on board. If they can get that out, you know, 227 00:11:55,280 --> 00:11:58,160 Speaker 1: my sort of presumption is that the House will feel 228 00:11:58,200 --> 00:12:00,600 Speaker 1: like they have to pass it just again, get this 229 00:12:00,679 --> 00:12:04,040 Speaker 1: off there, off their agenda. There are routines to Washington. 230 00:12:04,040 --> 00:12:05,680 Speaker 1: Something that used to drive me crazy about it was 231 00:12:05,720 --> 00:12:08,840 Speaker 1: how regularly the story was the same. And that's especially 232 00:12:08,880 --> 00:12:10,360 Speaker 1: true when it comes to the death ceiling. With the 233 00:12:10,400 --> 00:12:12,560 Speaker 1: debt limit, it would come up again and again and 234 00:12:12,600 --> 00:12:14,960 Speaker 1: again in the debate. The conversation would be the same 235 00:12:15,000 --> 00:12:17,480 Speaker 1: each time. What do you tie to it? If anything? 236 00:12:18,160 --> 00:12:20,559 Speaker 1: Is this something that should be raised, etcetera, etcetera. Were 237 00:12:20,640 --> 00:12:23,839 Speaker 1: there again? What are we hearing from this administration about that? 238 00:12:23,880 --> 00:12:25,480 Speaker 1: And I say, we're there again. We really don't know 239 00:12:25,520 --> 00:12:27,679 Speaker 1: when the actual date is that we're going to be 240 00:12:27,760 --> 00:12:30,400 Speaker 1: up against that ceiling. Yeah, exactly. Um, so that's sort 241 00:12:30,400 --> 00:12:34,360 Speaker 1: of the the ex date, the unknown date where Treasury 242 00:12:34,480 --> 00:12:38,280 Speaker 1: exhaust its extraordinary efforts in terms of um, you know, 243 00:12:38,480 --> 00:12:41,000 Speaker 1: the death ceiling limit to take a setback. It actually 244 00:12:41,040 --> 00:12:43,440 Speaker 1: the deadline was March fifteenth, but then Treasury has been 245 00:12:43,520 --> 00:12:47,480 Speaker 1: using extraordinary measures to delay that. Uh. You know, there's 246 00:12:47,559 --> 00:12:50,480 Speaker 1: some thinking that it could be as early as August, 247 00:12:50,559 --> 00:12:54,760 Speaker 1: although Secretary Minuchin was on the House testifying and saying 248 00:12:54,800 --> 00:12:57,360 Speaker 1: that it probably was September. I think that, you know, 249 00:12:57,400 --> 00:12:59,680 Speaker 1: the big question, here's what their strategy is going to be. 250 00:12:59,760 --> 00:13:03,280 Speaker 1: And and to your point, there hasn't been a coherent 251 00:13:03,360 --> 00:13:06,240 Speaker 1: strategy at least as of yet. Secretary Minutition wants a 252 00:13:06,240 --> 00:13:09,960 Speaker 1: clean debt ceiling bill. Um mcmulvaney, oh and B director 253 00:13:10,000 --> 00:13:12,080 Speaker 1: has said that he wants to have some provisions in 254 00:13:12,160 --> 00:13:15,160 Speaker 1: terms of reducing spending. The problem with that is no 255 00:13:15,280 --> 00:13:17,240 Speaker 1: Democrat will vote for it, and you need Democrats in 256 00:13:17,320 --> 00:13:19,320 Speaker 1: order to lift the debt ceiling. I will just add 257 00:13:19,360 --> 00:13:21,120 Speaker 1: to that the debt ceiling did not used to be 258 00:13:21,160 --> 00:13:23,000 Speaker 1: as much of an issue. Um. It was a hard 259 00:13:23,080 --> 00:13:25,800 Speaker 1: vote for members to take. But before two thousand eleven, 260 00:13:25,840 --> 00:13:29,280 Speaker 1: this idea of adding things to it was really unpopular. 261 00:13:29,600 --> 00:13:32,760 Speaker 1: Um and uh. And so you know, it's only really 262 00:13:32,760 --> 00:13:35,400 Speaker 1: become a big issue over the last few years. But 263 00:13:35,600 --> 00:13:37,640 Speaker 1: to your point, it could potentially be a big issue 264 00:13:37,640 --> 00:13:41,320 Speaker 1: from the market's perspective, given the compression of the congressional 265 00:13:41,400 --> 00:13:43,000 Speaker 1: calendar that you mentioned a few minutes ago. Do you 266 00:13:43,040 --> 00:13:45,720 Speaker 1: think it's likely we're going to see changes to the 267 00:13:45,720 --> 00:13:49,840 Speaker 1: the August recess. I know that lawmakers are love that recess, 268 00:13:50,440 --> 00:13:55,000 Speaker 1: but there's take a note. Mr Gurr has just discovered 269 00:13:55,280 --> 00:14:00,040 Speaker 1: the politicians only work thirty days a year. Well, I 270 00:14:00,040 --> 00:14:01,720 Speaker 1: hope they take August recess because I want to take 271 00:14:01,760 --> 00:14:04,320 Speaker 1: some vacation during August. But uh yeah, so you know, 272 00:14:04,360 --> 00:14:09,160 Speaker 1: the August recess is sacro sanc among members of Congress. 273 00:14:09,200 --> 00:14:11,520 Speaker 1: And I think you know, and I will I'll defend 274 00:14:11,520 --> 00:14:13,760 Speaker 1: members here a little bit. And everyone thinks that they're 275 00:14:13,800 --> 00:14:16,040 Speaker 1: on the beach. They really are going back to their districts. 276 00:14:16,040 --> 00:14:17,760 Speaker 1: And you know, they of course they take some vacation 277 00:14:17,800 --> 00:14:20,160 Speaker 1: with their families, but they really are going back to 278 00:14:20,200 --> 00:14:23,400 Speaker 1: their districts and meeting the constituents. But I did work 279 00:14:23,400 --> 00:14:26,640 Speaker 1: for a member of Congress um. But but I saw this, 280 00:14:26,720 --> 00:14:28,880 Speaker 1: I mean I witnessed this live, that there were events 281 00:14:28,920 --> 00:14:31,880 Speaker 1: in in the district. You know, regardless of what they're doing, 282 00:14:32,080 --> 00:14:34,680 Speaker 1: they are it is sacro sanc. So I think under 283 00:14:34,720 --> 00:14:38,680 Speaker 1: only extraordinary circumstances, I just I mean, it goes and 284 00:14:38,720 --> 00:14:40,440 Speaker 1: it goes back, of course when it used to be 285 00:14:40,520 --> 00:14:43,640 Speaker 1: by horseback and then by training where you had to 286 00:14:43,680 --> 00:14:46,080 Speaker 1: go back and see people. This has been great. Let 287 00:14:46,080 --> 00:14:48,640 Speaker 1: me carntil very generous of you be with us this 288 00:14:48,680 --> 00:14:52,040 Speaker 1: morning with David Gura and time keeneild you where this 289 00:14:52,120 --> 00:15:08,120 Speaker 1: worldwide coast to coast, this is bloomber. Let's get to 290 00:15:08,160 --> 00:15:11,680 Speaker 1: our guests. Um, and he knows very much about the 291 00:15:11,680 --> 00:15:13,440 Speaker 1: cf A. He is a c f A. As I 292 00:15:13,480 --> 00:15:17,760 Speaker 1: am seeing Josephs with State Street Global Advisors with a 293 00:15:17,800 --> 00:15:21,560 Speaker 1: particular look from Singapore on Southeast Asia and of course 294 00:15:21,600 --> 00:15:25,240 Speaker 1: all of Asia and particularly on his Malaysia as well. 295 00:15:26,040 --> 00:15:29,160 Speaker 1: Wonderful to speak to you this morning. Tell us the 296 00:15:29,200 --> 00:15:35,320 Speaker 1: Southeast Asia policy towards China, not only Singapore and Malaysia, 297 00:15:35,600 --> 00:15:38,440 Speaker 1: but is there a region, is a sphere? What is 298 00:15:38,480 --> 00:15:43,720 Speaker 1: their relationship with China? I would say that the relationship 299 00:15:43,880 --> 00:15:46,280 Speaker 1: is uh, it's been mixed. Adding on on the Jeo 300 00:15:46,360 --> 00:15:49,760 Speaker 1: political side, as you've probably aware, there's always the South 301 00:15:49,880 --> 00:15:53,760 Speaker 1: China see tension thing going on. So you know, while 302 00:15:53,760 --> 00:15:57,000 Speaker 1: they're trying to defend you know, their sovereignty rights, um, 303 00:15:57,120 --> 00:15:59,800 Speaker 1: you know, they could also be careful not to really 304 00:15:59,840 --> 00:16:03,440 Speaker 1: antagonized China. When it comes to the economic front, Um, 305 00:16:03,480 --> 00:16:09,000 Speaker 1: all these Southeast Asian countries certainly would welcome the Chinese participation. 306 00:16:09,400 --> 00:16:11,720 Speaker 1: And as you know, the trade flows we did Nascia 307 00:16:11,800 --> 00:16:14,920 Speaker 1: and as well as China is also very important. So 308 00:16:14,920 --> 00:16:17,000 Speaker 1: so I would say that you know, from that perspective, 309 00:16:17,280 --> 00:16:19,800 Speaker 1: the kind of view China as uh as as A 310 00:16:19,800 --> 00:16:22,680 Speaker 1: as a big brother, um, that is going to be 311 00:16:22,680 --> 00:16:26,560 Speaker 1: beneficial for economic terms, but also equally cautious when it 312 00:16:26,600 --> 00:16:30,680 Speaker 1: comes to the the kind of geopolitical sphere. Yeah, we 313 00:16:30,680 --> 00:16:33,320 Speaker 1: we we talked about the One Belt, One Road initiative 314 00:16:33,600 --> 00:16:37,560 Speaker 1: in geopolitical terms largely, but what could it mean economically 315 00:16:37,640 --> 00:16:41,160 Speaker 1: for the countries that stand to benefit or get resources 316 00:16:41,200 --> 00:16:45,680 Speaker 1: from this, this Chinese Pact initiative. I think first that 317 00:16:45,720 --> 00:16:49,200 Speaker 1: comes to mind would be on the infrastructure side. Um, 318 00:16:49,240 --> 00:16:51,720 Speaker 1: you know, on the infrastructure side, it could be you know, 319 00:16:51,920 --> 00:16:54,760 Speaker 1: in some cases would be pot it could be real 320 00:16:55,440 --> 00:16:59,600 Speaker 1: roads constructions as well as the financing that comes to it. 321 00:17:00,080 --> 00:17:02,240 Speaker 1: So I think in some of the areas, like the 322 00:17:02,280 --> 00:17:05,600 Speaker 1: construction sectors, they could also benefit along the way. So 323 00:17:05,680 --> 00:17:09,000 Speaker 1: I think that's going to create a second round effects 324 00:17:09,200 --> 00:17:11,840 Speaker 1: for the economic growth. Let me ask you a bit 325 00:17:11,840 --> 00:17:13,600 Speaker 1: about the Bank of Japan. As I mentioned, we've got 326 00:17:13,640 --> 00:17:15,760 Speaker 1: a rate decision from the bo J just a few 327 00:17:16,119 --> 00:17:18,720 Speaker 1: hours ago, capping off a week with a lot of 328 00:17:18,720 --> 00:17:22,360 Speaker 1: central bank activity here in the US, we got more clearity, 329 00:17:22,400 --> 00:17:24,400 Speaker 1: got some semblance of a roadmap for how the FED 330 00:17:24,520 --> 00:17:27,520 Speaker 1: is going to begin to unwind its its balance sheet. 331 00:17:27,760 --> 00:17:29,840 Speaker 1: How much eagerness is there from you and others to 332 00:17:29,920 --> 00:17:32,680 Speaker 1: get more clarity on tapering from the b o J 333 00:17:32,960 --> 00:17:36,280 Speaker 1: at this point. I think at this point BOG is 334 00:17:36,280 --> 00:17:40,320 Speaker 1: playing a very careful game here close um, you know, 335 00:17:41,200 --> 00:17:44,520 Speaker 1: choosing to keep the cards close to their chest. Um. Clearly, 336 00:17:44,920 --> 00:17:48,720 Speaker 1: they are continuing to support the bond buying program. Uh, 337 00:17:48,760 --> 00:17:50,600 Speaker 1: there's no sign that's going to ease at East at 338 00:17:50,600 --> 00:17:53,560 Speaker 1: this stage. But equally they are fully aware of the 339 00:17:53,600 --> 00:17:55,679 Speaker 1: fact that as the balance sheet continues to build at 340 00:17:55,680 --> 00:17:57,719 Speaker 1: the central bank, at some point they will need to 341 00:17:58,040 --> 00:18:01,000 Speaker 1: wind down. At this point, I do thing they are 342 00:18:01,119 --> 00:18:03,840 Speaker 1: ready to do anything yet. So at this point I 343 00:18:03,880 --> 00:18:06,520 Speaker 1: don't think they want to send a very clear signal 344 00:18:06,560 --> 00:18:09,399 Speaker 1: to the market when that timeline comes. But I think 345 00:18:09,440 --> 00:18:12,920 Speaker 1: they want to remain very flexible and to allow them 346 00:18:12,920 --> 00:18:15,600 Speaker 1: more time to assess what are the options they have, 347 00:18:16,280 --> 00:18:20,000 Speaker 1: What is the weapon of currency across Asia right now, 348 00:18:20,400 --> 00:18:25,000 Speaker 1: we personal surveillance Asia d X, why the that Asian 349 00:18:25,080 --> 00:18:28,640 Speaker 1: basket ex Japan or we look at Rettman, we look 350 00:18:28,640 --> 00:18:33,359 Speaker 1: at the end. Is currency a weapon for the nations 351 00:18:33,400 --> 00:18:37,480 Speaker 1: of Asia right now? I think it can be both 352 00:18:37,840 --> 00:18:41,480 Speaker 1: to edge swords, so to speak. Now at this point 353 00:18:41,520 --> 00:18:43,960 Speaker 1: in time, obviously the you know, at the beginning of 354 00:18:43,960 --> 00:18:46,240 Speaker 1: the year, we're looking for a strong dollar, which it 355 00:18:46,280 --> 00:18:49,199 Speaker 1: did happen, but subsequently now we're seeing a bit of 356 00:18:49,240 --> 00:18:52,680 Speaker 1: a soft dollar. So from that standpoint, you know, generally 357 00:18:52,720 --> 00:18:56,960 Speaker 1: the Asian countries will look for a dresdently reasonably kind 358 00:18:56,960 --> 00:18:59,639 Speaker 1: of weak currencies to help to support the exports. But 359 00:18:59,720 --> 00:19:01,879 Speaker 1: did would not want it to be two weeks that 360 00:19:01,920 --> 00:19:05,760 Speaker 1: would create any sense of fear among investors, that would 361 00:19:05,800 --> 00:19:09,199 Speaker 1: leave the countries from the capitol con perspective. So I 362 00:19:09,240 --> 00:19:11,199 Speaker 1: think it's kind of like a double edged sword that 363 00:19:11,240 --> 00:19:13,840 Speaker 1: they could do played very happily, and I don't think 364 00:19:13,880 --> 00:19:15,760 Speaker 1: they want to really play too hot at this point. 365 00:19:16,359 --> 00:19:19,280 Speaker 1: Thank you so much, Ken, seeing whether Saeson State Global 366 00:19:19,280 --> 00:19:23,200 Speaker 1: Advisors out of Singapore with a great perspective. We don't 367 00:19:23,200 --> 00:19:25,360 Speaker 1: do that enough, David, We don't do Southeast Asia enough. 368 00:19:32,480 --> 00:19:36,280 Speaker 1: Runch you by Bank of America Mary Lynch. With virtual reality, 369 00:19:36,520 --> 00:19:41,959 Speaker 1: virtually everything will change. Discover opportunities in a transforming world 370 00:19:42,400 --> 00:19:47,040 Speaker 1: VI of a mL dot Com slash VR, Mary Lynch, Pierce, 371 00:19:47,080 --> 00:19:57,359 Speaker 1: Fenner and Smith Incorporated. What I would suggest, David is 372 00:19:57,359 --> 00:20:03,720 Speaker 1: our next guest is the absolute personification of application of 373 00:20:03,800 --> 00:20:06,919 Speaker 1: math skills, the only equivalent and the sphere that we 374 00:20:07,000 --> 00:20:10,959 Speaker 1: have of government tax analysis. Jane Sterley maybe at the 375 00:20:11,119 --> 00:20:14,800 Speaker 1: legendary at the Urban Institute, and James Perturba, his colleague 376 00:20:14,840 --> 00:20:17,320 Speaker 1: long ago at m I T this. This is a 377 00:20:17,320 --> 00:20:20,320 Speaker 1: wonderful guy. Absolutely. Donald Marrin that joins us now. He's 378 00:20:20,320 --> 00:20:23,080 Speaker 1: a director of Economic Policy Initiatives at the Urban Institute 379 00:20:23,080 --> 00:20:25,360 Speaker 1: in Washington, d C. Former acting director of the Congressional 380 00:20:25,359 --> 00:20:27,679 Speaker 1: Budget Office, from our deputy director of the Council of 381 00:20:27,720 --> 00:20:30,479 Speaker 1: Economic Advisors at the White House. He joins us now 382 00:20:30,520 --> 00:20:32,159 Speaker 1: on our phone line. Stunner and great to speak with 383 00:20:32,200 --> 00:20:34,639 Speaker 1: you once again. And let's start with taxes, if we could. 384 00:20:35,119 --> 00:20:37,160 Speaker 1: You for so long, the head of the Joint Urban 385 00:20:37,200 --> 00:20:40,600 Speaker 1: Brookings Tax Policy Center. We've heard a lot about the 386 00:20:40,920 --> 00:20:43,760 Speaker 1: border adjusted tax, the so called border adjusted tax. It 387 00:20:43,880 --> 00:20:46,280 Speaker 1: was not something that was included on that list of 388 00:20:46,359 --> 00:20:49,040 Speaker 1: principles the White House handed out at a briefing. Now 389 00:20:49,080 --> 00:20:51,560 Speaker 1: a couple of months ago, there was a sense that 390 00:20:51,560 --> 00:20:54,400 Speaker 1: maybe the White House might come around to it. What's 391 00:20:54,440 --> 00:20:57,720 Speaker 1: what's your sense of the longevity of the vitality of 392 00:20:57,760 --> 00:21:01,959 Speaker 1: the border adjusted tax in Washington, d C. Today? I 393 00:21:02,000 --> 00:21:04,080 Speaker 1: think it's going to be much more vital in the 394 00:21:04,119 --> 00:21:08,200 Speaker 1: analyst community than in the political community. The BAT, as 395 00:21:08,240 --> 00:21:11,160 Speaker 1: we now call it, Uh, doesn't seem to have gotten 396 00:21:11,160 --> 00:21:15,080 Speaker 1: the political attraction necessary to go forward. We saw House 397 00:21:15,119 --> 00:21:18,119 Speaker 1: Ways and Means Committee Chairman Kevin Brady the other day 398 00:21:18,480 --> 00:21:20,960 Speaker 1: beginning to talk about, well, maybe you can phase it 399 00:21:21,000 --> 00:21:24,160 Speaker 1: in over time, things like that. Uh, And I gotta 400 00:21:24,200 --> 00:21:25,760 Speaker 1: I gotta say I view that as sort of a 401 00:21:25,800 --> 00:21:29,480 Speaker 1: sign of its impending demise politically. Yeah. How integral is 402 00:21:29,520 --> 00:21:32,639 Speaker 1: it when you when you look at the Bryan Brady Blueprint, 403 00:21:32,680 --> 00:21:35,240 Speaker 1: which I think is the fullest document we have, the 404 00:21:35,280 --> 00:21:38,840 Speaker 1: fullest proposal we have for tax reform from the Republican side. 405 00:21:38,880 --> 00:21:41,240 Speaker 1: How essential is the inclusion of a BAT of a 406 00:21:41,240 --> 00:21:44,800 Speaker 1: border adjusted tax? Well, you should you should think about 407 00:21:45,040 --> 00:21:46,879 Speaker 1: You know that the folks in the House want to 408 00:21:46,880 --> 00:21:50,560 Speaker 1: do revenue neutral tax reform, so fundamental tax reform without 409 00:21:50,640 --> 00:21:53,199 Speaker 1: changing how much money comes in. And so that's an 410 00:21:53,280 --> 00:21:56,159 Speaker 1: exercise in giving people ice cream and getting them to 411 00:21:56,160 --> 00:21:59,879 Speaker 1: eat spinach. And we mostly talk about the ice cream, right, 412 00:22:00,000 --> 00:22:03,439 Speaker 1: you know, cutting the corporate rate, etcetera, etcetera. But you 413 00:22:03,520 --> 00:22:05,760 Speaker 1: need some spinach in. There are some tax some revenue 414 00:22:05,760 --> 00:22:09,080 Speaker 1: increases to offset that, and the BAT has been that 415 00:22:09,119 --> 00:22:12,200 Speaker 1: way of doing it over ten years and round numbers 416 00:22:12,280 --> 00:22:14,880 Speaker 1: that that was expected to bring in around a trillion dollars. 417 00:22:15,680 --> 00:22:18,520 Speaker 1: That's a lot of money, even in Washington, and it 418 00:22:18,600 --> 00:22:21,200 Speaker 1: was really essential to the goal of revenue neutrality. If 419 00:22:21,240 --> 00:22:25,200 Speaker 1: if the BAT goes away, you're left with the question of, well, 420 00:22:25,280 --> 00:22:27,600 Speaker 1: where does the money come from? Or do we give 421 00:22:27,680 --> 00:22:30,199 Speaker 1: up on revenue neutral tax reform and just embrace a 422 00:22:30,240 --> 00:22:32,240 Speaker 1: big tax cut. Tom. I just want to tell you 423 00:22:32,280 --> 00:22:34,919 Speaker 1: in Park Slope now you can get asparagus gelato. So 424 00:22:34,920 --> 00:22:36,960 Speaker 1: maybe the days of few of the future of spache 425 00:22:36,960 --> 00:22:39,720 Speaker 1: ice cream, it's not that not that far away. Donald, Mary, 426 00:22:39,840 --> 00:22:42,880 Speaker 1: let me ask you. I'm sorry, you know, just John 427 00:22:42,920 --> 00:22:45,679 Speaker 1: and I do a number two value meal and from 428 00:22:45,760 --> 00:22:52,320 Speaker 1: McDonald's here, just to keep raising our culinari. We had 429 00:22:52,320 --> 00:22:54,160 Speaker 1: a sy can we go for ice cream? You ended 430 00:22:54,200 --> 00:22:58,920 Speaker 1: up getting chocolate last we were there. Never seen this man? Uh, Donald, Mary, 431 00:22:59,000 --> 00:23:00,960 Speaker 1: you mentioned a revenue new chality. Is this something that 432 00:23:01,000 --> 00:23:02,919 Speaker 1: the White House has embraced? In other words, it's a 433 00:23:02,920 --> 00:23:06,040 Speaker 1: component part of that Ryan Brady blueprint. Is Is it 434 00:23:06,160 --> 00:23:07,960 Speaker 1: something the white House says it wants to see as well? 435 00:23:09,480 --> 00:23:12,600 Speaker 1: So the White House says many things I think is 436 00:23:12,640 --> 00:23:15,919 Speaker 1: the fair statement. Uh. Sometimes the White House talks about 437 00:23:16,080 --> 00:23:19,520 Speaker 1: revenue neutral tax reform, you know, with some of that 438 00:23:19,640 --> 00:23:24,600 Speaker 1: coming and unspecified asterisk ways from economic growth. Uh. Sometimes 439 00:23:24,640 --> 00:23:26,679 Speaker 1: the President will tweet that, you know, he wants to 440 00:23:26,680 --> 00:23:29,960 Speaker 1: do the biggest tax cut in American history. Uh. If 441 00:23:29,960 --> 00:23:31,919 Speaker 1: you look at their budget, it was really hard to 442 00:23:31,920 --> 00:23:33,719 Speaker 1: see how you got all the numbers to add up 443 00:23:33,720 --> 00:23:37,960 Speaker 1: to revenue neutral tax reform. And so I guess the 444 00:23:37,960 --> 00:23:41,119 Speaker 1: answer is yes, occasionally they talk about doing revenue neutral 445 00:23:41,119 --> 00:23:43,159 Speaker 1: tax reform, but an awful lot of the signals you 446 00:23:43,160 --> 00:23:46,520 Speaker 1: see are more tax cut than reform. I'm recalling an 447 00:23:46,560 --> 00:23:49,000 Speaker 1: interview that our colleagues, Market Talvin Jennifer Jacobs did with 448 00:23:49,040 --> 00:23:51,360 Speaker 1: the President a few weeks back. One of the things 449 00:23:51,359 --> 00:23:54,800 Speaker 1: they asked him about was whether he would consider raising 450 00:23:54,800 --> 00:23:56,760 Speaker 1: the gas tax, and he said, in fact, he was 451 00:23:56,840 --> 00:23:59,920 Speaker 1: which was going against some orthodoxy there. When when you 452 00:24:00,040 --> 00:24:02,320 Speaker 1: look at alternatives to the bad or other ways to 453 00:24:02,320 --> 00:24:05,240 Speaker 1: to to pay for tax or for more tax cuts, 454 00:24:05,280 --> 00:24:08,080 Speaker 1: what are they and do you think that Republicans are 455 00:24:08,080 --> 00:24:12,320 Speaker 1: approaching them with with real seriousness? So next on the 456 00:24:12,359 --> 00:24:17,320 Speaker 1: list is rolling back you know, more controversial tax provisions 457 00:24:17,400 --> 00:24:21,480 Speaker 1: like rolling back deductibility of interest for business. Uh. If 458 00:24:21,480 --> 00:24:23,720 Speaker 1: you were aggressive in doing that, you could raise around 459 00:24:23,760 --> 00:24:27,280 Speaker 1: a trillion dollars. But that again is something that of 460 00:24:27,280 --> 00:24:29,840 Speaker 1: course companies that rely on a lot of debt to 461 00:24:29,840 --> 00:24:32,760 Speaker 1: finance their business have noticed that have organized against it. 462 00:24:32,800 --> 00:24:35,159 Speaker 1: And you've seen that that would that would face a 463 00:24:35,160 --> 00:24:38,639 Speaker 1: lot of political challenges on the hill. Uh. You could 464 00:24:38,800 --> 00:24:41,960 Speaker 1: try to cut back spending as a way to offset 465 00:24:42,000 --> 00:24:44,560 Speaker 1: the tax the tax cuts. We saw a few members 466 00:24:44,600 --> 00:24:48,119 Speaker 1: of Congress float that in recent weeks. I think politically 467 00:24:48,160 --> 00:24:50,040 Speaker 1: that's that's going to be a dead end. You can't 468 00:24:50,119 --> 00:24:52,560 Speaker 1: you know, cut you know, food stamps or whatever in 469 00:24:52,640 --> 00:24:56,000 Speaker 1: order to finance tax cuts. But that's out there. UM. 470 00:24:56,480 --> 00:25:00,560 Speaker 1: I periodically go to secret meetings around Washington where the 471 00:25:00,600 --> 00:25:03,080 Speaker 1: top you know, at least the ones I'm invited to 472 00:25:03,160 --> 00:25:06,440 Speaker 1: tend to all be about carbon tax. Uh. That sort 473 00:25:06,480 --> 00:25:08,960 Speaker 1: of you know, if you're if you if you believe 474 00:25:09,040 --> 00:25:10,919 Speaker 1: that you know, climate change is the problem that we 475 00:25:10,960 --> 00:25:14,360 Speaker 1: need to respond to. We're seeling seeing some rollback in regulations, 476 00:25:14,440 --> 00:25:16,879 Speaker 1: but uh, you know, there's kind of a two birds, 477 00:25:16,920 --> 00:25:19,240 Speaker 1: one stone thing you could do with a carbon taxes 478 00:25:19,280 --> 00:25:22,760 Speaker 1: help reduce carbon emissions, uh, combat climate change, and at 479 00:25:22,800 --> 00:25:25,080 Speaker 1: the same time, you know, a reasonable carbon tax could 480 00:25:25,119 --> 00:25:27,399 Speaker 1: easily bring in a trillion or more over the next decade, 481 00:25:27,400 --> 00:25:30,400 Speaker 1: and that that's money that could definitely make make doing 482 00:25:30,520 --> 00:25:34,000 Speaker 1: a tax reform easier. Obviously, the political viability of the 483 00:25:34,080 --> 00:25:37,480 Speaker 1: carbon tax and the current environment is very low, not zero, 484 00:25:37,560 --> 00:25:41,040 Speaker 1: but very low. But so you hear people talk about that. Uh. 485 00:25:41,240 --> 00:25:43,640 Speaker 1: You hear people talk about the magic of a dynamic 486 00:25:43,680 --> 00:25:45,639 Speaker 1: scoring and whether that means you can have, you know, 487 00:25:45,720 --> 00:25:50,120 Speaker 1: tax cuts that pay for themselves. Happily, we have professional agencies, 488 00:25:50,160 --> 00:25:52,840 Speaker 1: the Joint Committee on Taxation and the Congressional Budget Office 489 00:25:53,480 --> 00:25:56,320 Speaker 1: that you know, have the right approach to doing dynamic scoring, 490 00:25:56,359 --> 00:25:58,119 Speaker 1: which gives you a little bit of an effect, but 491 00:25:58,280 --> 00:26:02,560 Speaker 1: nowhere near a tax cuts pay for self kind of result. Uh. 492 00:26:02,600 --> 00:26:05,040 Speaker 1: And then increasingly in recent weeks we've seen more discussion 493 00:26:05,040 --> 00:26:07,960 Speaker 1: of not paying for tax cuts or you know, doing 494 00:26:08,000 --> 00:26:11,000 Speaker 1: things like using a really long budget window and having 495 00:26:11,119 --> 00:26:15,760 Speaker 1: temporary tax cuts that last, you know, for fifteen years. Uh, 496 00:26:15,800 --> 00:26:18,880 Speaker 1: and then you know, be revenue neutral beyond that, which 497 00:26:18,920 --> 00:26:21,720 Speaker 1: is kind of gimmickry. Can you can you get tax 498 00:26:21,760 --> 00:26:25,080 Speaker 1: reform without it being bipartisan? In other words, Tom was 499 00:26:25,119 --> 00:26:27,000 Speaker 1: talking a few minutes ago with Libby can Trill about 500 00:26:27,520 --> 00:26:30,439 Speaker 1: the secrecy surrounding the negotiations over a healthcare bill in 501 00:26:30,480 --> 00:26:33,440 Speaker 1: the Senate. Uh. It seems like I won't even say 502 00:26:33,440 --> 00:26:35,640 Speaker 1: that things are on parallel tracks. It seems like Republicans 503 00:26:35,640 --> 00:26:37,280 Speaker 1: are doing the bulk of the writing of this legislation 504 00:26:37,280 --> 00:26:40,280 Speaker 1: and there isn't much democratic involvement. Can you have full 505 00:26:40,320 --> 00:26:44,400 Speaker 1: tax reform, comprehensive tax reform without the involvement of both parties? 506 00:26:46,000 --> 00:26:47,720 Speaker 1: So I guess, I guess there are two questions there. 507 00:26:47,720 --> 00:26:49,920 Speaker 1: The first is whether you could pass tax reform, And 508 00:26:49,960 --> 00:26:52,280 Speaker 1: the answer is yes. You know, we have this budget 509 00:26:52,320 --> 00:26:57,080 Speaker 1: procedure known as reconciliation that avoid selobusters in the Senate. 510 00:26:57,200 --> 00:27:00,200 Speaker 1: And so if you could literally get you know, enough 511 00:27:00,240 --> 00:27:02,960 Speaker 1: Republicans in the House and you know, at least fifty 512 00:27:03,000 --> 00:27:05,639 Speaker 1: Republicans in the standard on board for something that the 513 00:27:05,640 --> 00:27:09,000 Speaker 1: President was willing to sign. Uh. In principle, you can 514 00:27:09,040 --> 00:27:11,520 Speaker 1: do a tax reform as long as it's satisfied it's 515 00:27:11,560 --> 00:27:14,800 Speaker 1: the requirements of reconciliation. Uh. And one of those is 516 00:27:14,840 --> 00:27:17,720 Speaker 1: that it has to be uh not increase the deficits 517 00:27:17,800 --> 00:27:20,240 Speaker 1: beyond the budget window. And then that leads to this 518 00:27:20,240 --> 00:27:23,160 Speaker 1: whole discussion about, well, we usually use a tenure budget window, 519 00:27:23,200 --> 00:27:24,760 Speaker 1: but if you made it longer, maybe you could have 520 00:27:24,880 --> 00:27:30,320 Speaker 1: temporary thing. Um. But but the second piece is that, UM, 521 00:27:30,359 --> 00:27:33,600 Speaker 1: it's hard to see how you have a permanent, persistent 522 00:27:34,280 --> 00:27:38,840 Speaker 1: tax reform if you do it in a fully partisan manner. Um. 523 00:27:38,880 --> 00:27:40,919 Speaker 1: You know, if your goal is to let's move us 524 00:27:40,960 --> 00:27:43,040 Speaker 1: to a tax system that's going to guide us for 525 00:27:43,160 --> 00:27:46,320 Speaker 1: decades into the future, uh, you know, you'd want that 526 00:27:46,440 --> 00:27:48,879 Speaker 1: to be bipartisan and have by inn from both sides. 527 00:27:48,920 --> 00:27:50,680 Speaker 1: And that's that's not where we are at the moment. 528 00:27:51,760 --> 00:27:53,840 Speaker 1: Very quickly here, if you and I were stuck at 529 00:27:53,840 --> 00:27:57,640 Speaker 1: Reagan Airport on a Friday afternoon's GOP understorm and hair 530 00:27:58,280 --> 00:28:00,879 Speaker 1: Don Marin might ted, this is going to go up? 531 00:28:04,600 --> 00:28:11,320 Speaker 1: Yeah not not? Not? Is he? Is he going to die? John? 532 00:28:11,359 --> 00:28:14,880 Speaker 1: That was the PhD from the Massachusetts Institute of Technology, 533 00:28:15,200 --> 00:28:18,360 Speaker 1: the Perturbitat and that. Yeah, they're gonna go up. We're 534 00:28:18,359 --> 00:28:22,200 Speaker 1: going to continue with Don uh Marin David uh, it's 535 00:28:22,320 --> 00:28:24,600 Speaker 1: it's great to get these guys. What a week it's been. Yeah, 536 00:28:25,000 --> 00:28:27,400 Speaker 1: Richard Clarida, are you see have you recovered from our 537 00:28:27,440 --> 00:28:30,040 Speaker 1: interview with Professor Clarena? You know, always at the printer. 538 00:28:30,119 --> 00:28:32,880 Speaker 1: I've got like hundreds of pages printed out of the 539 00:28:32,920 --> 00:28:37,160 Speaker 1: old Maren. Sorry if the old the old clarator put 540 00:28:37,160 --> 00:28:38,840 Speaker 1: it on for the weekend, I know there'll be a 541 00:28:38,880 --> 00:28:42,840 Speaker 1: quick on. The only one that got the math inaper 542 00:28:42,960 --> 00:28:46,960 Speaker 1: was done, Maren. Let me turn to the budget if 543 00:28:47,000 --> 00:28:49,840 Speaker 1: I could, Donald Marron, we have a budget proposal from 544 00:28:49,840 --> 00:28:52,000 Speaker 1: the White House on the heels of a list of 545 00:28:52,000 --> 00:28:54,640 Speaker 1: principles and later a skinny budget. Now we've got the 546 00:28:54,880 --> 00:28:58,680 Speaker 1: full thing. Where do we go from here? The members 547 00:28:58,720 --> 00:29:02,760 Speaker 1: of both parties on Capitol Hill Live expressed muted enthusiasm. 548 00:29:02,800 --> 00:29:04,880 Speaker 1: Let's let's say, for the document that the White House 549 00:29:05,240 --> 00:29:08,840 Speaker 1: has put forward. Where are we in the budget process? Yeah? 550 00:29:08,880 --> 00:29:11,480 Speaker 1: So yeah, muted enthusiasm was probably generous to the to 551 00:29:11,560 --> 00:29:15,360 Speaker 1: the reaction, uh you know, uh right, not a lot 552 00:29:15,400 --> 00:29:17,760 Speaker 1: of support for the president's budget overall up on the hill, 553 00:29:19,120 --> 00:29:22,040 Speaker 1: you know. So obviously the big driving thing is a 554 00:29:22,360 --> 00:29:24,120 Speaker 1: we need to figure out how we're going to fund 555 00:29:24,120 --> 00:29:27,160 Speaker 1: the government by September. Right end of September, we have 556 00:29:27,160 --> 00:29:30,000 Speaker 1: the usual need to to finance things for the next year, 557 00:29:30,080 --> 00:29:32,160 Speaker 1: and so we're gonna have this debate about defense spending 558 00:29:32,200 --> 00:29:35,920 Speaker 1: domestic spending. President wants to increase defense spending and cut 559 00:29:35,920 --> 00:29:40,240 Speaker 1: domestic expending UH at levels neither of which are politically viable. 560 00:29:40,280 --> 00:29:41,920 Speaker 1: But so Congress is going to be trying to work 561 00:29:41,920 --> 00:29:44,640 Speaker 1: forward to to something that's doable and remains to be 562 00:29:44,680 --> 00:29:47,920 Speaker 1: seen whether that's possible UM. And then separately, you know, 563 00:29:47,960 --> 00:29:50,320 Speaker 1: going back to the tax reform discussion, if you want 564 00:29:50,320 --> 00:29:53,480 Speaker 1: to do tax reform in a partisan way, you need 565 00:29:53,560 --> 00:29:56,920 Speaker 1: to get this structure known as reconciliation in place. And 566 00:29:57,000 --> 00:30:01,000 Speaker 1: to get reconciliation in place, you have to pass a budget. UH. 567 00:30:01,040 --> 00:30:03,640 Speaker 1: And so there's a lot of pressure on on the 568 00:30:03,680 --> 00:30:06,520 Speaker 1: House in the Senate Republicans to come up with a 569 00:30:06,560 --> 00:30:09,920 Speaker 1: budget that will outline specifically what the parameters are of 570 00:30:09,920 --> 00:30:12,960 Speaker 1: what an allowable tax reform would look like. And tax 571 00:30:12,960 --> 00:30:15,560 Speaker 1: reform really can't go forward unless they're able to do 572 00:30:15,600 --> 00:30:18,000 Speaker 1: that Donaldman will have a guest on from the foreign 573 00:30:18,040 --> 00:30:20,960 Speaker 1: policy world and talk about the the the code or 574 00:30:21,040 --> 00:30:25,040 Speaker 1: newly formed Trump doctrine. When it comes to Trump's attitude 575 00:30:25,040 --> 00:30:27,360 Speaker 1: towards the budget, can you can you draw some sense 576 00:30:27,400 --> 00:30:30,280 Speaker 1: of direction from the proposal that we saw? Was this 577 00:30:30,360 --> 00:30:34,520 Speaker 1: a Donald Trump budget or a Mick mulvaney budget. So 578 00:30:34,600 --> 00:30:36,800 Speaker 1: a couple of things I'd say about the budget. So 579 00:30:36,880 --> 00:30:41,400 Speaker 1: the first is, Uh, this administration isn't as constrained as 580 00:30:41,520 --> 00:30:45,000 Speaker 1: recent ones by trying to have a budget that adds up. Uh. 581 00:30:45,040 --> 00:30:47,360 Speaker 1: There's a giant asterisk in the middle of this budget 582 00:30:47,400 --> 00:30:49,600 Speaker 1: for two trillion dollars over the next ten years, which 583 00:30:49,640 --> 00:30:53,200 Speaker 1: is an enormous amount of money. Uh, it's very difficult 584 00:30:53,240 --> 00:30:55,520 Speaker 1: to see how you make all the pieces fit together. 585 00:30:55,760 --> 00:30:58,080 Speaker 1: And we've seen since the budget came out a lot 586 00:30:58,120 --> 00:31:01,880 Speaker 1: of confusion commentary out of different parts of the administration 587 00:31:01,880 --> 00:31:04,320 Speaker 1: about exactly what they want to do. So, you know, 588 00:31:04,480 --> 00:31:07,000 Speaker 1: this is not like an Obama or Bush or Clinton 589 00:31:07,040 --> 00:31:09,080 Speaker 1: budget where there was a lot of effort to put 590 00:31:09,120 --> 00:31:11,440 Speaker 1: together something that was integral and whole and you know, 591 00:31:11,480 --> 00:31:13,440 Speaker 1: maybe had a little hand waving, but nothing on the 592 00:31:13,480 --> 00:31:15,760 Speaker 1: scale of what we see here. Uh. You know, it 593 00:31:15,800 --> 00:31:18,760 Speaker 1: has enormous economic growth assumptions that are very hard to 594 00:31:18,800 --> 00:31:21,960 Speaker 1: justify given our given our kind of you know, aging 595 00:31:22,000 --> 00:31:25,800 Speaker 1: population and slowing labor force growth. So the first thing 596 00:31:25,920 --> 00:31:28,080 Speaker 1: is kind of big picture, it doesn't all add up, 597 00:31:28,080 --> 00:31:29,680 Speaker 1: and that seems to be from their point of view, 598 00:31:29,680 --> 00:31:32,880 Speaker 1: I think, a feature rather than than a bug. Uh. Second, 599 00:31:33,080 --> 00:31:37,120 Speaker 1: clearly this focus on shifting discretionary spending towards defense in 600 00:31:37,120 --> 00:31:41,080 Speaker 1: a way from domestic programs UH and domestic operations of 601 00:31:41,120 --> 00:31:44,960 Speaker 1: agencies UH, and clearly at levels that are beyond what's 602 00:31:44,960 --> 00:31:50,040 Speaker 1: going to be politically viable. Obviously, hope that various proposals 603 00:31:50,040 --> 00:31:54,760 Speaker 1: will will encourage economic growth, but again assumptions about success 604 00:31:54,800 --> 00:31:57,640 Speaker 1: on that front that seem wildly optimistic. Help me with 605 00:31:57,680 --> 00:31:59,440 Speaker 1: it with a phrase I've heard here over these last 606 00:31:59,480 --> 00:32:02,320 Speaker 1: few weeks, that is the double count. People saying that 607 00:32:02,400 --> 00:32:05,160 Speaker 1: within this budget proposal is a double count. What does 608 00:32:05,200 --> 00:32:08,080 Speaker 1: it mean and why is it's so problematic? Sure, so 609 00:32:08,120 --> 00:32:10,600 Speaker 1: that's the two trillion dollars. I mentioned that there there's 610 00:32:10,600 --> 00:32:12,640 Speaker 1: a line item in the budget which is two trillion 611 00:32:12,680 --> 00:32:16,440 Speaker 1: dollars of mostly revenue, a little bit spending decreases, but 612 00:32:16,520 --> 00:32:20,040 Speaker 1: mostly incoming revenue. That comes from the stronger economic growth 613 00:32:20,080 --> 00:32:23,240 Speaker 1: assumptions they have, which I should note are very very strong. 614 00:32:23,480 --> 00:32:25,960 Speaker 1: They're they're assuming economic growth over the next ten years 615 00:32:26,000 --> 00:32:28,680 Speaker 1: about one percentage point higher per year than the Congressional 616 00:32:28,680 --> 00:32:31,880 Speaker 1: Budget Office. You know, that's a difference bigger than any 617 00:32:31,920 --> 00:32:37,320 Speaker 1: we've seen at least I don't know years. Uh. And 618 00:32:38,200 --> 00:32:42,920 Speaker 1: they've talked about doing revenue neutral tax reform, and they 619 00:32:42,960 --> 00:32:45,960 Speaker 1: talked originally about some of that revenue neutrality coming from 620 00:32:46,080 --> 00:32:50,040 Speaker 1: economic growth, so that in principle would be included in 621 00:32:50,080 --> 00:32:52,320 Speaker 1: their tax reform proposal. But if you look in the budget, 622 00:32:52,720 --> 00:32:55,520 Speaker 1: they claim that they're going to have tax reform that's 623 00:32:55,560 --> 00:32:58,440 Speaker 1: revenue neutral, and then they have the separate line item 624 00:32:58,520 --> 00:33:00,800 Speaker 1: for for the benefits of economic growth. And so the 625 00:33:00,840 --> 00:33:03,600 Speaker 1: double counting is, well, can you have revenue neutral tax 626 00:33:03,640 --> 00:33:07,440 Speaker 1: reform and have this two trillion of benefits from economic growth? 627 00:33:08,480 --> 00:33:10,880 Speaker 1: A little unclear what the administration has been saying, but 628 00:33:10,920 --> 00:33:13,400 Speaker 1: they seem to have pivoted now to saying that they're 629 00:33:13,400 --> 00:33:15,760 Speaker 1: going to have tax reform that pays for itself. You know, 630 00:33:15,800 --> 00:33:18,960 Speaker 1: there is revenue neutral um without including economic growth, but 631 00:33:19,040 --> 00:33:22,520 Speaker 1: it's very unclear. You know, it's a highly unusual document 632 00:33:22,560 --> 00:33:25,920 Speaker 1: from that perspective, Donald's that mentioned you were the acting 633 00:33:25,960 --> 00:33:28,160 Speaker 1: head of the Congressional Budget Office for some time, and 634 00:33:28,360 --> 00:33:30,680 Speaker 1: I was struck by the comments from mcmulvanity, the head 635 00:33:30,680 --> 00:33:32,600 Speaker 1: of the Office of Management Budget a few weeks ago, 636 00:33:32,880 --> 00:33:36,000 Speaker 1: commenting on the role of that office. Essentially he said 637 00:33:36,040 --> 00:33:38,640 Speaker 1: that it is less relevant than it was. And you know, 638 00:33:38,640 --> 00:33:41,400 Speaker 1: maybe it's it's it's time has passed, sheds some life 639 00:33:41,400 --> 00:33:42,680 Speaker 1: for us, if you would, on the roll that it 640 00:33:42,720 --> 00:33:45,840 Speaker 1: has played in d does play in policy making in Washington, 641 00:33:46,040 --> 00:33:48,640 Speaker 1: and how extraordinary I think it might be the right word. 642 00:33:48,680 --> 00:33:51,240 Speaker 1: It was the way that the House health Care bill 643 00:33:51,320 --> 00:33:53,600 Speaker 1: was passed without going to the CBO first, That is 644 00:33:53,640 --> 00:33:59,000 Speaker 1: out of custom. Let's say, sure. Uh. And so you know, 645 00:33:59,040 --> 00:34:01,480 Speaker 1: if you jet back forward five years ago and the 646 00:34:01,480 --> 00:34:04,400 Speaker 1: Watergate scandal, which I believe if I have my dates right, 647 00:34:04,440 --> 00:34:08,759 Speaker 1: actually started today, uh, forty five years ago. Uh. A 648 00:34:08,840 --> 00:34:11,719 Speaker 1: backdrop for that was not just the the criminal activities 649 00:34:11,760 --> 00:34:14,279 Speaker 1: and concerns about the Nixon administration, but also there was 650 00:34:14,320 --> 00:34:17,560 Speaker 1: great budget concerns about how he handled budget policy relative 651 00:34:17,600 --> 00:34:20,239 Speaker 1: to Congress. And so Congress stepped up and said, you 652 00:34:20,239 --> 00:34:23,360 Speaker 1: know what, we the Congress are going to exercise more control, 653 00:34:23,480 --> 00:34:26,640 Speaker 1: more more discipline over how the government allocates its money, 654 00:34:26,719 --> 00:34:29,399 Speaker 1: raises its money, and does its budget. And as part 655 00:34:29,400 --> 00:34:31,400 Speaker 1: of that, it said, you know what to help us 656 00:34:31,440 --> 00:34:34,680 Speaker 1: do that, Congress needs an office, the Congressional Budget Office, 657 00:34:34,719 --> 00:34:37,360 Speaker 1: that is going to be our chief source of estimates 658 00:34:37,360 --> 00:34:41,319 Speaker 1: and numbers about the budget implications of policy. And over 659 00:34:41,320 --> 00:34:44,279 Speaker 1: the last forty five forty years, forty plus years, UH 660 00:34:44,360 --> 00:34:47,840 Speaker 1: CBO has developed into a very trusted, nonpartisan source of 661 00:34:48,040 --> 00:34:51,680 Speaker 1: objective analysis of the budget implications of policy. It's been 662 00:34:51,760 --> 00:34:54,840 Speaker 1: very useful to policymakers to understand the implications of ideas 663 00:34:54,880 --> 00:34:58,799 Speaker 1: they've been considering. And it's been incredibly useful in disciplining UH. 664 00:34:58,880 --> 00:35:01,160 Speaker 1: The Office of Manage been a budget right the executive 665 00:35:01,200 --> 00:35:03,920 Speaker 1: branch UH that you know, they know that if they 666 00:35:03,960 --> 00:35:06,560 Speaker 1: put out estimates or something, the folks at CBO are 667 00:35:06,560 --> 00:35:09,200 Speaker 1: going to put out estimates too. And if there's two wide, 668 00:35:09,360 --> 00:35:10,960 Speaker 1: you know, to wide a gap there, people are going 669 00:35:11,000 --> 00:35:13,360 Speaker 1: to look at scance or what what the executive branch 670 00:35:13,400 --> 00:35:16,279 Speaker 1: is suggesting. So CBO has played this great role of 671 00:35:16,320 --> 00:35:20,240 Speaker 1: both informing Congress about the budget implications of policy ideas 672 00:35:20,239 --> 00:35:24,080 Speaker 1: and legislation, and also of disciplining the larger process so 673 00:35:24,200 --> 00:35:26,960 Speaker 1: that people in the White House can't be too outlandish 674 00:35:26,960 --> 00:35:29,600 Speaker 1: in their claims about the budget benefits of the policies 675 00:35:29,640 --> 00:35:33,000 Speaker 1: they propose. How much can can can can Congress? Can 676 00:35:33,080 --> 00:35:35,480 Speaker 1: lawmakers focus on on the budget as they're up against 677 00:35:35,480 --> 00:35:38,520 Speaker 1: this funding deadline, the September funding deadline? In other words, 678 00:35:38,520 --> 00:35:41,120 Speaker 1: do they do they have to prioritize that over the budget? 679 00:35:41,120 --> 00:35:44,160 Speaker 1: Can they work on two things in tandem? I was 680 00:35:44,200 --> 00:35:46,040 Speaker 1: struck again. I lived in Washington for some time. When 681 00:35:46,080 --> 00:35:47,640 Speaker 1: I left, it seemed like we were in the era 682 00:35:47,719 --> 00:35:50,840 Speaker 1: of the Continuing Resolution, that there were these sort of 683 00:35:50,840 --> 00:35:54,360 Speaker 1: stop gap funding bills that had become the norm. Given that, 684 00:35:54,480 --> 00:35:57,000 Speaker 1: how radical departure would it be to return to regular 685 00:35:57,120 --> 00:35:59,200 Speaker 1: order to get a you know, a budget in place 686 00:35:59,239 --> 00:36:02,000 Speaker 1: as they used to get them in place for many, many, many, 687 00:36:02,000 --> 00:36:05,560 Speaker 1: many many decades. Yes, that would be a big departure, right, 688 00:36:05,600 --> 00:36:07,880 Speaker 1: As you say, we've been in continuing resolution land for 689 00:36:07,960 --> 00:36:11,319 Speaker 1: quite a while now, uh, and you know, and even 690 00:36:11,360 --> 00:36:14,200 Speaker 1: that sometimes hard, right, So you know, when September comes around, 691 00:36:14,239 --> 00:36:17,000 Speaker 1: we may again be at least having rhetorically a government 692 00:36:17,000 --> 00:36:21,759 Speaker 1: shutdown discussion as folks work towards that deadline. You know, 693 00:36:21,840 --> 00:36:23,920 Speaker 1: you can imagine that there's some parts of the budget 694 00:36:23,920 --> 00:36:26,560 Speaker 1: where they're going to be able to do appropriations. Military 695 00:36:26,600 --> 00:36:28,800 Speaker 1: construction is one that often has a lot of support, 696 00:36:29,120 --> 00:36:33,359 Speaker 1: maybe some other pockets. Uh, But you know, clearly we're 697 00:36:33,360 --> 00:36:35,520 Speaker 1: still going to be having discussions about how to spend 698 00:36:35,560 --> 00:36:38,640 Speaker 1: money well beyond the September deadline. I'm sure at least 699 00:36:38,680 --> 00:36:39,960 Speaker 1: parts of things are going to be done under a 700 00:36:39,960 --> 00:36:44,000 Speaker 1: continuing resolution. Uh. But you know, step one is they 701 00:36:44,040 --> 00:36:46,319 Speaker 1: need to pass a budget. And the budget would really 702 00:36:46,320 --> 00:36:49,359 Speaker 1: have two broad pieces of information. And at first they 703 00:36:49,360 --> 00:36:52,879 Speaker 1: would have the the instructions, the reconciliation instructions that can 704 00:36:52,880 --> 00:36:56,240 Speaker 1: guide the tax reform debate. And then second it should 705 00:36:56,239 --> 00:36:59,840 Speaker 1: have the top level spending numbers for the for you know, 706 00:36:59,880 --> 00:37:02,759 Speaker 1: the various agencies and activities of the sederal government that 707 00:37:02,960 --> 00:37:06,759 Speaker 1: could then uh spark the conversation about how exactly we're 708 00:37:06,760 --> 00:37:09,200 Speaker 1: going to allocate that spending. So a lot of pressure 709 00:37:09,239 --> 00:37:10,640 Speaker 1: on them to get a budget in place if they 710 00:37:10,680 --> 00:37:12,480 Speaker 1: want to make any progress on tax reform and if 711 00:37:12,520 --> 00:37:15,759 Speaker 1: they want to have a coherent funding the government discussion. 712 00:37:16,200 --> 00:37:18,520 Speaker 1: But yeah, don't don't expect everything to be done by September. 713 00:37:19,800 --> 00:37:21,480 Speaker 1: Donald Maren great to speak with you at this point 714 00:37:21,480 --> 00:37:23,560 Speaker 1: I really appreciate at the time. That's Donald Marin. He 715 00:37:23,640 --> 00:37:25,719 Speaker 1: is the director of the Economic Policy Initiatives at the 716 00:37:25,800 --> 00:37:40,479 Speaker 1: Urban Institute think tank in Washington, d C. David Gurray 717 00:37:40,560 --> 00:37:43,040 Speaker 1: here in New York. This is Bloomberg Surveillance on Bloomberg Radio. 718 00:37:43,080 --> 00:37:45,239 Speaker 1: And let's pick things up right where we left and 719 00:37:45,280 --> 00:37:47,400 Speaker 1: they're talking about housing with one Lindsay peg that she's 720 00:37:47,400 --> 00:37:49,919 Speaker 1: the chief economist as stephile joining us today, Lindsay, great 721 00:37:49,920 --> 00:37:52,520 Speaker 1: to talk to you, as always, any there detailing the 722 00:37:52,560 --> 00:37:56,120 Speaker 1: weak housing starts numbers this morning, Let's let's go broad first. 723 00:37:56,200 --> 00:37:58,960 Speaker 1: When you look at the housing market, the housing economy 724 00:37:58,960 --> 00:38:01,480 Speaker 1: here in the US right now, how does it look well? 725 00:38:01,520 --> 00:38:03,720 Speaker 1: If if we look at housing starts and housing permits, 726 00:38:04,000 --> 00:38:06,480 Speaker 1: you can clearly see a declining trend. This is not 727 00:38:06,760 --> 00:38:09,800 Speaker 1: a one off month of weakness, but we've actually seen 728 00:38:09,800 --> 00:38:13,719 Speaker 1: now three consecutive months of waning activity in terms of 729 00:38:13,760 --> 00:38:17,280 Speaker 1: new construction coming online. And in fact, we've now dragged 730 00:38:17,320 --> 00:38:21,719 Speaker 1: that annual page of new construction down into net negative territory. 731 00:38:22,040 --> 00:38:24,840 Speaker 1: So it doesn't necessarily bode well for the idea that 732 00:38:24,880 --> 00:38:27,080 Speaker 1: the FETE has really been touting that the U S 733 00:38:27,120 --> 00:38:30,120 Speaker 1: economy is on the track to gain momentum in some 734 00:38:30,239 --> 00:38:32,160 Speaker 1: of these key sectors. As we look to the end 735 00:38:32,160 --> 00:38:35,239 Speaker 1: of the second quarter and beyond into the second half 736 00:38:35,239 --> 00:38:38,080 Speaker 1: of the year. Building permits down four point nine percent, 737 00:38:38,200 --> 00:38:41,359 Speaker 1: well below what was what was expected. Fold this into 738 00:38:41,360 --> 00:38:43,440 Speaker 1: the greater economy. You were beginning to do that there 739 00:38:43,440 --> 00:38:46,040 Speaker 1: in your answer to the first question. But how important 740 00:38:46,080 --> 00:38:47,640 Speaker 1: is housing to the overall health of the U s 741 00:38:47,680 --> 00:38:50,960 Speaker 1: economy here in June of two tho seventeen. Well, housing 742 00:38:51,040 --> 00:38:54,200 Speaker 1: is a very key contributor. It's not necessarily the large 743 00:38:54,480 --> 00:38:57,840 Speaker 1: driver of economic activity as it was prior to the 744 00:38:57,880 --> 00:39:00,840 Speaker 1: Great Recession. Of course, it's also no longer the large 745 00:39:00,920 --> 00:39:03,960 Speaker 1: net drag on economic activity as it was in the 746 00:39:04,000 --> 00:39:07,080 Speaker 1: aftermath of the Great Recession. But housing has been a 747 00:39:07,120 --> 00:39:11,360 Speaker 1: consistent positive driver of top line growth, and it appears 748 00:39:11,400 --> 00:39:14,560 Speaker 1: to be losing a significant amount of momentum. So when 749 00:39:14,560 --> 00:39:16,560 Speaker 1: we take that out of the equation, it is housing 750 00:39:16,640 --> 00:39:19,120 Speaker 1: is not contributing to top line growth. What are we 751 00:39:19,239 --> 00:39:22,200 Speaker 1: left with? While the consumer the consumer, as we saw 752 00:39:22,239 --> 00:39:26,320 Speaker 1: earlier this week very disappointing retail sales numbers, the consumer 753 00:39:26,400 --> 00:39:29,880 Speaker 1: is still under pressure. Business investment is still very soft, 754 00:39:30,040 --> 00:39:35,000 Speaker 1: Domestic manufacturing is still under pressure amid a very stagnant 755 00:39:35,040 --> 00:39:39,440 Speaker 1: global economy and strong US dollars. So there's very few 756 00:39:39,560 --> 00:39:41,799 Speaker 1: green shoots, if you will, that we can hang our 757 00:39:41,840 --> 00:39:44,160 Speaker 1: hat on to say that the U. S. Economy is 758 00:39:44,160 --> 00:39:47,480 Speaker 1: going to be gaining improvement or gaining momentum from this 759 00:39:47,600 --> 00:39:50,800 Speaker 1: current very moderate pace. Lindsay, how much attention do you 760 00:39:50,880 --> 00:39:53,400 Speaker 1: pay to the soft data? We've been focused on the divide, 761 00:39:53,880 --> 00:39:56,160 Speaker 1: that sort of yawning divide between the soft data and 762 00:39:56,200 --> 00:39:59,040 Speaker 1: the hard data over these last few months. Um, what 763 00:39:59,120 --> 00:40:00,920 Speaker 1: what role does that play for you? To do the 764 00:40:00,960 --> 00:40:02,720 Speaker 1: do the soft data play for you as you assess 765 00:40:02,760 --> 00:40:05,080 Speaker 1: the health of the U. S. Economy? Well, if you 766 00:40:05,120 --> 00:40:06,600 Speaker 1: had asked me a few years ago, I would have 767 00:40:06,640 --> 00:40:09,200 Speaker 1: said it plays a much larger role. But what we 768 00:40:09,280 --> 00:40:11,120 Speaker 1: see now is when we look at the soft data 769 00:40:11,400 --> 00:40:15,160 Speaker 1: and for listeners, that meaning the survey data, asking consumers, 770 00:40:15,200 --> 00:40:18,160 Speaker 1: asking businesses how they feel, what their plans are in 771 00:40:18,280 --> 00:40:21,640 Speaker 1: terms of spending and investing, we have seen a growing 772 00:40:21,680 --> 00:40:25,839 Speaker 1: divergence over what people say and what people do in 773 00:40:25,920 --> 00:40:29,080 Speaker 1: more recent times, and so asking consumers how do you 774 00:40:29,120 --> 00:40:32,360 Speaker 1: feel about your financial footing? They see much more upbeat. 775 00:40:32,680 --> 00:40:34,920 Speaker 1: But then when we actually look at what they're spending 776 00:40:34,920 --> 00:40:39,080 Speaker 1: patterns are. We see them continuing to curtail what they're 777 00:40:39,080 --> 00:40:41,640 Speaker 1: purchasing on a months and months basis. So I would 778 00:40:41,640 --> 00:40:44,799 Speaker 1: expect that growing divide to remain for quite some time 779 00:40:44,840 --> 00:40:49,200 Speaker 1: and not necessarily translate into much stronger consumption or investment 780 00:40:49,280 --> 00:40:52,759 Speaker 1: figures despite the improvement in the soft data as of late. 781 00:40:52,880 --> 00:40:54,880 Speaker 1: And we'll get some figures from the University of Michigan 782 00:40:54,880 --> 00:40:56,960 Speaker 1: on sentiment a little later this morning at ten o'clock 783 00:40:57,239 --> 00:40:59,040 Speaker 1: at Wall Street time. Let me pivot here to ask 784 00:40:59,080 --> 00:41:01,399 Speaker 1: you about what we heard from the Fed Reserve this week. 785 00:41:01,440 --> 00:41:03,680 Speaker 1: From Fed Church Janet Yelling and her colleagues on the 786 00:41:03,680 --> 00:41:07,640 Speaker 1: Federal Open Market Committee, I wonder how their sense of 787 00:41:07,680 --> 00:41:10,360 Speaker 1: the US economy squares with yours, In other words, that 788 00:41:10,360 --> 00:41:13,480 Speaker 1: do you share their view of the U s economy. Well, 789 00:41:13,520 --> 00:41:17,760 Speaker 1: it's very clear that SET officials are acknowledging the recent 790 00:41:17,960 --> 00:41:21,520 Speaker 1: soft data, particularly on the inflation side, but they did 791 00:41:21,680 --> 00:41:25,560 Speaker 1: seem to sort of override that with their general sense 792 00:41:25,600 --> 00:41:29,520 Speaker 1: of optimism that the economy is on relatively moderate footing 793 00:41:29,640 --> 00:41:34,359 Speaker 1: and their expectation that the economy will continue to gain momentum. 794 00:41:34,480 --> 00:41:37,200 Speaker 1: So it was as if the Federal reserve was watching. 795 00:41:37,239 --> 00:41:42,280 Speaker 1: It was even walking this very thin line between recognizing 796 00:41:42,320 --> 00:41:45,760 Speaker 1: the more dismal reality and continuing to tout their more 797 00:41:45,800 --> 00:41:50,800 Speaker 1: positive expectations to support their more aggressive pathway for additional 798 00:41:50,920 --> 00:41:53,920 Speaker 1: rate increases in the remaining six months of the year. Now, 799 00:41:53,960 --> 00:41:57,400 Speaker 1: of course, if the data continues to disappoint, I do 800 00:41:57,560 --> 00:42:01,160 Speaker 1: suspect that the FED will be forced to more realistically 801 00:42:01,239 --> 00:42:04,680 Speaker 1: look at the economy and far back some of their 802 00:42:04,719 --> 00:42:08,040 Speaker 1: expectations as well as their expectations for additional rate increases. 803 00:42:08,280 --> 00:42:09,640 Speaker 1: To ask you quickly, We'll come back with you in 804 00:42:09,680 --> 00:42:11,120 Speaker 1: just a moment, but in the thirty seconds we have 805 00:42:11,320 --> 00:42:13,640 Speaker 1: left you before going to to break how much of 806 00:42:13,680 --> 00:42:15,520 Speaker 1: this has to do with momentum? In other words, that 807 00:42:15,560 --> 00:42:17,480 Speaker 1: the FED has begun to normalize and it wants to 808 00:42:17,480 --> 00:42:20,520 Speaker 1: continue to normalize just because of that. It's it's on 809 00:42:20,560 --> 00:42:23,880 Speaker 1: a particular path. Oh, absolutely, the FED doesn't want to 810 00:42:23,880 --> 00:42:26,239 Speaker 1: look as if they made a mistake early on and 811 00:42:26,280 --> 00:42:30,400 Speaker 1: now they have to arrest this pathway to normalization. So 812 00:42:30,719 --> 00:42:34,239 Speaker 1: from the Fed's point of view, any sign of moderation, 813 00:42:34,400 --> 00:42:37,759 Speaker 1: not solid, not strength, but moderation is good enough at 814 00:42:37,760 --> 00:42:40,359 Speaker 1: this point to continue down the pathway to hire rate 815 00:42:40,520 --> 00:42:42,719 Speaker 1: Let's see, we were talking a bit about the transitory. 816 00:42:43,239 --> 00:42:45,960 Speaker 1: The excuse the excuse of transitory sists from the FED 817 00:42:46,000 --> 00:42:49,480 Speaker 1: Reserve Chairwoman Janet Yellen. She outlined that in her comments 818 00:42:49,520 --> 00:42:52,680 Speaker 1: following the f o MC announcement on Wednesday afternoon, what 819 00:42:52,760 --> 00:42:55,160 Speaker 1: are the consequences of the FED were to get this wrong? 820 00:42:55,160 --> 00:42:58,919 Speaker 1: In other words, if what they see as transitory isn't well, 821 00:42:59,160 --> 00:43:01,480 Speaker 1: the concern is that I continue to raise rates and 822 00:43:01,520 --> 00:43:04,600 Speaker 1: remove accommodative support for the economy at a time when 823 00:43:04,600 --> 00:43:08,400 Speaker 1: we're actually losing momentum, so raising rates too fast and 824 00:43:08,440 --> 00:43:11,920 Speaker 1: actually cooling what little activity levels that we're seeing in 825 00:43:11,960 --> 00:43:15,520 Speaker 1: the U. S economy at this point, so essentially squashing 826 00:43:15,920 --> 00:43:19,200 Speaker 1: the recovery, the very delicate recovery that we're still seeing. 827 00:43:19,239 --> 00:43:23,279 Speaker 1: Now we're still, of course talking about very historically low rates, 828 00:43:23,320 --> 00:43:26,200 Speaker 1: So I don't think we're at a level of concern 829 00:43:26,360 --> 00:43:30,080 Speaker 1: at this point. But going forward, if the FED were 830 00:43:30,120 --> 00:43:33,560 Speaker 1: to follow through with their more aggressive pathway, meaning an 831 00:43:33,600 --> 00:43:36,279 Speaker 1: additional two rate increases by the end of the year, 832 00:43:36,719 --> 00:43:40,800 Speaker 1: three or four rate increases within the bounds, that could 833 00:43:40,800 --> 00:43:44,719 Speaker 1: be enough to again restrain the very modest levels of 834 00:43:44,760 --> 00:43:47,080 Speaker 1: growth that we're seeing in the U s economy and 835 00:43:47,160 --> 00:43:51,440 Speaker 1: force us into either a non accelerating pathway or worse, 836 00:43:51,600 --> 00:43:55,000 Speaker 1: into recession. Lindsie, we were talking with Matt Tom's of Void, 837 00:43:55,120 --> 00:43:57,120 Speaker 1: head of Fixed Income at Voyage just a few moments ago. 838 00:43:57,160 --> 00:43:59,200 Speaker 1: I asked him what his expectation was for when the 839 00:43:59,239 --> 00:44:02,000 Speaker 1: FED is going to begin to unwind the balance sheet. 840 00:44:02,040 --> 00:44:04,799 Speaker 1: We got some clarity on the path forward from the 841 00:44:04,800 --> 00:44:07,040 Speaker 1: Fed this week, we didn't get a specific a date. 842 00:44:07,080 --> 00:44:08,719 Speaker 1: What's your sense of when it will begin and how 843 00:44:08,719 --> 00:44:11,920 Speaker 1: long this process is going to take. Well, certainly at 844 00:44:11,920 --> 00:44:15,040 Speaker 1: this week's meeting we did get some welcome details surrounding 845 00:44:15,040 --> 00:44:19,200 Speaker 1: the process, surrounding the expectations in terms of caps being 846 00:44:19,239 --> 00:44:23,680 Speaker 1: implemented and very gradually stepping up those caps, But you're right, 847 00:44:23,760 --> 00:44:26,759 Speaker 1: we didn't get any specific commitment to a timeline of 848 00:44:26,760 --> 00:44:29,480 Speaker 1: when this process is set to begin. Now. We did 849 00:44:29,480 --> 00:44:33,440 Speaker 1: see a broad generality talking about if the economy evolved 850 00:44:33,440 --> 00:44:37,080 Speaker 1: as expected, most committee members anticipated that this would begin 851 00:44:37,160 --> 00:44:39,480 Speaker 1: by the end of the year, but that really was 852 00:44:39,680 --> 00:44:43,560 Speaker 1: very squishy language. And if the economy does continue to 853 00:44:43,600 --> 00:44:46,600 Speaker 1: show weakness as we expect, I think it's very likely 854 00:44:46,640 --> 00:44:51,720 Speaker 1: that we push out balance sheet normalization into or beyond 855 00:44:52,280 --> 00:44:54,919 Speaker 1: just is your expectation here We're going to get even 856 00:44:54,920 --> 00:44:57,799 Speaker 1: more detail on this going forward. I gather it was 857 00:44:57,960 --> 00:44:59,960 Speaker 1: somewhat of a surprise what we did learn on Wednesday 858 00:45:00,000 --> 00:45:01,960 Speaker 1: when it comes to unwanting the balance sheet. Is there 859 00:45:02,000 --> 00:45:03,600 Speaker 1: more that you would like to know that you expect 860 00:45:03,600 --> 00:45:06,359 Speaker 1: we will hear from Janet yelling her colleagues and before 861 00:45:06,400 --> 00:45:09,360 Speaker 1: this begins to go into effect. Well, certainly the market 862 00:45:09,400 --> 00:45:12,160 Speaker 1: wants to be fed to be as transparent as possible. 863 00:45:12,400 --> 00:45:15,680 Speaker 1: We certainly want to understand exactly the process that they're 864 00:45:15,680 --> 00:45:18,239 Speaker 1: going to be putting in place to avoid any sort 865 00:45:18,280 --> 00:45:21,400 Speaker 1: of adverse market reaction. But many of the questions that 866 00:45:21,440 --> 00:45:24,359 Speaker 1: we have left in terms of the timing, how long 867 00:45:24,360 --> 00:45:27,360 Speaker 1: will this take, the start date, the end date, the 868 00:45:27,480 --> 00:45:30,719 Speaker 1: target level on the balance sheet once they're done tapering, 869 00:45:31,200 --> 00:45:34,360 Speaker 1: All of these questions really can't be answered until the 870 00:45:34,400 --> 00:45:38,320 Speaker 1: Fed knows exactly one when they're going to begin the process, 871 00:45:38,360 --> 00:45:42,520 Speaker 1: and to how the markets evolving to this tapering process, 872 00:45:42,560 --> 00:45:45,200 Speaker 1: because remember, even the details that we saw this week 873 00:45:45,640 --> 00:45:49,480 Speaker 1: were a guideline. They were not a hard commitment, So 874 00:45:49,600 --> 00:45:53,200 Speaker 1: if the market begins to show signs of weakness, they 875 00:45:53,200 --> 00:45:57,239 Speaker 1: could easily taper the taper going forward. So again, a 876 00:45:57,239 --> 00:46:00,440 Speaker 1: lot of these pieces are are moving pieces, and we 877 00:46:00,480 --> 00:46:04,240 Speaker 1: won't know a firm answer until the FET initiates this process. Lindsay, 878 00:46:04,239 --> 00:46:05,520 Speaker 1: hope to talk to you again soon. Great to speak 879 00:46:05,560 --> 00:46:07,200 Speaker 1: with you as always. That's Lindsay Pie. She's the chief 880 00:46:07,239 --> 00:46:21,440 Speaker 1: economist at step. David grew here in New York with 881 00:46:21,719 --> 00:46:23,520 Speaker 1: someone we found by the salad bar at the Whole 882 00:46:23,520 --> 00:46:25,680 Speaker 1: Foods on Columbus Circle. Tom came back with us here 883 00:46:25,760 --> 00:46:29,560 Speaker 1: just couldn't say. You go out, folks, You go out 884 00:46:29,600 --> 00:46:33,600 Speaker 1: for four minutes, and there's a fourteen billion dollar transaction. 885 00:46:33,800 --> 00:46:36,279 Speaker 1: Retail world Chase a man, a man very familiar with 886 00:46:36,320 --> 00:46:38,960 Speaker 1: the multibillion dollar transactions, as Robert Perfusa. He is with 887 00:46:39,040 --> 00:46:41,359 Speaker 1: Jones Day m and a attorney there of course. Yeh. 888 00:46:41,600 --> 00:46:43,960 Speaker 1: He handled Procter and Gamble's sale of its beauty business 889 00:46:43,960 --> 00:46:46,480 Speaker 1: and Southern Company's acquisition of a g L Resources. He 890 00:46:46,560 --> 00:46:48,800 Speaker 1: joins us now on our phone line, SPOB. Great to 891 00:46:48,840 --> 00:46:51,080 Speaker 1: speak with you once again. Here. We've talked about what 892 00:46:51,120 --> 00:46:52,960 Speaker 1: this means for Amazon, what this means for Whole Foods. 893 00:46:53,000 --> 00:46:55,360 Speaker 1: Let's look at the deal itself. You're thirteen point seven 894 00:46:55,400 --> 00:46:59,200 Speaker 1: billion dollars including Whole foods markets that give us your 895 00:46:59,200 --> 00:47:02,120 Speaker 1: reaction to what we're earning this morning from these two companies, Well, 896 00:47:02,160 --> 00:47:04,719 Speaker 1: it's pretty extraordinary because I can't figure out if this 897 00:47:04,760 --> 00:47:07,760 Speaker 1: is a retail story, a text story, or a a grocery story, 898 00:47:07,840 --> 00:47:11,280 Speaker 1: or an activist story. Maybe it's just all of the above. Um, 899 00:47:11,600 --> 00:47:16,880 Speaker 1: it's quite an interesting development, and the market reaction, especially 900 00:47:16,880 --> 00:47:23,279 Speaker 1: to the other grocery store retailers, is pretty dramatic. But um, 901 00:47:24,040 --> 00:47:26,839 Speaker 1: it's I think we ought to like take a deep 902 00:47:26,840 --> 00:47:30,960 Speaker 1: breath and say, gee, what is this? Well, Amazon, of 903 00:47:31,000 --> 00:47:34,600 Speaker 1: course has been um moving to the grocery space, both 904 00:47:34,640 --> 00:47:36,760 Speaker 1: in terms of its uh I think it's called fresh 905 00:47:37,200 --> 00:47:42,160 Speaker 1: direct delivery model, and also the Amazon Go concept that 906 00:47:42,280 --> 00:47:45,680 Speaker 1: you walk in you wouldn't have a have to stand 907 00:47:45,719 --> 00:47:47,719 Speaker 1: in line at the cash register on the way out, 908 00:47:47,760 --> 00:47:50,279 Speaker 1: So it's not new for them. And of course Whole 909 00:47:50,280 --> 00:47:53,800 Speaker 1: Foods has had some pressure. It's had an activist actually 910 00:47:53,800 --> 00:47:58,760 Speaker 1: activists for two years. You're you're deeply experienced it merging 911 00:47:59,040 --> 00:48:02,839 Speaker 1: like company is and not like companies. I'm looking at 912 00:48:02,840 --> 00:48:05,840 Speaker 1: the Bloomberg at the income statements, and this is Mars 913 00:48:05,840 --> 00:48:10,000 Speaker 1: and venus. I got a grower, maybe a grower in 914 00:48:10,120 --> 00:48:13,080 Speaker 1: Amazon and with Whole Foods. I got a low single 915 00:48:13,120 --> 00:48:17,480 Speaker 1: digit disaster. How do you buy into a company on 916 00:48:17,560 --> 00:48:22,000 Speaker 1: hope and faith if the revenue growth so mismatches is 917 00:48:22,080 --> 00:48:25,080 Speaker 1: Amazon and Whole Foods. You know, the grocery business is 918 00:48:25,120 --> 00:48:28,440 Speaker 1: a tough business. It's a low margin, low growth. I 919 00:48:28,440 --> 00:48:30,319 Speaker 1: mean it's gonna be there. I mean people have to eat, 920 00:48:30,360 --> 00:48:33,400 Speaker 1: after all, so eat no matter what they general economic 921 00:48:33,400 --> 00:48:36,800 Speaker 1: conditions are. People are going to eat, whether they spend 922 00:48:36,920 --> 00:48:39,120 Speaker 1: lots of money at the grocery store on an upscale 923 00:48:39,239 --> 00:48:42,680 Speaker 1: brand or whether they go someplace else. In fact, as 924 00:48:42,719 --> 00:48:46,320 Speaker 1: you know, uh, Whole food itself was thinking about a 925 00:48:46,360 --> 00:48:50,640 Speaker 1: lower price point UM chain. So it's a tough business. 926 00:48:50,680 --> 00:48:54,680 Speaker 1: It'll be interesting to see how this fits. Cultural dissimilarity 927 00:48:54,719 --> 00:48:57,440 Speaker 1: in the merger context can lead to different results, and 928 00:48:57,440 --> 00:49:00,920 Speaker 1: I'm not predicting that here necessarily, but you know, the 929 00:49:01,040 --> 00:49:04,680 Speaker 1: M and A is uh littered with situations where companies 930 00:49:04,719 --> 00:49:08,359 Speaker 1: have with very disparate cultures where it hasn't worked out 931 00:49:08,400 --> 00:49:12,279 Speaker 1: so well. But we'll see. Um. I go back to 932 00:49:12,320 --> 00:49:15,080 Speaker 1: the point I made earlier to me. The the the 933 00:49:15,200 --> 00:49:18,000 Speaker 1: idea that that you should be shorting everybody else in 934 00:49:18,040 --> 00:49:20,360 Speaker 1: the space just because of this deal is gosh, it 935 00:49:20,480 --> 00:49:22,520 Speaker 1: just seems to me to be a real reaction. But 936 00:49:22,680 --> 00:49:25,400 Speaker 1: one we're a question before you get onto your billable day. 937 00:49:25,560 --> 00:49:27,919 Speaker 1: I want to know if Janet Yelling just bought Whole 938 00:49:27,960 --> 00:49:30,239 Speaker 1: Foods is the reason this funny money is going on 939 00:49:30,680 --> 00:49:33,320 Speaker 1: because the chair of the Fed has given you guys 940 00:49:33,800 --> 00:49:37,439 Speaker 1: negative interest rates. The financial repression that everybody else has 941 00:49:37,719 --> 00:49:42,200 Speaker 1: means that Mr Bezos can affect trans transactions like this. Well, 942 00:49:42,239 --> 00:49:44,880 Speaker 1: there's no question that the low cost the capital of 943 00:49:44,960 --> 00:49:48,480 Speaker 1: not just debt but but equity to um is feeling 944 00:49:48,600 --> 00:49:51,120 Speaker 1: a lot of activity. In fact, but for the uncertainty 945 00:49:51,120 --> 00:49:54,279 Speaker 1: and tax rates, I think we'd be in an astonishingly 946 00:49:54,440 --> 00:49:59,200 Speaker 1: active m and an environment most mostly because of the 947 00:49:59,320 --> 00:50:03,759 Speaker 1: overall gd the environment. We look forward to speaking to 948 00:50:03,760 --> 00:50:06,399 Speaker 1: you in the coming days on this transaction and many 949 00:50:06,440 --> 00:50:10,120 Speaker 1: others to come. Barbarafect with Jones day uh this morning. 950 00:50:19,160 --> 00:50:23,279 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 951 00:50:23,360 --> 00:50:28,759 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 952 00:50:28,800 --> 00:50:32,320 Speaker 1: platform you prefer. I'm on Twitter at Tom Keene. David 953 00:50:32,400 --> 00:50:36,560 Speaker 1: Gura is at David Gura. Before the podcast, you can 954 00:50:36,600 --> 00:50:51,239 Speaker 1: always catch us worldwide. I'm Bloomberg Radio brought you by 955 00:50:51,480 --> 00:50:55,800 Speaker 1: Bank of America Mary Lynch. With virtual reality, virtually everything 956 00:50:55,840 --> 00:51:00,759 Speaker 1: will change. Discover opportunities in a transforming world, be of 957 00:51:00,840 --> 00:51:05,120 Speaker 1: a m L dot com, slash VR, Mary Lynch, Pierce, 958 00:51:05,200 --> 00:51:07,200 Speaker 1: Fenner and Smith, Incorporated,