WEBVTT - A Netanyahu Pivot and Federal Spending Lessons 0:00:01.240 --> 0:00:05.039 You're listening to the Bloomberg Opinion podcast. Catch us Saturdays 0:00:05.080 --> 0:00:08.200 at one and seven pm Eastern on Bloomberg dot Com, 0:00:08.280 --> 0:00:11.440 the iHeartRadio app and the Bloomberg Business App, or listen 0:00:11.480 --> 0:00:17.000 on demand wherever you get your podcast. Welcome to Bloomberg Opinion. 0:00:17.000 --> 0:00:20.000 I'm Amy Morris. We continue to watch the turmoil in 0:00:20.000 --> 0:00:22.560 the banking sector, but today we're going to look at 0:00:22.600 --> 0:00:24.919 it from a couple of different angles. First, we'll learn 0:00:25.000 --> 0:00:27.400 more about the government's role in all of this and 0:00:27.560 --> 0:00:30.400 what lessons that might be learned in the future once 0:00:30.440 --> 0:00:33.199 the dust settles. Also, later in this show, we'll be 0:00:33.200 --> 0:00:36.240 looking at the impact the uncertainty has on the European 0:00:36.320 --> 0:00:40.080 luxury market, and we'll be talking about President Biden's chip 0:00:40.120 --> 0:00:43.080 making bill and why some believe it could wind up 0:00:43.080 --> 0:00:46.400 being a failure. Let's get started. We begin in Israel, 0:00:46.440 --> 0:00:50.560 where Prime Minister Benjamin Netnah who's administration moved to weaken 0:00:50.640 --> 0:00:54.640 the judiciary, igniting waves of protests and labor strikes. And 0:00:54.760 --> 0:00:56.959 it all came to a head this past week when 0:00:57.000 --> 0:01:00.120 Necktnyah who fired his defense minister, and a nation and 0:01:00.120 --> 0:01:03.279 wide walk out ground many operations to a halt. Nat 0:01:03.440 --> 0:01:07.080 Yahoo put the policy on pause, Triosha Shultz when there's 0:01:07.080 --> 0:01:10.320 an opportunity to avoid civil war through dialogue, I as 0:01:10.400 --> 0:01:13.400 Prime Minister and taking a time out for dialogue. Now, 0:01:13.440 --> 0:01:15.640 let's get some insight from Bobby go She is a 0:01:15.680 --> 0:01:20.440 Bloomberg opinion columnist specializing in foreign affairs. Now set us 0:01:20.480 --> 0:01:23.920 straight with something, Bobby. For decades, the US has seen 0:01:24.080 --> 0:01:27.919 Israel as the Middle East's only democracy, and you argue 0:01:27.920 --> 0:01:32.800 in your column that that assertion can be easily disproved. Yeah, 0:01:32.840 --> 0:01:37.600 it's something that Israeli politicians have claimed with pride for 0:01:37.600 --> 0:01:41.560 for many decades now, and American leaders, from presidents on 0:01:41.640 --> 0:01:45.760 town have sort of repeated it without relief, interrogating that 0:01:45.840 --> 0:01:48.480 claim very closely. But the fact is that there have 0:01:48.600 --> 0:01:53.360 been democracies in Israel's neighborhood for even longer than Israel 0:01:53.400 --> 0:01:57.760 has existed. Turkey is one example, Lebanon is another. There 0:01:57.800 --> 0:02:01.520 are other democracies in the region. And argue about how 0:02:01.720 --> 0:02:06.520 perfect they are, and many of them are far from perfect. 0:02:07.000 --> 0:02:09.480 But that leads me to my second point, which is 0:02:09.480 --> 0:02:14.640 that Israel's democracy in itself is far from perfect. Nearly 0:02:14.639 --> 0:02:18.320 twenty percent of the population of the country, which comprises 0:02:18.320 --> 0:02:24.320 of Palestinians don't have the same rights as as a 0:02:24.440 --> 0:02:28.919 Jewish israelis, which in my book makes it questionable whether 0:02:29.160 --> 0:02:32.440 we can call it a true democracy. You know, I 0:02:32.520 --> 0:02:35.280 was going to ask, Israel has pre elections, its population 0:02:35.400 --> 0:02:38.160 is protesting to the point where they've actually affected change, 0:02:38.360 --> 0:02:39.760 And I was going to ask, isn't that how a 0:02:39.800 --> 0:02:43.400 democracy works, your point being that's not how it works 0:02:43.440 --> 0:02:49.000 for everyone. Yes, that's true, and when when Israeli's protests, 0:02:50.240 --> 0:02:53.919 that's to be commended, especially when the protests of peastfool. 0:02:53.960 --> 0:02:57.600 But we've also seen what happens when Palestinians protest and 0:02:57.919 --> 0:03:02.960 the responses from security forces to those kinds of products. 0:03:03.040 --> 0:03:06.720 But beyond that, there's a larger point to be. The 0:03:06.960 --> 0:03:10.160 elections are very important in a democracy. The right to 0:03:10.280 --> 0:03:14.880 protest is very important in a democracy, in any free society, 0:03:14.919 --> 0:03:18.760 but these are only two of many tests of democracy. 0:03:19.000 --> 0:03:22.720 Freedom for all is I would argue, perhaps the most 0:03:22.720 --> 0:03:27.799 important test, and in that respect, Israel is all short 0:03:27.919 --> 0:03:31.760 of the stat the ability of institutions to stand up 0:03:31.800 --> 0:03:37.640 against authoritary and tendencies amongst politicians. That's very important that scenario. 0:03:37.680 --> 0:03:40.119 Where As Weel has done very well this pasti week. 0:03:40.640 --> 0:03:46.720 As you said in your introduction, we've seen how institutions, 0:03:46.760 --> 0:03:53.200 civil service organizations, civil service unions have stood up to 0:03:54.400 --> 0:03:58.160 Prime Minister that nah who am this very controversial proposal, 0:03:59.240 --> 0:04:02.840 and there as much as the protests in the streets 0:04:02.960 --> 0:04:06.600 have forced him to reconsiderately. Do you find that the 0:04:06.680 --> 0:04:09.800 events of the past few months, particularly those that you 0:04:09.920 --> 0:04:13.480 just atomized, there are a reflection of Israel's government as 0:04:13.560 --> 0:04:16.400 a whole in just how things are or is this 0:04:16.520 --> 0:04:21.400 specifically about the net Nahoo administration. Well, this is something 0:04:21.440 --> 0:04:26.440 that net Niya who personally and the far right. His 0:04:26.560 --> 0:04:30.760 administration is made up mostly of far right parties. These 0:04:30.800 --> 0:04:34.800 are proposals that have been discussed by the far right 0:04:34.839 --> 0:04:39.679 for quite a long time. They see Israel's judiciary as 0:04:40.080 --> 0:04:45.039 too independent. They fear that the judiciary keeps blocking their 0:04:45.080 --> 0:04:49.280 attempts to pursue the far right agenda. But as we've 0:04:49.279 --> 0:04:52.039 seen with this protest, there is an enormous section of 0:04:52.080 --> 0:04:59.120 the population that wants to see the judiciary remain independent. Israel, 0:04:59.120 --> 0:05:04.040 as a country that does have a written constitution, the 0:05:04.160 --> 0:05:08.760 judicially act as a kind of check against the government, 0:05:09.160 --> 0:05:11.240 which here in the US is something that we are 0:05:11.360 --> 0:05:17.240 very comfortable and which many many Israelis want to see continued, 0:05:18.080 --> 0:05:22.640 despite the efforts of Prime Minister Etnia who to change 0:05:22.680 --> 0:05:26.200 that stings. People always want to try to extrapolate and 0:05:26.240 --> 0:05:29.719 figure out where do things go from here? But one 0:05:29.760 --> 0:05:31.599 way to do that is to look at where things 0:05:31.600 --> 0:05:35.359 have been. So have we seen this before? Is this unprecedented? 0:05:35.440 --> 0:05:39.440 Is there some historic context you can put this in? Well, 0:05:39.480 --> 0:05:41.679 we've seen this in other parts of the Middle East, 0:05:43.160 --> 0:05:46.359 not so much in Israel itself, not recently, but we 0:05:46.480 --> 0:05:49.760 saw it. We saw it in the Arab Spring, where 0:05:50.240 --> 0:05:55.080 popular protest against authoritarian governments brought those governments down. In 0:05:55.560 --> 0:06:01.080 some cases Tunisia comes to mind. We saw how civil 0:06:02.160 --> 0:06:07.680 groups as well as trade unions back the protesters, enforced 0:06:08.360 --> 0:06:11.400 the governments to back. Now we've seen this recently in 0:06:12.080 --> 0:06:16.520 places like Lebanon and in Iraq, but the fact that 0:06:16.520 --> 0:06:19.320 we've seen this happen over and over again tells a 0:06:19.440 --> 0:06:23.160 story in itself. It tells you that in many parts 0:06:23.200 --> 0:06:27.440 of the Middle East, people are not satisfied with what 0:06:27.520 --> 0:06:33.200 they're getting from elections, that elections by themselves are not 0:06:33.320 --> 0:06:37.040 a solution, which the point of is making earlier elections 0:06:37.080 --> 0:06:41.400 are an important indicator of democracy. But that's not about 0:06:42.120 --> 0:06:46.360 how are these events in Israel playing out across the region, 0:06:46.400 --> 0:06:50.080 particularly with the Arab nations that sign the Abraham Accords. 0:06:51.160 --> 0:06:57.080 But they're being watched very closely. Countries in particularly the 0:06:57.400 --> 0:07:01.719 states in those neighborhood are are looking very closely at 0:07:01.760 --> 0:07:06.840 what happens. For several one is there's a concern that 0:07:07.240 --> 0:07:10.560 if Latnia Who can push through his far right agenda, 0:07:11.080 --> 0:07:15.960 there will be harsh consequences for Palestinians, and there is 0:07:16.000 --> 0:07:19.600 Arab solidarity, if not at the government level, then certainly 0:07:19.640 --> 0:07:24.280 at the level of Arab civilians. There's Arab solidarity for 0:07:24.440 --> 0:07:28.520 the Palestinians, for the countries that sign the Abram Accords, 0:07:28.560 --> 0:07:34.480 particularly the United Arab Emirates bheign. They're concerned that some 0:07:34.560 --> 0:07:40.200 of the far right partners in latnia Who's coalition are 0:07:40.400 --> 0:07:45.520 so overtly hostile towards Arabs, not just Arabs within the 0:07:45.600 --> 0:07:49.720 Israeli society, but Arabs in general, and that they are 0:07:49.840 --> 0:07:55.400 so openly Islamophobic that it makes them very uncomfortable to 0:07:55.560 --> 0:07:59.720 be in any kind of partnership with his. Other Arabs 0:08:00.040 --> 0:08:03.120 who did not sign those are courts like Albi Arabia, 0:08:03.160 --> 0:08:06.520 for instance, right now are feeling quite vindicated. They're thinking 0:08:06.560 --> 0:08:08.520 to themselves, well, it's a jolly good thing we didn't 0:08:08.560 --> 0:08:11.600 sign those are cords, because then we'd have to explain 0:08:11.720 --> 0:08:16.280 to our populations why we are partnered with the country 0:08:16.280 --> 0:08:19.400 where the government is so hostile to Islama, to Arabs. 0:08:19.880 --> 0:08:23.960 That hostility you referenced, is that bound to change or 0:08:24.040 --> 0:08:28.640 is it gaining more traction? Which way is that wind blowing? Well, 0:08:28.680 --> 0:08:32.320 it's always been there. There have been been factions within 0:08:32.520 --> 0:08:36.160 the Israeli far right that have openly expressed this kind 0:08:36.200 --> 0:08:39.840 of hostility for debt. The nature of coalition politics, which 0:08:39.880 --> 0:08:45.160 is a characteristicsm Israel is that extreme voices sometimes get 0:08:45.200 --> 0:08:48.600 platforms in the mainstream, and that's what we're seeing right now. 0:08:49.040 --> 0:08:51.480 Whether or not, if we'll continue, and whether it will 0:08:51.600 --> 0:08:56.280 get amplified, we'll have to see Latia who is beholden 0:08:56.320 --> 0:08:59.720 to some of these far right parties. These coalitions cannot stand, 0:09:00.200 --> 0:09:03.320 cannot remain in power without them. But against that you 0:09:03.440 --> 0:09:07.520 have not just the voices of all the Israelis who 0:09:07.559 --> 0:09:10.480 we've seen protesting over several months, but also as well 0:09:10.480 --> 0:09:14.280 as friends and partners abroad, the United States, the Biden 0:09:14.320 --> 0:09:18.120 administration has made it clear. The President himself has said 0:09:18.160 --> 0:09:22.160 that he does not think that these proposals to overhaul 0:09:22.200 --> 0:09:25.480 the judiciary are a good idea that he hopes let 0:09:25.520 --> 0:09:27.679 mea who back away from it. So all of his 0:09:27.800 --> 0:09:30.360 pressure is building up on left mea who is. What 0:09:30.440 --> 0:09:33.880 he does over the next few days and weeks will 0:09:33.960 --> 0:09:37.240 be very very interesting to watch. How might this impact 0:09:37.360 --> 0:09:41.160 the relationship with the US well, So let me I 0:09:41.200 --> 0:09:43.439 was in a very difficult position. On the one hand, 0:09:43.480 --> 0:09:46.480 the United States is far and away the most important 0:09:46.600 --> 0:09:50.600 ally and partner that Hasrael had security point of view, 0:09:50.840 --> 0:09:53.880 consural point of view, from point of view, war of trade, 0:09:54.720 --> 0:09:58.520 an investment. But at the same time, the United States 0:09:58.640 --> 0:10:01.960 is not going to keep let Miah who empower. People 0:10:01.960 --> 0:10:03.720 who are going to keep him in power are those 0:10:03.800 --> 0:10:07.440 small our right parties, And so he has to balance 0:10:07.480 --> 0:10:13.440 the national interest against his personal political interest. In the past, 0:10:14.080 --> 0:10:17.520 when faced with that kind of the fork in the road, 0:10:17.880 --> 0:10:21.480 let Bia who has always opted for the latter, which 0:10:21.559 --> 0:10:23.440 is to look out, look out for his own interest. 0:10:24.440 --> 0:10:27.480 If he continues to do that, well, things with the 0:10:27.520 --> 0:10:32.280 United States are bound google a little more sour. But 0:10:32.360 --> 0:10:35.080 if he can rise above his own interests now and 0:10:35.160 --> 0:10:39.880 pursue the interest of his country. Then the relationship will 0:10:39.960 --> 0:10:42.520 remain solid. All right, Bobby, thank you so much for 0:10:42.600 --> 0:10:45.959 taking the time with us today. Thanks so happy. Habby 0:10:46.040 --> 0:10:50.080 Coach is a Bloomberg Opinion columnist specializing in foreign affairs. 0:10:50.720 --> 0:10:52.040 Coming up, we're going to take a look at the 0:10:52.040 --> 0:10:54.120 fallout of the banking sector and the role of the 0:10:54.160 --> 0:10:57.360 federal government, not just in the recovery, but in the 0:10:57.400 --> 0:11:01.880 mindset of free money. Are just getting started. You're listening 0:11:01.880 --> 0:11:13.679 to Bloomberg Opinion. You're listening to the Bloomberg Opinion podcast. 0:11:14.040 --> 0:11:16.880 Catch us Saturdays at one and seven pm Eastern on 0:11:17.040 --> 0:11:19.680 Bloomberg dot Com, the I Heart Radio app and the 0:11:19.720 --> 0:11:22.760 Bloomberg Business App, or listen on demand wherever you get 0:11:22.800 --> 0:11:27.960 your podcasts. You're listening to Bloomberg Opinion. I'm Amy Morris, 0:11:28.200 --> 0:11:31.320 and we continue to follow the fallout of the turmoil 0:11:31.400 --> 0:11:34.960 in the banking sector. Investors are still assessing how the 0:11:35.000 --> 0:11:38.720 recent turmoil in regional banks will affect the broader economy 0:11:38.800 --> 0:11:42.839 in the US and how policymakers might respond. There is 0:11:42.880 --> 0:11:45.760 a calmer mood now of late in the banking sector, 0:11:45.840 --> 0:11:49.320 but there are also lessons to be learned. Meanwhile, President 0:11:49.360 --> 0:11:52.840 Biden continued to reassure the public that banking in the 0:11:52.960 --> 0:11:56.680 US remains safe and stable. It's pretty much under control. 0:11:56.760 --> 0:11:59.520 Now remands to be seen. We're looking to see whether 0:11:59.640 --> 0:12:02.440 we've done further legislation now, as President Biden on the 0:12:02.480 --> 0:12:05.640 safety of banking in the US this as Congress this 0:12:05.679 --> 0:12:09.120 past week held hearings on the bank failures, the impact 0:12:09.240 --> 0:12:12.120 on the country's financial system, and how they can try 0:12:12.160 --> 0:12:15.839 to keep this from happening again. Republican Senator Tim Scott 0:12:15.880 --> 0:12:18.960 of South Carolina wanted to hear more from bank officials 0:12:19.000 --> 0:12:24.160 themselves and from Biden administration officials, including FED Chair J Powell. 0:12:24.200 --> 0:12:27.120 I think it's incredibly important that we hear from the 0:12:27.120 --> 0:12:32.280 folks specifically and uniquely responsible for the failure of these banks. 0:12:32.480 --> 0:12:35.960 That's Republican Senator Tim Scott of South Carolina. Now, later 0:12:36.000 --> 0:12:38.200 this hour, we will look at the impact on the 0:12:38.280 --> 0:12:41.480 luxury goods sector and where that might be going this year. 0:12:41.520 --> 0:12:43.800 But right now, we want to look at the US 0:12:43.920 --> 0:12:46.200 government's role in all of this, not so much the 0:12:46.240 --> 0:12:48.800 bailout of the banks, but how the government seemed to 0:12:48.840 --> 0:12:52.080 behave over the past several years. As many consumers and 0:12:52.160 --> 0:12:55.840 bankers did, acting as though interest rates would remain at 0:12:55.920 --> 0:13:00.600 zero forever. Joining US Now Bloomberg opinion columnist Alice and Schreeger, 0:13:00.679 --> 0:13:04.040 she covers economics. Alison, thanks for joining us Now. You 0:13:04.080 --> 0:13:06.920 write in your column on the Bloomberg Terminal that the 0:13:07.040 --> 0:13:10.080 US federal government has been borrowing and spending as though 0:13:10.160 --> 0:13:13.360 rates would remain low forever, and you say they're still 0:13:13.360 --> 0:13:16.280 counting on that. What are you seeing now? Well, what 0:13:16.400 --> 0:13:20.240 we're seeing is Biden's leader's budget was six point nine 0:13:20.320 --> 0:13:24.880 trillion dollars. We still see big plans to expand a 0:13:24.960 --> 0:13:29.760 lot of entitlements and not even touched reforming the entitlements 0:13:29.800 --> 0:13:31.800 we do have. They're set a run out of money. 0:13:32.280 --> 0:13:34.960 It's just, you know, it seems like, you know, for 0:13:35.000 --> 0:13:36.680 a lot of years, when we at very low rates, 0:13:36.760 --> 0:13:38.960 you didn't really have to think about trade offs. Effectively, 0:13:39.040 --> 0:13:42.440 you could spend for free, and it doesn't seem like 0:13:42.480 --> 0:13:45.200 there's any acknowledgement that those days might be over. The 0:13:45.240 --> 0:13:48.439 attitude dates back fifteen years, though it's not anything new. 0:13:48.800 --> 0:13:50.360 We I mean, you can follow this back all the 0:13:50.360 --> 0:13:52.880 way to the two thousand date financial crisis. What have 0:13:52.920 --> 0:13:55.040 you found as you go back through your notes and 0:13:55.080 --> 0:13:59.640 through the historical parts of this, well, it does seem 0:13:59.679 --> 0:14:02.720 like as evolution, you know, because for most of American 0:14:02.800 --> 0:14:05.320 history we couldn't spend that way. You know, rates were 0:14:05.520 --> 0:14:09.000 significantly higher, but they've been trending down for forty years. 0:14:09.000 --> 0:14:12.840 And after the financial crisis, you know, there's you know, 0:14:12.960 --> 0:14:15.000 economists started to look around and be like, wow, rates 0:14:15.000 --> 0:14:17.160 are really low. You know, we can afford to make 0:14:17.200 --> 0:14:19.480 more investment in the economy. But it's one thing to 0:14:19.480 --> 0:14:22.040 make an investment in the economy, like build a bridge 0:14:22.120 --> 0:14:25.360 or a highway, and to actually commit to an ongoing entitlement. 0:14:25.880 --> 0:14:28.320 So I think, you know, we were a little slow 0:14:28.400 --> 0:14:31.200 to catch on, but over the years it's been building 0:14:31.240 --> 0:14:33.040 up of hey, we can spend as much as we want. 0:14:33.080 --> 0:14:35.920 We can spend as much as we want. And you know, 0:14:36.040 --> 0:14:38.560 I feel like now that reality has changed, and we're 0:14:38.640 --> 0:14:41.000 kind of slow to catch on to that too. So 0:14:41.200 --> 0:14:45.080 reality hasn't then sunk in yet, Is that what you're saying. Yeah, 0:14:45.120 --> 0:14:48.160 I mean, and I think to be fair, there's an 0:14:48.160 --> 0:14:52.400 expectation that maybe when we get through inflation, rates maybe 0:14:52.400 --> 0:14:54.640 will go back down to zero. I mean, I think 0:14:54.640 --> 0:14:57.080 it seems like the FED is counting on that. I 0:14:57.120 --> 0:14:59.600 looked at the CBO report, they expect, after you account 0:14:59.600 --> 0:15:02.120 for inflation, that ten year rates will only be one 0:15:02.120 --> 0:15:05.720 point eight percent. So it does if they are being 0:15:05.760 --> 0:15:09.720 intellectually consistent. But I think hoping that the zero rates 0:15:09.760 --> 0:15:12.160 we're kind of our new normal and that we're going 0:15:12.200 --> 0:15:15.400 to go back to that normal. Is there a lesson 0:15:15.480 --> 0:15:19.080 to be learned for the Biden administration here? Yeah? I 0:15:19.160 --> 0:15:21.600 think it is that you know interest rate risk is real, 0:15:21.880 --> 0:15:24.640 and that interest rates change a lot. You can't count 0:15:24.720 --> 0:15:28.080 on high rates forever, you can't count on low rates forever. Said, 0:15:28.240 --> 0:15:29.800 I don't think that we're going to going back to 0:15:29.920 --> 0:15:33.280 zero rates, and you maybe they're right, maybe I'm right, 0:15:33.560 --> 0:15:35.320 but one thing is for sure, we do not know, 0:15:35.480 --> 0:15:38.760 and you cannot sort of plan you're spending around the 0:15:38.800 --> 0:15:41.840 best case scenario. If you said you're a company and 0:15:42.360 --> 0:15:44.240 rates we're a rising, and you said, well, I'm just 0:15:44.240 --> 0:15:46.120 going to assume rate you're going to backtown to zero 0:15:46.360 --> 0:15:48.680 and sort of spend it that way, you'd be considered 0:15:48.720 --> 0:15:52.680 really irresponsible. Yeah, borrowing and spending with abandon would be 0:15:52.720 --> 0:15:56.000 considered irresponsible. But it's there's something to be said then 0:15:56.080 --> 0:15:58.960 for that investment that you would referred to earlier, you know, 0:15:59.000 --> 0:16:03.240 putting it into improvements in the infrastructure, that sort of thing. 0:16:03.640 --> 0:16:05.400 Is there some sort of happy medium, is what I'm 0:16:05.400 --> 0:16:09.080 getting at. Yeah, for sure, And I mean certainly not 0:16:09.200 --> 0:16:13.880 arguing we need to cut off all spending, you know. 0:16:13.960 --> 0:16:16.200 I mean it is that rates are historically still not 0:16:16.280 --> 0:16:20.400 even that high. You certainly can justify making productive investments 0:16:20.400 --> 0:16:23.640 in the economy, although you know those you know, those 0:16:23.640 --> 0:16:25.800 are hard to find and hard to execute, for sure. 0:16:26.400 --> 0:16:28.920 But I think the responsible thing to do would certainly 0:16:28.920 --> 0:16:30.840 would not be to cut off spending, but to sort 0:16:30.840 --> 0:16:33.000 of really think about the long term obligations. When you 0:16:33.040 --> 0:16:37.120 commit to an entitlement that's an ongoing expense forever, that's 0:16:37.240 --> 0:16:39.800 very very hard to cut. So if you're going to 0:16:39.880 --> 0:16:42.920 make that sort of commitment in a low rate environment, 0:16:43.080 --> 0:16:45.240 you really have to think about how can you finance 0:16:45.280 --> 0:16:48.920 this in a higher rate environment. Is there an argument 0:16:48.960 --> 0:16:51.560 to be made that that may be something that was 0:16:51.680 --> 0:16:54.760 underlying when they made the decision to bail out the banks, 0:16:54.840 --> 0:16:58.120 to step in and cover all of the deposits that 0:16:58.200 --> 0:17:01.600 were in SVB and Signature Bank that were at risk. 0:17:02.880 --> 0:17:05.120 I mean, I'm not sure that that was that they 0:17:05.119 --> 0:17:07.720 were being I think they were just responding in the moment, 0:17:07.960 --> 0:17:11.800 sort of setting the loop bleeding. But there is definitely 0:17:11.880 --> 0:17:14.600 a risk that you know, you can I mean, we 0:17:14.640 --> 0:17:18.280 saw this in the UK in the fall, that you know, 0:17:18.320 --> 0:17:20.560 when you end up with trouble in sort of the 0:17:20.640 --> 0:17:23.840 long term bond sector, that market can freeze up and 0:17:23.880 --> 0:17:26.640 then rates can get really high, and then that's that's 0:17:26.720 --> 0:17:28.760 you know. I think that was sort of the second 0:17:28.840 --> 0:17:31.399 order concern in the moment, but longer term that is 0:17:31.440 --> 0:17:34.119 a very real concern. So it sounds like all of 0:17:34.119 --> 0:17:37.760 this is really just a mindset. Everybody, including the federal government, 0:17:37.800 --> 0:17:42.040 maybe got comfortable with those super low zero interest rates. 0:17:42.640 --> 0:17:45.520 So at this point, then what would it take to 0:17:45.560 --> 0:17:50.240 adjust and amend that outlook. Well, it might be, as 0:17:50.240 --> 0:17:52.679 I said, I think we were slow to realize that 0:17:52.760 --> 0:17:54.480 rates were low, and we're probably going to be slow 0:17:54.520 --> 0:17:57.640 to realize rates will be high and probably I mean 0:17:57.720 --> 0:18:00.720 it's unfortunate, but maybe sort of having to put a 0:18:00.720 --> 0:18:02.960 lot more of a budget towards enters payments will be 0:18:03.000 --> 0:18:04.720 the wake up call people need. I mean, it would 0:18:04.760 --> 0:18:07.240 be better to realize that sooner rather than later, but 0:18:07.359 --> 0:18:09.760 sometimes you have to have that experience to realize it. 0:18:10.359 --> 0:18:13.119 When you are watching this and how this is unfolding, 0:18:13.160 --> 0:18:15.120 what do you expect to come about over the next 0:18:15.200 --> 0:18:17.760 quarter or maybe even the next year. I mean, this 0:18:17.800 --> 0:18:20.680 doesn't sound like something that's going to be wrapping up 0:18:20.840 --> 0:18:25.000 ending dust settling anytime soon. No, I mean, I think 0:18:25.400 --> 0:18:27.680 you know the dust will only settle really when we 0:18:27.720 --> 0:18:30.280 sort of end up with whatever our new inflation reality 0:18:30.480 --> 0:18:33.320 is said. If inflation is going to be permanently higher, 0:18:33.520 --> 0:18:36.480 then rache are going to be permanently highed too, And 0:18:36.760 --> 0:18:39.520 so I think everyone's just still wishing and hoping that 0:18:39.600 --> 0:18:42.760 everything goes back hu normal, and I think we have 0:18:42.800 --> 0:18:44.280 to wait and see if that happens. But it does 0:18:44.320 --> 0:18:46.919 seem in the meantime before we know that the government 0:18:46.960 --> 0:18:52.040 is still planning understanding a lot. And can we just 0:18:52.080 --> 0:18:55.800 clarify when you were talking about the government currently, you've 0:18:55.800 --> 0:18:58.639 got the Biden administration, would you apply this also to 0:18:58.800 --> 0:19:02.240 other administrations in the past, whether it be the Clinton, 0:19:02.320 --> 0:19:06.240 the Bush, the Obama, the Trump administrations, they've all sort 0:19:06.240 --> 0:19:10.040 of fallen into that trap of the low interest rates. Well, no, 0:19:10.160 --> 0:19:12.440 I mean the Climent administration faced higher indust rates and 0:19:12.520 --> 0:19:15.760 they actually ran a surplus. So of all the presidents 0:19:15.760 --> 0:19:18.720 you've named, they've been the most fiscally responsible by far, 0:19:19.800 --> 0:19:22.399 but each administration after that sort of gotten more and 0:19:22.560 --> 0:19:27.280 more progressively irresponsible. It said, like, you know, tax cuts 0:19:27.280 --> 0:19:29.479 are the other side of the coin of you know, 0:19:29.560 --> 0:19:33.639 more spending. It's also fiscally irresponsible. Alison Schrager is a 0:19:33.680 --> 0:19:37.440 Bloomberg Opinion columnist who covers economics, and you can find 0:19:37.480 --> 0:19:40.680 Allison's column. Biden has to learn the same lesson as 0:19:40.840 --> 0:19:44.199 SVB on the Bloomberg terminal. Now, stay with us, we 0:19:44.240 --> 0:19:46.919 have much more still to come. We'll be talking with 0:19:46.920 --> 0:19:52.080 Bloomberg Opinion editor Timothy Lavin about President Biden's chip making bill. Now, 0:19:52.080 --> 0:19:54.280 the President spent most of the past week on an 0:19:54.320 --> 0:19:59.119 Investing in America tour, touting his legislation, which provides subsidies 0:19:59.119 --> 0:20:03.280 for semiconduct from manufacturers across the country, and highlighting his 0:20:03.400 --> 0:20:07.320 economic agenda. Now, that so called ship bill has often 0:20:07.359 --> 0:20:10.359 been referred to as a win for Democrats, but could 0:20:10.359 --> 0:20:13.480 it actually wind up becoming a failure. There's a lot 0:20:13.520 --> 0:20:15.479 more work ahead, and we're going to get to it. 0:20:15.760 --> 0:20:19.199 That's coming up. Don't forget. We are also available as 0:20:19.200 --> 0:20:23.879 a podcast on Apple, Spotify, or your favorite podcast platform. 0:20:23.880 --> 0:20:38.240 This is Bloomberg Opinion. You're listening to the Bloomberg Opinion podcast. 0:20:38.600 --> 0:20:41.440 Catch us Saturdays at one and seven pm Eastern on 0:20:41.600 --> 0:20:45.400 Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, 0:20:45.560 --> 0:20:50.400 or listen on demand wherever you get your podcast. This 0:20:50.560 --> 0:20:54.480 is Bloomberg Opinion. I'm Amy Morris. The Biden administration is 0:20:54.520 --> 0:20:57.920 quick to tout the Chips and Science Act. It's considered 0:20:57.920 --> 0:21:00.959 a victory for Democrats, a bill that passed with bipartisan 0:21:01.000 --> 0:21:04.199 support with high hopes to revive the chip making capacity 0:21:04.520 --> 0:21:07.640 in the US. President Biden says the bill will help 0:21:07.680 --> 0:21:10.760 the US regain its edge. Erica lost its edge, and 0:21:10.880 --> 0:21:14.480 manufacturing lost its edge across the board, and we did 0:21:14.480 --> 0:21:19.280 that for decades. Now we're creating jobs, we're exporting jobs. 0:21:19.600 --> 0:21:23.359 No longer American products are being made here. We're growing 0:21:23.400 --> 0:21:27.040 the economy. But there are signs now that the legislation 0:21:27.400 --> 0:21:31.159 might not work. Let's bring in Bloomberg Opinion editor Timothy Leavin, 0:21:31.240 --> 0:21:36.480 a member of the Bloomberg Editorial Board covering technology and politics. Timothy, 0:21:36.600 --> 0:21:39.040 thank you very much for taking the time with us. Whatever, 0:21:39.440 --> 0:21:43.240 why do you believe that it won't work as intended. Well, 0:21:44.640 --> 0:21:48.520 I think this bill was a response to genuine concerns. 0:21:49.119 --> 0:21:53.040 You know, the chip making capacity is very heavily concentrated 0:21:53.040 --> 0:21:56.880 in East Asia. These chips are obviously essential to every 0:21:56.880 --> 0:22:01.119 part of modern economy. They're essential for a national defense. 0:22:01.160 --> 0:22:03.040 I think that you know, the Pentagon uses something like 0:22:03.080 --> 0:22:06.000 two billion chips a year for its its purposes. UM. 0:22:06.160 --> 0:22:08.639 So you know, there are genuine concerns that we don't 0:22:08.920 --> 0:22:12.240 have enough manufacturing capacity here at home UM, and that 0:22:12.359 --> 0:22:17.200 we're taking seriously. The problem is UM, US chip makers 0:22:17.280 --> 0:22:22.720 are not very competitive with overseas chip makers, and there 0:22:22.760 --> 0:22:24.159 are a lot of reasons for that. There are a 0:22:24.160 --> 0:22:27.280 lot of sort of deep um structural reasons in the 0:22:27.400 --> 0:22:31.040 US economy, in particularly with the US US politics, that 0:22:31.119 --> 0:22:34.280 makes it very difficult for manufacturers making chips here to 0:22:34.320 --> 0:22:37.080 compete with those overseas. The problem with this bill is 0:22:37.119 --> 0:22:39.200 that it writes a big check UM, but it really 0:22:39.240 --> 0:22:42.760 does not address any of those underlying problems. In many ways, 0:22:42.760 --> 0:22:45.800 it makes them worse. So I worry that while this 0:22:45.920 --> 0:22:49.080 bill was obviously quite well intentioned, as by partis et um, 0:22:50.119 --> 0:22:53.160 you know, I worry that it's very unlikely to end 0:22:53.200 --> 0:22:57.400 up producing, um, you know, a thriving chip making industry 0:22:57.440 --> 0:23:00.439 in the United States unless we start, you know, tackling 0:23:00.480 --> 0:23:03.959 the real underlying problems. You say, it's a microcosm of 0:23:04.000 --> 0:23:06.720 all that is wrong with America's approach to building things. 0:23:06.720 --> 0:23:08.919 And what I'm getting from you is we tend to 0:23:08.960 --> 0:23:12.199 throw money at something and hope it works. That's right. Uh. 0:23:12.320 --> 0:23:14.040 You know, there are a lot of reasons that we 0:23:14.080 --> 0:23:16.760 have difficulty building things in this country doing it, particularly 0:23:16.800 --> 0:23:20.800 building things quickly and building you know, things on a 0:23:20.840 --> 0:23:26.359 reasonable budget a huge problem. There's a huge problem across 0:23:26.359 --> 0:23:28.800 the board. If you recall them. The last Congress, we 0:23:29.000 --> 0:23:33.639 had a bunch of very, very big, ambitious piece of 0:23:33.760 --> 0:23:35.640 legislation that would have to do a trillions of dollars 0:23:35.680 --> 0:23:41.040 in spending on everything from green energy to um infrastructure 0:23:41.359 --> 0:23:45.600 to this building, particularly about jimming m. The problem is 0:23:46.119 --> 0:23:50.800 we tend to write these big checks um and you know, 0:23:50.880 --> 0:23:53.520 we often end up spinning our wheels and not achieving 0:23:53.560 --> 0:23:56.639 the goals of the of these of these big bills 0:23:57.359 --> 0:23:59.919 because we're not doing the hard work to change polish 0:24:00.200 --> 0:24:03.439 that's going to make these bills effective. So, in the 0:24:03.480 --> 0:24:05.680 case of chip making, some of the things we identify. 0:24:06.000 --> 0:24:09.080