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Speaker 1: Runt You by Bank of America Mary Lynch. With virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world.

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Speaker 1: Be of a, mL dot Com, slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner, and Smith Incorporated. Ye, Welcome to the Bloomberg

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Speaker 1: Surveillance Podcast. I'm Tom Keene with David Gura. Daily we

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Speaker 1: bring you insight from the best of economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Let's

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Speaker 1: start with Stan Collinder at the Budget Guy on Twitter.

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Speaker 1: Of course it worked on Capitol Hill as a stafford. Now,

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Speaker 1: as I said, with Corbus MSL m SL group in

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Speaker 1: washing d C. Stayd Great to speak with you as always,

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Speaker 1: Good morning, sounds like you've got a busy show as

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Speaker 1: as ever. Let me start out with what happened yesterday afternoon.

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Speaker 1: I mentioned it seems like the leader didn't have the

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Speaker 1: votes to get this through. He didn't have much wiggle room.

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Speaker 1: He needed to have all but two UH Senate Republicans

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Speaker 1: on on his side. What made him realize that there

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Speaker 1: wasn't gonna be a path forward here? Before their life

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Speaker 1: fourth recess. Well, it was very simple. They they took

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Speaker 1: a hard count and they said, all right, there isn't

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Speaker 1: fifty votes here and do And so they had a

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Speaker 1: decision to make. Do we want to move ahead with

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Speaker 1: the vote and lose it and then come back and

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Speaker 1: look terrible during the recess? Where do we want to

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Speaker 1: pull the pull the vote, stop it from happening, make

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Speaker 1: believe that we haven't lost anything yet, and say that

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Speaker 1: we're going to keep negotiating. And they decided on the

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Speaker 1: second path. Now, David, that's not insignificant because there were

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Speaker 1: some people who were saying that McConnell wanted to lose

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Speaker 1: the vote on healthcare and move on. So this clearly

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Speaker 1: shows that he's not quite ready to lose the vote

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Speaker 1: on healthcare, that passing something is actually a priority for him,

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Speaker 1: higher than many people thought. We've seen this movie before.

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Speaker 1: I haven't what we saw it in the house. We

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Speaker 1: saw the House pool the bill come back and then

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Speaker 1: pass something. And the majority leader says he's optimistic there

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Speaker 1: will be a bill that he and his colleagues can

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Speaker 1: all support. Uh do you do you understand his optimism? No? Uh,

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Speaker 1: let's remember that with without going too far into the weeds.

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Speaker 1: Paul Ryan needed his caucus to vote with him, so

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Speaker 1: we had a little bit of room McConnell needs of

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Speaker 1: his caucus. He's only got two votes to spare UM,

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Speaker 1: and that's going to be very, very difficult, given that

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Speaker 1: there are some people who are up for reelection and

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Speaker 1: Republicans who can't vote for something as as draconian or

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Speaker 1: as as difficult, as as potentially harmful, or as unpopular,

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Speaker 1: as as the as the plan that the Senate developed

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Speaker 1: seems to be UM. So you would expect him to

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Speaker 1: be optimistic. You wouldn't expect him to be down in

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Speaker 1: the dumps, especially coming out of the White House. But

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Speaker 1: I'm finding it difficult to understand what this path forward

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Speaker 1: is for all those who say that, oh, he's got

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Speaker 1: two hundred billion dollars, just give it away. That doesn't

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Speaker 1: help you when you're talking about defunding planned parenthood or

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Speaker 1: cutting people off Medicaid who would otherwise be on a

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Speaker 1: Medicaid is an extremely popular program, particularly among senior citizens

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Speaker 1: and their children who think that if it doesn't exist,

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Speaker 1: they'll be paying for their parents. So it's not going

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Speaker 1: to be as easy as McConnell was kind of indicating

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Speaker 1: yesterday didn't excuse me to come up with an alternative

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Speaker 1: san calendar with studios in Washington, which is a good thing.

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Speaker 1: Good morning everyone. Bloomberg surveillance worldwide, coast to coast stand

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Speaker 1: just as one example within the heroin opioid epidemic, does

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Speaker 1: McConnell just bribe the moderate senators and say, okay, I

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Speaker 1: said two billion for heroin opioid, I'm gonna make it

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Speaker 1: forty billion or whatever the number is? Is it? Is

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Speaker 1: it just that? Is it just that cold factual the

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Speaker 1: way they do this, I don't think so, Tom. I

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Speaker 1: mean that's old politics. And um, I think yes, that's

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Speaker 1: part of what some of the monitors would want. But

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Speaker 1: when you talk about some of the things like planned

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Speaker 1: parenthood and throwing people off Medicaid and the number of

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Speaker 1: people who would lose insurance or not being able to

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Speaker 1: afford insurance, let's put it that way, Um, the plan

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Speaker 1: the opioided dollars might not be enough. And plus you've

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Speaker 1: got this additional question that is, if you start reducing

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Speaker 1: the amount that you're going to reduce the deficit, um,

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Speaker 1: then you start losing, making conservatives a little nervous that

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Speaker 1: it doesn't do as much for them as they wanted.

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Speaker 1: So for every vote you you might pick up on

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Speaker 1: the moderate side, you might tend to lose one on

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Speaker 1: the conservative side. And that's the calculation that that mcconnald's

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Speaker 1: got to put together. That is, is there any way

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Speaker 1: for him to add votes without losing any Not to

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Speaker 1: be too cynical here, Stan, but I wonder if the

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Speaker 1: plan here, the way that this bill was written, the

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Speaker 1: way it came about, the way the schedule worked out,

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Speaker 1: these centators didn't have to go to their home states

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Speaker 1: before uh, the Senate majority leader wanted there to be

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Speaker 1: a vote. How does the calculus change now that they

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Speaker 1: have to go home and flip burgers and go to

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Speaker 1: picnics here over the July fourth holiday and interact with

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Speaker 1: their constituents before they come back for a vote. Um,

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Speaker 1: it's gonna play both ways. I mean, it's clearly the

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Speaker 1: Republicans are going to hear from their their donors saying,

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Speaker 1: you promised us and we demanded that you do something

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Speaker 1: about Obamacare, and you get rid of it and you

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Speaker 1: haven't done it yet. Get back there and get it

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Speaker 1: done at the same time as they go walking through

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Speaker 1: July four parades and uh, as you said, going to

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Speaker 1: bar outdoor barbecues and things. They're gonna be hearing from

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Speaker 1: people saying, don't cut my medicaid. You know, I've got

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Speaker 1: a pre existing condition and this is gonna make it impossible.

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Speaker 1: Or I'm a senior citizen. Uh and I'm not going

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Speaker 1: to be able to afford healthcare. What are you doing

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Speaker 1: this to me for so? Uh? And and remember this,

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Speaker 1: this bill has only got about a popularity rate, so

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Speaker 1: it will be an interesting question, David, um is it.

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Speaker 1: Are the donors more effective as as lobbyists back home

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Speaker 1: or the voters? Well, this frankly probably works better on

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Speaker 1: radio than TV. We can all imagine confident politicians walking

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Speaker 1: out yesterday, and you know that does a caricature. It

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Speaker 1: looks like Saturday Night Live. They're all standing, you know,

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Speaker 1: confidently with their body language, stand calendar and that are

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Speaker 1: these people's scared stiff? I mean the level of not cockiness.

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Speaker 1: But we're in control? Are no? Clearly not um And

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Speaker 1: and you've got to think that Republicans who were celebrating

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Speaker 1: just six months ago and an unexpectedly large victory and

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Speaker 1: and and control over all branches of government are now

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Speaker 1: starting to look at what's going on and saying this

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Speaker 1: is not good. They've got a president who's not popular

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Speaker 1: and his popularity is going down. Uh, and it's not

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Speaker 1: involved in the legislative process. You've got a healthcare bill

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Speaker 1: that's enormously unpopular, uh and much less popular than the

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Speaker 1: the Affordable Care Act that they want to get rid of. Um,

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Speaker 1: and it's it. You've got Democrats who were energy and

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Speaker 1: enthusiasm is going up. So you've got to believe that

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Speaker 1: this is a brave face of stiff upper lip, as

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Speaker 1: many many of your your your British house would probably say.

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Speaker 1: But um, this this, this is nothing anything. This is

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Speaker 1: the beginning of real worry time. And remember we're only

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Speaker 1: a few months into this this congressional term. It it's

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Speaker 1: it's what you will have to wonder what turns it

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Speaker 1: around for Republicans at this point. If they can't get

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Speaker 1: healthcare done, what happens to tax reform? And if they

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Speaker 1: can't get healthcare and tax reform done, what happens to

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Speaker 1: the rest of their program? Uh? You know what happens

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Speaker 1: to the defense dollars that the president and John McCain wants.

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Speaker 1: What happens to the big domestic cuts that the that

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Speaker 1: the president seems to want but Republicans are unwilling to

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Speaker 1: give him. Do they look like Do the congressional Republicans

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Speaker 1: in the White House look like the game that couldn't

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Speaker 1: shoot straight when it comes to economic policymaking? Stand a

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Speaker 1: little later today on TV, I'm gonna talk with Tim Phillips,

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Speaker 1: the president of Americans for Prosperity. Of course, Koch Brothers

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Speaker 1: back group here that opposed this piece of of legislation.

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Speaker 1: Is this a victory for him? Can he count what

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Speaker 1: happened yesterday as a victory? Oh? Absolutely. I mean he

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Speaker 1: didn't want the bill yesterday to as as expressed yesterday

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Speaker 1: to pass, and it didn't. Um. The question is does

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Speaker 1: he have an alternative that could pass that that would

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Speaker 1: be any more popular? Um? That's the next step right now.

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Speaker 1: I mean, David, we're dealing in in the question of

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Speaker 1: minutes and seconds rather than long term policy making here.

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Speaker 1: So they wanted he got the victory that he wanted yesterday.

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Speaker 1: The question is where do you go forward? And it's

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Speaker 1: not clear that there is that path or that he's

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Speaker 1: got a path that that that can get fifty fifty

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Speaker 1: one Republican votes just strikes me. Stand here, the real

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Speaker 1: difficulty is you've got senators who opposed this bill who

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Speaker 1: aren't really all on They're not on the same page.

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Speaker 1: There are a lot of moperates, and there are a

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Speaker 1: lot of Conservais who don't like it. It's hard for

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Speaker 1: me to see them coming together to create something here

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Speaker 1: that that they and their colleagues could support it well.

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Speaker 1: And I mean that's exactly right. But the most interesting

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Speaker 1: and maybe the most important thing that McConnell said yesterday

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Speaker 1: wasn't that we're optimistic or I'm optimistic he said about

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Speaker 1: moving forward and getting a bill passed. He said he

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Speaker 1: absolutely wasn't going to work with Democrats. Um. You know,

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Speaker 1: in the past, twenty years ago, thirty years ago, when

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Speaker 1: I was on Capitol Hill, Um, there would have been

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Speaker 1: some negotiations, some discussion, can we get five Democratic votes?

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Speaker 1: It looks like he has you know, taken that path away. Um.

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Speaker 1: And and and then with with what you just said, David,

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Speaker 1: is there a majority in the Republican Party that Republicans

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Speaker 1: and send an Okay, here's gonna do for it's gonna

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Speaker 1: come back with Stan Colendar I promise that our next

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Speaker 1: block will be healthcare free. We'll actually talk about something

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Speaker 1: mundane like the mathematics and the fictional plugins of our

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Speaker 1: federal budget process. Mr Colindar holding court at FM Studios

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Speaker 1: in Washington, Michael Bard, do you know that the only

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Speaker 1: reason we get calendar into the studio is the food

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Speaker 1: court in Washington Auto It is outstanding. It is has

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Speaker 1: a bipartisan protein counter. There's a hot chocolate smoothies, avocado smoothies,

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Speaker 1: and it's great. Yeah, no pork, thank you, cond than

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Speaker 1: twins and no pork buried. Within the twenty page or

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Speaker 1: so summary of the CBO report on your budget is

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Speaker 1: a paragraph on the guestimates of GDP. There's no one

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Speaker 1: better to talk to about this. Stanley Colindar MSL group.

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Speaker 1: He's got a Twitter handle. You can remember the budget guy,

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Speaker 1: which actually works for stand stand. You know they talk

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Speaker 1: about setting g DP now one percent They use an

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Speaker 1: adverb here, it's very dangerous. In your work of line,

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Speaker 1: roughly one percentage point higher is what GDP used to be.

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Speaker 1: How critical is the g DP plug in to the

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Speaker 1: current expectation and realities of deficit to GDP? Well, it's critical, Uh,

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Speaker 1: it's absolutely critical. If the if the as you start

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Speaker 1: to manipulate, or let's not use it as such a

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Speaker 1: macki Avellian term, but as as the note that number

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Speaker 1: starts to change, the long term outlook changes on the

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Speaker 1: deficit as well. The longer term it's out and the

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Speaker 1: longer that GDP number stays in place, the bigger, the

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Speaker 1: bigger the the delta. Um. Excuse me for using jargon.

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Speaker 1: Line that's okay, delta is not jargon. All right, we

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Speaker 1: don't ring a bell or something like that like um.

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Speaker 1: But but this, don't forget the administer aation used a

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Speaker 1: rosy scenario of three percent. CBO is saying that's not likely.

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Speaker 1: And the difference there is the difference between a budget

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Speaker 1: that balances over ten years and one that is still

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Speaker 1: vastly in deficit and debt um and so these numbers

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Speaker 1: become critical. It's one of the reasons that Republicans were

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Speaker 1: so critical of CBO until recently anyway, because they just

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Speaker 1: didn't think it was being optimistic enough and therefore was

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Speaker 1: forcing more action by the administration. I remember talking to

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Speaker 1: Alice rivel in a few months back when CBO was

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Speaker 1: taking some hits and she said, it comes with the territory.

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Speaker 1: When you head up that organization, you used to being

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Speaker 1: hit on both sides by Democrats and Republicans. Is today

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Speaker 1: somehow different in light of the rhetoric we've heard directed

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Speaker 1: at this nonpartisan office, Is it more bruised and batter

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Speaker 1: than it has been in the past? All right, I

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Speaker 1: don't want to sound like I'm from Washington, but I

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Speaker 1: want to answer this in two different ways. All right? Uh.

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Speaker 1: Number one, yes, these Uh, the criticism is goes with

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Speaker 1: the territoriallysis, exactly right. Um. But the viciousness of the

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Speaker 1: criticism with New Gingrich calling it a socialist organization is

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Speaker 1: not wrong. But a socialist organization whose time has passed, um,

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Speaker 1: is virtually unprecedented. Uh. That is that you know, it's

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Speaker 1: CBO has never taken these kinds of partisan, you know,

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Speaker 1: desperately partisan hits and with an attempt to discredit an

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Speaker 1: organization whose credibility should never you know, has never really

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Speaker 1: been questioned. That that significantly. But let me let me

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Speaker 1: just answer this is the second way I want to

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Speaker 1: answer it. Um. In spite of all the criticism that

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Speaker 1: that CBO has taken and the hits that and the

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Speaker 1: slings and arrows that have come in its direction. It's

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Speaker 1: probably stronger today than it was two months ago. Even

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Speaker 1: Paul Ryan yesterday or the day before came out with

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Speaker 1: the statement saying it's good to have it around. And

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Speaker 1: noticed the way CBO released its numbers. It didn't hold

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Speaker 1: a press conference, it didn't make a big deal and

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Speaker 1: just released the numbers and let the numbers speak for themselves.

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Speaker 1: Um And while yes, the White House criticized them, the

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Speaker 1: Congressional Republicans did not. Um. So, if anything, the Congressional

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Speaker 1: Budget Office has come out of this discussion stronger, more

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Speaker 1: credible than it was before. When there's a lot of

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Speaker 1: criticism that when it came to the Affordable Care Act

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Speaker 1: stand the CBO was was wrong, they forecasted wrong. Uh

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Speaker 1: do do people assess the record of the CBO? In

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Speaker 1: other words, they're they're making their best assumptions and guesses

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Speaker 1: and estimates based on the data they have. How right

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Speaker 1: have they been throughout history? More correct than the Office

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Speaker 1: Monument and Budget, or the General Accounting Office or or

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Speaker 1: almost anybody else who do does these kinds of numbers.

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Speaker 1: Remember I said this on TV this morning. CBO's only

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Speaker 1: job is to try to get the numbers right. Um, now,

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Speaker 1: they're gonna be wrong over a ten year period. I

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Speaker 1: mean everyone's going to be wrong over a ten year period. Yeah,

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Speaker 1: but the critically things standing, We're gonna run out of

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Speaker 1: time here. But I think this is important to be clear.

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Speaker 1: The CBO does not make point estimates. Amateurs make point estimates.

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Speaker 1: The media makes point estimates because we love the Mickey

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Speaker 1: mouse certitude of it. These guys are pros and they

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Speaker 1: make fan distribution gues estimates of where we are in

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Speaker 1: ten or twenty years, right, right, And and we know

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Speaker 1: that twenty years from now that it's gonna be five

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Speaker 1: presidential elections, ten presidential, ten congressional elections from now, and

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Speaker 1: god knows how many you know, natural and man made

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Speaker 1: disaster exactly. Things are going to be different than we're expecting.

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Speaker 1: But based on what we know, natal CBO has been

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Speaker 1: more accurate than anybody. Twenty seconds. What's your tip point

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Speaker 1: on deficit? The g DPS calendars radar up at four percent,

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Speaker 1: five percent, six percent? What's your tip point where it

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Speaker 1: becomes a story It wasn't our ut Probably four and

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Speaker 1: a half to five. Okay, this has been great State calendar,

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Speaker 1: Thank you so much. Studios in Washington stopped by Gucci.

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Speaker 1: Today's standing at your bonus price. They opened like a

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Speaker 1: two PM. I don't know what that's. I don't know

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Speaker 1: what that's. A pleasure here has always be joined by

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Speaker 1: Comal Street com the president of Street Kumar Global Strategies,

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Speaker 1: and so much to talk what we're talking about healthcare,

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Speaker 1: but there's a lot more to talk about, of course,

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Speaker 1: and markets and economics. Yesterday afternoon, Jennet Yellen, the FED Chair,

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Speaker 1: sat down with Lord Nicholas Tern in London for a

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Speaker 1: spirited conversation on the Fed's mandate, of course, the way

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Speaker 1: that it looks at data, and also on regulation. And

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Speaker 1: to be fair, Lord Nicholastern has led her in that direction,

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Speaker 1: but it struck me that Janet Yellen was very eager

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Speaker 1: to talk about the regulatory legacy of the Federal Reserve.

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Speaker 1: Years we have point as we approach a point where

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Speaker 1: there could be a turning point when it comes to

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Speaker 1: the regulatory responsibilities of the I don't know if you

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Speaker 1: were listening yesterday, but how cognizant do you think that

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Speaker 1: FED Chair Jennet Yellen is now of where the FED

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Speaker 1: is headed when it comes to regulation. I think, uh,

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Speaker 1: they have switched objectives, David. I think it used to

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Speaker 1: be inflation and it used to be growth, and they

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Speaker 1: are not. Neither of them is going by what the

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Speaker 1: FED would want. So she's moving on to regulation, the

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Speaker 1: need for proper regulation, as well as what is happening

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Speaker 1: with respect to the build up of speculative pressures. So

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Speaker 1: it seems to me that the FED would do a

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Speaker 1: lot better if they stayed very close to the knitting

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Speaker 1: in terms of the two main objectives, rather than go

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Speaker 1: diversify in terms of what that objectives are. It is

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Speaker 1: not as if they have achieved their original objectives to

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Speaker 1: be able to find something new to do. Yeah, there

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Speaker 1: was a very interesting moment to me, at least at

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Speaker 1: the beginning of that conversation yesterday, she's sort of outlining

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Speaker 1: fed cher Jenillen, outlining what the FED does. She says,

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Speaker 1: there's the furbest model, there's the dynamic stochiastic, stochastic general

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Speaker 1: equilibrium models. But she said, good morning, good morning, Mr Clara.

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Speaker 1: But she said, for actual forecasting, we don't really rely

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Speaker 1: on any of those models. We take those insights and

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Speaker 1: then we use a variety of tools and judgment to

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Speaker 1: try to forecast what the path the economy is going

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Speaker 1: to be over the next a couple of years. I

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Speaker 1: guess she's alluding there to some secret sauce at the

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Speaker 1: FED Reserve. Has has the FED gotten better at forecasting

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Speaker 1: under her? Under her leadership, I think the forecasting ability

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Speaker 1: is getting worse because they have been The FED has

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Speaker 1: been wrong every year in looking for a pickup in

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Speaker 1: economic growth, David from two thousand nine onward, it hasn't happened.

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Speaker 1: If you were the FED chairman and you've had two

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Speaker 1: or three years of failure on your forecasting ability, it

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Speaker 1: should make you more modest, more humble in terms of

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Speaker 1: trying to do something rather than go ahead and repeat

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Speaker 1: the forecast as if you've had a stellar record on

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Speaker 1: the forecasting side. Especially now that after seven eight years

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Speaker 1: of the so called economic recovery that we have had,

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Speaker 1: inflation is going well below the Fed's target and economic

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Speaker 1: growth is slowing before it even picks up, makes me

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Speaker 1: believe that the forecasting ability is not getting really much

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Speaker 1: better than before the usual three you've had an uproar response.

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Speaker 1: I want to come back and talk about full time jobs.

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Speaker 1: But Steve Roach with a brilliant column and summary today.

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Speaker 1: Yesterday rather in Project Syndicate talks about Richard Baldwin of Geneva.

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Speaker 1: Is the idea of an unbundling globalization is everything we're

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Speaker 1: talking about, just about the new dynamics of globalization and

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Speaker 1: almost an oversupply because of the slew rates and efficiencies

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Speaker 1: of logistics, travel, trade and all. Is there a new

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Speaker 1: globalization out there? That is a new globalization? But I

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Speaker 1: think there are players who dominate the new globalization are

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Speaker 1: different one what it was before, tom you had the

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Speaker 1: United States and the I m F which used to

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Speaker 1: champion globalization, free trade, and you had to drag emerging

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Speaker 1: markets many countries in Europe along with you. Now it

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Speaker 1: looks as if the table has turned and you have

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Speaker 1: more of the emerging markets trying to form free trade associations.

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Speaker 1: They have their own form of globalization, even as Europe

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Speaker 1: gets better and comes closer together. So yes, I think

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Speaker 1: globalization is alive. But who is leading and who is

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Speaker 1: dragging behind? I think has changed. Let's come back Street

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Speaker 1: Camar with us. I got a great full time chart.

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Speaker 1: I'm gonna put it on Twitter, will feature tomorrow television

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Speaker 1: as well. Street camar with us now with a very

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Speaker 1: cautious you on economic growth three, a chart which I

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Speaker 1: just seem to be doing a lot of like early

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Speaker 1: candidates for chart of the year. Full time employment has

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Speaker 1: actually grown pretty well. But when you adjust full time

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Speaker 1: employment for population and the growth of population, it's stunning

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Speaker 1: how bad it was at the bottom in two thousand

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Speaker 1: eight nine and now it's only made it halfway back.

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Speaker 1: We have full time population adjusted employment back to December seven.

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Speaker 1: It's amazing how that full time job has disappeared population adjusted?

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Speaker 1: Is that part of the damp and g d P

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Speaker 1: view we have? Absolutely? I think that is part of

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Speaker 1: the problem. And recent why the Fed in terms of

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Speaker 1: hiking by suggesting that we are approaching full employment with

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Speaker 1: the four point three you three, unemployment rate is just

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Speaker 1: wide of the mark. As you pointed out, Tom, population

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Speaker 1: adjusted people are looking for are only able to get

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Speaker 1: part time jobs. They are also accepting jobs paying less

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Speaker 1: than what they were paid before, and as a result

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Speaker 1: of that they are essentially there is more slack in

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Speaker 1: the market. The key telling statistic here is the number

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Speaker 1: of hours that worked per week, and that has been

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Speaker 1: stuck at the same number thirty four point four hours

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Speaker 1: average work week for the past year. That does not

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Speaker 1: suggest to me that you're going you have a problem

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Speaker 1: with not finding enough labor. Second, if you look at

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Speaker 1: people who are looking for multiple jobs, that continues to

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Speaker 1: remain high and rising year on year. And I would

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Speaker 1: say again, this is a corollary to what you said, Tom.

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Speaker 1: If you're not able to find a full time job,

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Speaker 1: and you need a full time job to get a

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Speaker 1: decent salary for yourself, you're probably looking for second, third,

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Speaker 1: and fourth jobs, and which is why there is a

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Speaker 1: big increase in those who are holding multiple jobs. And

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Speaker 1: that also tells you that there is a real problem

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Speaker 1: in the labor market. What have we learned from Mario

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Speaker 1: drag the e c B yes yesterday the day before

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Speaker 1: when he spoke in Portugal at the CCB the converence,

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Speaker 1: he was also talking about employment, about the employment picture

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Speaker 1: in Europe. How much has that changed? How similar is

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Speaker 1: the similar are the challenges that Europe's face is what

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Speaker 1: we're seeing here in the US. Europe has a bigger

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Speaker 1: problem than the United States. Europe's biggest problem, particularly focused

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Speaker 1: on France and Italy, is the fact that you have

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Speaker 1: very rigid labor markets, and in fact, we are expecting

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Speaker 1: French President mccron to try to reform it starting today.

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Speaker 1: And you have more than twenty percent youth unemployment rate

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Speaker 1: in France, you have youth unemploy eiment rate between thirty

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Speaker 1: five and forty in Italy. That is a different kind

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Speaker 1: of a problem. But what we have in the United States,

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Speaker 1: the unemployment takes the form of the low skilled occupations

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Speaker 1: David and those who cannot get full time jobs. In

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Speaker 1: the case of France and Italy in particular, you are

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Speaker 1: able to hold onto your full time job if you're

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Speaker 1: in your late forties or in your fifties because nobody

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Speaker 1: can push you out. It's very difficult to fire a worker.

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Speaker 1: But jobs are just not available for those in their twenties.

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Speaker 1: So it's a different kind of a problem. But I

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Speaker 1: think Mario dragging, especially in his own home country of Italy,

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Speaker 1: he faces a real issue as well. What do you

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Speaker 1: say is the next big test in Europe? Of course,

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Speaker 1: the Prexit process continues to unfold. Let's put that aside.

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Speaker 1: We saw some intervention in banks in Spain and Italy.

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Speaker 1: Is that where the action is going to be when

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Speaker 1: you look at big tests here on the horizon for Europe.

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Speaker 1: Is it going to be in the banking sector? Do

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Speaker 1: you think the major issues are I think three four

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Speaker 1: one you mentioned one of them. Brexit is going to

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Speaker 1: be very important. And how over the next two years

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Speaker 1: or even longer. Who knows, they may not resolve it

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Speaker 1: by March. How is that going to be resolved? Who

429
00:23:12,520 --> 00:23:15,320
Speaker 1: is going to be the British Prime Minister who negotiates it.

430
00:23:15,320 --> 00:23:18,399
Speaker 1: It may not be Theresa May. You may have elections,

431
00:23:18,480 --> 00:23:21,959
Speaker 1: so you add to all the uncertainties. That's one problem.

432
00:23:22,040 --> 00:23:24,960
Speaker 1: On the other side of the English channel, we actually

433
00:23:25,080 --> 00:23:30,359
Speaker 1: have an improvement in conditions. The Purchasing Managers INDEXES numbers

434
00:23:30,400 --> 00:23:35,359
Speaker 1: are looking good. German in business confidence index has reached

435
00:23:35,359 --> 00:23:39,119
Speaker 1: a new high recently. Germany is absolutely in the peak

436
00:23:39,200 --> 00:23:42,560
Speaker 1: and even French growth is starting to become very positive.

437
00:23:43,400 --> 00:23:46,880
Speaker 1: So the final point here on the on the integration

438
00:23:46,960 --> 00:23:51,800
Speaker 1: side is that Macro and Merkel are talking in terms

439
00:23:51,800 --> 00:23:55,120
Speaker 1: of some kind of unification, and David I fell out

440
00:23:55,119 --> 00:23:58,000
Speaker 1: of my chair when I thought I saw the cautious

441
00:23:58,080 --> 00:24:03,440
Speaker 1: Angela Merkel say even before her elections in September, that

442
00:24:03,520 --> 00:24:07,080
Speaker 1: she may consider a common euro Zone White bond and

443
00:24:07,240 --> 00:24:11,199
Speaker 1: perhaps a common euro Zone Finance minister. This is a

444
00:24:11,280 --> 00:24:14,320
Speaker 1: no no to the German public. Those are big changes.

445
00:24:15,200 --> 00:24:17,800
Speaker 1: Is this all about? We just have to get used

446
00:24:17,840 --> 00:24:21,880
Speaker 1: to lower growth politicians with their short term frame and

447
00:24:21,920 --> 00:24:24,280
Speaker 1: it's not a hit against politicians, their their goals to

448
00:24:24,320 --> 00:24:29,840
Speaker 1: get reelected. They can't deal with the three commar growth

449
00:24:29,880 --> 00:24:33,320
Speaker 1: rate real or nominal. I mean, it's not something that's

450
00:24:33,359 --> 00:24:36,439
Speaker 1: politically feasible. What about the rest of us? Do we

451
00:24:36,480 --> 00:24:40,320
Speaker 1: just have to get used to three commars world? I

452
00:24:40,359 --> 00:24:45,679
Speaker 1: think um low um employment, low wage world, low growth

453
00:24:45,680 --> 00:24:50,560
Speaker 1: ward is going to persist until we change economic policy.

454
00:24:50,600 --> 00:24:55,240
Speaker 1: I'm often reminded of Albert Einstein's definition of insanity. You

455
00:24:55,359 --> 00:24:58,000
Speaker 1: keep doing the same thing and you hope for different results.

456
00:24:58,440 --> 00:25:02,200
Speaker 1: Since two thousand nine, we have had monetary easing be

457
00:25:02,359 --> 00:25:04,960
Speaker 1: the only tool that is supposed to cause economy. So

458
00:25:05,000 --> 00:25:08,920
Speaker 1: you'd recommend fiscal stimulus right now. Infrastructure what infrastructure should

459
00:25:08,920 --> 00:25:11,560
Speaker 1: be done? And then you need structural reforms as Germany

460
00:25:11,640 --> 00:25:15,959
Speaker 1: did after two thousand three. You need vocational training. You

461
00:25:16,000 --> 00:25:18,760
Speaker 1: need people to take a cup cut in the pay

462
00:25:18,920 --> 00:25:21,360
Speaker 1: so that you get education in what you can get

463
00:25:21,400 --> 00:25:24,879
Speaker 1: a job as a carpenter, for instance, or doing something

464
00:25:24,920 --> 00:25:28,760
Speaker 1: in a tool factory where jobs are available and actually

465
00:25:28,760 --> 00:25:31,720
Speaker 1: they are looking for workers. Well I did this charge,

466
00:25:31,840 --> 00:25:34,600
Speaker 1: thank you Michael McKee and and others. The other day

467
00:25:34,640 --> 00:25:38,480
Speaker 1: of of hires versus job openings never it's amazing. I mean,

468
00:25:38,840 --> 00:25:42,880
Speaker 1: it's absolutely unreal, the lack of hiring versus job openings

469
00:25:43,000 --> 00:25:46,080
Speaker 1: right exactly, so it is. And then you you have

470
00:25:46,119 --> 00:25:53,000
Speaker 1: talked again about bifurcated or bifurcated economy, the dichotomy and

471
00:25:53,080 --> 00:25:56,320
Speaker 1: some of the high skill occupations that is a shortage

472
00:25:56,960 --> 00:25:59,600
Speaker 1: and the quick trate is very high. Those workers are

473
00:25:59,640 --> 00:26:02,760
Speaker 1: able to get other jobs, whereas for the most of

474
00:26:02,800 --> 00:26:06,200
Speaker 1: the population, uh, there is nothing. And you're talking about

475
00:26:06,200 --> 00:26:08,480
Speaker 1: a low growth world. So the answer to your question

476
00:26:08,640 --> 00:26:12,119
Speaker 1: is if you want everybody to benefit from a higher

477
00:26:12,119 --> 00:26:15,560
Speaker 1: growth and good job opportunities, the changes need to be

478
00:26:15,640 --> 00:26:18,359
Speaker 1: on the fiscal front, and they need to be structural.

479
00:26:18,480 --> 00:26:20,640
Speaker 1: It cannot just be monitoring. Let me ask a bit

480
00:26:20,640 --> 00:26:23,399
Speaker 1: about Brazil or our self. Poll of beure chief is

481
00:26:23,440 --> 00:26:25,080
Speaker 1: in New York. We had occasion to talk with her

482
00:26:25,680 --> 00:26:28,440
Speaker 1: yesterday off Mike, just about how things are going there.

483
00:26:28,440 --> 00:26:30,800
Speaker 1: You're you're interested investing in Brazil at this point? How

484
00:26:30,800 --> 00:26:32,440
Speaker 1: difficult is that to do? What are your council and

485
00:26:32,480 --> 00:26:35,480
Speaker 1: investor who perhaps sees opportunity in Brazil but is put

486
00:26:35,480 --> 00:26:38,560
Speaker 1: off or worried about the political tumult that we're seeing

487
00:26:38,560 --> 00:26:41,240
Speaker 1: that the latest corruption allegations against the sitting president of

488
00:26:41,280 --> 00:26:45,080
Speaker 1: that country. I watched the the analysis the discussions with

489
00:26:45,160 --> 00:26:48,440
Speaker 1: your some follow bureau chief with interests yesterday on TV.

490
00:26:49,440 --> 00:26:52,359
Speaker 1: My approach here is Brazil. I have been going to

491
00:26:52,440 --> 00:26:55,600
Speaker 1: Brazil since nineteen eighty and I have not seen that

492
00:26:55,640 --> 00:26:58,520
Speaker 1: country stay low for too long a period of time.

493
00:26:59,320 --> 00:27:01,919
Speaker 1: The problem you have is it is an emerging market,

494
00:27:02,200 --> 00:27:04,520
Speaker 1: they say, and the joke is it will always be

495
00:27:04,600 --> 00:27:07,480
Speaker 1: an emerging market, so it has not come to develop

496
00:27:07,560 --> 00:27:11,320
Speaker 1: country status. However, it is not the same as Argentina,

497
00:27:11,680 --> 00:27:15,360
Speaker 1: the neighboring country. It is very different from Venezuela, and

498
00:27:15,440 --> 00:27:19,760
Speaker 1: you have a pickup in economic growth despite the political situation.

499
00:27:19,920 --> 00:27:23,960
Speaker 1: My expectation is whether Michelle theemer the president survives or

500
00:27:24,040 --> 00:27:28,680
Speaker 1: does not survive. You're going to have reforms continue, particularly

501
00:27:28,720 --> 00:27:33,320
Speaker 1: with pension and social security spending, because all politicians seem

502
00:27:33,400 --> 00:27:36,199
Speaker 1: unified that that has to be done. The problem is

503
00:27:36,320 --> 00:27:39,920
Speaker 1: the level of our corruption allegations against the sitting president

504
00:27:40,400 --> 00:27:45,160
Speaker 1: Number one and second, his popularity rating is seven percent,

505
00:27:45,600 --> 00:27:48,320
Speaker 1: and that makes it very difficult to make touch tough changes.

506
00:27:48,560 --> 00:27:52,040
Speaker 1: Here are the positives. Elections are supposed to be held

507
00:27:52,040 --> 00:27:56,040
Speaker 1: in October twenty eighteen, and they may be advanced if

508
00:27:56,080 --> 00:27:58,240
Speaker 1: you have an issue with the current president and the

509
00:27:58,280 --> 00:28:03,280
Speaker 1: population cannot stand the corruption allegations. The two land leading

510
00:28:03,320 --> 00:28:07,240
Speaker 1: candidates are Enrique Mariellis, who is the finance minister. He

511
00:28:07,400 --> 00:28:12,240
Speaker 1: was the head of a large US banks before Harvard educated,

512
00:28:12,680 --> 00:28:15,360
Speaker 1: and he would be excellent. He's a leading candidate as

513
00:28:15,400 --> 00:28:19,200
Speaker 1: well as Lula the former looks back. That would be interesting.

514
00:28:19,480 --> 00:28:21,879
Speaker 1: Street Camar, welcome back. We'll have him again on So

515
00:28:22,160 --> 00:28:25,600
Speaker 1: thank you for your huge response to street Camar's comments.

516
00:28:33,160 --> 00:28:37,000
Speaker 1: Runch you by Bank of America Mary Lynch with virtual reality,

517
00:28:37,240 --> 00:28:42,640
Speaker 1: virtually everything will change. Discover opportunities in a transforming world

518
00:28:43,120 --> 00:28:47,320
Speaker 1: VI of a mL dot Com slash VR, Mary Lynch,

519
00:28:47,440 --> 00:28:57,320
Speaker 1: Pierced Fenner and Smith Incorporated. David. Just days ago, Senator

520
00:28:57,720 --> 00:29:02,040
Speaker 1: Senator Lee was sitting in our studios absolutely talking about

521
00:29:02,040 --> 00:29:03,600
Speaker 1: what's going on. Why don't you bring in the other

522
00:29:03,640 --> 00:29:07,080
Speaker 1: Michael from Utah the uncentatively talking about what needs to

523
00:29:07,120 --> 00:29:09,280
Speaker 1: change when it comes to healthcare reform, and of course

524
00:29:09,280 --> 00:29:11,640
Speaker 1: he's expressed some hesitation with the bill that was put

525
00:29:11,680 --> 00:29:14,200
Speaker 1: forward by Senate Republicans. Michael Levitt, former Secretary of Health

526
00:29:14,240 --> 00:29:16,880
Speaker 1: and Human Services, form administrator the Environmental Protection Agency, and

527
00:29:16,880 --> 00:29:18,880
Speaker 1: of course former governor of the state of you touch,

528
00:29:18,920 --> 00:29:21,040
Speaker 1: joins us now from our Bloomberg ninety nine one studios

529
00:29:21,200 --> 00:29:23,400
Speaker 1: in Washington, d c. Secually, you love it great to

530
00:29:23,440 --> 00:29:25,520
Speaker 1: speak with you once again here, and good good morning

531
00:29:25,520 --> 00:29:27,320
Speaker 1: to both of you. Let me ask you first about

532
00:29:27,360 --> 00:29:29,760
Speaker 1: the role of moderates in the crafting of this bill.

533
00:29:29,800 --> 00:29:31,640
Speaker 1: You watched all of this unfold. There were I think

534
00:29:31,680 --> 00:29:35,760
Speaker 1: thirteen people involved in drafting it in some secrecy on

535
00:29:35,920 --> 00:29:38,800
Speaker 1: Capitol Hill. Was it a mistake not to include moderates

536
00:29:38,960 --> 00:29:41,240
Speaker 1: in the drafting of that legislation? Not to include more people,

537
00:29:41,240 --> 00:29:45,280
Speaker 1: I should say, in the drafting of that legislation. Anytime

538
00:29:45,320 --> 00:29:48,720
Speaker 1: you draft legislation, you have to get to a basic

539
00:29:48,800 --> 00:29:51,720
Speaker 1: work document, and typically it's easier to do that with

540
00:29:51,760 --> 00:29:55,719
Speaker 1: fewer people than more. But as we see now, anyone

541
00:29:55,760 --> 00:29:58,200
Speaker 1: who does not feel like they were at the tables

542
00:29:58,240 --> 00:30:00,920
Speaker 1: going to have their moment, and we're in a period

543
00:30:00,920 --> 00:30:04,520
Speaker 1: of negotiation. Mens McConnell has to find the fifty votes.

544
00:30:04,960 --> 00:30:07,600
Speaker 1: I think in time he will. I'm not at all

545
00:30:07,640 --> 00:30:10,840
Speaker 1: surprised that he had to step back. I think he

546
00:30:10,920 --> 00:30:13,959
Speaker 1: had to create a deadline that created pressure. He'll do

547
00:30:14,000 --> 00:30:16,480
Speaker 1: it again. Uh, there'll be a moment in time when

548
00:30:16,480 --> 00:30:18,520
Speaker 1: I think they vote. I think they'll ultimately get the

549
00:30:18,520 --> 00:30:21,800
Speaker 1: fifty votes, but they'll have to make some do some negotiating.

550
00:30:22,080 --> 00:30:25,520
Speaker 1: They have some back pressure right now. The vehicle they're

551
00:30:25,600 --> 00:30:27,720
Speaker 1: using to do it, which allows them to only need

552
00:30:27,800 --> 00:30:34,719
Speaker 1: fifty votes. The Reconciliation Bill expires septemb Once that occurs, Uh,

553
00:30:35,240 --> 00:30:37,120
Speaker 1: there without a vehicle to get it done. So I

554
00:30:37,120 --> 00:30:40,040
Speaker 1: think the pressure will increase as time goes on. I

555
00:30:40,040 --> 00:30:42,120
Speaker 1: had an interesting conversation a couple of days ago with

556
00:30:42,200 --> 00:30:44,560
Speaker 1: Jan Brewer, of course, the former governor of Arizona. She's

557
00:30:44,600 --> 00:30:47,880
Speaker 1: somebody who did expand Medicaida in her state, and she's

558
00:30:47,880 --> 00:30:51,240
Speaker 1: somebody who's talked to other Republicans about how successful that's

559
00:30:51,240 --> 00:30:53,560
Speaker 1: been in that state. As you look at a path

560
00:30:53,600 --> 00:30:56,120
Speaker 1: forward here, how much does that the expansion to medicate

561
00:30:56,160 --> 00:31:01,320
Speaker 1: complicate changing the Affordable Care Act. It's a a huge

562
00:31:01,360 --> 00:31:06,120
Speaker 1: part of this equation. Uh. And the big villana is

563
00:31:06,160 --> 00:31:10,120
Speaker 1: that there are sixteen governors. I believe the number is

564
00:31:10,640 --> 00:31:15,160
Speaker 1: who are Republican, many of whom governed large states that

565
00:31:15,200 --> 00:31:22,160
Speaker 1: were critical to President's President Trump's electoral majority have expanded

566
00:31:22,280 --> 00:31:26,280
Speaker 1: the population of Medicaid recipients, and they're not at all

567
00:31:26,360 --> 00:31:30,239
Speaker 1: prepared to step back from that decision that that that

568
00:31:30,280 --> 00:31:33,960
Speaker 1: complicates matters. What does a governor do? I think there's

569
00:31:33,960 --> 00:31:37,480
Speaker 1: not enough discussion. I actually call you, governor, love it.

570
00:31:37,520 --> 00:31:41,160
Speaker 1: I don't know, can you be secretary love it today? Governor?

571
00:31:41,440 --> 00:31:44,320
Speaker 1: What what does a governor do when those guys in

572
00:31:44,440 --> 00:31:48,440
Speaker 1: Washington start playing around with the check they cut you

573
00:31:48,520 --> 00:31:51,600
Speaker 1: for Medicaid? What what's it like sitting at the desk

574
00:31:52,000 --> 00:31:56,400
Speaker 1: in Salt Lake City when that happens. Important to recognize

575
00:31:56,400 --> 00:32:00,560
Speaker 1: that these services are delivered, of course on the ground.

576
00:32:00,560 --> 00:32:04,680
Speaker 1: There delivered where the governor lives, and they're real people

577
00:32:04,880 --> 00:32:09,480
Speaker 1: behind uh those numbers, And so the governor is hearing

578
00:32:09,560 --> 00:32:13,400
Speaker 1: from a lot of people, not just those that are

579
00:32:13,400 --> 00:32:17,719
Speaker 1: receiving care, but those are who are providing care. And

580
00:32:17,800 --> 00:32:20,800
Speaker 1: once the decision has been made to expand the population

581
00:32:20,840 --> 00:32:24,240
Speaker 1: of those who depend on Medicaid, scaling it back is

582
00:32:24,280 --> 00:32:28,360
Speaker 1: extraordinarily difficult. Ultimately, I believe will end up in a

583
00:32:28,440 --> 00:32:31,840
Speaker 1: situation where the grand bargain is that there will be

584
00:32:32,840 --> 00:32:36,280
Speaker 1: less money available for medicaid, but they will grant the

585
00:32:36,320 --> 00:32:40,280
Speaker 1: state's greater flexibility and say to the governors, we're going

586
00:32:40,320 --> 00:32:43,280
Speaker 1: to give you tools that you currently don't have in

587
00:32:43,360 --> 00:32:48,640
Speaker 1: order to make these dollars go further. That's a piece

588
00:32:48,640 --> 00:32:52,400
Speaker 1: of the debate that I think is disappointingly absent, That is,

589
00:32:52,480 --> 00:32:56,120
Speaker 1: how can we utilize the money we have more efficiently?

590
00:32:56,240 --> 00:32:59,280
Speaker 1: There are many ways that could be done within that debate.

591
00:33:00,040 --> 00:33:03,120
Speaker 1: In a town seventy eight miles from Salt Lake City

592
00:33:03,200 --> 00:33:08,160
Speaker 1: or Provoor Sandy, there's somebody in Utah making thirty seven thousand,

593
00:33:08,160 --> 00:33:11,040
Speaker 1: five or dollars a year, how do you frame to

594
00:33:11,080 --> 00:33:12,880
Speaker 1: them the idea that they're going to have a three,

595
00:33:12,960 --> 00:33:16,720
Speaker 1: four or five six thousand dollar deductible. Is that a

596
00:33:16,720 --> 00:33:19,880
Speaker 1: a point of concern for the former governor of Utah.

597
00:33:20,160 --> 00:33:23,480
Speaker 1: It's a point of concern for anyone who aspires to

598
00:33:23,520 --> 00:33:28,720
Speaker 1: have everyone in America have access to an affordable insurance policy. Uh.

599
00:33:28,760 --> 00:33:32,000
Speaker 1: One of the discussions around medicaid right now really is

600
00:33:32,040 --> 00:33:35,800
Speaker 1: a debate over what the purpose of medicaid is. There

601
00:33:35,800 --> 00:33:39,440
Speaker 1: are those who believe medicaid is a program to help

602
00:33:40,080 --> 00:33:43,120
Speaker 1: those who are in economic hardship. And then there are

603
00:33:43,120 --> 00:33:45,880
Speaker 1: others who believe that medicaid is a vehicle to expand

604
00:33:45,920 --> 00:33:48,760
Speaker 1: the number of people who have insurance. If you approach

605
00:33:49,400 --> 00:33:52,680
Speaker 1: this as a vehicle to expand the number of people

606
00:33:52,680 --> 00:33:55,880
Speaker 1: who have insurance, that comes at some cost of the

607
00:33:55,920 --> 00:33:58,600
Speaker 1: person you described, it makes thirty seven thousand, five hundred

608
00:33:58,640 --> 00:34:03,360
Speaker 1: dollars because you're spreading those dollars much more thinly. Your

609
00:34:03,360 --> 00:34:06,120
Speaker 1: office at the Department Health and Human Services, in the

610
00:34:06,200 --> 00:34:08,520
Speaker 1: that brutalist Hubert Humphrey building was just a couple of

611
00:34:08,520 --> 00:34:11,200
Speaker 1: blocks away from from the Capital Complex. I wonder if

612
00:34:11,200 --> 00:34:13,680
Speaker 1: you could help us understand here how somebody in that

613
00:34:13,719 --> 00:34:16,160
Speaker 1: position as Secretary Health and Human Services decides when to

614
00:34:16,239 --> 00:34:18,719
Speaker 1: engage or if to engage with what's going on on

615
00:34:19,080 --> 00:34:21,839
Speaker 1: Capitol Hill. You have Tom Price, who has talked about

616
00:34:21,840 --> 00:34:23,480
Speaker 1: the need for health care reform, but this has been

617
00:34:23,480 --> 00:34:26,160
Speaker 1: something that's been playing out in the halls of Congress largely.

618
00:34:26,160 --> 00:34:29,040
Speaker 1: He'll chime in from from time to time when when

619
00:34:29,080 --> 00:34:31,160
Speaker 1: health care is being dealt with by Congress. How does

620
00:34:31,200 --> 00:34:33,760
Speaker 1: the secretary decide whether or not he's needed to step

621
00:34:33,800 --> 00:34:35,799
Speaker 1: in to talk about it, To engage with lawmakers on

622
00:34:35,880 --> 00:34:40,439
Speaker 1: Capitol Hill. There are two components to the Secretary's job.

623
00:34:40,800 --> 00:34:43,840
Speaker 1: One is that the Secretary is responsive to members of

624
00:34:43,880 --> 00:34:47,319
Speaker 1: Congress when they ask for information. And given the fact

625
00:34:47,360 --> 00:34:50,360
Speaker 1: that the Department of Health and Human Services administers the

626
00:34:50,400 --> 00:34:54,000
Speaker 1: programs from the federal point of view, UH, there's a

627
00:34:54,080 --> 00:34:58,080
Speaker 1: need to be responsive. But the other duty is to

628
00:34:58,239 --> 00:35:01,759
Speaker 1: represent the President of the United Eights, who has a

629
00:35:01,840 --> 00:35:05,880
Speaker 1: point of view advocates for that point of view. I

630
00:35:05,920 --> 00:35:08,560
Speaker 1: think Secretary prices on the road today. As a matter

631
00:35:08,560 --> 00:35:10,960
Speaker 1: of fact, at least he has been this week UH

632
00:35:11,280 --> 00:35:15,440
Speaker 1: in states talking about the president's views on this subject

633
00:35:15,520 --> 00:35:18,399
Speaker 1: and the need for reform. So the Secretary is both

634
00:35:18,480 --> 00:35:23,000
Speaker 1: an administrator and an advocate UH and and as also

635
00:35:24,000 --> 00:35:27,040
Speaker 1: has a duty on behalf of the the president to

636
00:35:27,080 --> 00:35:31,640
Speaker 1: be responsive to the legislative branch of government. Secretary level,

637
00:35:31,640 --> 00:35:33,640
Speaker 1: do you do you appreciate the sense of urgency we've

638
00:35:33,640 --> 00:35:37,560
Speaker 1: seen from the White House and from Republican members of Congress.

639
00:35:37,560 --> 00:35:39,920
Speaker 1: We had this delay yesterday. I wonder if that indicates

640
00:35:39,960 --> 00:35:43,279
Speaker 1: to you that perhaps a lawmakers moved too quickly, that

641
00:35:43,560 --> 00:35:45,800
Speaker 1: they needed more time to to hammer this out before

642
00:35:46,280 --> 00:35:48,920
Speaker 1: they pushed ahead with him. No no one should be

643
00:35:48,960 --> 00:35:52,720
Speaker 1: surprised by the fact that the that the Senate Majority

644
00:35:52,800 --> 00:35:55,000
Speaker 1: leader was required to push this vote back. I think

645
00:35:55,040 --> 00:35:56,920
Speaker 1: if you look at what happened in the House, this

646
00:35:57,000 --> 00:35:59,880
Speaker 1: is this is the rhythm of Washington. It's the rhythm

647
00:35:59,880 --> 00:36:02,600
Speaker 1: of legislation. You have to create a deadline. If you

648
00:36:02,640 --> 00:36:04,640
Speaker 1: don't have what you need done by the deadline, you

649
00:36:04,680 --> 00:36:09,320
Speaker 1: extend the deadline. You continue to negotiate. Um. On the House,

650
00:36:09,560 --> 00:36:11,680
Speaker 1: there was a different dynamic. You had the Freedom Compass

651
00:36:11,760 --> 00:36:14,560
Speaker 1: who had said we have to be at the table,

652
00:36:14,640 --> 00:36:17,439
Speaker 1: and they basically said, we're not going anywhere until we're

653
00:36:17,480 --> 00:36:21,040
Speaker 1: at the table. Uh. Then you had Paul Ryan and

654
00:36:21,200 --> 00:36:23,360
Speaker 1: Donald Trump do exactly what you'd have to do it

655
00:36:23,440 --> 00:36:26,560
Speaker 1: in negotiation. They they walked away as well, and then

656
00:36:26,760 --> 00:36:29,439
Speaker 1: behind the scenes they got together and at some point

657
00:36:29,520 --> 00:36:31,800
Speaker 1: there was a news conference and we're going to vote tomorrow.

658
00:36:32,160 --> 00:36:35,040
Speaker 1: We'll have a similar kind of episode and maybe more

659
00:36:35,080 --> 00:36:37,920
Speaker 1: than that. We have between now and the thirty September,

660
00:36:37,960 --> 00:36:41,320
Speaker 1: when the vehicle that they are using to get this done,

661
00:36:41,400 --> 00:36:45,400
Speaker 1: the reconciliation expires. My guess is we'll go into uh,

662
00:36:45,719 --> 00:36:50,239
Speaker 1: we'll go through the August recessment. Interesting interest, get into September. Well,

663
00:36:50,239 --> 00:36:52,120
Speaker 1: thank you so much, Governor love it, Thank you so much.

664
00:36:52,160 --> 00:36:54,840
Speaker 1: He is a former governor of Utah and the Secretary

665
00:36:54,840 --> 00:37:11,840
Speaker 1: of Health and Human Services for UH this nation. So

666
00:37:11,920 --> 00:37:13,560
Speaker 1: let's been out of Diane Swamshe of course, is the

667
00:37:13,560 --> 00:37:16,279
Speaker 1: founder of the es Economics in Chicago and Talian. I

668
00:37:16,320 --> 00:37:18,239
Speaker 1: don't know if you want to take a bite out

669
00:37:18,239 --> 00:37:19,920
Speaker 1: of this, but I'll have you comment if you if

670
00:37:19,960 --> 00:37:21,399
Speaker 1: you'd like to. I know you've probably been paying close

671
00:37:21,400 --> 00:37:23,279
Speaker 1: attention to what's been going on in Portugal here over

672
00:37:23,280 --> 00:37:26,000
Speaker 1: these last a few days at the Central Bankers confab

673
00:37:26,520 --> 00:37:28,640
Speaker 1: in Portugal. What did you make of what Mario drag

674
00:37:28,640 --> 00:37:31,560
Speaker 1: You had to say yesterday. I think it's a difficult

675
00:37:31,600 --> 00:37:33,920
Speaker 1: situation for them. They're sort of at the end of

676
00:37:34,000 --> 00:37:38,600
Speaker 1: their ability to really push on the economy. They're trying

677
00:37:38,600 --> 00:37:41,239
Speaker 1: to they're trying to normalize, they're trying to get out

678
00:37:41,239 --> 00:37:44,399
Speaker 1: of it. Certainly, the Eurozone economy is doing better than

679
00:37:44,440 --> 00:37:47,000
Speaker 1: it has been doing, which is the good news. Um.

680
00:37:47,040 --> 00:37:49,840
Speaker 1: The bad news is it still requires a lot of support,

681
00:37:49,960 --> 00:37:52,719
Speaker 1: and it's still highly fragmented, and at the end of

682
00:37:52,719 --> 00:37:55,319
Speaker 1: the day, this is the one issue we continue to

683
00:37:55,320 --> 00:37:57,759
Speaker 1: deal with in the Eurozone you look at Mario drag

684
00:37:57,840 --> 00:38:00,480
Speaker 1: in the case that he made yesterday that support is

685
00:38:00,520 --> 00:38:03,040
Speaker 1: still needed when it comes to inflation, when it comes

686
00:38:03,040 --> 00:38:05,120
Speaker 1: to employment. You look at what yell is saying about

687
00:38:05,120 --> 00:38:08,440
Speaker 1: the transitory nature of the inflationary headwinds here in the US.

688
00:38:08,719 --> 00:38:10,800
Speaker 1: How hard does it become for these central bankers to

689
00:38:10,880 --> 00:38:14,120
Speaker 1: defend the positions that they're they're staking out. I think

690
00:38:14,120 --> 00:38:16,640
Speaker 1: it's getting really hard. I mean, the interesting part for

691
00:38:16,760 --> 00:38:20,520
Speaker 1: Yelling is saying that this is transitory. It may be transitory. Um,

692
00:38:20,520 --> 00:38:23,080
Speaker 1: we do know that certainly selfmone prices plummeted and that

693
00:38:23,160 --> 00:38:26,279
Speaker 1: sort of a step down prescription drug prices are not

694
00:38:26,360 --> 00:38:28,920
Speaker 1: likely to stay down. That's true too, But aill prices

695
00:38:28,920 --> 00:38:30,680
Speaker 1: are coming down now? Is that a big issue for

696
00:38:30,719 --> 00:38:32,399
Speaker 1: the side, are not a big issue for the FED?

697
00:38:32,760 --> 00:38:35,120
Speaker 1: Certainly it's divided within the FED. And I think that's

698
00:38:35,120 --> 00:38:37,879
Speaker 1: what you're starting to see, is these divisions as cher

699
00:38:38,040 --> 00:38:40,440
Speaker 1: Yellin attempts to sort of set up a legacy of

700
00:38:40,520 --> 00:38:43,400
Speaker 1: normalization before she leaves. I think she really wants to

701
00:38:43,400 --> 00:38:46,200
Speaker 1: get that in place and say we're on course for

702
00:38:46,280 --> 00:38:48,439
Speaker 1: continued rate hikes and would like to get a third

703
00:38:48,520 --> 00:38:51,480
Speaker 1: rate hike in this year. And just also this challenge

704
00:38:51,480 --> 00:38:53,399
Speaker 1: that we're seeing. You know, Dudley came out and talked

705
00:38:53,440 --> 00:38:55,919
Speaker 1: about it, Williams has talked about it at the FED.

706
00:38:55,960 --> 00:38:59,240
Speaker 1: And that is even though inflation is below target, since

707
00:38:59,280 --> 00:39:02,920
Speaker 1: the FED is the East, financial conditions are easier, which

708
00:39:03,080 --> 00:39:05,360
Speaker 1: you know, that's not what we expected. We expected interest

709
00:39:05,400 --> 00:39:08,600
Speaker 1: rates to go up, not down. What do you see

710
00:39:09,360 --> 00:39:13,280
Speaker 1: within the region of Diane's swank, Not the state of Illinois,

711
00:39:13,280 --> 00:39:17,080
Speaker 1: which is its own fiction right now, but Diane Swak.

712
00:39:17,120 --> 00:39:20,279
Speaker 1: I think our audience really desperately wants to know a

713
00:39:20,440 --> 00:39:24,360
Speaker 1: view outside the cozy confines of three zip codes in

714
00:39:24,360 --> 00:39:26,959
Speaker 1: New York City or for me, or to zip codes

715
00:39:27,000 --> 00:39:30,080
Speaker 1: in Washington. I mean, do you see a vector up

716
00:39:30,120 --> 00:39:34,520
Speaker 1: of economic growth or do you see the disinflationary malaise

717
00:39:35,000 --> 00:39:38,040
Speaker 1: people like three Komar talking about. You know what, I

718
00:39:38,080 --> 00:39:41,479
Speaker 1: really think what's interesting is the conundrum we're sitting starting

719
00:39:41,480 --> 00:39:44,120
Speaker 1: to see with inflation, we are seeing really tight labor

720
00:39:44,160 --> 00:39:47,880
Speaker 1: market conditions. Um, it's really stunnying. I've talked to an

721
00:39:47,960 --> 00:39:50,399
Speaker 1: enormous amount of employers that are saying, yes, we're having

722
00:39:50,400 --> 00:39:52,920
Speaker 1: a hard time filling jobs. I don't talk to a

723
00:39:52,920 --> 00:39:56,080
Speaker 1: lot of employers that are raising wages, and so you know,

724
00:39:56,200 --> 00:39:59,880
Speaker 1: they're training more, they're investing more in lower skilled workers,

725
00:40:00,040 --> 00:40:02,960
Speaker 1: and so that may show up as the overall costs

726
00:40:02,960 --> 00:40:05,279
Speaker 1: of bringing on an onboarding a worker, which you do

727
00:40:05,360 --> 00:40:08,760
Speaker 1: expect to see as the labor market titans. The skills

728
00:40:08,840 --> 00:40:12,120
Speaker 1: aren't there that once we're there, or the skills set

729
00:40:12,120 --> 00:40:14,359
Speaker 1: has moved. It's a moving target of what people need.

730
00:40:14,400 --> 00:40:16,719
Speaker 1: We all know this is a fifty year trend. It's

731
00:40:16,800 --> 00:40:20,439
Speaker 1: really prevalent here in the Midwest, and the complaints I'm

732
00:40:20,480 --> 00:40:24,600
Speaker 1: hearing are consistent across the board. Yet we're still not

733
00:40:24,760 --> 00:40:27,880
Speaker 1: seeing that. Really. One of the biggest surprises in last

734
00:40:28,000 --> 00:40:32,280
Speaker 1: month's um implant report was manufacturing in the durable goods

735
00:40:32,360 --> 00:40:37,719
Speaker 1: cars has manufacturing That productivity picked up a bit and

736
00:40:37,880 --> 00:40:41,520
Speaker 1: wages decelerated. That was the first time I'd see major

737
00:40:41,560 --> 00:40:44,800
Speaker 1: deceleration in a long time. What what level of GDP

738
00:40:45,760 --> 00:40:51,279
Speaker 1: growth is genet yelling managing genet yelling managing towards towards

739
00:40:51,320 --> 00:40:56,480
Speaker 1: two Christian reguards at two point yeah, you know, I mean,

740
00:40:56,560 --> 00:40:58,160
Speaker 1: I mean if we're if we're lucky, you'll get two

741
00:40:58,160 --> 00:41:01,120
Speaker 1: in a quarter or two two point one percent? Supercent?

742
00:41:01,280 --> 00:41:03,839
Speaker 1: Is our stuck range, but we're at that potential growth now.

743
00:41:04,239 --> 00:41:06,240
Speaker 1: And you know, it gets in this hard thing about

744
00:41:06,280 --> 00:41:10,120
Speaker 1: who's employable, who's not employable, that's full employment, that's not

745
00:41:10,200 --> 00:41:13,120
Speaker 1: who wants a job. And I think there's a really

746
00:41:13,280 --> 00:41:16,040
Speaker 1: hard line here about what do we do when we

747
00:41:16,080 --> 00:41:17,919
Speaker 1: deal with many of these workers and for a long

748
00:41:17,960 --> 00:41:20,680
Speaker 1: time have lost some of their soft skills and hard skills.

749
00:41:20,880 --> 00:41:22,560
Speaker 1: How do we bring them up to speed? And it's

750
00:41:22,600 --> 00:41:25,000
Speaker 1: not just the Great Recession made it worse where you

751
00:41:25,040 --> 00:41:27,880
Speaker 1: had people that were on part time employment even longer.

752
00:41:28,239 --> 00:41:31,160
Speaker 1: You've got the rural urban divide, and you know, it's

753
00:41:31,160 --> 00:41:33,319
Speaker 1: one of the things where maybe Larry Summers had a

754
00:41:33,320 --> 00:41:35,520
Speaker 1: little bit of a point. I think that you know,

755
00:41:35,560 --> 00:41:39,520
Speaker 1: the issue of you know, rooting skills. World War two

756
00:41:39,600 --> 00:41:43,360
Speaker 1: wasn't just a spending stimulus. Well, let's bell people to

757
00:41:43,360 --> 00:41:45,759
Speaker 1: get back in the labor for this is really important.

758
00:41:45,800 --> 00:41:48,000
Speaker 1: Diane Swark with us from Chicago. Let's come back and

759
00:41:48,440 --> 00:41:52,480
Speaker 1: address Mr Summers in the phrase secularistagnation. Uh, Diane, I

760
00:41:52,480 --> 00:41:55,920
Speaker 1: believe it's why Michael C plus I plus G plus

761
00:41:56,080 --> 00:42:00,440
Speaker 1: n X. Let us start with consumption. It has been dampen.

762
00:42:00,520 --> 00:42:05,200
Speaker 1: There is a retail uproar where I guess Amazon does

763
00:42:05,239 --> 00:42:08,200
Speaker 1: better and everybody else does work. Do you just assume

764
00:42:08,239 --> 00:42:11,000
Speaker 1: a dominum moving online? Do you do you just assume

765
00:42:11,040 --> 00:42:14,879
Speaker 1: a diminished consumption? Um? No, No, it's it's actually once

766
00:42:14,920 --> 00:42:17,600
Speaker 1: you adjust for inflation, because inflation has come. This is

767
00:42:17,640 --> 00:42:20,640
Speaker 1: another issue. Is it the Walmart effect of the nine nineties,

768
00:42:20,719 --> 00:42:24,000
Speaker 1: the globalization that stepped down in inflation we saw as

769
00:42:24,040 --> 00:42:27,520
Speaker 1: people comparison shop more and move online from in stores.

770
00:42:27,960 --> 00:42:30,319
Speaker 1: That's another factor that the pet has to taken too,

771
00:42:30,800 --> 00:42:34,120
Speaker 1: you know, sort of into its mindset. Is it secular

772
00:42:34,600 --> 00:42:37,480
Speaker 1: or is it cyclical? It's a bit secular, right. This

773
00:42:37,520 --> 00:42:39,359
Speaker 1: is the move of how we shop. We shop off

774
00:42:39,360 --> 00:42:42,520
Speaker 1: our phones now. Um, that's a very different way than

775
00:42:42,560 --> 00:42:44,560
Speaker 1: we shopped in the past, and it's you know, going

776
00:42:44,600 --> 00:42:47,319
Speaker 1: to up end the retail sector. It already is. We're

777
00:42:47,320 --> 00:42:51,800
Speaker 1: also spending on entertainment. We're spending on experiences in different

778
00:42:51,800 --> 00:42:54,799
Speaker 1: ways and that's where we should see the inflation. Some

779
00:42:54,960 --> 00:42:56,600
Speaker 1: of it's been seen there, not as much as we

780
00:42:56,640 --> 00:43:00,440
Speaker 1: expect so far. Doan Let me ask you you when

781
00:43:00,440 --> 00:43:02,560
Speaker 1: you look at the housing market, how you assess the

782
00:43:02,560 --> 00:43:04,880
Speaker 1: health of it? What's what's the indicator that's most important?

783
00:43:04,920 --> 00:43:06,560
Speaker 1: To you, we get pending home sales a little later

784
00:43:06,600 --> 00:43:09,000
Speaker 1: this morning at ten oclock at Wall Street time. What's

785
00:43:09,000 --> 00:43:11,640
Speaker 1: the indicator you look to. Well, you know what's interesting

786
00:43:11,760 --> 00:43:14,239
Speaker 1: is um one is just how how long does it

787
00:43:14,280 --> 00:43:16,000
Speaker 1: take to sell a home on the market, And that

788
00:43:16,280 --> 00:43:19,240
Speaker 1: is just dropped and plummeted since, of course the crisis,

789
00:43:19,280 --> 00:43:21,040
Speaker 1: when no one could move a home, nobody wanted to

790
00:43:21,040 --> 00:43:23,200
Speaker 1: buy a home, and nobody could sell a home. Now

791
00:43:23,239 --> 00:43:25,200
Speaker 1: we've got less than a month on the market in

792
00:43:25,320 --> 00:43:28,560
Speaker 1: terms of existing home sales, and in some areas much

793
00:43:28,600 --> 00:43:30,800
Speaker 1: less than that. Bidding war is coming back. The fact

794
00:43:31,000 --> 00:43:32,759
Speaker 1: this is one of those things that they started to

795
00:43:32,840 --> 00:43:34,920
Speaker 1: notice but didn't really understand the meaning of it. I

796
00:43:34,920 --> 00:43:37,480
Speaker 1: think Ned Grahantlock thought was TV shows on how to

797
00:43:37,520 --> 00:43:39,239
Speaker 1: flip homes. You know, all of a sudden those are

798
00:43:39,239 --> 00:43:43,080
Speaker 1: getting really popular again. Investors coming in, cash buyers coming in,

799
00:43:43,160 --> 00:43:45,920
Speaker 1: first time buyers coming in. The problem is demand is

800
00:43:45,960 --> 00:43:49,920
Speaker 1: outpacing supply. Yeah, but this is the polarity, Dan, that

801
00:43:49,960 --> 00:43:52,080
Speaker 1: you're so good at. You've got just what you said,

802
00:43:52,520 --> 00:43:55,000
Speaker 1: and we all get that. And yet at the same time,

803
00:43:55,000 --> 00:43:57,840
Speaker 1: I've got news articles telling me the percent of paycheck

804
00:43:57,920 --> 00:44:01,640
Speaker 1: going to rent across the count tree borders on Jimmy

805
00:44:01,719 --> 00:44:05,319
Speaker 1: Stewart in that movie from the Depression. I mean it's

806
00:44:05,440 --> 00:44:08,719
Speaker 1: I'm sorry, Diane, and you've let on this. It is

807
00:44:09,080 --> 00:44:13,200
Speaker 1: to America's um. It is to America's there's no question.

808
00:44:13,239 --> 00:44:15,520
Speaker 1: The other issues. You can't get people from rural America

809
00:44:15,560 --> 00:44:18,360
Speaker 1: who are underwater on their mortgages and with a lower

810
00:44:18,400 --> 00:44:20,880
Speaker 1: skill set to move to urban America where they require

811
00:44:20,960 --> 00:44:23,759
Speaker 1: higher skills and it's more expensive of their paychecks. They

812
00:44:23,760 --> 00:44:26,160
Speaker 1: can't get enough paychecks to even take the larger piece

813
00:44:26,200 --> 00:44:29,160
Speaker 1: out of There is also a trade off between rents

814
00:44:29,280 --> 00:44:32,879
Speaker 1: and homeownership that arbitrage is starting to narrow as we've

815
00:44:32,880 --> 00:44:35,920
Speaker 1: had this constraint and supply. Many of these constraints and supply.

816
00:44:35,960 --> 00:44:38,760
Speaker 1: You hear the President talk about deregulation, he can't touch

817
00:44:38,880 --> 00:44:41,799
Speaker 1: the deregulation at the state and local level um. In

818
00:44:41,920 --> 00:44:44,840
Speaker 1: terms of what's going on on, land use costs particularly

819
00:44:44,920 --> 00:44:48,640
Speaker 1: bad in places like l A in San Francisco, where

820
00:44:48,719 --> 00:44:51,320
Speaker 1: you know they put all these restrictions where you can't

821
00:44:51,400 --> 00:44:55,920
Speaker 1: literally afford to build a new a new home for

822
00:44:55,960 --> 00:45:00,440
Speaker 1: a starter starter group, an entry level home. The instruction

823
00:45:00,480 --> 00:45:04,160
Speaker 1: costs have just accelerated dramatically, everything from materials and now

824
00:45:04,239 --> 00:45:07,440
Speaker 1: labor shortages are acute. Going to Texas and you ask

825
00:45:07,520 --> 00:45:10,360
Speaker 1: them about later labor shortages and they're a little bit concerned.

826
00:45:10,640 --> 00:45:13,200
Speaker 1: They don't have anyone to build homes right now. Dove,

827
00:45:13,280 --> 00:45:15,479
Speaker 1: tell this with your your work on the Federal Reserve,

828
00:45:15,600 --> 00:45:18,000
Speaker 1: we're starting to see the effects of the Fed raising

829
00:45:18,080 --> 00:45:20,040
Speaker 1: rates considering what to do with with its balance she

830
00:45:20,160 --> 00:45:22,560
Speaker 1: playing out in the housing market. You know, that's the

831
00:45:22,560 --> 00:45:24,239
Speaker 1: real questions. People are like, oh, it's a bubble and

832
00:45:24,280 --> 00:45:26,240
Speaker 1: the housing market again, well, you know, it's very uneven.

833
00:45:26,360 --> 00:45:29,560
Speaker 1: What we've got is overall real estate values have sort

834
00:45:29,560 --> 00:45:32,320
Speaker 1: of climbed to previous peaks, and some markets have exceeded

835
00:45:32,320 --> 00:45:35,200
Speaker 1: previous peaks, and that is an in balance between supply

836
00:45:35,239 --> 00:45:37,359
Speaker 1: and demand. It's not just because of low rates, it's

837
00:45:37,360 --> 00:45:39,960
Speaker 1: because of this lack of supply as well. That's not

838
00:45:40,000 --> 00:45:42,480
Speaker 1: anything the subtle Reserve can do much about and what

839
00:45:42,520 --> 00:45:44,360
Speaker 1: they like to see. We are also seeing with lower

840
00:45:44,400 --> 00:45:47,080
Speaker 1: gas prices you mentioned lower prices at the pump, people

841
00:45:47,120 --> 00:45:49,640
Speaker 1: are willing to expand their search. Finally, last year we

842
00:45:49,680 --> 00:45:52,160
Speaker 1: saw people buying in the suburbs again, not just the

843
00:45:52,239 --> 00:45:54,719
Speaker 1: urban cores. It turns out older millennials want to form

844
00:45:54,760 --> 00:45:57,440
Speaker 1: home have they defer it, They have it later, but

845
00:45:57,560 --> 00:45:59,880
Speaker 1: they will commute. They don't need to be just in

846
00:46:00,040 --> 00:46:04,040
Speaker 1: the urban corpse. But can we generate not only within housing,

847
00:46:04,120 --> 00:46:08,040
Speaker 1: but just within general consumption? The spirit we used to

848
00:46:08,080 --> 00:46:10,840
Speaker 1: know at two point whatever percent g d P. I

849
00:46:10,840 --> 00:46:13,120
Speaker 1: don't buy it for a minute. Well, no you can't

850
00:46:13,160 --> 00:46:16,600
Speaker 1: because that consumption was generated on debt and we don't

851
00:46:16,640 --> 00:46:20,440
Speaker 1: have the access to debt we once did, and we

852
00:46:20,440 --> 00:46:23,759
Speaker 1: don't have the even if the aggregate aggregates disguised the

853
00:46:23,840 --> 00:46:27,000
Speaker 1: unevenness of income to thank you, that's really there you go,

854
00:46:27,520 --> 00:46:29,759
Speaker 1: and the FED has to manage too aggregates, but it

855
00:46:29,880 --> 00:46:32,880
Speaker 1: really is, and it's one of the conundrum's fiscal policy

856
00:46:32,960 --> 00:46:35,640
Speaker 1: is much better directed. And we talked about World War

857
00:46:35,680 --> 00:46:38,200
Speaker 1: two lifting skills. What do we have out there that

858
00:46:38,200 --> 00:46:41,080
Speaker 1: can systematically lived the skills of people who have lost

859
00:46:41,160 --> 00:46:44,160
Speaker 1: him for fifty years. That was Dr Swank channeling late

860
00:46:44,239 --> 00:46:48,520
Speaker 1: Allan Meltzer. Let's back up, and folks, Alan Meltzer wants

861
00:46:48,520 --> 00:46:52,359
Speaker 1: to be at Carnegie mellon Um. I think Marvin good

862
00:46:52,360 --> 00:46:54,719
Speaker 1: Friend was holding my elbow saying shut up. Tom listened

863
00:46:54,760 --> 00:46:58,319
Speaker 1: to the Meltzer. He said aggregates matter and that you

864
00:46:58,480 --> 00:47:01,960
Speaker 1: sum in on the macro. One hundred and four of

865
00:47:02,000 --> 00:47:06,560
Speaker 1: our listeners, Professor Swack don't agree. They see every day

866
00:47:06,680 --> 00:47:10,040
Speaker 1: two or three America's explain to them why we should

867
00:47:10,120 --> 00:47:14,359
Speaker 1: aggregate Allah Alan Meltzer, Well, you know, I love all

868
00:47:14,600 --> 00:47:17,080
Speaker 1: I loved him and I miss him. Um, I disagree

869
00:47:17,120 --> 00:47:21,360
Speaker 1: on the disaggregation is important. Unfortunately, when you're making monetary policy,

870
00:47:21,680 --> 00:47:23,640
Speaker 1: you don't have any other way to do it because

871
00:47:23,960 --> 00:47:27,359
Speaker 1: if you don't aggregate, you're gonna you you have to. Um,

872
00:47:27,400 --> 00:47:30,040
Speaker 1: you're gonna have so much overshooting. So you do need

873
00:47:30,360 --> 00:47:34,279
Speaker 1: to do it. That said, it's fiscal policy that really

874
00:47:34,320 --> 00:47:37,839
Speaker 1: gets into the disaggregation. That's where the representation is after all.

875
00:47:38,120 --> 00:47:40,400
Speaker 1: And I think that's really important. And I think what

876
00:47:40,480 --> 00:47:42,080
Speaker 1: we need to do is we need to think about

877
00:47:42,080 --> 00:47:45,319
Speaker 1: fiscal policy that makes our labor market more friendly to

878
00:47:45,680 --> 00:47:48,799
Speaker 1: We've seen women. Female participation rate in the United States

879
00:47:48,920 --> 00:47:51,840
Speaker 1: is seventeen among twenty two O e c D countries.

880
00:47:52,120 --> 00:47:55,239
Speaker 1: It is plateaued. To raise that participation rate, we need

881
00:47:55,280 --> 00:47:58,280
Speaker 1: to change some labor laws that make it more advantageous.

882
00:47:58,320 --> 00:48:01,680
Speaker 1: And now the economics scene cent of it's not detrimental.

883
00:48:01,880 --> 00:48:06,640
Speaker 1: It's actually beneficial for firms to have more diversity in

884
00:48:06,680 --> 00:48:09,080
Speaker 1: the labor force and a larger pool to tap front.

885
00:48:09,400 --> 00:48:12,000
Speaker 1: They have lower turnover rays, it costs them less. The

886
00:48:12,080 --> 00:48:14,839
Speaker 1: cost benefit is now there to change some of these

887
00:48:14,920 --> 00:48:17,440
Speaker 1: labor laws that we have failed to change, and I

888
00:48:17,480 --> 00:48:20,000
Speaker 1: think that's one of the most important issues. I'm talking

889
00:48:20,000 --> 00:48:22,719
Speaker 1: to large companies right now, some of the largest in

890
00:48:22,760 --> 00:48:26,279
Speaker 1: the in the world, multinationals, and they're embracing diversity in

891
00:48:26,280 --> 00:48:28,680
Speaker 1: a way i've never seen it, not because it's a nicety,

892
00:48:28,880 --> 00:48:32,239
Speaker 1: but because it's a necessity. Even invisible diversity is one

893
00:48:32,280 --> 00:48:34,759
Speaker 1: of which I have. Not that I'm a woman that's

894
00:48:34,760 --> 00:48:38,239
Speaker 1: pretty visible, but I'm dyslexic. It turns out, dyslexic we're

895
00:48:38,239 --> 00:48:40,360
Speaker 1: good at doing calculus in our head and thinking about

896
00:48:40,400 --> 00:48:43,919
Speaker 1: complex problems and being able to see reaction functions. It's

897
00:48:43,920 --> 00:48:46,040
Speaker 1: a little harder to tell the difference between the words

898
00:48:46,080 --> 00:48:49,200
Speaker 1: from inform Diane. Let me ask you lastly about some

899
00:48:49,280 --> 00:48:51,520
Speaker 1: data that we got on Monday, the dribal codsorder data

900
00:48:51,560 --> 00:48:53,920
Speaker 1: that was down one point one percent. The expectation was

901
00:48:53,960 --> 00:48:58,040
Speaker 1: to be down point six percent. This is a volatible measure,

902
00:48:58,080 --> 00:49:00,080
Speaker 1: of course, how worried. Does that make you about of

903
00:49:00,600 --> 00:49:03,640
Speaker 1: held in that part of the economy. It's really disappointing.

904
00:49:03,680 --> 00:49:06,279
Speaker 1: We've underinvested and people say, oh, as a share of

905
00:49:06,320 --> 00:49:08,399
Speaker 1: the economy, haven't and it's a low economy, so it's

906
00:49:08,400 --> 00:49:11,520
Speaker 1: a small share. The reality as we've underinvested, given the

907
00:49:11,600 --> 00:49:14,000
Speaker 1: kind of profit share we've seen. We've seen record profit

908
00:49:14,040 --> 00:49:18,080
Speaker 1: share in this recovery, partly because these businesses, non financials,

909
00:49:18,080 --> 00:49:20,320
Speaker 1: restruct at their balance sheet. They got a lot of money,

910
00:49:20,360 --> 00:49:23,320
Speaker 1: but it wasn't redeployed in the future. And there's something

911
00:49:23,440 --> 00:49:25,920
Speaker 1: and this gets back to maybe Larry Summers had a point,

912
00:49:26,239 --> 00:49:28,000
Speaker 1: and I think he did in some ways, is that

913
00:49:28,400 --> 00:49:31,560
Speaker 1: not building a base for a future. Productivity growth started

914
00:49:31,600 --> 00:49:34,400
Speaker 1: slowing in two thousand five, took another step down in

915
00:49:35,160 --> 00:49:38,040
Speaker 1: the dividends of the earlier tech bubble were sort of briefed,

916
00:49:38,360 --> 00:49:40,680
Speaker 1: and then we didn't invest for the next wave. A

917
00:49:40,680 --> 00:49:43,440
Speaker 1: lot of the technology investment we're putting in today is

918
00:49:43,480 --> 00:49:47,520
Speaker 1: to defense, you know, cybersecurity, not too for offense, not

919
00:49:47,600 --> 00:49:50,080
Speaker 1: to think about how to be competitive. Or there's a

920
00:49:50,080 --> 00:49:53,279
Speaker 1: lot of money going into applications on our phones that

921
00:49:53,680 --> 00:49:56,000
Speaker 1: trigger dopamine and get is addicted I'm not sure how

922
00:49:56,040 --> 00:49:58,600
Speaker 1: productive they are. I'm just talking about watching my millennia

923
00:50:00,080 --> 00:50:02,520
Speaker 1: quick question here. Lastly, just about soft data and hard data.

924
00:50:02,520 --> 00:50:05,080
Speaker 1: Of course, that's sort of highlighting the divide between the

925
00:50:05,719 --> 00:50:08,279
Speaker 1: two things. Do you value one more than the other

926
00:50:08,320 --> 00:50:09,920
Speaker 1: at this point when you look at the US economy,

927
00:50:09,920 --> 00:50:11,719
Speaker 1: are you are you paying more attention to soft data

928
00:50:11,719 --> 00:50:14,440
Speaker 1: than hard data. You've got to look at them together,

929
00:50:14,520 --> 00:50:17,480
Speaker 1: because basically what we've got is um something that sort

930
00:50:17,480 --> 00:50:20,200
Speaker 1: of fills in the colors between the lines. We get

931
00:50:20,239 --> 00:50:22,440
Speaker 1: an outline of the economy from the hard data, and

932
00:50:22,480 --> 00:50:24,840
Speaker 1: we try to shade it with the soft data. And

933
00:50:24,960 --> 00:50:27,920
Speaker 1: so the soft data on manufacturing confirm what we saw

934
00:50:27,920 --> 00:50:30,759
Speaker 1: in industrial production, that industrial production is picking up. The

935
00:50:30,760 --> 00:50:34,000
Speaker 1: hard data saying it's not picking up enough to invest

936
00:50:34,400 --> 00:50:37,719
Speaker 1: in our infrastructure in our future. And I think understanding

937
00:50:37,800 --> 00:50:40,080
Speaker 1: those two steps, and how much do we need for

938
00:50:40,120 --> 00:50:42,640
Speaker 1: it to pick up to really see that investment or

939
00:50:42,680 --> 00:50:46,400
Speaker 1: infrastructure consistently? How much strength many companies I'm talking to

940
00:50:46,440 --> 00:50:48,880
Speaker 1: are saying at two percent growth, there's not enough of

941
00:50:48,920 --> 00:50:52,600
Speaker 1: a sunrise on the horizon to shoot for data. Thank

942
00:50:52,600 --> 00:51:07,360
Speaker 1: you so much, great, I appreciate it. With economics, what

943
00:51:07,440 --> 00:51:10,719
Speaker 1: a good time to speak with Brian Weezer, who, like

944
00:51:10,920 --> 00:51:13,920
Speaker 1: no one links the moderate modern digital economy to the

945
00:51:13,960 --> 00:51:18,480
Speaker 1: advertising world like Mr Weezer. Brian, I'm just from where

946
00:51:18,560 --> 00:51:20,000
Speaker 1: you are, and I don't want to get into state

947
00:51:20,040 --> 00:51:24,719
Speaker 1: tax minutia because it's not anybody's expertise. But when the

948
00:51:24,760 --> 00:51:30,680
Speaker 1: President United States goes hashtag Amazon Washington Post, do you

949
00:51:30,800 --> 00:51:35,200
Speaker 1: presume a tight linkage between Mr Bezos and Amazon and

950
00:51:35,280 --> 00:51:39,319
Speaker 1: the day to day grind of the Washington Post. I

951
00:51:39,400 --> 00:51:42,239
Speaker 1: don't think so. I mean, I think we all know

952
00:51:42,440 --> 00:51:47,239
Speaker 1: that they run those businesses pretty separately. Um, So I

953
00:51:47,320 --> 00:51:50,440
Speaker 1: don't think there's an issue. I mean, obviously the president

954
00:51:50,480 --> 00:51:54,400
Speaker 1: can try to draw a connections he wants, but but

955
00:51:54,440 --> 00:51:58,040
Speaker 1: I don't think anyone who's close to the business six that,

956
00:51:58,280 --> 00:52:03,000
Speaker 1: I mean beyond like these modestly helpful things on ad

957
00:52:03,000 --> 00:52:05,440
Speaker 1: products and we hear about, you know, the the shift

958
00:52:05,480 --> 00:52:09,560
Speaker 1: of how they deliver content, um, very minor technical things

959
00:52:09,560 --> 00:52:11,359
Speaker 1: where he has people who can throw up for tea set.

960
00:52:11,560 --> 00:52:13,879
Speaker 1: But I think when it comes to editorial, I mean,

961
00:52:14,600 --> 00:52:16,279
Speaker 1: it's just the fact that they have resort. The only

962
00:52:16,320 --> 00:52:18,080
Speaker 1: connection is the fact that they know they don't they

963
00:52:18,080 --> 00:52:21,000
Speaker 1: won't go bankrupt anytime soon they can keep investing against

964
00:52:21,160 --> 00:52:24,480
Speaker 1: long firm journalism. Wizard does not cover Amazon. We just

965
00:52:24,520 --> 00:52:26,000
Speaker 1: wanted to get that in with a tweet of the

966
00:52:26,000 --> 00:52:31,319
Speaker 1: president here on Amazon Washington. Uh post Facebook two billion units, Brian,

967
00:52:31,360 --> 00:52:34,279
Speaker 1: you were brilliant on Facebook as they struggled, and then

968
00:52:34,280 --> 00:52:36,600
Speaker 1: I really, like a moonshot, have done better than good.

969
00:52:36,960 --> 00:52:40,120
Speaker 1: We've talked a lot about the upside of revenue for

970
00:52:40,239 --> 00:52:46,719
Speaker 1: different tech platforms. Does Facebook have unlimited upside revenue? No,

971
00:52:46,800 --> 00:52:48,759
Speaker 1: absolutely not. And this is where I think, you know,

972
00:52:48,760 --> 00:52:51,560
Speaker 1: Wall Streets maybe getting a little ahead of itself as

973
00:52:51,560 --> 00:52:56,080
Speaker 1: certainly this year. Um, a simple math would say that

974
00:52:56,600 --> 00:52:58,960
Speaker 1: if you've seen the digital advertising group by about fifteen

975
00:52:59,280 --> 00:53:02,520
Speaker 1: each year over then next six years digital advertising would

976
00:53:02,560 --> 00:53:06,160
Speaker 1: be about one of advertising. Sorry Tom, that unless you're

977
00:53:06,160 --> 00:53:08,799
Speaker 1: on Facebook, I mean you're not working and probably means

978
00:53:08,800 --> 00:53:11,880
Speaker 1: that all the radio industry, all the TV industry, all

979
00:53:11,920 --> 00:53:15,160
Speaker 1: the print, everything is gone. That is totally not realistic.

980
00:53:15,800 --> 00:53:17,960
Speaker 1: And yet I think that there are many of the

981
00:53:18,000 --> 00:53:21,880
Speaker 1: investment community who thinks growth rates for Internet in general

982
00:53:22,280 --> 00:53:25,680
Speaker 1: are sustainable, which are absolutely not. And so yes, Google

983
00:53:25,680 --> 00:53:27,840
Speaker 1: and Facebook will continue to take the bulk of share

984
00:53:27,880 --> 00:53:30,840
Speaker 1: of that growth. But the reality is that we're starting

985
00:53:30,840 --> 00:53:34,360
Speaker 1: to approach this point where there's to saturated the market,

986
00:53:34,520 --> 00:53:36,640
Speaker 1: so to speak, in terms of what's plausible. I mean,

987
00:53:36,680 --> 00:53:39,040
Speaker 1: it's it's a few years away, is the point. And

988
00:53:39,080 --> 00:53:41,000
Speaker 1: so at that point you get to a terminal growth

989
00:53:41,120 --> 00:53:44,279
Speaker 1: rate number. So I think that there there is a

990
00:53:44,280 --> 00:53:47,759
Speaker 1: bit of a gap, UH from UH where investors are

991
00:53:47,880 --> 00:53:51,760
Speaker 1: to where reality is now. You could be Facebook, for example,

992
00:53:51,800 --> 00:53:53,600
Speaker 1: and you can say, hey, we know that we're running

993
00:53:53,600 --> 00:53:56,600
Speaker 1: out of room in pure digital budgets, so we need

994
00:53:56,600 --> 00:53:58,640
Speaker 1: this TV money. This is among the reasons why for

995
00:53:58,760 --> 00:54:01,120
Speaker 1: years Facebook has been saying we have a Super Bowl audience,

996
00:54:01,120 --> 00:54:03,320
Speaker 1: why we can do anything TV can do. Reality, No,

997
00:54:03,480 --> 00:54:06,600
Speaker 1: they can't, and so they're investing in premium content like

998
00:54:06,680 --> 00:54:08,759
Speaker 1: TV to get TV budgets. But the problem is that's

999
00:54:08,760 --> 00:54:11,440
Speaker 1: going to be lower margin, right, So that's going to

1000
00:54:11,480 --> 00:54:13,520
Speaker 1: be the trades off they have to make. Brian Weezer

1001
00:54:13,520 --> 00:54:17,640
Speaker 1: with this pivotal We're a waiting an important conference UH

1002
00:54:17,880 --> 00:54:21,640
Speaker 1: in Portugal with central bankers including Mr Drug, Mr Pauls

1003
00:54:21,680 --> 00:54:24,759
Speaker 1: of Canada, Mr Kuroda of Japan, and Mr Kearney of

1004
00:54:24,800 --> 00:54:26,839
Speaker 1: the United Kingdom. We're going to bring that to you

1005
00:54:26,920 --> 00:54:31,160
Speaker 1: when we get to it. But David Gura. They're tastefully late,

1006
00:54:31,960 --> 00:54:34,320
Speaker 1: is they call it in the banker world, Brian. We

1007
00:54:34,640 --> 00:54:36,839
Speaker 1: let me ask you about I remember a few years back,

1008
00:54:36,920 --> 00:54:39,279
Speaker 1: Cheryl Sandberg getting out and saying how video is going

1009
00:54:39,280 --> 00:54:41,480
Speaker 1: to be incredibly important to Facebook. When you look at

1010
00:54:41,520 --> 00:54:43,560
Speaker 1: the metric we got yesterday that the number of users

1011
00:54:43,600 --> 00:54:46,200
Speaker 1: has now exceeded to billion, how much of that is

1012
00:54:46,200 --> 00:54:49,120
Speaker 1: attributable to this video strategy that was put in place,

1013
00:54:50,239 --> 00:54:52,239
Speaker 1: It's not, I don't think so. I mean it to

1014
00:54:52,280 --> 00:54:55,960
Speaker 1: be clear, they're continuously improving and iterating what their product

1015
00:54:56,040 --> 00:54:58,680
Speaker 1: is and what the consumer experiences. UM. But it's also

1016
00:54:58,760 --> 00:55:01,279
Speaker 1: true that as they to get to two billion verses

1017
00:55:01,320 --> 00:55:03,640
Speaker 1: at one point eight versus at one point six, so

1018
00:55:03,680 --> 00:55:06,840
Speaker 1: they have a presence and say Indonesia, UH, and in

1019
00:55:06,920 --> 00:55:09,799
Speaker 1: an arc like Indonesia, a certain threshold of people have

1020
00:55:10,600 --> 00:55:14,960
Speaker 1: UH devices that can access Facebook and or ultimately, Facebook

1021
00:55:15,200 --> 00:55:17,520
Speaker 1: also has a Facebook Light product which is arguably much

1022
00:55:17,560 --> 00:55:20,799
Speaker 1: more important, which would not be about video. UM. And

1023
00:55:20,880 --> 00:55:22,480
Speaker 1: so that just makes it possible for more people to

1024
00:55:22,560 --> 00:55:24,200
Speaker 1: use the platform. Right, So that's how you get to

1025
00:55:24,239 --> 00:55:27,440
Speaker 1: user growth. The user growth is not particularly meaningful in

1026
00:55:27,480 --> 00:55:32,800
Speaker 1: every major market with advertising UH, they are relatively ubiquitous

1027
00:55:32,840 --> 00:55:34,719
Speaker 1: or better as ubiquitous is will get. You know, seven

1028
00:55:34,920 --> 00:55:37,680
Speaker 1: percent of the population is using it, and it's not

1029
00:55:37,719 --> 00:55:40,080
Speaker 1: going to go much higher than that, and if it did,

1030
00:55:40,120 --> 00:55:42,760
Speaker 1: it would make a much of a difference. Anyways. Um,

1031
00:55:42,800 --> 00:55:47,480
Speaker 1: the video strategy in terms of having video related content, again,

1032
00:55:47,600 --> 00:55:50,040
Speaker 1: it helps with engagement, helps people want to share video

1033
00:55:50,640 --> 00:55:53,040
Speaker 1: do it through Facebook rather than on say YouTube or

1034
00:55:53,040 --> 00:55:56,160
Speaker 1: somewhere else. We were getting to see a movement toward

1035
00:55:56,200 --> 00:55:59,160
Speaker 1: to companies like Facebook creating more original content of their

1036
00:55:59,160 --> 00:56:02,160
Speaker 1: own past. We've seen broker deals with news outlets for instance.

1037
00:56:03,120 --> 00:56:07,279
Speaker 1: Is Facebook's future does that involve more content creation? Yeah? Well,

1038
00:56:07,320 --> 00:56:09,600
Speaker 1: I think we've established that Bloomberg will get subsumed into

1039
00:56:09,640 --> 00:56:13,319
Speaker 1: Facebook and Google. Um but um, but no, I think

1040
00:56:13,320 --> 00:56:15,920
Speaker 1: that if if they want to see more of the

1041
00:56:15,960 --> 00:56:19,680
Speaker 1: advertising dollars that is presently associated with premium content, that

1042
00:56:19,800 --> 00:56:22,239
Speaker 1: yes they will, and I think they will because you

1043
00:56:22,280 --> 00:56:25,160
Speaker 1: know the the analogy. I wish I could remember who

1044
00:56:25,160 --> 00:56:28,080
Speaker 1: described it to me, but putting video on Facebook, like

1045
00:56:28,120 --> 00:56:30,719
Speaker 1: premium video on Facebook is like having chocolate in the

1046
00:56:30,800 --> 00:56:34,239
Speaker 1: vegetable aisle of a grocery store. They're kind of disjointed,

1047
00:56:34,320 --> 00:56:38,279
Speaker 1: but you could find ways to make them go together. UM.

1048
00:56:38,360 --> 00:56:40,879
Speaker 1: And so that's kind of where they are. It's like, sure,

1049
00:56:40,920 --> 00:56:44,600
Speaker 1: they're going to just grow their total uh consumption UM

1050
00:56:45,120 --> 00:56:48,319
Speaker 1: from a user perspective and from an advertiser perspective, they're

1051
00:56:48,480 --> 00:56:51,840
Speaker 1: producing a product that is much more appealing uh and

1052
00:56:52,120 --> 00:56:55,200
Speaker 1: take share wallet from a lot of their existing customers.

1053
00:56:55,400 --> 00:56:57,120
Speaker 1: When when you look at all of the social media

1054
00:56:57,160 --> 00:56:59,920
Speaker 1: companies right now, exclusive of Facebook, which is coming closest

1055
00:56:59,920 --> 00:57:02,239
Speaker 1: to Facebook, where's that where's the threat coming from? I

1056
00:57:02,239 --> 00:57:05,840
Speaker 1: guess is what I'm asking. Well, the first thing is

1057
00:57:05,840 --> 00:57:08,759
Speaker 1: that is that the law of large numbers UM. Now

1058
00:57:08,800 --> 00:57:13,160
Speaker 1: you have competition between Facebook and Google certainly UM where

1059
00:57:13,160 --> 00:57:17,000
Speaker 1: they're each fighting for share of many of the same customers.

1060
00:57:17,040 --> 00:57:20,520
Speaker 1: So uh, Facebook and Google are both significant with small

1061
00:57:20,600 --> 00:57:23,720
Speaker 1: MUM sized enterprises. Google is bigger, Facebook has compelling products,

1062
00:57:23,880 --> 00:57:27,240
Speaker 1: is growing pretty fast with SMBs. E Commerce is something

1063
00:57:27,280 --> 00:57:30,640
Speaker 1: that UM, Facebook really hasn't solved for UH. If you're

1064
00:57:30,680 --> 00:57:34,360
Speaker 1: an e commerce related advertiser, Google is really where you're

1065
00:57:34,360 --> 00:57:38,600
Speaker 1: still concentrating your budgets. UM. With large brands, UM, they

1066
00:57:38,600 --> 00:57:41,280
Speaker 1: can both fight for the for the audience or sorry

1067
00:57:41,320 --> 00:57:45,520
Speaker 1: for the advertiser budget in that way. UM. Beyond that,

1068
00:57:45,640 --> 00:57:48,760
Speaker 1: the two of them basically take share on an ongoing basis. Now,

1069
00:57:48,800 --> 00:57:52,640
Speaker 1: can someone like Bath which is the division Verizon which

1070
00:57:52,880 --> 00:57:56,840
Speaker 1: includes Alone and Yahoo UM, as well as display meatory

1071
00:57:56,880 --> 00:57:59,360
Speaker 1: from Microsoft that they represent, Can they serve as sort

1072
00:57:59,360 --> 00:58:03,200
Speaker 1: of on point of leverage for an advertiser when they're negotiating. Yes,

1073
00:58:03,280 --> 00:58:06,920
Speaker 1: and so they can take incremental share. Amazon is and

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00:58:07,000 --> 00:58:09,000
Speaker 1: has been the sleeping giant out there. Again, I don't

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00:58:09,000 --> 00:58:13,320
Speaker 1: cover Amazon, but I do pay attention to the implications

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00:58:13,320 --> 00:58:16,760
Speaker 1: for advertising. They are possibly one of the largest UM.

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00:58:16,840 --> 00:58:19,560
Speaker 1: They have some of the largest potential to capture advertising

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00:58:19,600 --> 00:58:23,880
Speaker 1: budgets UM, at least among certain segments of advertisers, and

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00:58:23,960 --> 00:58:27,480
Speaker 1: so they'll be increasingly competitive as time progressive as well.

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00:58:37,120 --> 00:58:41,320
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

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00:58:41,360 --> 00:58:46,680
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

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00:58:46,800 --> 00:58:50,880
Speaker 1: platform you prefer. I'm on Twitter at Tom Keene David Gura.

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Speaker 1: Is that David Gura? Before the podcast? You can always

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00:58:54,960 --> 00:59:09,720
Speaker 1: catch us worldwide. I'm Bloomberg Radio, brought you by Bank

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00:59:09,760 --> 00:59:14,440
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