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Speaker 1: Bloomberg Audio Studios, Podcasts, radio.

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Speaker 2: News, thirty six hours.

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Speaker 3: How far out are we thirty six houssy about thirty

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Speaker 3: six hours.

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Speaker 1: Yes, not that I'm counting.

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Speaker 2: Not that you're counting. Meghan Scully heads up Bloomberg's coverage

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Speaker 2: of Congress, and she says if the White House and

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Speaker 2: lawmakers can't agree to a funding bill by midnight on Tuesday,

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Speaker 2: the US government will shut down. Ahead of a meeting

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Speaker 2: at the White House on Monday, President Trump and congressional

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Speaker 2: leaders from both parties are staking out their positions. These

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Speaker 2: people are crazy, the Democrats.

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Speaker 1: So if it asked to shut down, it love.

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Speaker 3: We don't want to shut down the government. It's Trump

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Speaker 3: who's doing it, so ask him. What you have is

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Speaker 3: everybody trying to shift the blame, like who is going

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Speaker 3: to be the one responsible politically for a shutdown, which

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Speaker 3: seems increasingly likely as the hours go by.

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Speaker 2: Meghan says the sticking points and negotiations come down to

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Speaker 2: a couple key issues for Democrats.

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Speaker 3: They have decided to centralize their message here on healthcare.

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Speaker 3: Rising ACA premiums. That's the Obamacare premiums that were kept

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Speaker 3: at lower levels due to subsidies from the Biden administration.

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Speaker 3: They're due to expire on January first. For Republicans, they

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Speaker 3: are arguing that they want a so called clean stop

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Speaker 3: gap spending bill. They just want to keep the government

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Speaker 3: funded until November twenty first, and they said that they

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Speaker 3: will negotiate on these ACA premiums and other demands from

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Speaker 3: Democrats after they pass this bill.

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Speaker 2: Government shutdowns have become more and more common, but Megan

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Speaker 2: says this one, if it comes to pass, would be

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Speaker 2: very different. Aside from the usual fears of furloughs and

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Speaker 2: delayed economic data, the White House has called for using

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Speaker 2: a shutdown as a way to eliminate thousands of federal jobs,

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Speaker 2: which could have a big impact on the economy.

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Speaker 3: In the last several years, we have seen markets largely

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Speaker 3: shrug off the effects of a government shutdown, and what

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Speaker 3: makes this one potentially more durable then previous shutdowns is

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Speaker 3: the threat of mass firings.

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Speaker 2: Last week, the White House asked government agencies for plans

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Speaker 2: to lay off, rather than furlough, many non essential workers

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Speaker 2: if the government shuts down.

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Speaker 3: If tens of thousands or hundreds of thousands of US

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Speaker 3: government workers get laid off as a result of this shutdown,

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Speaker 3: that means they do not get their back pay, they

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Speaker 3: do not have jobs at the end of this that

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Speaker 3: will have a longer term economic impact.

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Speaker 2: I'm David Gera, and this is the big take from

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Speaker 2: Bloomberg News today on the show. As the US gets

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Speaker 2: closer and closer to another government shutdown, what's up for negotiation,

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Speaker 2: what isn't, and why this shutdown could have a more

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Speaker 2: significant impact on markets in the economy than we're accustomed to.

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Speaker 2: It's shutdown eve Eve, as Bloomberg's Megan Scully calls it.

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Speaker 2: Democrats say they're not willing to budge on those Affordable

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Speaker 2: Care Act subsidies. I asked Megan to explain why.

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Speaker 3: So they affect millions of Americans, and it would come

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Speaker 3: with a bill of about three hundred and fifty billion

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Speaker 3: dollars to increase these subsidies into the new year. That's

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Speaker 3: a pretty hefty price tag, although it is something that

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Speaker 3: Democrats say is necessary both you know, financially, but also economically.

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Speaker 3: If a family's health insurance payments go up double triple

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Speaker 3: in the new year, that obviously has widespread economic effects.

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Speaker 1: For Democrats, they see this as a.

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Speaker 3: Winning argument heading into the twenty twenty six midterms when

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Speaker 3: they're hoping to reclaim control of the House, the Senate

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Speaker 3: or both. And wrapped up in this broader healthcare debate is,

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Speaker 3: of course, the Medicaid cuts that were part of the

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Speaker 3: huge Trump tax bill that passed on the backs of

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Speaker 3: Republican only support earlier this year. They're also demanding that

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Speaker 3: these cuts get reversed.

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Speaker 1: I think that is.

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Speaker 3: Very unlikely to happen, but they are making it part

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Speaker 3: of their broader messaging on this.

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Speaker 2: Given the fact that there are Republican voters who benefit

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Speaker 2: from these subsidies, who rely on these subsidies, given the

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Speaker 2: fact that this isn't just a blue state issue or

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Speaker 2: a red state issue. Are there Republicans who down the

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Speaker 2: line conceivably would be willing to negotiate around this.

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Speaker 3: Yes, absolutely, and Republicans have said that they are willing

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Speaker 3: to negotiate on this come you know, November, but let's

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Speaker 3: just keep the government open. Within the Republican ranks, you

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Speaker 3: certainly have some who would be opposed to this, particularly

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Speaker 3: I'm thinking of fiscal conservatives like the House Freedom Caucus,

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Speaker 3: who don't want to be spending this money. But what

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Speaker 3: Democrats are saying is this is their biggest point of leverage.

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Speaker 1: Republicans need sixty.

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Speaker 3: Votes in the Senate to pass the stop gap spending bill,

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Speaker 3: and for Democrats, they have the most sway now then

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Speaker 3: they would have on a standalone healthcare only bill, So

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Speaker 3: they see this as the best chance to get most

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Speaker 3: of what they want.

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Speaker 2: Where is President Trump on these negotiations. Is he in

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Speaker 2: line with Republicans in the House and Senate or does

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Speaker 2: he have kind of a different perspective here?

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Speaker 3: You know, last week he said, you know, if there's

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Speaker 3: a shutdown, there's a shutdown, it'll happen.

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Speaker 1: Well, this is all caused by the Democrats.

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Speaker 3: He was supposed to meet last week with the Democratic

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Speaker 3: leaders of the House and Senate that got canceled at

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Speaker 3: the last minute. They are meeting today for the first time.

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Speaker 3: The Republican congressional leaders will also be at this meeting.

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Speaker 3: But we saw a little bit of a preview of

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Speaker 3: that this morning with Carolyn Levitt, the White House spokesperson,

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Speaker 3: really digging into the President's message and Republican's message writ large,

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Speaker 3: which is it's our way or the highway. There is

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Speaker 3: zero good reason for Democrats to vote against this clean

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Speaker 3: continuing resolution. Either we passed this so called clean cr

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Speaker 3: or the government shuts down. Not expecting to see a

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Speaker 3: whole lot of wiggle room coming out of this meeting today.

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Speaker 2: Megan says her expectations for how all of this will

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Speaker 2: play out are based on years of reporting on pass

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Speaker 2: shutdowns and near shutdowns. They've become increasingly common over the

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Speaker 2: last few decades.

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Speaker 3: There have been four fourteen shutdowns going back to nineteen

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Speaker 3: eighty one, which is when sort of the current the

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Speaker 3: modern era of shutdowns began.

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Speaker 2: Before nineteen eighty one, all government employees still had to

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Speaker 2: report to work when there was a shutdown, so the

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Speaker 2: disruption to government services was minimal. The biggest impact was

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Speaker 2: on government workers who didn't get paid.

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Speaker 3: The last shutdown we had was the twenty eighteen to

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Speaker 3: twenty nineteen shutdown, the thirty five days shutdown during Trump's

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Speaker 3: first administration, and the longest shutdown in US history. Since then,

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Speaker 3: we have certainly gotten to the brink of a shutdown

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Speaker 3: more times than I can count. Pretty much anytime there

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Speaker 3: has been a funding deadline, it is at the eleventh

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Speaker 3: hour that an agreement comes through. We saw that most

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Speaker 3: recently in March, but we have not actually seen a

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Speaker 3: shutdown now in nearly seven years.

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Speaker 2: But this shutdown, if it happens, could look very different

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Speaker 2: from any of those fourteen previous shutdowns that's coming up.

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Speaker 2: Last week, the White House sent a memo to federal

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Speaker 2: agencies ahead of this looming shutdown saying it would quote

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Speaker 2: use this opportunity to consider reduction in force, that it

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Speaker 2: would lay off employees in government programs that don't align

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Speaker 2: with President Trump's priorities. So I asked Bloomberg's Megan Scully,

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Speaker 2: what we know about the jobs that are potentially at

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Speaker 2: risk if the government does shut down.

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Speaker 3: So we don't know certainly exactly whose jobs are at risk.

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Speaker 3: They did say, you know, programs that were not specifically

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Speaker 3: authorized and jobs within the government that do not support

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Speaker 3: Trump's broader agenda, both domestically and internationally. This is extremely,

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Speaker 3: extremely unusual for a shutdown. Typically, what happens is most

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Speaker 3: federal employees get furloughed. Some deemed essential must report to

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Speaker 3: work without pay at the end of a shutdown. Thanks

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Speaker 3: to a twenty nineteen law that was passed during the

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Speaker 3: last long shutdown that our employees must receive back pay.

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Speaker 3: We have never seen an administration use a shutdown as

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Speaker 3: an opportunity to carry out a mass firing of the

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Speaker 3: federal workforce.

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Speaker 2: Should we see that as the White House acting opportunistically

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Speaker 2: or some other way? In other words, the White House

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Speaker 2: could kind of do these layoffs in the way they

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Speaker 2: have during the first few months of this the president's

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Speaker 2: second term. Why is this the mechanism that they're thinking

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Speaker 2: of using here.

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Speaker 3: Russ Vote, who is Trump's budget director, the chief of

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Speaker 3: the Office of Management and Budget within the White House

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Speaker 3: and also sort of the architect of Project twenty twenty five,

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Speaker 3: which has been sort of the guiding principle of many

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Speaker 3: of Trump's policies in his first term, is a firm

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Speaker 3: believer in a strong executive and sees this as an

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Speaker 3: opportunity for Trump to really exert executive authority. Government funding

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Speaker 3: runs out on October first, then gives the president the

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Speaker 3: ability to make these mass firings that Congress did not

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Speaker 3: do its job via the power of the purse, thus

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Speaker 3: giving Trump the ability to do these. Of course, Trump's

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Speaker 3: efforts to fire the federal workforce has been tied up

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Speaker 3: in courts.

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Speaker 1: We've seen him win.

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Speaker 3: A lot of these arguments, a lot of these cases

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Speaker 3: in court. But this is sort of a new way

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Speaker 3: for him to go about this.

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Speaker 2: Thinking more about russ Vote's role here as the director

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Speaker 2: of the Office of Management Budget, there's this more muscular

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Speaker 2: approach to executive power. Certainly these layoffs potential layoffs are

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Speaker 2: part of that. In the past, we've also relied on

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Speaker 2: OMB for detail about what's supposed to happen if there

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Speaker 2: is a shutdown, and I gather this time around, we're

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Speaker 2: not getting a lot of clarity about the way that

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Speaker 2: OMB is thinking about contingency planning.

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Speaker 3: Yes, so typically by this point on shutdown eve eve,

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Speaker 3: we would have agency by agency documentation of what will

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Speaker 3: happen who is considered an essential employee and who is not.

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Speaker 3: Federal workers would start signing off on these shutdown plans,

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Speaker 3: would be making their plans for when they leave work

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Speaker 3: tomorrow if the shutdown does.

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Speaker 1: In fact go into effect.

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Speaker 3: It certainly feels like this is very late to the game,

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Speaker 3: especially because under law, federal employees who are non essential

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Speaker 3: need to start signing off on paperwork saying they will

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Speaker 3: not be working during the shutdown.

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Speaker 2: Is there a risk that this government might not be

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Speaker 2: ready to shut down by this deadline if they're not

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Speaker 2: where they should be in terms of preparations.

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Speaker 3: For one, they don't really have a choice thanks to

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Speaker 3: the Anti Deficiency Act. When the shutdown comes, the government

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Speaker 3: is shut down. Aside from essential personnel, we already know

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Speaker 3: sort of the broad contours of who are the essential workers.

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Speaker 3: Active duty military is considered essential workers. Emergency workers like

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Speaker 3: FEMA as well as air traffic controllers all considered emergency employees,

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Speaker 3: So you know, that's pretty much set. There is some

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Speaker 3: concern though, that this will certainly be more disruptive and

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Speaker 3: more chaotic because of the absence of planning and communication

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Speaker 3: to the federal workforce. So this has rippling effects across

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Speaker 3: the country. People not knowing whether they need to report

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Speaker 3: to work or not on Wednesday certainly is disruptive and

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Speaker 3: just kind of adds to the chaos of an already

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Speaker 3: turbulent event.

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Speaker 2: In March, the country faced another funding deadline. Senate Minority

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Speaker 2: Leader Chuck Schumer warned that a shutdown would allow the

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Speaker 2: administration to quote destroy vital government services at a significantly

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Speaker 2: faster rate than they can right now. He ultimately decided

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Speaker 2: to vote to fund the government to avoid that scenario,

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Speaker 2: and he faced a lot of blowback for that decision

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Speaker 2: from progressives within the Democratic Party. This time, Megan says,

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Speaker 2: he's taking a very different.

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Speaker 1: Approach going back to March.

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Speaker 3: The last time we were at this funding stalemate, Schumer

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Speaker 3: at the last minute decided that Trump, who was only

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Speaker 3: two months into his second term at that point, was

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Speaker 3: too powerful to risk it politically for the party, and

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Speaker 3: so a minority of Democrats in the US Senate voted

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Speaker 3: with Schumer to avert a shutdown. That immediately prompted blowback

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Speaker 3: from progressives within the party who saw this as Senate

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Speaker 3: Democrats really just acceding to Trump and to Republicans. Schumer

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Speaker 3: personally had his own book coming out that same week

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Speaker 3: and he had to cancel his book tour due to

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Speaker 3: the tremendous backlash he was receiving. So I think it's

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Speaker 3: fair to say he learned his lesson that time around.

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Speaker 3: Should also note that Trump's approval ratings have been sort

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Speaker 3: of on a decline in the intervening six months, giving

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Speaker 3: Schumer more ability to really risk it here. And we

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Speaker 3: are also inching closer to the twenty twenty six midterms.

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Speaker 3: Democrats are seeing this more as an opportunity to stand

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Speaker 3: up to the Trump administration and politically for them. That

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Speaker 3: is more of a net positive than it was six

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Speaker 3: months ago.

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Speaker 2: I'm very curious sort of what you see as potential

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Speaker 2: off ramps here. So there is this meeting on Monday

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Speaker 2: at the White House among congressional leadership and the President,

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Speaker 2: with just hours to go here till funding runs out.

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Speaker 2: How do you see this playing out or what are

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Speaker 2: the ways in which it could play out in the

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Speaker 2: next few hours.

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Speaker 3: I think that the most likely scenario here is that

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Speaker 3: the government shuts down at twelve oh one am on

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Speaker 3: October first. There is, I would say, a potential for

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Speaker 3: them to come out of this meeting and agree to

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Speaker 3: a very short stop gap spending bill, something in the

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Speaker 3: order of a week or two, and say, you know,

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Speaker 3: we will vote in the Senate today to keep the

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Speaker 3: government open until October seventh or October tenth, to avert

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Speaker 3: a shutdown this week, but Democrat saying we are not

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Speaker 3: going to agree to this longer seven weeks gap that

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Speaker 3: Republicans have demanded. If that were to happen, the Senate

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Speaker 3: could vote on that tonight and the House, which it's

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Speaker 3: important to note, are out of town until October seventh.

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Speaker 3: They could then vote by unanimous consent sort of in

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Speaker 3: absentia to keep the government open, and has provided nobody

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Speaker 3: objects to that. Then that could certainly be the band

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Speaker 3: aid for the next week or so, especially as storms

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Speaker 3: threaten the southeast coast right now. That is certainly a

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Speaker 3: possibility that we should not discount, but part of his

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Speaker 3: intentions being what they are at this moment, I am

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Speaker 3: not banking on that.

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Speaker 1: Megan.

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Speaker 2: How do you think about the potential consequences of all

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Speaker 2: of this too, markets and the economy, and looking at

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Speaker 2: those past hunt ends, we've talked about what impact have

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Speaker 2: they had and when does it really become an issue

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Speaker 2: for investors and for the US economy broadly.

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Speaker 3: So a shutdown is not the market rattling catas that say,

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Speaker 3: a debt ceiling breach would bring about, but it certainly

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Speaker 3: is disruptive, at least in.

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Speaker 1: The short term.

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Speaker 3: In the last several years, we have seen markets largely

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Speaker 3: shrug off the effects of a government shutdown, and we

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Speaker 3: have seen that in the run up to this one.

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Speaker 3: What we could see sort of in the immediate aftermath

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Speaker 3: of a shutdown is some short term market consequences and

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Speaker 3: certainly some short term economic consequences.

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Speaker 2: For example, if there is a government shutdown, the jobs

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Speaker 2: report won't come out on Friday when it's scheduled too.

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Speaker 3: That certainly is a huge indicator of where the economy

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Speaker 3: is and where it's going, and not having that then

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Speaker 3: has effects on what decisions people make in the short term,

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Speaker 3: on their finances and on their investments. Typically, though, in

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Speaker 3: a government shutdown, any economic effect or market effect is

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Speaker 3: short lived, even during the thirty five day shutdown of

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Speaker 3: twenty eighteen and twenty nineteen.

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Speaker 2: Again, that's for the typical government shutdown. But like we've

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Speaker 2: been saying, this time could be different if the White

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Speaker 2: House follows through on its plan to use the government

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Speaker 2: shutdown as a way to further reduce the federal workforce.

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Speaker 2: If those workers lose their jobs instead of merely being

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Speaker 2: furloughed with back pay, the economic consequences of this government

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Speaker 2: shutdown could have a much bigger impact. This is the

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Speaker 2: Big Take from Bloomberg News. I'm David Gura. To get

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