WEBVTT - A Political Reporter Argues That Wall Street Doesn't Get DC 0:00:10.920 --> 0:00:15.000 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:15.080 --> 0:00:19.120 I'm Joe, Wasn'tal, and I'm Tracy all Away. So Tracy, 0:00:19.560 --> 0:00:24.759 we are recording this episode. I think just six days gee, 0:00:24.840 --> 0:00:29.160 I know, just six days before the election. I think, uh, 0:00:29.280 --> 0:00:31.400 by the time people listen to it, the election will 0:00:31.440 --> 0:00:34.720 have been passed. Um. But nonetheless, we're in a period 0:00:34.840 --> 0:00:37.080 either way in which there is just an extraordinary amount 0:00:37.080 --> 0:00:41.320 of attention paid to what's going on in Washington, d C. Yeah, 0:00:41.440 --> 0:00:44.280 less than six days to go. It's time to start 0:00:44.400 --> 0:00:47.360 making predictions about the outcome of the election. So everyone 0:00:47.400 --> 0:00:50.040 who listens to this after it actually happens can tell 0:00:50.080 --> 0:00:54.720 us we were wrong. Perfect timing. Yeah, that's exactly that's 0:00:54.760 --> 0:00:57.120 that's the perfect way. Also, if all of our predictions 0:00:57.280 --> 0:00:59.320 are off, we just want to air the episode. Now. 0:00:59.480 --> 0:01:01.800 I'm justing, but I mean I do feel like, hey, 0:01:01.800 --> 0:01:03.400 I don't I'm not going to stick my neck out 0:01:03.440 --> 0:01:07.679 and make any predictions and be you know, election decide. 0:01:07.760 --> 0:01:09.959 And of course the election is sucking all the oxygen 0:01:09.959 --> 0:01:12.520 out of the room in terms of people's attention. Just 0:01:12.560 --> 0:01:16.000 paying attention to what's going on in d C has 0:01:16.040 --> 0:01:19.800 been increasing and important for markets it seems like for 0:01:19.840 --> 0:01:23.000 a long time now. Yeah, I think that's right, and 0:01:23.120 --> 0:01:28.160 I mean has basically taken everything to an extreme. All 0:01:28.200 --> 0:01:32.080 these long term economic and business trends that have been 0:01:32.080 --> 0:01:34.880 in play for many years now seemed to have accelerated 0:01:35.280 --> 0:01:39.039 this year. But I think you can argue that there 0:01:39.319 --> 0:01:43.960 was more of a focus on politics after the financial crisis. 0:01:44.000 --> 0:01:47.840 You had a lot of attention paid to financial regulation 0:01:48.160 --> 0:01:51.440 than you had the Eurozone crisis. You had Brexit, then 0:01:51.480 --> 0:01:54.920 you have the US China trade war, and now in 0:01:56.160 --> 0:01:59.400 you have the fiscal stimulus and the response to the 0:01:59.440 --> 0:02:02.960 coronavirus risk crisis. So it does feel like we've been 0:02:03.000 --> 0:02:06.840 in this long running trend of investors paying more attention 0:02:06.880 --> 0:02:11.440 to politics and policy and has really just shifted that 0:02:11.480 --> 0:02:13.600 into high gear. And now we have the election on 0:02:13.680 --> 0:02:17.200 top of it. Yeah, exactly right. And you know, I 0:02:17.280 --> 0:02:19.600 think like one of the things we've learned, and it's 0:02:19.600 --> 0:02:22.399 a pretty widely held view now, but something that comes 0:02:22.440 --> 0:02:24.679 up a lot of times in our discussions is that 0:02:25.160 --> 0:02:28.600 if the government gives people money, Um, that is a 0:02:28.720 --> 0:02:33.799 very effective economic policy. It's very powerful, but that but 0:02:33.880 --> 0:02:36.160 you know, the government doesn't always just hand out money 0:02:36.200 --> 0:02:38.760 to people and you need to corrall vote to get 0:02:38.760 --> 0:02:41.880 it done. So here you have this lever this policy 0:02:41.880 --> 0:02:45.240 tool that's extremely effective, and there's not really much debate 0:02:45.280 --> 0:02:48.200 about can it be done sort of from a fiscal 0:02:48.280 --> 0:02:51.840 standpoint or a monetary standpoint, but about whether there's the 0:02:51.880 --> 0:02:55.000 political capacity to do it. I think it's going to be. 0:02:55.120 --> 0:02:57.000 It's an issue now, It's probably gonna be an issue 0:02:57.000 --> 0:03:00.680 in one regardless of the makeup of government. Man. And 0:03:00.760 --> 0:03:04.120 so I feel like there's going to be increasing demand 0:03:04.600 --> 0:03:06.840 on the part of investors, on the part of economists 0:03:06.840 --> 0:03:12.200 to understand whether that political capacity continues to exist in 0:03:12.480 --> 0:03:16.720 in d C and what it takes to make it happen. Yeah. Absolutely, 0:03:16.760 --> 0:03:20.320 And I think there's sometimes a tendency on Wall Street. 0:03:20.720 --> 0:03:23.440 I guess because a lot of investors and analysts tend 0:03:23.480 --> 0:03:27.120 to be quite rational people. I think there's sometimes a 0:03:27.160 --> 0:03:33.440 tendency to ascribe rationality to politicians. Uh. And you think, well, 0:03:33.560 --> 0:03:35.840 they're going to do what's good for people, They're going 0:03:35.880 --> 0:03:38.680 to do what's good for the economy, and maybe in 0:03:38.720 --> 0:03:43.480 this case that's fiscal stimulus, but sometimes they don't always 0:03:43.480 --> 0:03:46.000 do that. But also, wait, I'm not voicing this, no, 0:03:46.200 --> 0:03:49.400 I get it. You're making on No. Well, I was 0:03:49.400 --> 0:03:52.400 gonna say, sometimes I think there are also motivations that 0:03:52.520 --> 0:03:56.320 Wall Street isn't necessarily aware of, so they look at 0:03:56.360 --> 0:03:59.200 everything from a sort of zero sum game why wouldn't 0:03:59.240 --> 0:04:02.680 you do this? But there are things that politicians are 0:04:02.720 --> 0:04:06.360 thinking about that wouldn't necessarily jump out to your average 0:04:06.360 --> 0:04:08.440 sell side analysts. No. I mean, for one thing, they're 0:04:08.480 --> 0:04:11.200 all focused on re election in large part. And the 0:04:11.280 --> 0:04:13.800 number of times I've read an analysts say well, maybe 0:04:13.840 --> 0:04:18.120 we'll get an infrastructure deal is just totally embarrassing. Anyway, Uh, 0:04:18.160 --> 0:04:20.520 this is a good set up to our guest because 0:04:20.680 --> 0:04:25.080 he has asserted quite prominently several times the Wall Street 0:04:25.160 --> 0:04:28.240 is just totally clueless or markets are totally clueless, or 0:04:28.279 --> 0:04:30.679 maybe both. We can sort of get into the distinctions 0:04:30.720 --> 0:04:34.279 about how DC really works. And so if that's true, 0:04:35.040 --> 0:04:38.160 that's something important for people to internalize given the increasing 0:04:38.240 --> 0:04:42.160 importance of DC. We're gonna be speaking with Jake Sherman. 0:04:42.279 --> 0:04:45.920 He's at Politico. He's also the author of the popular 0:04:45.960 --> 0:04:49.960 playbook Newsletter. He's going on to do something else after 0:04:50.000 --> 0:04:51.560 this year, but we don't know what it is, so 0:04:51.600 --> 0:04:54.200 we'll I'll be waiting to see where Jake goes next. 0:04:54.640 --> 0:04:56.919 But in the meantime we could talk about what, in 0:04:57.080 --> 0:04:59.760 his view, Wall Street gets wrong. So, Jake, thank you 0:04:59.839 --> 0:05:01.960 very much for joining us. Thanks guys, I'm a huge 0:05:01.960 --> 0:05:04.160 fan and I'm really happy to be here. Thanks. Yeah, 0:05:04.240 --> 0:05:07.240 it's great to have you. So we've gotten into some 0:05:07.279 --> 0:05:09.320 Twitter fights. I don't know if Twitter fights are the 0:05:09.400 --> 0:05:12.599 right word, but especially in these last few weeks about 0:05:12.600 --> 0:05:15.800 the stimulus up and ups and downs. Sometimes it look 0:05:15.880 --> 0:05:19.920 more promising, sometimes it's looked less promising. The market moves 0:05:20.360 --> 0:05:23.440 on these headlines. Pelosian Minuchin will say their meeting in 0:05:23.440 --> 0:05:27.200 the afternoon, stocks go up half a percent, meeting ends 0:05:27.240 --> 0:05:30.520 with no agreement, stocks go down. And in your view, 0:05:30.600 --> 0:05:33.080 the fact that the markets are so sensitive to these 0:05:33.080 --> 0:05:36.680 headlines just shows that somehow they don't really get it. 0:05:38.160 --> 0:05:40.719 I think, yes, I let me agree with all of 0:05:40.720 --> 0:05:43.960 the things you just said. Um my argument has been 0:05:44.240 --> 0:05:47.080 and I just my way. Background. I've been covering Congress 0:05:47.080 --> 0:05:48.880 since two thousand and nine, so I've been a part 0:05:48.920 --> 0:05:53.520 of covering every major crisis for the last the last decade, 0:05:53.520 --> 0:05:55.840 and there's been plenty. Right, We've almost had our debt downgraded, 0:05:55.880 --> 0:05:59.160 we've had government shut shut downs, all those things. I 0:05:59.200 --> 0:06:02.920 think that on Wall Street and generally speaking, people are 0:06:02.960 --> 0:06:07.880 making judgments about the probability of events without taking into 0:06:07.920 --> 0:06:11.960 consideration the personalities that are driving these events. Right and 0:06:11.960 --> 0:06:14.039 and Tracy, you did a really good job, although you 0:06:14.040 --> 0:06:16.200 said you didn't, but you actually did a great job 0:06:16.279 --> 0:06:18.839 of of explaining some of that at the top of 0:06:18.839 --> 0:06:21.919 this right, Like, people are not rational. Politicians are not 0:06:21.960 --> 0:06:25.520 always rational in a traditional sense. They're not going to 0:06:25.640 --> 0:06:28.000 just pass a trillion dollars of stimulus because it makes 0:06:28.000 --> 0:06:30.960 the most sense. You need to take into into into 0:06:31.040 --> 0:06:37.040 account a broad array of of human behavior and assumptions 0:06:37.040 --> 0:06:40.640 of human behavior when making these predictions. For example, Nancy 0:06:40.680 --> 0:06:43.000 Pelosi hates Mark Meadows. She's not going to make a 0:06:43.040 --> 0:06:46.560 deal if Mark Meadows is there. Um Stephen Manuchin like, 0:06:47.000 --> 0:06:50.680 I think investors and markets generally speaking have not only 0:06:50.720 --> 0:06:54.000 been too sensitive to these things, but have just ignored 0:06:54.120 --> 0:06:59.000 fundamental realities of governing and um and are just passing 0:06:59.000 --> 0:07:03.000 off information shin as gospel when it really is just 0:07:03.160 --> 0:07:06.520 nothing but a singular data point in a broad array 0:07:06.520 --> 0:07:09.920 of data points that need to be under consideration. So 0:07:10.040 --> 0:07:12.520 can you elaborate on that point? Then? Uh, you know, 0:07:12.600 --> 0:07:16.320 Joe mentioned in the beginning that politicians clearly want to 0:07:16.360 --> 0:07:19.480 be reelected, so that's always a focus for them. You 0:07:19.600 --> 0:07:24.560 mentioned some personal feuds, and you know, likes and dislikes. 0:07:24.600 --> 0:07:28.000 There might be alliances in the background that people aren't 0:07:28.040 --> 0:07:33.320 even aware of. What motivates the average politician in your opinion, 0:07:34.400 --> 0:07:38.720 reelection and power. Right, I mean, my personal hobby horse 0:07:39.000 --> 0:07:42.200 is um, one of my many personal hobby horses. And 0:07:42.320 --> 0:07:44.440 Joe could probably attest to this since he follows me 0:07:44.440 --> 0:07:47.160 on Twitter and we have some back and forths. I mean, listen, 0:07:47.280 --> 0:07:49.840 we I think the media is guilty in this too, 0:07:49.920 --> 0:07:54.320 because we're we concentrate on whether Congressman X believes there 0:07:54.520 --> 0:07:58.160 is a deal in hand or not. I'll pick a 0:07:58.240 --> 0:08:01.080 random member of Congress, right, I mean Josh Gottheimer is 0:08:01.120 --> 0:08:04.800 a Democrat whose chairs the Problem Solvers Caucus, a caucus 0:08:04.800 --> 0:08:07.480 that has not solved any problems, but calls itself the 0:08:07.520 --> 0:08:10.960 problem solvers Caucus. He's a Democrat from northern New Jersey. 0:08:11.040 --> 0:08:15.160 His district is heavily populated with people in the financial 0:08:15.160 --> 0:08:17.680 services industry and who work in New York. And he 0:08:17.880 --> 0:08:20.280 will go on TV or he will make some sort 0:08:20.320 --> 0:08:23.320 of remark to a newspaper to somebody that I think 0:08:23.320 --> 0:08:25.200 a deal is close and stocks will go up or 0:08:25.240 --> 0:08:27.520 go down based on that, or I'll get a thousand 0:08:27.520 --> 0:08:30.320 text messages from from sources on Wall Street or people 0:08:30.320 --> 0:08:32.720 in the financial services community based on that. There are 0:08:33.120 --> 0:08:36.319 like four or five people in Washington that you need 0:08:36.360 --> 0:08:39.320 to understand to understand what's going to happen. And those 0:08:39.360 --> 0:08:43.920 people are Nancy Pelosi, Mitch McConnell, Chuck Schumer, Donald Trump, 0:08:44.120 --> 0:08:47.319 even Minuton and Kevin McCarthy. It's no more complicated than that. 0:08:47.720 --> 0:08:50.520 And there within you need to focus on what's at 0:08:50.520 --> 0:08:54.680 stake for each individual participant. Right, So let's let's dissect 0:08:54.679 --> 0:08:58.200 this a little bit more. Nancy Pelosi decided to not 0:08:58.320 --> 0:09:01.920 do a medium sized a school deal because she wanted 0:09:02.000 --> 0:09:05.920 a large fiscal deal, and she was incentivized by Stephen Mnuchin, 0:09:06.080 --> 0:09:09.400 who kept running back to the negotiating table every single 0:09:09.480 --> 0:09:12.520 time something was about to fall apart and giving into Pelosi. 0:09:12.800 --> 0:09:16.719 So then Pelosi takes a look at the the legislative 0:09:16.800 --> 0:09:19.320 landscape and says, oh, I could get a lot out 0:09:19.400 --> 0:09:21.800 of this, So why don't I try to get a 0:09:21.800 --> 0:09:25.359 lot out of this? Um, I could get tons of 0:09:25.360 --> 0:09:29.240 of priorities because Stephen Manuchin really wants a deal, and 0:09:29.320 --> 0:09:31.480 I've been in this game for thirty years. He's a 0:09:31.480 --> 0:09:34.240 new participant, so I could string him along for a ride. 0:09:34.960 --> 0:09:37.360 Those are the kinds of things that that you know. 0:09:37.440 --> 0:09:40.840 I just think that we're oftentimes listening to the noise 0:09:40.880 --> 0:09:43.640 and not looking for the signal in understanding this. And 0:09:43.679 --> 0:09:46.640 some of my sources on Wall Street have indicated, well, 0:09:46.800 --> 0:09:49.760 we're trading headlines, and we're a macro fund. We care 0:09:49.760 --> 0:09:53.720 about the headline that comes out and whether it's a 0:09:53.720 --> 0:09:55.880 positive or negative headline, and markets will go up and 0:09:55.920 --> 0:10:00.240 down based on that. But like, that is not that's mine. 0:10:00.320 --> 0:10:02.760 Maybe that's a business, but that's not that's not an 0:10:02.800 --> 0:10:04.719 indicator of whether there will be a deal. I mean, 0:10:04.960 --> 0:10:07.280 I have been on the on the since I think 0:10:07.320 --> 0:10:10.560 since August or September, and again we're taping this before 0:10:11.320 --> 0:10:13.440 we know for sure it's six days before the election. 0:10:13.679 --> 0:10:15.560 There could there be a deal in the next six days. 0:10:15.559 --> 0:10:18.800 I put a point five percent probability on that, but 0:10:19.160 --> 0:10:21.840 just assuming there's not. But let me just finishes one thought. 0:10:21.880 --> 0:10:24.120 I mean, I've been saying since September. The dynamics have 0:10:24.120 --> 0:10:26.600 been obvious for people who understand this stuffs in September. 0:10:27.280 --> 0:10:30.080 So you say, like, okay, the guy from the Problem 0:10:30.120 --> 0:10:33.400 Solvers Caucus goes on cable news and said, I think 0:10:33.400 --> 0:10:36.760 there's a deal that's noise, and I get that, and 0:10:36.760 --> 0:10:38.320 I think a lot of people get that, and if 0:10:38.320 --> 0:10:40.520 they don't, you know, they really should pay more attention. 0:10:40.760 --> 0:10:45.480 On the other hand, your assertion that markets don't get it. Okay, 0:10:45.520 --> 0:10:49.760 so the SNP bounces a quarter of a percent, I 0:10:49.800 --> 0:10:52.800 could tell you that's noise. I don't think that's necessarily 0:10:52.840 --> 0:10:56.600 reflective of some broad consensus and to the extent that 0:10:56.920 --> 0:11:00.120 since the beginning of September, um the odds of a 0:11:00.200 --> 0:11:03.679 deal have really diminished. Well, markets are down since the 0:11:03.720 --> 0:11:05.600 beginning of September, at least a lot of them are. 0:11:05.920 --> 0:11:09.680 So doesn't that actually reflect perhaps a you're the one, 0:11:10.000 --> 0:11:13.400 uh reading too much into noise and be that markets 0:11:13.400 --> 0:11:16.800 have more or less gotten it right? Well, yes and no, 0:11:17.080 --> 0:11:19.400 Because when you have Nancy Pelosi go out and say 0:11:19.400 --> 0:11:22.439 I'm optimistic for a deal, we're putting pen to paper, uh, 0:11:22.480 --> 0:11:24.520 and you see stocks bounce on that, and you see 0:11:24.720 --> 0:11:27.199 and I see a headline in the morning stimulus hopes 0:11:27.679 --> 0:11:31.520 uh increase based on Nancy Pelosi saying there's optimism and 0:11:31.840 --> 0:11:34.320 you see, you know, I see Bloomberg charts on Twitter 0:11:34.600 --> 0:11:36.839 and stocks you're pointing up and futures are up based 0:11:36.840 --> 0:11:40.240 on based on renewed stimulus hopes. I mean, the dynamic 0:11:40.320 --> 0:11:44.960 here has been remarkably static since August or September, and 0:11:45.040 --> 0:11:47.640 still there have been these momentary swings where stocks are 0:11:47.760 --> 0:11:50.280 up a good deal and maybe they're not up net 0:11:50.360 --> 0:11:53.440 net over, uh, you know, since September, but you do 0:11:53.520 --> 0:11:56.800 get these momentary bounces which are just complete garbage. It's 0:11:57.200 --> 0:12:01.040 it's it's it's it's completely made up. It's not there art. 0:12:01.080 --> 0:12:04.320 I mean, Nancy Pelosi says she's optimistic about everything, So 0:12:04.360 --> 0:12:06.840 I think, uh, and maybe I'm maybe what I'm saying 0:12:06.880 --> 0:12:09.280 is that there the structure is off, and the incentive 0:12:09.280 --> 0:12:11.520 structure for Wall Street is off. But what I'm saying 0:12:11.600 --> 0:12:15.120 is that broadly speaking, the dynamics have been static for 0:12:15.360 --> 0:12:35.040 months and have not changed appreciably at all. Part of 0:12:35.080 --> 0:12:38.080 me wonders, and I hate to, I hate to be 0:12:38.120 --> 0:12:41.320 really self referential, but some of this could well be 0:12:41.360 --> 0:12:45.120 a financial media problem. Right markets. Markets are up half 0:12:45.120 --> 0:12:50.080 a percent because Pelosi said something optimistic about financial stimulus. 0:12:50.800 --> 0:12:54.840 I mean, that's a narrative that someone who covers markets 0:12:55.040 --> 0:12:58.960 is basically putting together when you could actually write. You know, 0:12:59.040 --> 0:13:01.319 it could be any number of things. It could be positioning, 0:13:01.480 --> 0:13:03.720 or you know, it could be something completely random that 0:13:03.800 --> 0:13:06.920 we don't even know about. I don't know what my 0:13:06.960 --> 0:13:11.120 point is, um, I guess like I wonder if there's 0:13:11.160 --> 0:13:17.920 a tendency in financial markets among investors to seek out 0:13:18.280 --> 0:13:21.960 narratives to explain market moves, and that's why we end 0:13:22.040 --> 0:13:26.320 up with this sort of simple, simplistic construction around what's 0:13:26.360 --> 0:13:29.120 going on in d C. I think there's some truth 0:13:29.200 --> 0:13:31.640 to that. I think it's Listen, everything boils down to 0:13:31.679 --> 0:13:34.760 a media problem at some level, right, But um, I 0:13:34.800 --> 0:13:38.240 think that, Uh, I think that's right and to some degree. 0:13:38.320 --> 0:13:40.800 And I don't mean to wrap on the media. We're 0:13:40.840 --> 0:13:43.200 all card carrying members of said groups. So I don't 0:13:43.240 --> 0:13:45.599 mean to uh to to wrap on the media. But 0:13:45.640 --> 0:13:51.000 also remember these politicians are are playing you to write, 0:13:51.040 --> 0:13:54.520 there playing all of us. They know broadly speaking, they're not. 0:13:54.720 --> 0:13:57.160 So I've heard a lot of times I have people 0:13:57.480 --> 0:13:59.240 that I talked to on Wall Street. I'm sure you 0:13:59.280 --> 0:14:01.640 talked to a lot of similar people to who say, well, 0:14:01.640 --> 0:14:04.640 what's the buzz like on on the markets? What are 0:14:04.640 --> 0:14:07.120 people thinking like? I could tell you that most members 0:14:07.120 --> 0:14:09.840 of Congress are only vaguely aware of financial markets in 0:14:09.840 --> 0:14:11.960 the sense that they know whether they are up and 0:14:12.040 --> 0:14:15.080 down as a general proposition. They don't know the momentary 0:14:15.120 --> 0:14:17.600 moves of markets, and probably north should they, right, I mean, 0:14:17.800 --> 0:14:20.320 they shouldn't be focused on that unless there's some calamitous 0:14:20.320 --> 0:14:22.760 events that they need to be aware of. But I 0:14:22.800 --> 0:14:24.920 don't know if I ever reported this, but Nancy Pelosi 0:14:24.960 --> 0:14:27.920 when she gave her press conference last week, I forget 0:14:27.920 --> 0:14:30.120 what she said exactly, but afterwards she said on a 0:14:30.200 --> 0:14:32.680 call with her leadership, the market was up when I 0:14:32.720 --> 0:14:35.680 was talking. She they understand what it takes to game 0:14:35.720 --> 0:14:38.920 markets and what it takes to to push markets up 0:14:38.920 --> 0:14:41.160 and to give more hope when there shouldn't be hope 0:14:41.160 --> 0:14:44.400 at all. They get this, They get this game better 0:14:44.440 --> 0:14:47.480 than anybody is. Donald Trump might say so uh and 0:14:47.480 --> 0:14:50.120 and they go on Fox Business, and they go on Bloomberg, 0:14:50.200 --> 0:14:53.080 and they go on CNBC because they know that they 0:14:53.120 --> 0:14:56.560 could instill hope whether where there might not be any 0:14:56.640 --> 0:14:58.640 reason for hope. So this is all part of a 0:14:59.200 --> 0:15:00.960 large game, and to be what I'm saying is the 0:15:01.000 --> 0:15:03.880 game is is stupid and rigged in every sense of 0:15:03.880 --> 0:15:07.200 the word, and and uh it shouldn't be, or maybe 0:15:07.240 --> 0:15:09.880 it should be. So that's kind of my my overall take. 0:15:10.680 --> 0:15:13.000 You know, I'm curious is as we were talking about 0:15:13.040 --> 0:15:16.440 the intro, we had an incredibly powerful fiscal stimulus this year, 0:15:16.600 --> 0:15:19.680 arguably the biggest and most effective one in history, in 0:15:19.720 --> 0:15:23.600 the form of the Cares Act. Setting aside the current gamesmanship. 0:15:23.840 --> 0:15:26.840 Right now, looking forward, we don't know what the makeup 0:15:26.840 --> 0:15:29.960 of government is. What did it take to make that happen? 0:15:30.240 --> 0:15:34.200 Why did CARES come into existence? Why? Why how did 0:15:34.200 --> 0:15:36.480 the politics align for that one? In your view, because 0:15:36.480 --> 0:15:38.160 I think this is gonna be an important thing in 0:15:38.240 --> 0:15:41.080 terms of people thinking about like the prospects for another 0:15:41.120 --> 0:15:44.720 fiscal stimulus is what does it actually take for the 0:15:44.760 --> 0:15:48.080 wheels of politics to make it happen. What it took 0:15:48.200 --> 0:15:50.960 was the find was the incentives of every member of 0:15:51.000 --> 0:15:54.760 the leadership to get this done, meaning Nancy Pelosi, Mitch McConnell, 0:15:55.000 --> 0:15:57.880 Chuck Schumer, and Kevin McCarthy. Every single person had to 0:15:57.880 --> 0:16:00.360 be bought in and had to agree to the general 0:16:00.400 --> 0:16:04.280 proposition that this was an extraordinary time and extraordinary measures 0:16:04.280 --> 0:16:07.600 need to be taken. Once Mitch, so that's why it happened. 0:16:07.600 --> 0:16:10.120 Mitch McConnell was up for reelection and there was no 0:16:10.240 --> 0:16:13.040 question that something needed to be done. Then we moved 0:16:13.040 --> 0:16:17.200 into another phase where Senate Republicans were looking at decreasing 0:16:17.280 --> 0:16:22.800 unemployment numbers, increasing stock market numbers, and a general marginally 0:16:22.960 --> 0:16:26.320 rosier picture of the economy. And then the incentive started 0:16:26.320 --> 0:16:29.040 to diverge, and you had a president who was not 0:16:29.120 --> 0:16:31.480 really sure what he wanted and was out of the game, 0:16:32.000 --> 0:16:35.640 and a party that was generally a drift and a speaker, 0:16:35.720 --> 0:16:39.960 a Democratic speaker that saw opportunity to play members of 0:16:39.960 --> 0:16:43.120 the administration off of each other, Mark Meadows Againsteven Manuchin, 0:16:43.480 --> 0:16:46.520 Stephen Manuchin against Mark Meadows, and and that and Mark 0:16:46.560 --> 0:16:49.480 Meadows and the President against each other, and against even Manuchin. 0:16:49.760 --> 0:16:52.560 So let's talk about going forward, what will it take 0:16:52.880 --> 0:16:56.240 to get another stimulus deal passed? So the general conventional 0:16:56.280 --> 0:16:59.880 wisdom tends to be that no matter what happens on 0:17:00.000 --> 0:17:03.040 November three, there will be what we call a lame 0:17:03.120 --> 0:17:05.960 duck stimulus deal. So some sort of deal between November 0:17:06.000 --> 0:17:09.520 four and January twenty whatever, when the new Congress is in, 0:17:09.800 --> 0:17:12.760 when the new president's inaugurated and the new Congress takes 0:17:12.760 --> 0:17:16.040 the seat takes its its place. I'm very barish on that. 0:17:16.160 --> 0:17:19.439 I think that's an unlikely scenario that there will be 0:17:19.480 --> 0:17:23.240 some sort of large scale fiscal deal UH in that period. Now, 0:17:23.280 --> 0:17:25.159 that could change. I don't feel as strongly about that, 0:17:25.200 --> 0:17:27.000 and I'll tell you why. So let's talk about the 0:17:27.040 --> 0:17:31.000 incentives again. Nancy Pelosi, if she wants to clear the 0:17:31.040 --> 0:17:34.159 decks for Joe Biden, if she believes it's advantageous for 0:17:34.280 --> 0:17:36.359 Joe Biden to come in and to not have to 0:17:36.400 --> 0:17:39.240 do that, then she will push for it. Because Mitch McConnell, 0:17:39.280 --> 0:17:41.479 is he about to lose the Senate? Is Chuck Schumer 0:17:41.720 --> 0:17:43.880 want to get it off? Biden's played as well. If 0:17:43.920 --> 0:17:46.800 all of those things converge, then that could happen. But 0:17:46.840 --> 0:17:49.560 if any of those things slide away, I don't care 0:17:49.680 --> 0:17:53.080 what Josh Kodheimer or Rocana or uh pat to me 0:17:53.240 --> 0:17:55.280 or any of these people say, it doesn't make a difference. 0:17:55.520 --> 0:17:58.359 Every all of the leadership has to be aligned. Now, listen, 0:17:58.400 --> 0:18:01.160 if this doesn't happen in the lane you're talking about 0:18:01.200 --> 0:18:04.080 a fiscal stimulus deal that I would view as somebody 0:18:04.080 --> 0:18:07.520 who's covered this, unlikely until late February, you know, sometime 0:18:07.600 --> 0:18:10.399 in February or March. And I'm I know that's not 0:18:10.400 --> 0:18:13.439 what people want to hear. But January is shot. The 0:18:13.440 --> 0:18:15.640 President doesn't get into office until the end of the month. 0:18:15.880 --> 0:18:17.639 Then it's going to take some weeks. I mean, it 0:18:17.680 --> 0:18:19.639 takes the Senate a week to do anything. Then you 0:18:19.680 --> 0:18:22.760 have fights over whether to eliminate the so called filibuster, 0:18:23.040 --> 0:18:25.680 the sixty vote requirement to do things. So I mean, 0:18:25.800 --> 0:18:28.440 there's just things don't happen in a vacuum. Things don't 0:18:28.480 --> 0:18:31.160 happen because people want them to happen on the outside. 0:18:31.560 --> 0:18:34.600 This is an institution that could only take so much 0:18:35.040 --> 0:18:38.439 external pressure or so much water, and everything has to 0:18:38.480 --> 0:18:42.080 align for something big like that to happen. So on 0:18:42.200 --> 0:18:44.720 that note, one of the conversations that Joe and I 0:18:44.920 --> 0:18:48.040 have had this year is about the idea of automatic 0:18:48.119 --> 0:18:52.520 stabilizers in the economy, or basically the notion that you 0:18:52.560 --> 0:18:57.600 could bypass all this political gridlock if you had an 0:18:57.640 --> 0:19:02.240 automatic thing that kicked in and say, unemployment went above 0:19:02.440 --> 0:19:05.520 a certain level. So you know, if unemployment reached twelve 0:19:05.560 --> 0:19:08.800 percent or something like that. That's pretty extreme. You would 0:19:09.000 --> 0:19:12.919 have I don't know, additional checks that suddenly get mailed 0:19:12.920 --> 0:19:17.520 out to Americans making below a certain income. And that's 0:19:17.520 --> 0:19:20.480 something that we spoke about with the economist Claudia some 0:19:21.119 --> 0:19:26.680 Do you think that's an interesting, uh solution or potential 0:19:26.720 --> 0:19:31.240 solution to the problem that we're discussing here. So it's interesting, 0:19:31.320 --> 0:19:33.240 but it's not going to happen. And I'll tell you why. 0:19:33.400 --> 0:19:37.720 I mean, this would require Congress, Congress giving away the 0:19:37.800 --> 0:19:40.920 one thing that it has, which is power. People don't 0:19:41.000 --> 0:19:44.800 get into this business by and large for noble reasons. 0:19:44.840 --> 0:19:48.320 They don't get into it because they want to solve 0:19:48.480 --> 0:19:51.280 some sort of major crisis. In many cases, they get 0:19:51.280 --> 0:19:53.800 into this business because they want power and want to 0:19:53.840 --> 0:19:57.680 increase it and exercise it in ways that benefit them 0:19:57.680 --> 0:20:01.000 and their constituents and their party a large. And if 0:20:01.119 --> 0:20:04.360 you have some sort of automatic turn offs which that 0:20:04.480 --> 0:20:07.600 turns off that power, that says, well, like think about it, 0:20:07.680 --> 0:20:10.520 think about it this way, Tracy. Like. The big argument 0:20:10.600 --> 0:20:15.040 here over fiscal stimulus is the White House's disagreement with 0:20:15.119 --> 0:20:18.679 Nancy Pelosi that the that states and state and local 0:20:18.720 --> 0:20:22.720 governments need money. This entire argument has been over that 0:20:23.000 --> 0:20:26.240 dynamic at its core, right like, and it's a difference 0:20:26.240 --> 0:20:28.399 of really a hundred fifty billion dollars, and there's a 0:20:28.400 --> 0:20:31.720 ton of disagreements that's that come off of that. So 0:20:31.920 --> 0:20:35.200 an entire deal is being held up because of one dynamic. 0:20:36.080 --> 0:20:39.239 People wouldn't have the ability to do that if they 0:20:39.280 --> 0:20:42.119 set something on a glide path. We've had similar discussions 0:20:42.119 --> 0:20:45.200 when I mean we, I mean like America and Congress 0:20:45.840 --> 0:20:48.920 over the debt ceiling, whether there should be some sort 0:20:48.920 --> 0:20:53.800 of automatic trigger by which Congress should raise the nation's 0:20:53.840 --> 0:20:58.040 borrowing limit to avoid kind of you know, uh crises 0:20:58.080 --> 0:21:00.359 that that come up when the borrowing limit is reached. 0:21:00.600 --> 0:21:03.520 And Congress has by and large said note to that 0:21:03.760 --> 0:21:06.760 because they see it as a safety valve. Congress likes 0:21:06.840 --> 0:21:11.760 this conflict. This tension animates Congress, This tension drives Congress. 0:21:11.840 --> 0:21:15.840 There's no if we had automatic switches in in our 0:21:15.920 --> 0:21:19.520 government system, the power would diminish and it would almost 0:21:19.560 --> 0:21:22.600 not need to exist in the same way that it exists. 0:21:22.920 --> 0:21:26.280 So I just think that everybody has an incentive to 0:21:26.359 --> 0:21:29.719 keep these things on the table because it lends it 0:21:29.800 --> 0:21:33.439 lends leverage points for other things that Congress wants to accomplish. 0:21:33.640 --> 0:21:37.399 I think this is a super super interesting point, just 0:21:37.520 --> 0:21:39.760 an interesting thing to think of. You know, you also 0:21:39.840 --> 0:21:42.880 hear it in the context of, well, what about giving 0:21:42.880 --> 0:21:47.080 the Federal Reserve more tools through legislation such that it 0:21:47.119 --> 0:21:51.000 could print money and put put dollars into people's bank account. 0:21:51.440 --> 0:21:55.879 But all of that, as you say, implicitly means that 0:21:55.960 --> 0:21:59.560 Congress would have to be willing to permanently give up 0:21:59.560 --> 0:22:02.600 the power or in the future and permanently sort of 0:22:02.800 --> 0:22:06.320 be willing to not be there. And as it sounds like, 0:22:06.560 --> 0:22:10.919 the sort of the fiscal clip ification of policy in 0:22:10.960 --> 0:22:13.560 the end is something that even know it's miserable, is 0:22:13.600 --> 0:22:19.480 actually something Congress wants to keep. Yeah, and Congress likes inefficiency, right. 0:22:19.520 --> 0:22:24.080 Inefficiency drives Congress and drives policymakers because it gives opportunity 0:22:24.119 --> 0:22:26.199 to get other things done. I mean, you see this 0:22:26.320 --> 0:22:29.920 all the time. Mitch McConnell said, no fiscal stimulus will 0:22:29.920 --> 0:22:32.080