WEBVTT - Bloomberg Surveillance TV: June 5, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and a Marie Hortern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify, 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:35.840 Bloomberg Terminal and the Bloomberg Business App. 0:00:36.560 --> 0:00:38.720 Have you received a callback from mister Musk. 0:00:40.080 --> 0:00:43.639 Yes, Look, Elon's a good friend. We texted late last night. 0:00:43.720 --> 0:00:45.720 We're going to talk this morning. I just want to 0:00:45.720 --> 0:00:48.519 make sure that he understands what I think everybody on 0:00:48.560 --> 0:00:51.440 Capitol Hill understands. This is not a spending bill, of 0:00:51.560 --> 0:00:55.680 my friends, this is a budget reconciliation bill. And what 0:00:55.720 --> 0:00:58.560 we're doing here is delivering the America First agenda. This 0:00:58.640 --> 0:01:01.240 is all the President's priority and all the priorities of 0:01:01.280 --> 0:01:04.560 the Republican Party. Everything we promise the American people, that 0:01:04.680 --> 0:01:06.759 is what we are delivering with this piece of legislation. 0:01:06.800 --> 0:01:10.600 And the reason we're using the reconciliation process is because 0:01:10.640 --> 0:01:12.560 that is the only way to get around the sixty 0:01:12.640 --> 0:01:16.279 vote threshold in the Senate. Everybody probably recognizes Chuck Schumer 0:01:16.319 --> 0:01:19.399 and the Democrats are in no mood and not going 0:01:19.440 --> 0:01:22.679 to be helpful in delivering President Trump's agenda for the people. 0:01:23.040 --> 0:01:24.399 We have to do it this way. 0:01:24.800 --> 0:01:26.399 We can do it with fifty one votes in the 0:01:26.440 --> 0:01:30.040 Senate only, and that's the urgency of the hour, and 0:01:30.080 --> 0:01:31.120 we have to do it quickly. 0:01:31.160 --> 0:01:32.839 For all the reasons we can discuss this morning. 0:01:32.959 --> 0:01:34.760 So did you get a sentence from Elon Muster in 0:01:34.760 --> 0:01:37.080 those tex exchange that he was going to stop his 0:01:37.160 --> 0:01:39.960 insistence on this bill that he thinks needs to be killed. 0:01:41.360 --> 0:01:43.480 He seems pretty dug in right now, and I can't 0:01:43.560 --> 0:01:46.240 quite understand the motivation behind it. But I would tell 0:01:46.280 --> 0:01:48.920 you that what we're delivering in this bill is not 0:01:48.960 --> 0:01:52.600 only historic tax cuts, but historic savings as well. 0:01:52.920 --> 0:01:53.840 He seems to miss that. 0:01:54.040 --> 0:01:57.480 I mean, the projection is that this legislation is going 0:01:57.520 --> 0:02:01.080 to save us one point six trillion dollars with a t. Now, 0:02:01.120 --> 0:02:04.720 there's never been a piece of legislation ever delivered in 0:02:04.720 --> 0:02:06.720 the history of government on the face of the earth. 0:02:07.320 --> 0:02:10.160 That saves that much money. So this is truly historic. Now, 0:02:10.240 --> 0:02:10.880 is it enough? 0:02:11.080 --> 0:02:13.600 No, because all three of us understand that we have 0:02:13.760 --> 0:02:16.840 a large federal debt. We've had deficits for some time, 0:02:16.880 --> 0:02:19.400 and it's a serious concern. In fact, it's the number 0:02:19.400 --> 0:02:22.720 one threat to our national security. But this is the 0:02:22.760 --> 0:02:26.639 biggest step in addressing that problem that Congress has ever delivered, 0:02:26.720 --> 0:02:27.720 and we must do it. 0:02:27.960 --> 0:02:29.359 And I will hasten to say this. 0:02:29.720 --> 0:02:32.679 I've told Elon and tell everyone this is the first 0:02:32.840 --> 0:02:34.800 of a series of steps that we will. 0:02:34.639 --> 0:02:38.040 Take to bring that debt under control. But you can't 0:02:38.080 --> 0:02:39.000 turn it on a dime. 0:02:39.480 --> 0:02:41.720 It took us decades to get into this situation, so 0:02:41.760 --> 0:02:43.800 we have to we have to do it incrementally, and 0:02:43.840 --> 0:02:46.520 this is a huge step forward in that endeavor. 0:02:46.680 --> 0:02:50.960 What's the driving force behind Elon Musk's problems with this bill? 0:02:51.040 --> 0:02:54.800 Has he asked you directly to potentially keep the electric 0:02:54.880 --> 0:02:57.760 vehicle benefits we saw under the Inflation Reduction Act of 0:02:57.760 --> 0:03:00.600 the Biden error into the bill. 0:03:00.880 --> 0:03:04.480 Look, I'll let everybody draw their own conclusions about Elon's motivations. 0:03:04.480 --> 0:03:07.400 I'll tell you that I mean, obviously, the EV mandate 0:03:07.520 --> 0:03:12.040 going away. I'm sure a concern for the leader of 0:03:12.080 --> 0:03:16.799 Tesla and other things as well. But I think there's 0:03:16.800 --> 0:03:19.400 a lot of confusion out there about what the legislation is. 0:03:19.440 --> 0:03:22.120 There's certainly a lot of misinformation. I mean, the Democrats 0:03:22.120 --> 0:03:25.799 have been engaged in this effort, this strategy for many, 0:03:25.840 --> 0:03:28.160 many weeks and many months. But remember it took us 0:03:28.200 --> 0:03:31.120 over a year to develop this piece of legislation. We 0:03:31.160 --> 0:03:34.160 have eleven different committees in the House, all the areas 0:03:34.200 --> 0:03:38.320 of jurisdiction that worked on the reconciliation effort to reconcile 0:03:38.320 --> 0:03:40.560 the budget. And what we're going to deliver her again 0:03:40.680 --> 0:03:44.440 is historic tax relief and savings. At the same time, 0:03:44.800 --> 0:03:47.640 if we do not get this bill done, the tax 0:03:47.680 --> 0:03:50.480 cuts of twenty seventeen, the tax cuts and JOBZAC will 0:03:50.560 --> 0:03:53.520 expire at the end of December. Every American will receive 0:03:53.520 --> 0:03:56.480 the largest tax increase in US history, all at once. 0:03:56.520 --> 0:03:59.400 It would be devastating for the economy. So we've addressed 0:03:59.400 --> 0:04:03.640 that here. The tax cuts permanent, and we've infused it 0:04:03.680 --> 0:04:06.320 with a pro growth series of policies that will get 0:04:06.320 --> 0:04:08.680 the economy going again. It will be jet fueled to 0:04:08.680 --> 0:04:11.400 the economy because we're going to reduce wasteful spending. We're 0:04:11.440 --> 0:04:14.280 going to reduce taxes, and we're going to reduce regulations 0:04:14.320 --> 0:04:16.839 as well, and that is what will allow job creators 0:04:16.839 --> 0:04:19.080 in the energy sector and everyone else to get going again. 0:04:19.120 --> 0:04:21.640 And your version of the bill, of course, increases the 0:04:21.680 --> 0:04:25.760 salt deduction cap, which yesterday Senate Majority Leader John Thune said, quote, 0:04:25.839 --> 0:04:28.480 there isn't a single Republican senator who cares much about 0:04:28.520 --> 0:04:31.400 the salt issue. You and I both know you cannot 0:04:31.480 --> 0:04:35.039 pass this bill without increasing the salt deduction cap. How 0:04:35.080 --> 0:04:39.400 do you envision that deduction changing given the fact that 0:04:39.520 --> 0:04:43.200 no senator Republican senator wants a vote for this. 0:04:44.320 --> 0:04:46.000 Well, I appreciate that they don't. 0:04:46.040 --> 0:04:48.120 They all come from red states, right as do I, 0:04:48.560 --> 0:04:52.360 and we have very different perspective on salt than our 0:04:52.400 --> 0:04:55.120 colleagues in the Blue states, for example, in California and 0:04:55.160 --> 0:04:58.039 New New York, in New Jersey. But that is the 0:04:58.080 --> 0:05:00.880 reality in the House. Remembering they have to remember my 0:05:00.920 --> 0:05:03.159 senate friends and colleagues have to remember I have to 0:05:03.200 --> 0:05:05.320 deliver two hundred and seventeen votes to get that thing 0:05:05.360 --> 0:05:07.840 across the line if they modify it. So I had 0:05:07.960 --> 0:05:11.279 lunch with my senate friends Tuesday, last two weeks ago 0:05:11.360 --> 0:05:13.720 before we passed the bill in the House on that Thursday, 0:05:14.160 --> 0:05:17.719 and I encouraged them to modify it as little as possible, 0:05:17.800 --> 0:05:20.159 right because I gave a metaphor. I said, my friends, 0:05:20.200 --> 0:05:22.040 I am crossing the Grand Canyon on a piece of 0:05:22.120 --> 0:05:25.560 dental flaws. Okay, the equilibrium that we reached here took 0:05:25.680 --> 0:05:28.800 quite a bit of time to get to where we are, 0:05:29.160 --> 0:05:31.240 and you can't load me up on either side. And 0:05:31.320 --> 0:05:33.919 if you go and slash the salt cap that we 0:05:34.000 --> 0:05:36.800 negotiated carefully for over a year, it's going to make 0:05:36.839 --> 0:05:39.159 it very difficult for me to deliver the necessary number 0:05:39.160 --> 0:05:41.800 of votes. Remembering I can only lose three in the House. 0:05:42.080 --> 0:05:44.160 They can only lose three in the Senate to get 0:05:44.160 --> 0:05:44.640 this done. 0:05:44.680 --> 0:05:45.839 So we're all working together. 0:05:45.880 --> 0:05:48.880 It's one team, House and Senate together, united in this effort. 0:05:49.720 --> 0:05:52.840 They understand that, and I think they understand certainly Leader 0:05:52.880 --> 0:05:55.000 Thun and the leaders over their understand the complexity of 0:05:55.000 --> 0:05:55.760 what we're having to deal. 0:05:55.680 --> 0:05:56.560 With here, Spiky Johnson. 0:05:56.560 --> 0:05:57.640 Just to sort of put a bow on it, so 0:05:57.720 --> 0:05:59.720 forty thousands still likely to remain the cap. 0:06:02.040 --> 0:06:04.359 That's what we negotiated here, and I'm certainly trying to 0:06:04.360 --> 0:06:06.840 hold to that number, and look, we've paid for it. 0:06:06.920 --> 0:06:09.080 I think we've got it worked out and all the 0:06:09.120 --> 0:06:11.520 math and the legislation, and I think it's something that 0:06:11.920 --> 0:06:13.400 I know they don't they're not in love with it, 0:06:13.400 --> 0:06:15.680 but I certainly hope they'll tolerated so we can maintain 0:06:16.560 --> 0:06:17.200 our vote tally. 0:06:17.279 --> 0:06:19.800 Over here, Speaker Johnson, as you walk that piece of 0:06:19.839 --> 0:06:22.560 dentalfloss over the Grand Canyon. There is this question of 0:06:22.600 --> 0:06:25.560 how the bill is currently being used, whether it's for 0:06:25.880 --> 0:06:30.120 budget negotiations and budget reconciliation over the next decade, or 0:06:30.160 --> 0:06:34.880 whether it's to negotiate trade agreements. There is two point 0:06:34.880 --> 0:06:38.560 eight trillion dollars of revenue that is being penciled in 0:06:38.800 --> 0:06:43.159 by the Congressional Budget Office from tariffs that might be 0:06:43.279 --> 0:06:46.159 used as a negotiating tactic might not be How do 0:06:46.200 --> 0:06:49.640 you understand the way that tariffs are looked at as 0:06:49.680 --> 0:06:52.039 part of this budget balancing Act? 0:06:53.120 --> 0:06:56.039 Well, it hasn't been included in the calculations, and that's 0:06:56.080 --> 0:06:59.040 because groups like the CBO, the Congressional Budget Office, as 0:06:59.080 --> 0:07:01.240 you noted, won't give us any credit for that. 0:07:01.320 --> 0:07:02.359 But it is very real. 0:07:02.400 --> 0:07:04.560 I mean, the revenue is real, and it is realized 0:07:04.600 --> 0:07:07.960 and it's not included in the calculation that we've made 0:07:08.040 --> 0:07:11.240 or they've made, but obviously it's a big factor. We 0:07:11.320 --> 0:07:14.680 believe that we're going to bring about a roaring economy again, 0:07:14.720 --> 0:07:18.320 and it's not based on conjecture or ground list optimism. 0:07:18.520 --> 0:07:20.680 I mean, this is based on the history. We did 0:07:20.720 --> 0:07:23.080 this in twenty seventeen, after the first two years of 0:07:23.120 --> 0:07:25.640 the Trump administration, when we passed the tax cuts and 0:07:25.720 --> 0:07:28.960 Jobs ac We reduce taxes, we reduced regulations, and the 0:07:29.040 --> 0:07:32.080 economy was raringw I mean you all remember it. Before COVID, 0:07:32.080 --> 0:07:33.920 we had the greatest economy in the history of the world. 0:07:33.920 --> 0:07:37.720 I mean, everybody was doing better every demographic wages were up, 0:07:37.840 --> 0:07:41.600 the job participation numbers where at record highs, inflation was down, 0:07:41.600 --> 0:07:43.240 and manageable things were going great. 0:07:43.280 --> 0:07:46.240 And then COVID hit. So we're going to do that same. 0:07:46.120 --> 0:07:49.200 Series of policies, implement that same philosophy, but this time, 0:07:49.240 --> 0:07:51.080 as I say, on steroids, and. 0:07:51.040 --> 0:07:52.640 It's going to make a major difference for every and 0:07:52.680 --> 0:07:53.280 everybody's life. 0:07:53.360 --> 0:07:55.320 Speaker John said, a lot of people in Marcus are 0:07:55.360 --> 0:07:58.239 concerned about a number of provisions here and actually don't 0:07:58.280 --> 0:08:01.400 think they will spur growth. One of them being Section 0:08:01.560 --> 0:08:05.200 eight ninety nine, which talks about taxing foreign investment in 0:08:05.240 --> 0:08:09.600 the United States from specific countries that have non tariff 0:08:09.640 --> 0:08:13.000 barriers like the VAT tax and other things that have 0:08:13.120 --> 0:08:17.080 been contentious during negotiations of trade deals. 0:08:17.240 --> 0:08:19.280 How much do you see that dampening? 0:08:19.320 --> 0:08:21.160 I mean, is that a concern for you, because right 0:08:21.200 --> 0:08:24.280 now around the world there are people wondering whether they 0:08:24.320 --> 0:08:27.360 can still invest in the United States without getting penalized 0:08:27.400 --> 0:08:27.680 for it. 0:08:28.880 --> 0:08:33.360 Yes, Look, there's a complexity to the tariff negotiations. I mean, 0:08:33.679 --> 0:08:35.720 we tip our hat to the White House, and President's 0:08:35.720 --> 0:08:38.120 strategy is working. As you know, there's more than seventy 0:08:38.160 --> 0:08:41.720 five countries renegotiating their trade agreements right now, finalizing that 0:08:41.760 --> 0:08:45.599 even as we speak, that's going to be better for America. 0:08:45.120 --> 0:08:47.200 Because it will be more fair. You know. 0:08:47.720 --> 0:08:50.320 I'm always liking myself to be a Reagan Republican and 0:08:50.400 --> 0:08:54.040 free trade is one of our core principles that we've 0:08:54.040 --> 0:08:57.920 all supported over the years. And every time I would 0:08:57.920 --> 0:08:59.520 say that over the last several years to President Trump, 0:08:59.559 --> 0:09:02.520 he would say, yes, free and fair trade, and he's right. 0:09:02.679 --> 0:09:05.160 I mean, this is a disparity that must have needed 0:09:05.160 --> 0:09:07.600 to be addressed and it has been, so we think 0:09:08.080 --> 0:09:10.000 in total, this is going to be good when it's all, 0:09:10.040 --> 0:09:12.800 when all the dust settles on the tariff negotiations and 0:09:12.840 --> 0:09:14.719 the new trade agreement. So it's going to be good 0:09:14.720 --> 0:09:17.480 for America and good for the world. And so we're 0:09:17.480 --> 0:09:20.120 factoring that in. We're working in tandem with the White House, 0:09:20.160 --> 0:09:22.200 and it's it's part of going to stay in calculation 0:09:22.280 --> 0:09:22.559 in the la. 0:09:22.559 --> 0:09:25.240 Laker Johnson, just to be clear that provision will stay 0:09:25.240 --> 0:09:26.320 in that is important to you. 0:09:28.040 --> 0:09:28.960 Look, I think it is. 0:09:29.040 --> 0:09:32.040 I mean, obviously the bill is still a live instrument 0:09:32.080 --> 0:09:34.320 that's being worked on in the Senate, so we'll see 0:09:34.400 --> 0:09:37.320 if they modify those provisions. But I think for now, 0:09:37.360 --> 0:09:39.640 I think that's good policy for US. And I want 0:09:39.679 --> 0:09:42.679 to say to foreign investors, you're in good stead to 0:09:43.600 --> 0:09:45.560 invest in America. This is the time to do it, 0:09:45.600 --> 0:09:47.960 because the American economy is about to take off again 0:09:48.080 --> 0:09:49.720 and it's going to be good for you and good. 0:09:49.600 --> 0:09:50.079 For the world. 0:09:50.600 --> 0:09:53.640 We're the largest trading partner for most other nations. They 0:09:53.640 --> 0:09:55.920 need America, and a strong America is good for the 0:09:55.920 --> 0:09:57.760 whole world. And that is what we are going to 0:09:57.760 --> 0:10:00.840 bring about with these sound policies and pro growth initiatives. 0:10:00.960 --> 0:10:03.840 Speaking, Johnson, you and your colleagues have a self imposed 0:10:03.920 --> 0:10:07.000 July fourth deadline. Partially that is because you have to 0:10:07.080 --> 0:10:10.640 raise the debt ceiling. Are you considering raising the debt 0:10:10.679 --> 0:10:14.120 limit if this deal isn't finished by July fourth with 0:10:14.160 --> 0:10:16.640 a different measure, Well. 0:10:16.520 --> 0:10:17.760 It'd be very difficult to do it. 0:10:17.800 --> 0:10:21.080 I mean, it would require a bipartisan measure in that regard, 0:10:21.120 --> 0:10:22.960 and I would like to believe that Chuck Schumer and 0:10:22.960 --> 0:10:24.719 the Democrats and the Senate would do the right thing. 0:10:24.760 --> 0:10:29.000 But I wouldn't count on that. That debt cliff, as 0:10:29.120 --> 0:10:31.960 we're regarding it, is coming soon, and that's why Secretary 0:10:31.960 --> 0:10:33.760 Besson has said we've got to get this done by 0:10:33.760 --> 0:10:35.920 Independence Day, and I think it'd be a great celebration 0:10:36.000 --> 0:10:37.880 for all of us. But it's not just because of 0:10:37.920 --> 0:10:41.040 the debt ceiling. It's also because we need to get 0:10:41.080 --> 0:10:44.560 tax relief in this new roaring economy to the American 0:10:44.559 --> 0:10:47.280 people as quickly as possible. They're owed that and this 0:10:47.360 --> 0:10:48.960 is going to be a great thing for everyone. And 0:10:49.440 --> 0:10:51.480 you know, I have to also think about the politics 0:10:51.520 --> 0:10:53.360 of it. Right, we have a midterm election coming up 0:10:53.400 --> 0:10:55.959 in twenty twenty six. If we get this done soon 0:10:56.080 --> 0:10:59.680 and quickly this summer, then everyone will feel those effects 0:10:59.720 --> 0:11:02.959 before they have to go vote again in that midterm election. 0:11:03.040 --> 0:11:04.760 We want to keep the House majority and keep this 0:11:04.840 --> 0:11:06.880 going for four years for President Trump and not two. 0:11:07.320 --> 0:11:09.280 And if we lost the majority, there's no doubt that 0:11:09.320 --> 0:11:11.920 the House Democrats would try to impeach the president and 0:11:12.000 --> 0:11:15.760 everything would be truly chaotic for investors and job creators 0:11:15.840 --> 0:11:18.559 and consumers. So we have to keep this going, keep 0:11:18.600 --> 0:11:21.199 the momentum going. The timeline's very important, and that's why 0:11:21.520 --> 0:11:23.800 I put this on a very aggressive schedule. I said 0:11:23.920 --> 0:11:25.280 back in the early part of this year that we 0:11:25.280 --> 0:11:27.360 would pass the big, beautiful bill out of the House 0:11:27.840 --> 0:11:30.760 before Memorial Day, and people laughed, they mocked me when 0:11:30.760 --> 0:11:32.640 I said that. But we beat it by four days. 0:11:32.800 --> 0:11:34.360 We're going to stay on track and we're going to 0:11:34.360 --> 0:11:35.400 deliver for the American people. 0:11:35.440 --> 0:11:38.599 Well, you have exactly twenty nine days to hit that deadline. 0:11:38.640 --> 0:11:41.360 Are you saying there's no plan B for raising the 0:11:41.400 --> 0:11:44.840 debt ceiling if this bill is not done between House 0:11:44.880 --> 0:11:46.280 Republicans and House Senators. 0:11:47.280 --> 0:11:49.960 Look, Republicans in a House and Senate will deliver and 0:11:50.040 --> 0:11:51.960 we'll take care of our business one way or the other. 0:11:52.320 --> 0:11:53.360 But I'm just telling you. 0:11:54.120 --> 0:11:57.000 The smartest and most efficacious way to do this is 0:11:57.040 --> 0:11:58.959 to stay on this schedule and deliver for the people. 0:11:58.960 --> 0:12:01.680 And that's what we're dog determined to do or laser 0:12:01.720 --> 0:12:04.200 focused on it. And if we take our focus off 0:12:04.200 --> 0:12:07.280 of that, then the strategy doesn't work. So I'm telling 0:12:07.320 --> 0:12:08.280 you that we are working on that. 0:12:08.360 --> 0:12:08.600 Regard. 0:12:08.720 --> 0:12:11.439 Leader Thuon and I are in constant communication. He understands 0:12:11.440 --> 0:12:14.040 that deadline as well. The Secretary of the Treasury and 0:12:14.520 --> 0:12:17.640 the NEEC and all the leaders in the White House 0:12:18.120 --> 0:12:19.520 and the administration understand that. 0:12:19.600 --> 0:12:20.640 So we're going to get it done. 0:12:20.840 --> 0:12:23.360 Speaker Johnson, how closely are you watching the bond markets 0:12:23.440 --> 0:12:25.600 right now, given the fact that we've seen a real 0:12:26.000 --> 0:12:30.199 sense of concern, particularly in longer duration US treasuries. 0:12:31.640 --> 0:12:32.520 We watch it closely. 0:12:32.880 --> 0:12:36.280 Look, I really do believe that delivering this historic legislation 0:12:36.400 --> 0:12:38.559 is going to be critically important for a lot of reasons, 0:12:38.600 --> 0:12:41.000 not the least of which is that Congress can send 0:12:41.000 --> 0:12:43.960 a very important signal to the bond markets, to the 0:12:43.960 --> 0:12:48.200 stock market, to investors everywhere that we're very serious about this, 0:12:48.360 --> 0:12:51.120 not only in getting the US economy roaring again, but 0:12:51.240 --> 0:12:54.440 also in addressing the long term debt, and I think 0:12:54.480 --> 0:12:56.680 that's an important thing for everyone to understand. We have 0:12:56.760 --> 0:12:59.600 a strategy that's some multiple steps, as I said, multiple 0:12:59.600 --> 0:13:03.760 steps rategy to address this over the next year, two years, 0:13:03.840 --> 0:13:06.280 three years, and we're going to get the US economy 0:13:06.320 --> 0:13:09.720 back on sound footing. We're the party of fiscal responsibility, 0:13:10.000 --> 0:13:11.760 and you'll see that demonstrated day after day. 0:13:11.760 --> 0:13:23.520 Here President Trump's slamming FED cher J. 0:13:23.679 --> 0:13:25.480 Powell once again saying. 0:13:25.320 --> 0:13:28.960 Quote too late, Powell must lower interest rates after a 0:13:28.960 --> 0:13:32.720 week ADP data. Krishna Guha of Evercore writing it would 0:13:32.720 --> 0:13:36.360 take a large and rapid increase in unemployment driven by 0:13:36.400 --> 0:13:38.920 increasing layoffs to cut in July. It is easy for 0:13:38.960 --> 0:13:41.960 the FED to justify remaining and await and see mode. 0:13:42.160 --> 0:13:43.160 Krishna joins us. 0:13:43.080 --> 0:13:44.959 Now, Trisha, thank you so much for being with us. 0:13:45.200 --> 0:13:46.400 A lot of people agree with you. 0:13:46.480 --> 0:13:48.920 At the same time, a September rate cut is pretty 0:13:49.000 --> 0:13:51.920 much baked in. Does that seem appropriate to you based 0:13:51.960 --> 0:13:54.679 on the economic data that has been weakening over the 0:13:54.760 --> 0:13:55.679 past couple of days. 0:13:57.120 --> 0:14:01.240 Look, I have a base case of a September cut, 0:14:01.280 --> 0:14:04.360 but I don't think it's anything close to a slam dump. 0:14:05.160 --> 0:14:08.080 I think right now, the question is does the labor 0:14:08.120 --> 0:14:12.360 market weaken enough over the next several months for the 0:14:12.400 --> 0:14:15.559 FED to judge that it makes sense to lean against 0:14:15.600 --> 0:14:19.360 that weakening where the cuts in September, I think to 0:14:19.440 --> 0:14:22.640 get that you need unemployment moving out to something like 0:14:22.800 --> 0:14:25.920 four and a half percent by September. I think it's 0:14:25.960 --> 0:14:27.640 a close call, to be honest. 0:14:28.400 --> 0:14:29.880 And this is the reason why I think a lot 0:14:29.880 --> 0:14:32.480 of people are looking at whether it is just going 0:14:32.520 --> 0:14:34.560 to be one print, whether it's going to be a 0:14:34.600 --> 0:14:35.800 collection of prints. 0:14:36.040 --> 0:14:37.520 Something that caught my eye yesterday. 0:14:37.520 --> 0:14:41.440 We all are so data dependent, and yet this Bureau. 0:14:41.120 --> 0:14:42.880 Of Labor Statistics put out. 0:14:42.800 --> 0:14:46.800 In a dendum talking about how they collected fewer data 0:14:46.880 --> 0:14:49.960 points in the April CPI survey because of a lack 0:14:50.000 --> 0:14:53.560 of staff. And there's been this speculation about the accuracy 0:14:53.600 --> 0:14:56.880 of some of these surveys as employment has gone down 0:14:56.960 --> 0:15:01.240 and frankly, as responses have gone down. Cretence, do you 0:15:01.360 --> 0:15:03.440 give to some of the data that we get? Do 0:15:03.480 --> 0:15:05.360 you think that it still has the same integrity? 0:15:07.480 --> 0:15:10.800 So in order to make good judgments, you have to 0:15:10.880 --> 0:15:13.680 have good data. It's as simple as that. Now, I 0:15:13.760 --> 0:15:18.720 still think that the US government official statistics ba bls 0:15:19.160 --> 0:15:23.520 are still the gold standard, but we have to be 0:15:23.600 --> 0:15:26.240 careful because, as you say, some response rates have been 0:15:26.240 --> 0:15:29.920 coming down, and now we're starting to worry about staffing 0:15:30.000 --> 0:15:34.120 cutbacks and other funding cutbacks potentially weakening the quality of 0:15:34.120 --> 0:15:37.520 these data series going forward. So in any moment in time, 0:15:37.560 --> 0:15:39.640 you want to look at the holistic picture of the data, 0:15:39.760 --> 0:15:43.400 all the private sector data, including very much on the employments, 0:15:43.680 --> 0:15:46.960 challenger layoffs, indeed, job postings and so on, as a 0:15:46.960 --> 0:15:49.840 crosscheck against the official data, and sometimes getting ahead of 0:15:49.840 --> 0:15:52.480 the official data. But I'll tell you, having seen for instance, 0:15:53.120 --> 0:15:55.880 how problematic it has become in the UK, where some 0:15:55.920 --> 0:15:59.560 of that core official government labor data just hasn't been 0:15:59.600 --> 0:16:03.080 reliable for some time, it can be very, very damaging. 0:16:03.360 --> 0:16:04.880 And that's a much smaller economy. 0:16:04.920 --> 0:16:06.640 So if you're not one hundred if you're not one 0:16:06.720 --> 0:16:10.240 hundred percent trusting the data, you don't have policy uncertainty. 0:16:09.840 --> 0:16:10.640 In Washington, DC. 0:16:11.000 --> 0:16:13.800 What's your north start of these days? 0:16:14.920 --> 0:16:18.080 Well, I think, look, I think we know from first 0:16:18.120 --> 0:16:21.080 principles that tariffs are going to slow growth and push 0:16:21.160 --> 0:16:25.640 up prices. Right, what we're trying to understand is the 0:16:25.800 --> 0:16:30.960 relative balance of those effects. I think that we're going 0:16:31.040 --> 0:16:33.520 to learn a fair amount over the next several months 0:16:33.560 --> 0:16:36.240 on both of these counts. But my hunches that will 0:16:36.400 --> 0:16:39.000 learn more on the labor side than we will about 0:16:39.000 --> 0:16:41.760 what really matters on inflation, which is not the first 0:16:41.880 --> 0:16:44.440 round price impact, but whether it starts to get embedded 0:16:44.480 --> 0:16:48.680 into underlying inflation dynamics. So I'm going to be looking 0:16:48.680 --> 0:16:52.680 at everything official and private sector company level data and 0:16:52.760 --> 0:16:54.880 earnings calls and so on. But what I'm really trying 0:16:54.880 --> 0:16:58.440 to understand at this point is do those inflation expectations 0:16:58.480 --> 0:17:01.960 stay anchored A, because that's the precondition for even considering cuts, 0:17:02.200 --> 0:17:04.960 And then B do we get a material enough weakening 0:17:05.000 --> 0:17:07.840 in the labor market for the FED to want to 0:17:07.840 --> 0:17:11.040 cut to lean against that gathering any momentum. I think 0:17:11.040 --> 0:17:13.000 it may still be a little while before we really 0:17:13.000 --> 0:17:15.520 get visibility on this. My hunch is that will have 0:17:15.600 --> 0:17:18.240 a feel for that how much the labor market is 0:17:18.240 --> 0:17:22.119 deteriorating by September, which makes it the logical moment to 0:17:22.240 --> 0:17:23.800 call the next move on rates. 0:17:24.520 --> 0:17:28.160 Hi christ nat Lori Calvasina from RBC. I've been getting 0:17:27.680 --> 0:17:30.280 the good to see you. I've been getting a lot 0:17:30.280 --> 0:17:33.000 of questions on small caps which are related to rate cuts, 0:17:33.000 --> 0:17:35.879 And I'm wondering in your conversations, are you starting to 0:17:35.880 --> 0:17:38.840 see expectations that the Fed is actually going to do 0:17:38.920 --> 0:17:42.240 something in September? Are those moving up? Are those moving down? 0:17:42.280 --> 0:17:44.040 There's been a lot of dispersion, There's been a lot 0:17:44.080 --> 0:17:46.080 of shifts in kind of the vibe on the ground. 0:17:46.119 --> 0:17:47.800 What's your read of the tea leaves right now? 0:17:49.400 --> 0:17:54.080 So the market has has with this most recent sort 0:17:54.080 --> 0:17:56.919 of patch of week of data with ADP and with 0:17:57.760 --> 0:18:02.800 ISM services, markets move to price in more conviction, high 0:18:02.800 --> 0:18:06.800 conviction around a September move, and you know, and more 0:18:06.840 --> 0:18:09.359 than two cuts discounted through the end of the year. 0:18:09.920 --> 0:18:12.520 And you know, obviously, if we get more rate cuts, 0:18:12.800 --> 0:18:16.680 provided that's not in the context of a recession, and 0:18:16.880 --> 0:18:19.800 that's a modern weekning that the Fed's leaning against, that 0:18:19.880 --> 0:18:23.959 can potentially help your small caps and other stocks. But 0:18:24.000 --> 0:18:26.119 I think we've got to be a little careful interpreting this. 0:18:27.280 --> 0:18:30.760 I don't think we should interpret market pricing is saying 0:18:31.080 --> 0:18:33.600 September is anything close to certain, and I say there's 0:18:33.600 --> 0:18:36.280 somebody who has it as a narrow base case. I 0:18:36.280 --> 0:18:39.280 think the reality is that there is still very much 0:18:39.280 --> 0:18:42.040 a pathway here where we end up with no cuts 0:18:42.080 --> 0:18:45.120 because the labor market doesn't weaken all that much. There's 0:18:45.160 --> 0:18:47.000 a pathway where we get two or three cuts, and 0:18:47.040 --> 0:18:49.840 that the intermediate case, where there's some softening and the 0:18:49.880 --> 0:18:52.919 FEDS leaning against that as it emerges, but not before 0:18:53.000 --> 0:18:55.760 it goes, and then it is still the recession case, 0:18:55.880 --> 0:18:57.840 you know, is that twenty five thirty percent is it 0:18:57.880 --> 0:19:00.679 a bit more, a bit less, And if we do 0:19:00.880 --> 0:19:04.000 break into a session this year, benefit will be cutting 0:19:04.119 --> 0:19:07.200 very very aggressively. So remember that the you know, the 0:19:07.520 --> 0:19:11.240 market pricing is essentially the mean average weighted average of 0:19:11.320 --> 0:19:12.879 those three different parts. 0:19:13.240 --> 0:19:15.879