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Speaker 2: Donald Trump taking to True Social to give us a
Speaker 2: read on a phone call he had today with President
Speaker 2: Vladimir Putin of Russia. In part, the True Social post reads,
Speaker 2: we have agreed to work together very closely, including visiting
Speaker 2: each other's nations. We have also agreed to have our
Speaker 2: respective team start negotiations immediately, and he said that would
Speaker 2: begin by calling President Zelensky of Ukraine. We confirmed that
Speaker 2: that call happened as well as the President says that
Speaker 2: President Zelensky will be meeting together with Vice President jad
Speaker 2: Vance and Secretary of State Marco Rubio on Friday in Munich.
Speaker 2: As it looks like these conversations long been promised Joe,
Speaker 2: are actually about to get underway.
Speaker 3: Yes, indeed, Friday is a date that we're going to
Speaker 3: be looking forward to here. I'm also curious to see
Speaker 3: if either of these world leaders visit each other's countries.
Speaker 3: The idea of a state visit by Vladimir Putin is
Speaker 3: something that would reinvent the optics all over again here, Kayley,
Speaker 3: but this is something that is moving pretty quickly. Donald Trump,
Speaker 3: we should mention is set to sign a series of
Speaker 3: executive actions starting around two thirty, about an hour from
Speaker 3: right now, and based on what we've seen the past
Speaker 3: couple of weeks, that may become an open press event.
Speaker 4: Where we learn more about this.
Speaker 3: But indeed, Caroline Levitt, the Press Secretary, confirming that as
Speaker 3: she held forth before reporters, that briefing is underway right now.
Speaker 2: Yeah, and while that is ongoing, we want to get
Speaker 2: some insight into where these negotiations realistically could go. And
Speaker 2: turn to Kurt Volker, who of course was former US
Speaker 2: Special Representative for Ukraine negotiations from twenty seventeen to twenty nineteen,
Speaker 2: also served as US Ambassador to NATO. Ambassador, thank you
Speaker 2: for coming back to balance of power as it looks
Speaker 2: like these conversations are about to get underway. Is this
Speaker 2: really go time? And what are Russia and Ukraine bringing
Speaker 2: to the table at this point?
Speaker 5: Well, I think it is I think the fact that
Speaker 5: President Putin went ahead made that call with President Trump.
Speaker 5: Now that is kind of kicking things off. What President
Speaker 5: Trump has been doing until now is indicating that he
Speaker 5: expects Putin to end the war, so he's holding Putin
Speaker 5: accountable for that, and he's trying to create a pathway
Speaker 5: for a solution so that the war ends and doesn't
Speaker 5: come back. I think there are three elements that are
Speaker 5: consistent with what we're hearing from President Trump. That is
Speaker 5: the idea of a ceasefire, so stopping the fighting right now. Second,
Speaker 5: deterring any future Russian aggression so that there's a permanent piece.
Speaker 5: And third, shifting the burden for securing Ukraine in the
Speaker 5: future more to the Europeans, not leaving the US out entirely,
Speaker 5: but shifting the burden more towards Europe. And I think
Speaker 5: that's what we're going to see and aim to this
Speaker 5: team of people to get started on this, and I
Speaker 5: think they will get started right away. In fact, Rubio
Speaker 5: will be at the Munich Security Conference later this week,
Speaker 5: and I think we're having conversations about it right there.
Speaker 3: Bessar, it's great to have you back with us on Bloomberg.
Speaker 3: We heard from the new Defense secretary earlier today, who
Speaker 3: with his comments, might make you wonder about what kind
Speaker 3: of leverage Ukraine has at this negotiating table. He called
Speaker 3: it unrealistic to get NATO membership, which was of course
Speaker 3: a major goal of Alto Rizzelenski, or returning to pre
Speaker 3: twenty fourteen borders. You know a lot about this. How
Speaker 3: unrealistic are those goals?
Speaker 5: Well, I think we have to really listen carefully to
Speaker 5: what he said. It was a prepared statement, And about
Speaker 5: NATO membership he said not realistic. Do you get that
Speaker 5: in the course of negotiations, which means that Russia is
Speaker 5: not going to agree to that. And I don't think
Speaker 5: we should even be talking about that with Russia. It's
Speaker 5: not proper to have ATO membership the subject of negotiations
Speaker 5: with Russia. That's something for Ukraine and NATO allies to
Speaker 5: figure out later. So it's not on the table right now,
Speaker 5: and it's not something that we should be talking to
Speaker 5: Russia about. As for US troops, he said there'd be
Speaker 5: no US ground troops, but he did not all out
Speaker 5: support for European troops that would be there, so enabling
Speaker 5: support over the horizon presence. So I think we have
Speaker 5: to wait and see how this really lays out and
Speaker 5: what kind of security assurances for Ukraine are actually agreed.
Speaker 5: It's a delicate thing to try to get Putin to
Speaker 5: stop the war, doing so by showing that there's enough
Speaker 5: force on the table that he has to and at
Speaker 5: the same time doing it in a way that prevents
Speaker 5: us from having to actually go to war. You want
Speaker 5: to end it and then you want to deter the
Speaker 5: next war. That's the delicate balance.
Speaker 2: Well, certainly delicate seems like the proper description here, Ambassadors.
Speaker 2: We consider that Russia is going to want to get
Speaker 2: something from these negotiations. Surely, how much is too much
Speaker 2: in terms of what the give and take will be here?
Speaker 2: That could leave the door open to Vladimir Putin thinking
Speaker 2: that he can kind of make these teriatorial claims in
Speaker 2: the future.
Speaker 5: What Putin really wants, and he's been very explicit about it,
Speaker 5: is to eliminate Ukraine as a sovereign independent country and
Speaker 5: eliminate the idea of a Ukrainian national identity. He sees
Speaker 5: them all as Russians or that he should have control
Speaker 5: over him. Giving up on that and accepting that Ukraine exists,
Speaker 5: that is a very very big deal, and I don't
Speaker 5: think Ukraine is going to agree that Russia owns Ukrainian territory,
Speaker 5: has successfully seized it, but I think Zelensky will agree
Speaker 5: that he's not going to be able to take it
Speaker 5: back militarily. That is going to be a long term dispute,
Speaker 5: more like what we saw with East and West Germany
Speaker 5: for forty years.
Speaker 3: I want to ask you about the release of Mark Fogel.
Speaker 3: Pretty remarkable to watch him arrive at the White House
Speaker 3: as the snow was coming down last evening. If you
Speaker 3: were with us on Bloomberg TV or YouTube there you
Speaker 3: see the image right now with the American flag draped
Speaker 3: over his shoulders. People should know, Ambassador, this was not
Speaker 3: just some American teacher on an exchange program. His past
Speaker 3: students included the children of William Burns, Joe Biden's CIA director,
Speaker 3: and Michael McFall, ambassador to Moscow during the Obama administration.
Speaker 3: There's writing this morning in the Wall Street Journal that
Speaker 3: the operation to detain him was an extensively coordinated trial
Speaker 3: run for future arrests planned by the Kremlin to actually
Speaker 3: include an American embassy school. Now that this has happened
Speaker 3: and the White House has been pretty cagy about what
Speaker 3: went behind this deal. What are you hearing about the
Speaker 3: exchange that took place and what Russia got in return.
Speaker 5: Well, it's interesting. I haven't heard very much directly. Maybe
Speaker 5: we'll get more from President Trump when he's signing these
Speaker 5: executive orders later, maybe he'll tell us a little bit
Speaker 5: more of what was behind it. But I think this
Speaker 5: is really President Vladimir Putin trying to make a gesture
Speaker 5: toward President Trump. He has seen that Trump has been
Speaker 5: talking with Zelensky. He's heard reports of maybe we get
Speaker 5: minerals and access to some of the titanium or lithium
Speaker 5: that Ukraine has in exchange for continuing to provide weapons
Speaker 5: to Ukraine. It's hearing about security assurances for Ukraine, and
Speaker 5: I think he wanted to send a gesture to Trump
Speaker 5: to say, hey, I'm in the game here, I'm ready
Speaker 5: to negotiate. Here's a good will gester. I'll let this
Speaker 5: teacher go, because I think Putin may have been feeling
Speaker 5: a little bit left out up to that point.
Speaker 2: Well, an incredible that it was Steve Whitkoff, who of
Speaker 2: course is serving as the envoy to the Middle East,
Speaker 2: who was dispatched to Russia to pick up Mark Vogel
Speaker 2: and take him home. Ambassador, what does that signal to
Speaker 2: you about if Witkof is going to play a greater
Speaker 2: role with Russia in addition to what he's taken on
Speaker 2: with the Middle East.
Speaker 5: It indicates that he will. And if you saw the
Speaker 5: President Trump's truth social post about his phone call with
Speaker 5: President Putin, he named Marco Rubio, John Ratcliffs, a director,
Speaker 5: Mike Waltz, the National Security Advisor, and Witkoff as his
Speaker 5: negotiating team for dealing with Russia about Ukraine. And what's
Speaker 5: interesting there is his own Special representative for Ukraine and Russia.
Speaker 5: Keith Kellogg was not mentioned.
Speaker 4: That is duly noted, Ambassador. It's great to have you back.
Speaker 3: It sounds like we're going to have a lot more
Speaker 3: to talk about as we make our way forward here
Speaker 3: talks beginning Friday in Munich. Kurt folk Or, former US
Speaker 3: Special Representative for Ukraine Negotiations, former US Ambassador to NATO,
Speaker 3: thank you.
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Speaker 2: We have some new figures from here in Washington we
Speaker 2: want to talk about because we've been waiting for these
Speaker 2: for some time. It's the budget proposal from the Republican
Speaker 2: led House of Representatives as they try to take the
Speaker 2: first steps towards ultimately one big budget reconciliation package that
Speaker 2: is intended at least to achieve all of the legislative
Speaker 2: priorities of President Trump. A big part of that, of course,
Speaker 2: is tax cuts, but border and energy policy folded into
Speaker 2: this as well, And it was going to be a
Speaker 2: question of the dollar figures. And this proposed budget Joe
Speaker 2: would allow Congress, at least specifically the Tax Writing, Ways
Speaker 2: and Means Committee, to increase the deficit by four and
Speaker 2: a half trillion dollars over the next ten years. That
Speaker 2: may seem like a lot. The problem is all that
Speaker 2: would really allow for is an extension of the twenty
Speaker 2: seventeen tax cuts, not all of these other ideas that
Speaker 2: we've seen, Salt cap being lifted, no tax on social security, overtime, etc.
Speaker 2: So it seems like we may still have some negotiating.
Speaker 3: These are pretty big numbers. The debt limit, will remind you,
Speaker 3: is already at thirty six trillion dollars. You cut taxes
Speaker 3: by four and a half, as Kayley mentioned, over ten years,
Speaker 3: and the math gets to be really complicated if you
Speaker 3: want to do anything else, like no tax on tips,
Speaker 3: no tax on overtime. We're not even touching entitlements right now.
Speaker 3: And Douglas Oltzekin suddenly has a facial tick. He's back
Speaker 3: with us on Bloomberg TV and Radio. Wanted to talk
Speaker 3: to the president of the American Action Forum because he
Speaker 3: is the former director of the Congressional Budget Office, and
Speaker 3: the CBO at some point is going to have a
Speaker 3: product to score. Douglas, what do you think of the
Speaker 3: first salvo here? Just the fact that it's even happening
Speaker 3: is news today in Washington.
Speaker 6: Well, certainly this is the first progress we've seen both
Speaker 6: the House with this chairman's mark, they'll have the hearing tomorrow.
Speaker 7: Market up and over in the Senate.
Speaker 6: Senate Budget chair Lizzie Graham has done a similar effort
Speaker 6: for a small bill that will be one of two
Speaker 6: that accomplishes what the one big, beautiful House bill would accomplish,
Speaker 6: so we have a little activity on both sides of
Speaker 6: the Congress. I think the right way for people to
Speaker 6: think about what they got today is that, roughly speaking,
Speaker 6: it allows for extension of the twenty seventeen tax law
Speaker 6: that's about four point seven trillion dollars, and then they
Speaker 6: have to pay for anything new. So if you're gonna
Speaker 6: do no tax on tips, you're gonna have to have
Speaker 6: some spending cuts. If you're gonna do no taxes in overtime,
Speaker 6: same thing, And so they can get to their bottom
Speaker 6: line numbers in that way. This resolution doesn't tell any
Speaker 6: committee how to get to their number ways means can
Speaker 6: do whatever it wants. It just gives you this sort
Speaker 6: of outline of what the numbers.
Speaker 7: Have to be.
Speaker 2: Well, and one of those number requirements is that at
Speaker 2: least one and a half trillion dollars in spending cuts
Speaker 2: need to take place over the next decade. Douglas looking
Speaker 2: at proms like Medicaid snap for example, And this is
Speaker 2: just what has already been outlined. So if they need
Speaker 2: to find other spending cuts elsewhere to pay for further
Speaker 2: tax cuts, what realistic buckets are they going to be
Speaker 2: able to pull from.
Speaker 7: Well, this has been a real challenge.
Speaker 6: Some members of the House wanted as much as two
Speaker 6: and a half or three trillion dollars to spending cuts initially.
Speaker 6: Obviously they came in much lower than that. Several members
Speaker 6: have expressed reservation on touching medicaid. The President has said
Speaker 6: Medicare and sole security are off limits. So you're down
Speaker 6: to a much smaller set of programs. So you've got
Speaker 6: the discretionary spending. No one wants to touch defense, so
Speaker 6: you're looking at non defense discretionary spending, and you're looking at.
Speaker 7: The smaller.
Speaker 6: Mandatory spending programs. You know, things like crop support in
Speaker 6: the Agricultural Department, modest things in the Financial Services Committee.
Speaker 6: There's really no easy place to go for a lot
Speaker 6: of money. The big programs are the money, and they're
Speaker 6: off limits.
Speaker 3: Whether this is one bill or two, we do see
Speaker 3: the House and Senate both driving in their own directions here.
Speaker 4: What do you make of this effort?
Speaker 8: Here?
Speaker 3: Will the Senate end up jamming the House? And does
Speaker 3: it matter in the end? Donald Trump doesn't seem to care.
Speaker 6: I think this is literally a matter of how do
Speaker 6: you get to a majority in the House. In the Senate,
Speaker 6: you know, there are no style points in reconciliation. You've
Speaker 6: got to get to fifty one. In the Senate, you're
Speaker 6: going to have to get to two seventeen in the House.
Speaker 6: They have no margin for error, so they're going to
Speaker 6: add and subtract until they can get to yes. That
Speaker 6: may look like one big bill, maybe two in the end,
Speaker 6: that's really good to just come down to count in
Speaker 6: the votes. It's the domestic policy agenda that's really what
Speaker 6: the President should care about. How many little pieces it
Speaker 6: comes in is not really too important to them. So
Speaker 6: whether they can do the border and the energy first,
Speaker 6: as the Senate would like to, then come back to tax,
Speaker 6: or do it all at once as the House is
Speaker 6: trying to, I think, is really not fundament only that important.
Speaker 2: Well, how important is it that a debt ceiling increase
Speaker 2: is included in this package, Douglas? Because there are multiple
Speaker 2: members of the House of Representatives in the Republican conference
Speaker 2: who are reluctant to vote for any debt ceiling increase.
Speaker 2: How much harder does that make this.
Speaker 7: I was surprised to see it in there. I'll be honest.
Speaker 6: You know, we don't have to have a debt ceiling
Speaker 6: increase in the reconciliation process, we do have to have
Speaker 6: either an increase or a suspension of the debt ceiling
Speaker 6: by somewhere in late spring early summer. So that's a
Speaker 6: must do a piece of the activity list in Congress.
Speaker 6: So put it in here, go to the committee, see
Speaker 6: if you can get it out of the budget community.
Speaker 6: If you can't get it out of the Budget committee,
Speaker 6: then it falls out of reconciliation and they have to
Speaker 6: try it in some other bill. So I'd say that's
Speaker 6: one to watch, but not count on being in the
Speaker 6: final product.
Speaker 3: At the first hearing today of the House Oversight Committee's
Speaker 3: DOGE subcommittee, Douglas, the chair, Marjorie Taylor Green, says it's
Speaker 3: a topic that should be easy to be bi partisan on. That,
Speaker 3: of course is not true. And I wonder what your
Speaker 3: thought is on legislating the findings of DOGE.
Speaker 6: It'll be interesting to see what DOSE reports on July four,
Speaker 6: twenty twenty six, which is its deadline. Thus far, I'd
Speaker 6: say what they have would report would be okay. There's
Speaker 6: some systems that need modernized. Are you going to modernize
Speaker 6: them and fund the modernization and there's a whole lot
Speaker 6: of change in the workforce that we think would be desirable,
Speaker 6: and the question is whether they think they need legislation
Speaker 6: to do that or not. Doge has transformed dramatically in
Speaker 6: a short period of time. It was a an outside
Speaker 6: the government voluntary effort. The President had put it inside
Speaker 6: the government by assigning the executive Order that renamed the
Speaker 6: United States Digital Service, But that order gave it a
Speaker 6: very narrow mandate. It said, martynd irons technologies go. He
Speaker 6: signed another executive Order the day ago which really laid
Speaker 6: out the Workforce Agenda and essentially codified what Elon Muskin
Speaker 6: Doge have been up to in reducing the number of
Speaker 6: people working for the federal government and cutting out whole
Speaker 6: divisions of some agencies. They now have at least his
Speaker 6: blessing to do that. It's going to be some partisan wrangling,
Speaker 6: to be sure. One of the features of that executive
Speaker 6: order it hasn't got a lot of attention, is just
Speaker 6: like he has one regulation in ten have to go
Speaker 6: out in that executive order.
Speaker 7: If you hire a government worker, four have to go.
Speaker 7: So it's one in four out for the government workforce.
Speaker 2: All right, good point, Douglas Holteek and President of the
Speaker 2: American Action Forum, joining us here on Bloomberg TV and Radio.
Speaker 2: Thank you so much. And, of course, as we frequently
Speaker 2: pointed out, with the Doge, Elon Musk serving in his
Speaker 2: capacity leading the Department of Government Efficiency doing so having
Speaker 2: been not elected and not confirmed by the Senate.
Speaker 4: That's correct.
Speaker 3: Elon mush in the Oval Office yesterday with his son
Speaker 3: X A lot is being said about what the two
Speaker 3: of them were wearing.
Speaker 4: But we're waiting to hear on more.
Speaker 3: Appeals to these stoppages of the dismantling of USAID payments out.
Speaker 4: Of FEMA and so forth. We could have more news
Speaker 4: on this today.
Speaker 3: As Elon Musk says openly to reporters yesterday, we're moving
Speaker 3: so fast we will make mistakes.
Speaker 8: Yeah.
Speaker 2: He's also calling for the impeachment of judges who are
Speaker 2: at that's right, against the interests of the Doge here.
Speaker 2: So this is a story we're going to continue to follow.
Speaker 2: But there's more stories to follow here in Washington today.
Speaker 2: As we talk about Elon Musk being unconfirmed, we can
Speaker 2: add one more person to the list of confirmed people
Speaker 2: joining Donald Trump's second administration. Tulci Gabbard today getting the
Speaker 2: requisite votes in the Senate to be the next Director
Speaker 2: of National Intelligence. And here with more is Bloomberg's Tyler Kendall. So, Tyler,
Speaker 2: just weeks ago, we weren't sure that this was going
Speaker 2: to happen, and yet fifty two to forty eight she
Speaker 2: gets it done.
Speaker 9: Exactly one of the most controversial picks for president. And
Speaker 9: if we take a step back on how we've reached
Speaker 9: this point, you will recall she narrowly advanced out of
Speaker 9: the Senate Intelligence Committee, where she had her confirmation hearing.
Speaker 9: One of those key votes that we were watching for
Speaker 9: was Senator Todd Young, a Republican from Indiana. I actually
Speaker 9: had the chance to catch up with him on Capitol
Speaker 9: Hill a couple weeks ago, and he was dodging questions
Speaker 9: from reporters on whether or not he could publicly back
Speaker 9: Tulci Gabbard. Ultimately, he said he received this list of
Speaker 9: commitments from her. Notably on it, she has assured him
Speaker 9: that she will support the reauthorization of section seven oh
Speaker 9: two under the Foreign Intelligence Surveillance Act FAIZA, which we
Speaker 9: know that she had previously raised these security concerns about.
Speaker 9: But ultimately is considered to be pretty important to the
Speaker 9: national security community. So it was commitments like that, but
Speaker 9: also a rhetoric like this that I want you to
Speaker 9: take a listen to that helped to get this nomination
Speaker 9: over the finish line.
Speaker 8: If confirmed as d and I I will do my
Speaker 8: very best to fulfill this mandate and bring leadership to
Speaker 8: the intelligence community with the laser like focus on our
Speaker 8: essential mission ensuring this safety, security, and freedom of the
Speaker 8: American people.
Speaker 9: Now. Gabbard has also made other sort of commitments that
Speaker 9: lawmakers were looking for, including that she will not make
Speaker 9: any recommendation when it comes to the legal standing of
Speaker 9: Edward Snowden that was considered to be one of those
Speaker 9: hot topics during her confirmation hearing, after she had previously
Speaker 9: suggested that the charges against him should be dropped. But
Speaker 9: it's not just some of these positions that were controversial.
Speaker 9: Of course, we should note Toulcie Gabbert is a former
Speaker 9: Democrat and that also kind of heightened her nomination here.
Speaker 9: Of course, though we weren't expecting any Democrats to go
Speaker 9: against it. At the end of the day, only one
Speaker 9: Republican broke and that was former Senate Majority Leader Mitch McConnell.
Speaker 4: How about that.
Speaker 3: I'm very curious to see how he votes on another
Speaker 3: nominee we were told might never pass, and that would
Speaker 3: be RFK Junior. He's got another important vote on the
Speaker 3: way as well.
Speaker 9: Right, And while Mitch McConnell did vote to invoke cloture
Speaker 9: as it's known, this key procedural hurdle that he ended
Speaker 9: up passing earlier today, that basically clears the way for
Speaker 9: his nomination to pass. Although Mitch McConnell could end up
Speaker 9: vote against it, but at the end of the day
Speaker 9: it wouldn't be enough. Of course, we know that he
Speaker 9: needs a simple majority one vote whenn't put him over.
Speaker 9: He is slated for a final vote tomorrow. That is
Speaker 9: pretty early in the morning. We're expecting a seven am vote.
Speaker 9: It just goes to show how this Senate is working
Speaker 9: very hard to try to get these nominations.
Speaker 4: The Senate in a seventh That's what I was saying.
Speaker 4: They're gonna have to finish shoveling first, I think.
Speaker 3: Bloomber's Tyler Kendall, thank you so much, Tyler.
Speaker 4: We've got a lot more to cover.
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch
Speaker 1: US live weekdays at noon and five pm Eastern on
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Speaker 1: us live on YouTube and.
Speaker 3: The gavel drops on a second day of testimony from
Speaker 3: the FED Chair J Powell, Chair French Hill of the
Speaker 3: House Financial Services Committee wrapping things up there and what
Speaker 3: was a multi hour affair, as we expected, a bit
Speaker 3: longer than the Senate side yesterday because there are many
Speaker 3: more members in this House committee, a FED chair who
Speaker 3: clearly sees more work to do, as we understood from
Speaker 3: very similar commentary as we heard yesterday on this CPI day.
Speaker 3: Of course, J Powell reacting to that as well. I'm
Speaker 3: Joe Matthew alongside Kaylee Lines and Washington. Thanks for being
Speaker 3: with us on Bloomberg TV and Radio. The Wednesday edition
Speaker 3: of Ballots of Power, Kaylee and day two of testimony
Speaker 3: from j Powell on a day that he was reading
Speaker 3: on truth social from President Trump that it's time to
Speaker 3: cut interest rates. Not likely something that's going to happen
Speaker 3: until the end of the year, if at all.
Speaker 2: Yeah, we did not get the indication from the chairman
Speaker 2: that cutting interest rates is really what the Fed is
Speaker 2: looking to do at this point, especially in light of
Speaker 2: data like today work month on month, year on year,
Speaker 2: core and headline CPI came in hot, and it's that
Speaker 2: still persistent inflationary pressure that is leaving the Fed on
Speaker 2: hold for now. And we did hear the Chairman doubling
Speaker 2: down on that as he fielded questions on a number
Speaker 2: of other things as well. It was not just about
Speaker 2: monetary policy. Lots of fiscal policy oriented questions that the
Speaker 2: Chairman had to deal with today as Congress is working
Speaker 2: through a budget process, a.
Speaker 3: Lot of questions about the DOGE as well, which is
Speaker 3: of course kind of top of mind everywhere right now
Speaker 3: in the nation's capital. Just a day after we saw
Speaker 3: Elon Musk holding forth in the Oval Office with the
Speaker 3: President of the United States. Elizabeth Warren was on with
Speaker 3: a balance of power last evening referred to him as
Speaker 3: co President Musk.
Speaker 2: Yeah. Elizabeth Warren, of course, the senator from Massachusetts, also
Speaker 2: told us last night she still thinks the Fed should
Speaker 2: be cutting correct at this point. So maybe there is
Speaker 2: something that Warren and Trump do agree on, but on
Speaker 2: the subject of rates and where the appropriate level has
Speaker 2: been for the FED funds rate at given times. We
Speaker 2: did hear the Chairman in his testimony with some reflection
Speaker 2: on that.
Speaker 10: We'll say, and I've said before that hindsight suggests it
Speaker 10: would have been good if we had tightened earlier. I
Speaker 10: don't know how much difference that would have made, but
Speaker 10: I'd be very careful with those rules.
Speaker 7: Those rules.
Speaker 10: Those rules in the middle of last year suggested that
Speaker 10: our policy rate was a couple hundred basis points too high,
Speaker 10: so we need to They're a starting point, not an
Speaker 10: ending point.
Speaker 9: Is.
Speaker 2: So for more on this, we turned to Michael McKee,
Speaker 2: Bloomberg International Economics and Policy correspondent, who was still with
Speaker 2: us here in Washington, d C. So obviously we heard
Speaker 2: a lot of the same from the Chairman today as
Speaker 2: we did yesterday, and in light of the data, he's
Speaker 2: kind of stay infirmed that even if they moved too late,
Speaker 2: they aren't eager to do too much too early.
Speaker 11: This time a little bit of different choreography on the
Speaker 11: House side, but the message was the same that the
Speaker 11: FED is on hold. And he was asked about the
Speaker 11: CPI today and said, basically, we look at the.
Speaker 12: PCEE, which is running a little bit lower.
Speaker 11: And doesn't have some of the same weights of housing
Speaker 11: in particular and medical services that the CPI does, so
Speaker 11: it comes in a little bit lower.
Speaker 12: So we're not as worried, and we're not worried because.
Speaker 11: It was just one month and we'll see what happens
Speaker 11: in coming months. But he didn't give any ground on
Speaker 11: the idea that they're going to be thinking of cutting
Speaker 11: rates anytime again soon.
Speaker 12: He repeated that they have no idea.
Speaker 11: What the President is going to do, and so they
Speaker 11: can't analyze it or figure out what it means. He
Speaker 11: was specifically asked about that tweet from the President calling
Speaker 11: for lower interest rates, and he said, I don't comment
Speaker 11: on what the President says.
Speaker 3: Well, so, but what's really going on there? The interest
Speaker 3: rates should be lowered. Donald Trump writes something which would
Speaker 3: go hand in hand with upcoming tariffs. Let's rock and
Speaker 3: roll America three exclamation points.
Speaker 7: I know J.
Speaker 3: Powell is a grateful dead fan, but what is he
Speaker 3: in for if he has no interest in cutting rates
Speaker 3: essentially until the end of the year. If then, when
Speaker 3: Donald Trump is already on truth social and probably on
Speaker 3: the phone as well.
Speaker 11: Well, that's going to be an interesting question to see
Speaker 11: how far Donald Trump goes. Remember when the Fed last
Speaker 11: met and didn't cut interest rates, Trump said that was okay.
Speaker 12: Probably what he would have done.
Speaker 11: And Powell has the excuse, which would be hard for
Speaker 11: Trump to argue with, that they don't know what the
Speaker 11: President's going to do, so they don't know what the
Speaker 11: impact on the economy is. Once all this stuff is
Speaker 11: taking care, probably once they get through reconciliation and they
Speaker 11: move on to maybe a reconciliation too in taxes, then
Speaker 11: they might start putting pencil to paper and decide what
Speaker 11: they're going to do. Is certainly classical economics would tell
Speaker 11: you that tariffs are inflationary, and so you go into
Speaker 11: it probably believing you have less reason to cut going forward.
Speaker 11: But this could be an ongoing process. The Fed's not
Speaker 11: going to know for quite some time. Markets will go
Speaker 11: up and down on whatever the data is, and nothing's
Speaker 11: really going to change. And we know the President's always
Speaker 11: going to want lower interest rates, But does he make
Speaker 11: a federal case out of it.
Speaker 12: He seems awfully busy with other things right now.
Speaker 2: Well, certainly that is true, and keeping us busy while
Speaker 2: he himself remains so. Mike to the point, though, that
Speaker 2: classic economics would tell you that tariffs are inflationary. Is
Speaker 2: there though a risk that the upside risk to inflation
Speaker 2: is outdone by a downside risk to growth if consumers
Speaker 2: are suddenly fail with higher prices and change their behavior
Speaker 2: as a result.
Speaker 11: Well, it's interesting because Kevin Hassett was on Bloomberg TV
Speaker 11: today and made a couple of other appearances where he
Speaker 11: said the administration is looking to increase supply and decrease
Speaker 11: aggregate demand, which is essentially a recipe for recession. And
Speaker 11: when we pressed him on it, he said, no, we're
Speaker 11: not looking for a recession and that's not our plan here.
Speaker 11: Increased supply will take care of all the problems. But
Speaker 11: that hasn't worked in the past.
Speaker 12: So the question.
Speaker 11: Is is what are the impacts going to be. You
Speaker 11: go back to Paul Volker. That's what he did, raising
Speaker 11: rates to cut aggregate demand, and Ronald Reagan was a
Speaker 11: supply side, cutting taxes and we got two significant recessions.
Speaker 11: So it's hard to see how they can make this work,
Speaker 11: but that's their argument at the moment.
Speaker 3: It's great to have you with us a second day
Speaker 3: in a row. Michael McKee down from the World headquarters in
Speaker 3: New York. On this second day of testimony by Chair J.
Speaker 3: Powell mentioned Kevin Hassett, of course, running the NEEC, the
Speaker 3: National Economic Council inside this new Trump white House. He
Speaker 3: indeed was on Bloomberg TV and radio earlier today. Here's
Speaker 3: what he said about inflation.
Speaker 13: Austin Goolesby, the Chicago FED President, just gave a speech
Speaker 13: a couple of days ago saying, hey, inflation's under control.
Speaker 13: And here we see that we're looking at a three
Speaker 13: month moving average above four. Right, So that's not what
Speaker 13: the FED should be saying right now, and it's not true.
Speaker 13: But we're going to fix it with or without the FED.
Speaker 4: With or without the FED.
Speaker 3: As we add the voice now of Catherine Edwards's economic
Speaker 3: policy consulted with us here on balance of power. Catherine,
Speaker 3: it's great to have you back. What is that supposed
Speaker 3: to mean? And how much can the White House do
Speaker 3: on its own?
Speaker 14: The White House can has control of its own policy,
Speaker 14: but its economic research is very clear. The independence of
Speaker 14: the FED is integral to a successful economy, and the
Speaker 14: less independence the FED has, or a central bank has
Speaker 14: over its own decision making the worst the economy.
Speaker 2: Performs well and clearly we heard many references to FED
Speaker 2: independence over the course of these two days of testimony, Catherine.
Speaker 2: We also heard many references to fiscal policy, which, as
Speaker 2: the Chairman reiterated, is not in their purview. But as
Speaker 2: we think about the policies pursued by this administration, whether
Speaker 2: it's deficit additive, whether a tax cuts are in play,
Speaker 2: how does the FED realistically have to be thinking about
Speaker 2: this at this point?
Speaker 14: I mean it has to think about its room to maneuver,
Speaker 14: which I think is very predictive of where rate cuts
Speaker 14: or not rate cuts will be over the next twelve months.
Speaker 14: There's a lot of uncertainty in the economy, there's a
Speaker 14: lot of weakness in the economy, and you're adding incredibly
Speaker 14: disruptive policy. So I think the economy right now has
Speaker 14: very good numbers. We're in a stable position, and I
Speaker 14: think that's where Powell wants to be, to have the
Speaker 14: room to go up or down with interest rates as
Speaker 14: prices or growth.
Speaker 4: Dictation, Catherine.
Speaker 3: Before President Trump kicked out the Rock and Roll America
Speaker 3: truth he posted when CPI numbers were released, Biden inflation up.
Speaker 3: Of course, we know that interest rates have been rising
Speaker 3: a bit most recently and since Donald Trump took office,
Speaker 3: we've got a ten year up today to four sixty three.
Speaker 3: Is this the last gasp of Biden inflation? And how
Speaker 3: should this White House be framing it?
Speaker 12: I don't know.
Speaker 14: That's a hard question to answer because I don't know
Speaker 14: if it's right to call something. I mean, politicians love
Speaker 14: to take all the credit for a good economy and
Speaker 14: none of the credit for a bad economy, and of
Speaker 14: course blame their opponents when something goes wrong. I mean
Speaker 14: it's a really you know, politicians view on the economies
Speaker 14: having their cake and eat it too. So I mean,
Speaker 14: let him have his moment. He doesn't have to be
Speaker 14: held to his word. He doesn't dictate interest rate policy,
Speaker 14: and so he can say what he would like about
Speaker 14: this data release and its interpretation in terms of interest
Speaker 14: rate policy. But the blame game on politicians, I mean,
Speaker 14: that's a tale as old as time doesn't have any
Speaker 14: weight on what is actually going on in the economy.
Speaker 2: Well, so as we talk about the reality of what
Speaker 2: is going on in the economy, and you're pointing to weaknesses, Catherine,
Speaker 2: and we look back at last Friday, for example, in
Speaker 2: the University of Michigan, consumer sentiment data, which dropped, inflation
Speaker 2: expectations went up. Just how vulnerable is the consumer right
Speaker 2: now as we're talking about things like high egg prices,
Speaker 2: concerns around tariffs, and changes in the labor market, be
Speaker 2: it from deportation and migration changes to what's going on
Speaker 2: with the federal government.
Speaker 14: You know, this inflation spike that has since receded. You know,
Speaker 14: we're hanging out at a rate that's you know, at
Speaker 14: a price rate that is a little bit higher than
Speaker 14: what the Fed would would prefer. But it's helpful to
Speaker 14: remember that when this started, we were in a gangbusters
Speaker 14: economy with a labor market that we had, you know,
Speaker 14: stronger than one that basically we had ever seen. Wages
Speaker 14: were growing at a great clip, you had an incredible
Speaker 14: amount of high we're an incredibly low unemployment rate. We're
Speaker 14: not in that labor market now. Right now, the hiring
Speaker 14: rate in the US economy is equivalent to hiring rates
Speaker 14: that we typically see when the unemployment rate is north
Speaker 14: of eight percent. If you look at the unemployment rate,
Speaker 14: the labor market is fine. If you look at the
Speaker 14: hiring rate, the labor market is in the middle of
Speaker 14: a deep recession. Wages are not growing at the clip
Speaker 14: that they used to. The ability for a strong labor
Speaker 14: market to buffer continued price increases is simply not there.
Speaker 14: We're in a much weaker position as a result of
Speaker 14: years of interest rate hikes. So the concern that I
Speaker 14: have is that we are simply we have a lot
Speaker 14: of households and a lot of businesses that have been
Speaker 14: holding on for better days and are not necessarily prepared
Speaker 14: to take another inflation spike, another hike and interest rates.
Speaker 14: Now I'm worried how long this kind of purgatory that
Speaker 14: the economy is in can hold in the phase of
Speaker 14: either bad economic news or bad economic decisions.
Speaker 3: So how long then before we're hearing predictions of another recession.
Speaker 14: I thought that that's jobs the economists to always be
Speaker 14: making predictions of recessions, and that way we're eventually proved.
Speaker 4: Right, So when does it start, Catherine?
Speaker 14: You know what Powell said in his last press conference
Speaker 14: is something that I've seen through the labor market data
Speaker 14: is that, you know, the problem with having a hiring
Speaker 14: rate so low is that it can accelerate an increase
Speaker 14: in unemployment. I mean, if hiring is already at levels
Speaker 14: that we typically see in recessions, it doesn't take long
Speaker 14: for a blip in layoffs to become a meteoric rise
Speaker 14: in the unemployment rate. And that was his concern. He
Speaker 14: said at the last meeting, We're very worried about the
Speaker 14: hiring rate. It's an accelerant on an unemployment rate increase
Speaker 14: to have hiring already so low as opposed to see
Speaker 14: hiring fall from a place of strength. You know, that
Speaker 14: means that we don't necessarily have a year or two
Speaker 14: years to see a recession coming. It could happen relatively
Speaker 14: quickly with a big shock to the economy.
Speaker 2: Well, what if one of those shocks is, for example,
Speaker 2: as we watch what's happening on Capitol Hill laps in
Speaker 2: the twenty seventeen tax cuts, if Congress cannot find its
Speaker 2: way forward on a package to make those permanent, Catherine,
Speaker 2: what would that realistically do to the economy if everyone
Speaker 2: effectively got a tax hike.
Speaker 14: Well, the interesting thing about tax cuts is that they're
Speaker 14: not very strong economic policy in either direction because they're
Speaker 14: not targeted and they're not timely. So if I have
Speaker 14: a tax rate increase that passes through the end of
Speaker 14: twenty twenty five, that's going to hit the tax rates
Speaker 14: that people pay almost a year from now, and it's
Speaker 14: a marginal change to any individual taxes. So I might
Speaker 14: face a half a point increase marginal rate on the
Speaker 14: taxes that I pay, but you know it's going to
Speaker 14: take a year for that to go into an effect,
Speaker 14: and that's spread out over a year's earnings. I mean,
Speaker 14: this is why tax This is why tax cuts are
Speaker 14: such ineffective economic policy, is because they're distributed throughout the economy.
Speaker 14: And of course helpful to keep in mind that the
Speaker 14: bottom fifty percent of households doesn't have that high tax
Speaker 14: rate to begin with. So to the extent that there
Speaker 14: are acute effects of tax policy, they tend to be
Speaker 14: concentrated amongst the Americans that have the most ability to
Speaker 14: face economic problems because they are richer and wealthier. So,
Speaker 14: you know, you tell me that the step up basis
Speaker 14: is going to start having a more targeted tax of
Speaker 14: wealth upon inheritance, that's not going to affect you know,
Speaker 14: ninety five percent of Americans. If you tell me that
Speaker 14: we're no longer allowed the estate tax is going to
Speaker 14: fall from twenty six million dollars, that's again, that's not
Speaker 14: going to affect the vast majority of Americans.
Speaker 2: All Right, Katherine Edwards, economic policy consultant and Bloomberg opinion contributor,
Speaker 2: Thank you so much.
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