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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is your weekly Washington Policy Pulse, the Balance of

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Speaker 2: Power podcast. I'm Joe Matthew. Every Monday, Bloomberg Intelligence, senior

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Speaker 2: policy analyst and friend of the show, Nathan Dean shares

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Speaker 2: his weekly call on upcoming catalysts in the nation's capital.

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Speaker 2: Listen for the most recent and relevant policy research from

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Speaker 2: our team at Bloomberg Intelligence. Now with today's installment, here's

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Speaker 2: Nathan Dean.

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Speaker 3: Good morning and good afternoon everybody. Welcome again to the

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Speaker 3: Washington Policy Pulse. My name is Nathan Dean. I'm a

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Speaker 3: senior policy analyst with Bloomberg Intelligence here in Washington, DC.

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Speaker 3: Also want to say thank you to those of you

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Speaker 3: who are listening to us via the Balance of Power podcast.

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Speaker 3: We always welcome your support and your participation as well.

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Speaker 3: We actually have somewhat of a light week this week,

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Speaker 3: So what I want to do this week is I

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Speaker 3: want to run through some of the smart items first

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Speaker 3: and then we'll talk about the government much shutdown at

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Speaker 3: the end.

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Speaker 1: So what else is happening this week?

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Speaker 3: Well, tomorrow we have an election in Virginia, New Jersey,

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Speaker 3: New York City, and a couple of other things across

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Speaker 3: the nation. Key thing to keep in mind is right now, Virginia,

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Speaker 3: the Democratic governor candidate has about a twelve point lead.

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Speaker 3: New Jersey it's a little bit closer, a little bit tighter.

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Speaker 3: The Democrat has a four to five point lead, but

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Speaker 3: within the margin of air. And so, you know, I

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Speaker 3: would just caution those that, as much as we love

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Speaker 3: to see people say that, you know, this is going

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Speaker 3: to be a bell weather for twenty twenty six elections

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Speaker 3: and so forth like that, just keep in mind that

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Speaker 3: politics are local, politics is also national. There's a lot

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Speaker 3: of things going into this, but again, you know, we'll

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Speaker 3: know tomorrow night, obviously who's going to be the winner.

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Speaker 3: We also have the election in New York City. President

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Speaker 3: Trump most certainly has already been talking about this over

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Speaker 3: the weekend. Most certainly we'll also get involved in the

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Speaker 3: New York City mayor election in terms of commenting on it.

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Speaker 3: And then finally, you know, just other things to keep

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Speaker 3: in mind is that there's a proposition in California for

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Speaker 3: redistricting that we're going to be keeping an eye on.

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Speaker 3: And also there's some more smaller items in Texas. So again,

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Speaker 3: election night on Tuesday, for those of you are in

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Speaker 3: the Fairfax County, Virginia area. You know, obviously you know

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Speaker 3: that your children don't have schools, so you know, it's

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Speaker 3: something that just every few years, you know, Virginia has

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Speaker 3: to deal with it. So other things going on Wednesday,

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Speaker 3: we have a very important day in terms of President

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Speaker 3: Trump's reciprocal tariffs. This is when we're going to hear

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Speaker 3: oral arguments at the Supreme Court on whether or not

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Speaker 3: those tariffs. Think of the Liberation Day tariffs where President

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Speaker 3: Trump held up those you know, those pieces of paper

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Speaker 3: in the Rose Garden back in April. This is the

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Speaker 3: day in which we'll get an indication whether the Supreme

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Speaker 3: Court will find the find those tariffs to be lawful

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Speaker 3: or unlawful. Just real, big backstory here is obviously President

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Speaker 3: Trump has used the International Economic Powers Emergency Economic Powers

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Speaker 3: Act I, also known as AIPA to put these tariffs

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Speaker 3: in place. For what it's worth, tariff is not mentioned

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Speaker 3: in the International Economic Emergency Powers Act. You know, this

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Speaker 3: was something that you know, was challenged on legal grounds.

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Speaker 3: He went to the US Trade Court. The US Trade

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Speaker 3: Court found that those tariffs were unlawful. He went to

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Speaker 3: the Appeals Court, the Appeals Court found that those tariffs

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Speaker 3: will be lawful, and my colleague Holly from has a

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Speaker 3: sixty percent chance the Supreme Court is going to find

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Speaker 3: those tariffs to be unlawful. Now, the hearing is anticipate

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Speaker 3: in the last round two and a half hours. We'll

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Speaker 3: probably know listening to Holly and listening to what Bloomberg

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Speaker 3: News has been reporting, will probably know during that hearing

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Speaker 3: how certain justices are going to be thinking of this.

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Speaker 3: So you may get insight on where the Supreme Court

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Speaker 3: is going. And it's just as a reminder that if

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Speaker 3: the Supreme Court does find that these to be unlawful,

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Speaker 3: Treasury Secretary Scott Benson has said that they're going to

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Speaker 3: refund approximately eighty to one hundred billion dollars worth of tariffs,

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Speaker 3: and Bloomberg News has a piece on how that would work,

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Speaker 3: and they call it refund chaos because the United States

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Speaker 3: does not have the ability to just turn on an

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Speaker 3: electric ChIL send wires to like the refunds here. It

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Speaker 3: has to be done by check It's going to be

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Speaker 3: very messy, so they call it refund chaos. So if

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Speaker 3: the Supreme Court does move this way, and obviously this

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Speaker 3: isn't decision day. This is just the oral argument day.

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Speaker 1: You know, if the.

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Speaker 3: Supreme Court moves this way, stay close. We're going to

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Speaker 3: have to probably do a little bit more research on

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Speaker 3: how those refunds are actually going to get doled back

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Speaker 3: out to the industry. And just as a reminder, you know,

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Speaker 3: this doesn't stop President Trump from using other avenues to

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Speaker 3: conduct tariffs, like Section two thirty two or Section three

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Speaker 3: oh one. This just removes the avenue that President Trump

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Speaker 3: has actually been using for reciprocal tariffs. Other thing to

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Speaker 3: keep in mind, just last week, we saw some votes

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Speaker 3: in the Senate on resolutions to overturn President Trump's Canada

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Speaker 3: and Brazil tariffs. These actually passed the House because a

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Speaker 3: number of Republicans joined Democrats in opposing those tariffs. Just

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Speaker 3: keep in mind these are resolutions. Even though they passed

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Speaker 3: the Senate, the House has already said that they're not

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Speaker 3: going to take this up. It's symbolic in nature, it's

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Speaker 3: not going to go anywhere. So that's what's going on

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Speaker 3: in tariff land.

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Speaker 1: A couple other things to keep in mind. Snap benefits.

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Speaker 3: So as we saw you know, November first, the Supplemental

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Speaker 3: Nutrition Assistance Program is currently lapsed. There's no funding associated

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Speaker 3: with it. This is very important to those of you

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Speaker 3: who have exposure to Walmart, Albertson's, and Kroger. Walmart brings

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Speaker 3: in about twenty five percent of SNAP related revenue. Albertsons

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Speaker 3: is at six Kroger is at eight percent, and for

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Speaker 3: what it's worth, there's about eight billion dollars per month

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Speaker 3: in terms of SNAP revenue. So if you do the math,

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Speaker 3: Walmart has some decent exposure here. But what happened is

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Speaker 3: over on Friday, there was a lawsuit essentially saying, and

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Speaker 3: I'm paraphrasing here to the White House saying, look, you

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Speaker 3: have the ability to reallocate funds into Snap, and under

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Speaker 3: the law, you're supposed to do this. And the court agreed.

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Speaker 3: So the court gave the White House up until today

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Speaker 3: to fully refund SNAP, to do a partial refund by Wednesday.

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Speaker 3: It sounds like that's what Treasury Secretary Scott Bessett wants

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Speaker 3: to do, is he made comments yesterday that it sounds

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Speaker 3: like the Wednesday partial refunding, which means they would just

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Speaker 3: reallocate certain funds, not the entire eight billion, but just

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Speaker 3: certain funds that they would put that in by Wednesday,

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Speaker 3: So then you're looking at a couple of days lag

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Speaker 3: from an economic perspective and certainly from an equity perspective.

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Speaker 3: This isn't one of those situations where the lapse in

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Speaker 3: money just means the money's not going to be spent.

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Speaker 3: It just means the money's going to be spent a

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Speaker 3: little bit later in the month. So once those SNAP

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Speaker 3: benefits go flu to the consumer, the consumer then will

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Speaker 3: then spend a Walmart, Albertsonson, Kroger. So you're looking at

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Speaker 3: a headline risk perspective, but not something that ultimately is

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Speaker 3: going to be that much of a drain on the

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Speaker 3: equities unless we get into a situation where SNAP Benefits

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Speaker 3: isn't funded for the entire month of November. And that

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Speaker 3: leads me to the later discussion of the government shutdown. Now,

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Speaker 3: last thing that last two things I want to talk

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Speaker 3: about before the shutdown is. The first is just keep

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Speaker 3: in mind that while the shutdown continues, farmers are hurting

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Speaker 3: and farmers are still waiting for this bailout. Now, last

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Speaker 3: week we saw the US China deal where they try

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Speaker 3: to agree to purchase some soybeans. If you want more

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Speaker 3: insight on that deal, IB me, call me, message me,

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Speaker 3: and I will send you a Votes and Verdicts po

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Speaker 3: podcast that we did with our chief geoeconomics analyst, Jenny Welchuse.

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Speaker 1: It's just right behind me.

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Speaker 3: She went a little bit deeper into that deal and

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Speaker 3: what it means, so you know, I will give you

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Speaker 3: a copy of that. It's actually an Apple and Spotify,

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Speaker 3: so you don't even need a terminal for that. So

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Speaker 3: I don't want to go into too much detail of

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Speaker 3: that deal, but from what it's worth is is that

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Speaker 3: the reaction that we got from our egg analysts and

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Speaker 3: from the farmer community is that the soybean purchases that

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Speaker 3: China has agreed to do, it's great, but it's not

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Speaker 3: that great. And so we're anticipating a significant farmer bailout

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Speaker 3: coming at the end of this government shutdown. You know,

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Speaker 3: it's been floated thirteen billions. Some folks in the House

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Speaker 3: agg Committee want as much as fifty billion. So that's

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Speaker 3: something that we're going to be keeping an eye on,

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Speaker 3: is how much of that overall number. And just as

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Speaker 3: a reminder, I've said this on this call before, is

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Speaker 3: that if you're going to get around thirteen billion dollars

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Speaker 3: in farmer AG bailout if you will. Our AG analyst

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Speaker 3: Alexis Maxwell, who does the fertilizer industry for BI estimates

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Speaker 3: that most of that is going to go to four

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Speaker 3: Q spend. It's not going to be a long term solution.

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Speaker 3: This is actually just going to be going for temporary

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Speaker 3: purchases in the month of four Q. Finally moving away

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Speaker 3: from Congress and moving back towards the regulatory agencies. If

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Speaker 3: you recall last Monday, I talked a little bit about

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Speaker 3: bank capital issues that have been going on over the

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Speaker 3: Federal Reserve. The friday before that call, the Federal Reserve

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Speaker 3: had released a stress testing proposal on transparency. I finally

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Speaker 3: had the chance to go through that and just to

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Speaker 3: summarize at a high level what this proposal does. It

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Speaker 3: essentially just gave the twenty twenty six scenarios to the

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Speaker 3: banking industry in advance and made it more transparence, so

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Speaker 3: that if you're going into the stress test season of

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Speaker 3: twenty twenty six, and if you're one of the twenty

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Speaker 3: three banks that have to.

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Speaker 1: Do this, you at least know what you're going to

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Speaker 1: be judged on.

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Speaker 3: This is something that I would like to I like

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Speaker 3: the joke that would get the chief risk officer or

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Speaker 3: the chief compliance officer or the chief legal officer, it

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Speaker 3: would get them excited. So if you work in risk, compliance,

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Speaker 3: are legal, you're probably really excited about this. If you're

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Speaker 3: on the investor side or if you're looking in the

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Speaker 3: front office, this is something that probably doesn't excite you

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Speaker 3: all that much because ultimately there's really no impact on

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Speaker 3: capital requirements. Here maybe a small indirect impact on the

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Speaker 3: stress capital buffer, but ultimately I think both this stress

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Speaker 3: testing proposal and the one that came from April, which

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Speaker 3: was about volatility, really isn't all that big of a

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Speaker 3: deal when it comes to capital requirements, and anticipate both

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Speaker 3: of those to be finalized in the first quarter of

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Speaker 3: next year before we get into the twenty twenty six

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Speaker 3: stress testing season.

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Speaker 1: So let's talk about the government shutdown now.

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Speaker 3: There is some optimism that the government shutdown could end

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Speaker 3: later this week. So let me back up and tell

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Speaker 3: you what's happened over the last couple of days. At

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Speaker 3: the tail line of last week, there were discussions chit

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Speaker 3: chats if you will. I'm not going to call them negotiations,

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Speaker 3: but there were discussions about moving forward on certain appropriation bills.

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Speaker 3: And this was coming from rank and file senators, not leadership.

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Speaker 3: So think of the National Defense Authorization at the NBAA,

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Speaker 3: think of a couple of other appropriation bills. And so

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Speaker 3: some of these rank and file senators got together on

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Speaker 3: their own and they said, Okay, let's start trying to

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Speaker 3: talk about trying to put together a pro creations so

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Speaker 3: that when the government does reopen, we can move forward.

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Speaker 3: And in the NDAA case, there's optimism that they could

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Speaker 3: get something done by Thanksgiving.

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Speaker 1: So these Democrats are Republicans.

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Speaker 3: Started talking together and I'm not going to say it

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Speaker 3: made them feel better about the situation, but at least

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Speaker 3: they got them talking. And so now combined with some

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Speaker 3: of the catalysts that are going on the SNAP benefits,

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Speaker 3: obviously SNAP is not being funded until Wednesday. Assuming, according

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Speaker 3: to the Treasury Secretary, you have SNAP benefits, you have

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Speaker 3: air traffic controllers calling sick. The Transportation Secretary just said

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Speaker 3: this morning that they're operating about two to three thousand

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Speaker 3: dollars eight air sorry, two to three thousand air traffic

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Speaker 3: controllers under what they need. O'Hare had a two zero

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Speaker 3: point five two and a half hour ground stop. Newark's

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Speaker 3: had several ground stops.

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Speaker 1: JFK.

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Speaker 3: Laguardi at DCA knock on Wood. I'm flying this weekend.

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Speaker 3: I really hope there's not a ground stop on Saturday.

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Speaker 3: But the air traffic controller situation is getting worse, and

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Speaker 3: that is weighing on congress people's minds. For example, DCA

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Speaker 3: had a ground stop on Friday when a lot of

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Speaker 3: Senators were trying to fly home, and especially the majority

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Speaker 3: leaders Thune. I think he was stuck at Reagan Airport

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Speaker 3: for three hours before he could get back to South Dakota. So,

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Speaker 3: and for what it's worth, if Congress is leaving, the

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Speaker 3: Senate leaving again on Friday, so if you're flying on Friday,

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Speaker 3: maybe some air traffic controllers may decide to call it

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Speaker 3: sick when the senators are over at Reagan. But you've

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Speaker 3: got SNAP benefits, you got the ACA open rollment. Those

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Speaker 3: premiums have now gone up. People are beginning to look

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Speaker 3: at it and they're seeing the prices of those healthcare

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Speaker 3: subsidies being gone. You have the Virginia and New Jersey elections.

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Speaker 3: If the Democrats win tomorrow, they could potentially say, look,

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Speaker 3: let's cash our chips in while we're high people like

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Speaker 3: our strategy. If the Republicans went big tomorrow, the Democrats

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Speaker 3: may say, look, Broll, this isn't really working. Let's talk

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Speaker 3: about an endgame strategy. There's a lot of different catalysts

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Speaker 3: that are happening this week, and that ultimately impacts that

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Speaker 3: if those chit chats and what comes over appropriations combine

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Speaker 3: with these catalysts to the point that nobody wants travel

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Speaker 3: snafu's over Thanksgiving week, combined with the fact that the

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Speaker 3: Senate is supposed to go on a ten day right

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Speaker 3: recess starting on Friday, and they don't want to be

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Speaker 3: here in Washington. The House isn't here, the Senate doesn't

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Speaker 3: want to be here. There are some folks saying that

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Speaker 3: potentially the government could open later this week. I don't

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Speaker 3: want to say it's going to but you know, in

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Speaker 3: my course scenario and what I've been telling my clients

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Speaker 3: is that it will either open at the end of

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Speaker 3: this week or probably the weekend right before Thanksgiving, just

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Speaker 3: because you know, again that Thanksgiving travel snafood. That's going

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Speaker 3: to be something that's really weighing on policymakers' minds. Former

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Speaker 3: Congressman former O and b director Mick Molvaney was actually

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Speaker 3: on Bloomber Television last week and eastad back in the

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Speaker 3: twenty eighteen twenty nineteen shutdown, the travel snaffoos were essentially

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Speaker 3: the thing that they were keeping in mind when they

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Speaker 3: were determining when the government would reopen. So a little

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Speaker 3: bit cause of optimism here, but again, you know, I

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Speaker 3: don't want to say it's going to happen. The last

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Speaker 3: thing I want to talk about is really just this

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Speaker 3: idea of you know, when the government impact. We aren't

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Speaker 3: really seeing it in the markets. We're continuing to not

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Speaker 3: see it in the markets, and we're not seeing it

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Speaker 3: even in like defense industries or anything like that. But

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Speaker 3: if we get into a situation where if the government

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Speaker 3: shutdown goes beyond Thanksgiving, you're going to see President Trump

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Speaker 3: really put on the pressure to end the filibuster when

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Speaker 3: it comes to the budget. You know, President Trump said

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Speaker 3: over the weekend that Republicans should get rid of the philbuster.

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Speaker 3: They have control, they should be able to do what

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Speaker 3: they want. There is not that there aren't the votes

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Speaker 3: in the Senate to do away with the philibuster. Senator

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Speaker 3: Thune is against it. Senator Buzman's against it. Senator McConnell's

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Speaker 3: against it. There's plenty of Republican senators who are against

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Speaker 3: this idea because if the Republicans do away with the

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Speaker 3: philibuster now, filbuster won't exist when the Democrats come into power,

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Speaker 3: and it's one of the last remaining checks and balances

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Speaker 3: of having a minority powerty party versus the majority party.

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Speaker 3: So I don't think the filibuster is going the weigh

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Speaker 3: unless the government shutdown goes into December. At that point,

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Speaker 3: the pressure is going to be extremely difficult for some

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Speaker 3: to come back and say that we're going to extend this,

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Speaker 3: and we're going to keep extending this.

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Speaker 1: So just keep that in mind.

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Speaker 3: The filbuster is not going away right now, but if

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Speaker 3: the shutdown goes in the December, that pressure is going

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Speaker 3: to ramp up tremendously. So I'm going to stop there.

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Speaker 3: I'm going to say thank you very much for attending.

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Speaker 3: We really appreciate it. If we can ever be of assistance,

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Speaker 3: please don't hesitate to reach out and we'll talk soon.

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Speaker 2: Our thanks to Nathan Dean Bloomberg Intelligence senior policy analyst

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Speaker 2: bringing you the latest installment of his weekly Washington Policy

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Speaker 2: Pulse for more from Bi or to join this call

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Speaker 2: live each week, you can email Nathan at ndan at

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Speaker 2: bloomberg dot net. That's n D e A n at

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Speaker 2: Bloomberg dot net and come back to the podcast later

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Speaker 2: today for the latest edition of Balance of Power.