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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at

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Speaker 1: noon and five pm Eastern on Apple Coarckley and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: All right, there you have it. President Trump on his

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Speaker 2: way to Marine one now and to a much warmer

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Speaker 2: place for the weekend. I'm Joe, Matthew and Washington. Thank

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Speaker 2: you for joining us. If you're just joining on Bloomberg

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Speaker 2: TV and Radio. Balance of Power the Friday edition with

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Speaker 2: a lot of questions as we just heard about Venezuela,

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Speaker 2: about Iran, and yes as well about Greenland with an

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Speaker 2: important congressional, bipartisan and bicameral codell in Denmark today to

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Speaker 2: try to reassure Copenhagen that the US Congress does not

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Speaker 2: have designs on Greenland. President Trump referring to the deal

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Speaker 2: between and China and mister Carney, okay, for him to

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Speaker 2: get a deal with China, he says, it's a good

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Speaker 2: thing for Karney. It's what he should be doing. On

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Speaker 2: his meeting with Karina Machado yesterday, very interesting, as we

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Speaker 2: saw the two only in a photograph. As Machado presented

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Speaker 2: the President of the United States with her Peace Prize medal,

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Speaker 2: he says, we'll be talking again. No reason to use

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Speaker 2: the Insurrection Act meantime, in Minnesota right now, we're going

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Speaker 2: to be spending some time, as I mentioned to you,

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Speaker 2: with Richard Haas from the Council on Foreign Relations, and

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Speaker 2: I want to get back to where we began our

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Speaker 2: conversation with Greenland. Having spent time this week with a

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Speaker 2: Democrat and a Republican in the United States Senate. They're

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Speaker 2: both over there right now, Chris Coons, the Democrat from Delaware,

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Speaker 2: Tom Tillis the Republican from North Carolina. With their reactions

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Speaker 2: to President Trump's designs on Greenland.

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Speaker 3: Listen, one of our most trusted and loyal allies in

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Speaker 3: NATO saying that the future of this alliance that has

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Speaker 3: kept us say and secure and process for eighty years,

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Speaker 3: that is a staggering prospect. So this bipartisan and by

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Speaker 3: cameral delegation is going to present ourselves in Denmark and

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Speaker 3: Copenhagen to say we appreciate you, we value the NATO alliance.

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Speaker 4: I think that an illegal taking of another territory and

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Speaker 4: from a sovereign nation and a member of NATO is

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Speaker 4: just not good advice. And I'm going there to tell

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Speaker 4: them there's at least one branch of government that stands

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Speaker 4: with the NATO Alliance.

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Speaker 2: Joined live now by Richard has the President Emeritis, Council

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Speaker 2: on Foreign Relations, senior counselor centerview partner. It's great to

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Speaker 2: have you back, Richard on Bloomberg TV and Radio. Do

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Speaker 2: you take the President at his word? Is a codell

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Speaker 2: like this necessary?

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Speaker 5: Well, the codel is simply a reaction excuse me, to

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Speaker 5: a policy, and I would describe as unnecessary and misguided.

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Speaker 5: We can get whatever economic and military arrangements we want

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Speaker 5: with Greenland without pressuring them or bulling them, much less

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Speaker 5: with doing something that would essentially transform the United States

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Speaker 5: in the eyes of many, into a rogue actor and

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Speaker 5: undermine NATO. So this seems to me unnecessary. God invented

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Speaker 5: diplomats for a region reason, and the reason is to

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Speaker 5: negotiate special arrangements. Greenland and Denmark are more than willing

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Speaker 5: to do that if we would only meet them halfway.

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Speaker 2: Well, you mentioned the president's policy on this, and I'm

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Speaker 2: not sure, I'm entirely clear on what it is. We've

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Speaker 2: heard that he's interested in potentially buying Greenland, that there

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Speaker 2: might be kind of a half measure in which there's

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Speaker 2: an expanded relationship as opposed to a military invasion. We're

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Speaker 2: not really talking about a NATO member invading another NATO

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Speaker 2: member's territory, are.

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Speaker 5: We I don't think so. The real question is what

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Speaker 5: if Greenland refuses to be bought? What if Denmark refuses

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Speaker 5: to sell? And then the question is what is the

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Speaker 5: United States reaction? What kind of pressure do we apply?

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Speaker 5: And again, I understand the importance of Greenland strategically, economically,

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Speaker 5: we can debate it. But this is this is unnecessary.

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Speaker 5: There's there's lots of ways to get to where we

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Speaker 5: want to get without turning this into a heavy handed

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Speaker 5: what a piece of foreign policy theater. It's just ill

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Speaker 5: advised and it really is unnecessary.

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Speaker 2: Before I bring you to Ron, I'm curious your thoughts

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Speaker 2: just on the domestic politics here to see Republican lawmakers

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Speaker 2: crossing the ocean to reassure Denmark that Congress will not

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Speaker 2: support the president. How significant is this moment?

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Speaker 5: Look, it's always nice to see Republicans rediscovering Article one

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Speaker 5: of the Constitution, and that Congress has a role to play.

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Speaker 5: That said President's not just this president, but every president

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Speaker 5: enjoys enormous latitude and leeway and discretion when it comes

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Speaker 5: to the making of foreign policy. So it's again, I

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Speaker 5: appreciate the trip. I think it sends a useful signal

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Speaker 5: that of support for NATO and for a proper relationship.

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Speaker 5: But again, the president is basically the one who has

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Speaker 5: the lion's share of the influence on decision.

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Speaker 2: More happy talk strangely about Iran in the driveway just now,

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Speaker 2: Richard has President Trump saying that he greatly respects Iran's

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Speaker 2: decision to not execute anti government protesters, knowing that more

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Speaker 2: than three thy four hundred have been killed already. We

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Speaker 2: heard from Press Secretary Caroline Levitt on the president's decision

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Speaker 2: to slow roll any potential strikes. Here's what she said.

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Speaker 6: The President and his team have communicated to the Iranian

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Speaker 6: regime that if the killing continues, there will be grave consequences.

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Speaker 6: And the President received a message, as he revealed to

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Speaker 6: all of you in the whole world yesterday, that the

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Speaker 6: killing and the executions will stop. And the President understands

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Speaker 6: today that eight hundred executions that were scheduled and supposed

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Speaker 6: to take place yesterday were halted, and so the president

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Speaker 6: and his team are closely monitoring this situation.

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Speaker 2: Are we to believe, Richard, that the President of the

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Speaker 2: United States is actually affecting outcomes right now in Iran?

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Speaker 2: And do you buy this softer rhetoric. Well, military options

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Speaker 2: remain on the table. Well a couple of things.

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Speaker 5: It's possible that the Iranians have backed off doing the

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Speaker 5: public executions, but as you've pointed out, they've killed thousands

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Speaker 5: of people since this president first threatened them with consequences

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Speaker 5: if they went ahead and did it. Second of all,

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Speaker 5: for all we know these people are incarcerated. For all

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Speaker 5: we know they're going to be killed. I don't see

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Speaker 5: any change in the behavior of the Iranian regime. I

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Speaker 5: think the administration can't quite figure out what its policy is.

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Speaker 5: It got very forward on its skis with its rhetoric.

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Speaker 5: It didn't deliver, it didn't back up its words, and

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Speaker 5: arguably it shouldn't. It never should have said those things

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Speaker 5: in the first place. We can't use military force to

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Speaker 5: bring about a change of regime in Iran. We can't

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Speaker 5: use military force to protect individual Iranians protesting the regime.

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Speaker 5: So I really think the administration needs to take a

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Speaker 5: step back and come up with a sustainable policy to

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Speaker 5: try to bring about changing on its nuclear program, at

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Speaker 5: support for proxy groups, on how it treats its own people,

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Speaker 5: and there ought to be a more patient discipline program.

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Speaker 5: But we're not going to bring about regime change in

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Speaker 5: an afternoon, even if we were to attack them. Iron

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Speaker 5: simply has too many people in place. You want to

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Speaker 5: sustain this system.

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Speaker 2: You write in an op ed in the Financial Times.

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Speaker 2: Two things can be true. At the same time. The

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Speaker 2: Iranian regime is closer to collapse now than at any

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Speaker 2: time since the nineteen seventy nine revolution, which is quite

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Speaker 2: a statement to hear from you. Yet it is still

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Speaker 2: not on the brink of collapsing. And this was suggested

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Speaker 2: as one of the reasons why President Trump decided not

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Speaker 2: to move, that the military options on the table were

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Speaker 2: not convincing enough that it would in fact topple the regime.

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Speaker 2: We've got an aircraft carrier on the way right now,

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Speaker 2: it's probably two weeks out if reports are right. This

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Speaker 2: is the USS Lincoln that's on its way to the

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Speaker 2: Mediterranean is that when something happens.

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Speaker 5: But again, we could shoot off, you know, p hismissiles,

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Speaker 5: we could send in some planes, but that's not going

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Speaker 5: to bring about regime change. Regime chains takes sustained effort.

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Speaker 5: It's got to be a situation that is incredibly brittle,

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Speaker 5: and then you've got to follow it up. As bad

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Speaker 5: as the situation is in Iran, why does anyone assume

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Speaker 5: that a successor situation would be so much better? Maybe

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Speaker 5: the bad guys would have even more power at that point.

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Speaker 5: And you know, and I know Joe, that this administration,

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Speaker 5: which wasn't prepared to get involved in Venezuela in a

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Speaker 5: serious way, is not going to get involved in a

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Speaker 5: country of more than ninety million people. Yeah, that would

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Speaker 5: make a Rock or Afghanistan look like a cakewalk by comparison.

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Speaker 5: So I don't think we're really in a position to

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Speaker 5: promote regime change directly with military force. The real question

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Speaker 5: is using economic tools and the like, whether we can

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Speaker 5: move or on in a direction that we want to see.

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Speaker 2: Well, even with all the things we're talking about here,

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Speaker 2: President Trump's got a Nobel Peace Prize. I guess hanging

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Speaker 2: on the Wall in the Oval Office. Do we look

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Speaker 2: at this as Donald Trump's peace Prize? Now nobody looks

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Speaker 2: at it that way.

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Speaker 5: More important, I think the leader of the Venezuelan opposition,

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Speaker 5: I think she was hoping to play Donald Trump by

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Speaker 5: offering him the Peace Prize, she would get a Goshi.

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Speaker 2: Instead, she got played.

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Speaker 5: The opposition still has no role in the future of Venezuela.

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Speaker 2: That's great to have you with us again, Richard. Thank you,

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Speaker 2: Richard Haass Council on Foreign Relations with a voice of

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Speaker 2: experience and insight that we can only bring it here

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Speaker 2: on Bloomberg. We'll assemble our political panel next, stay with

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Speaker 2: us on Balance of Power. We'll have much more coming

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Speaker 2: up after this.

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Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

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Speaker 1: us live weekdays at noon and five pm Eastern on

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Speaker 1: flagship New York station Just Say Alexa played Bloomberg eleven thirty.

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Speaker 2: We've been spending some time talking about some of the

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Speaker 2: populist ideas coming out of the White House with regard

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Speaker 2: to the economy affordability. Even though the President doesn't like

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Speaker 2: to use that word. Pick the one you want. Inflation

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Speaker 2: costs prices, they clearly need to come down, and that

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Speaker 2: could be through healthcare legislation, it could be through any

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Speaker 2: number of things, including what the President's up to today,

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Speaker 2: trying to lower your electricity bills, because the polling data

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Speaker 2: shows people are very concerned about this, just like they

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Speaker 2: were in the election that brought Donald Trump back to

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Speaker 2: the White House. There's some interesting private polling data as

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Speaker 2: well today that Axios is reporting on that we're going

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Speaker 2: to talk about for a little bit with our political

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Speaker 2: panel here. As President Trump's team has recently reviewed private

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Speaker 2: Republican polling that shows support for his immigration policies falling.

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Speaker 2: And when we say immigration, we should probably be more specific.

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Speaker 2: People have enormous support for security at the border, for

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Speaker 2: closing the border. It's the ice raids that we've been seeing,

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Speaker 2: and these numbers were taken before the fatal shooting in

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Speaker 2: Minneapolis that have caused great consternation here. To the degree

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Speaker 2: that they support a more constrained approach is what we're

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Speaker 2: talking about here, and the erosion specifically among independence is

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Speaker 2: something that the White House is concerned about. Should there

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Speaker 2: be a new approach. We talked about this with Republican

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Speaker 2: Congresswoman Nicole Malia Takis of New York yesterday, remembering she

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Speaker 2: turns to the border every time we speak with her,

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Speaker 2: and certainly did during the campaign. Is her number one issue.

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Speaker 2: Here's what she said yesterday.

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Speaker 7: We also see that there are areas where they've gone

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Speaker 7: too far, and we've had a real discussion about this

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Speaker 7: with the Speaker and with the White House because we

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Speaker 7: want to see some type of balance here, right. I

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Speaker 7: think that's what the American people want. So you secure

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Speaker 7: the border, you're deporting the criminals. But when it comes

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Speaker 7: to these raids, I think they are problematic. But I

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Speaker 7: think the other issue is that the municipalities are not

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Speaker 7: cooperating to deport those criminals.

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Speaker 2: This is where we start with our political panel, and

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Speaker 2: we've got a great one for you today. Bloomberg Politics

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Speaker 2: contributor Jeanie Shanzeno is with US Democracy visiting fellow at

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Speaker 2: Harvard Kennedy School's Ash Center, alongside Republican strategist Sarah Chamberlain,

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Speaker 2: of course, Republican Main Street Partnership President, and it's great

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Speaker 2: to have you both with us on a Friday Sarah,

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Speaker 2: I'm going to start with you as our Republican here.

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Speaker 2: What was found in the polling and the research was

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Speaker 2: a rupturing of the coalition of independent, moderate and minority

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Speaker 2: voters who really came together in a way almost to

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Speaker 2: redefine the map for President Trump. What do you think

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Speaker 2: of the comments from the congresswoman and how do they

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Speaker 2: align with the priorities at the Main Street Partnership.

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Speaker 8: So the congressman when she talked about she's had these meetings,

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Speaker 8: a group of had these meetings with the speaker, Well,

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Speaker 8: I've been in those meetings, so it's been very interesting

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Speaker 8: they are going on.

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Speaker 2: There's a lot of nervousness, concern.

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Speaker 8: We are happened in Minnesota is a great tragedy, there's

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Speaker 8: no doubt about that.

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Speaker 2: Nobody questions that.

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Speaker 8: But we are capturing criminals, but we're not talking about it.

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Speaker 8: We need to start saying, you know, nineteen thousand rapists

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Speaker 8: have been removed, you know, ten thousand killers like whatever

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Speaker 8: that is, gang members, but you're not seeing any of

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Speaker 8: that of those statistics out there. So we're pushing the

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Speaker 8: White House to please try to get the statistics out

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Speaker 8: there so people understand we're just not tackling you know,

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Speaker 8: women and daycare centers. Yes, you know, we're actually going

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Speaker 8: for the real criminals and getting them out of our country.

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Speaker 2: So is this the communications or messaging issue only, or

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Speaker 2: is it also the way ICE is comporting itself. I mean,

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Speaker 2: we're we're seeing this daily barrage of videos of breaking windows,

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Speaker 2: pulling people outside of their cars or their homes or

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Speaker 2: whatever is you described. In many cases they're not criminals.

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Speaker 2: Do we need a different method on the ground we

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Speaker 2: need we need a little change.

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Speaker 8: Yes, we need to talk about the numbers.

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Speaker 2: If you're breaking the.

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Speaker 8: Window of a criminal, I don't think in America would care.

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Speaker 8: We need to emphasize, okay, this person, we broke this

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Speaker 8: one because he's a gang member.

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Speaker 2: Sure, not just somebody that needs to be deported. Sweeping

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Speaker 2: up mess Yes.

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Speaker 8: We need to tone that down and concentrate on the criminals,

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Speaker 8: because that is what this group voted for. They voted

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Speaker 8: for the border shot, which we've done, and they voted

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Speaker 8: for the criminals to be removed from our country. Sure

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Speaker 8: that we're doing, but we're not talking about it enough,

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Speaker 8: and we need to stop going after people that yes

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Speaker 8: they've broken the law, but there are other priorities.

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Speaker 2: Yeah, well, this has become its own issue on Capitol Hill,

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Speaker 2: and Genie, we've talked about this when it comes to

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Speaker 2: the funding debate and exactly what Democrats will be able

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Speaker 2: to do to affect funding for DHS, for the Department

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Speaker 2: of Homeland Security. And there are some different ideas including

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Speaker 2: I guess there's a compromise bill now that's getting some attention.

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Speaker 2: We'll ask Sarah about this as well, to have ice

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Speaker 2: agents where body cams. How far should Democrats push this

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Speaker 2: when it comes to a funding issue.

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Speaker 9: You know, I think Democrats will push it quite far

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Speaker 9: as these pictures continue to pour out of the Midwest.

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Speaker 9: But I think this, you know, immigration is one critically

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Speaker 9: important issue that Donald Trump ran and went on.

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Speaker 10: So is the economy.

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Speaker 9: These polls showed that in both of those areas he

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Speaker 9: is underwater. It's not concerning when he's underwater with Democrats,

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Speaker 9: but the independence and moderates matter an awful lot and

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Speaker 9: he is suffering there.

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Speaker 10: And what the American.

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Speaker 9: Public is seeing is chaos coming out of this White House.

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Speaker 10: And I think this comes down.

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Speaker 9: To something that we see with a lot of administrations,

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Speaker 9: which is an overreading of a mandate to your point.

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Speaker 9: In Sarah's point, when the president ran and won on immigration,

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Speaker 9: it was about border security that he has done very well.

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Speaker 10: He gets very high marks for that.

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Speaker 9: Where this starts to fall off the raptors for most

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Speaker 9: people is you see a militarized Minneapolis. You see ice

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Speaker 9: agents and masks, all of these things. When the president

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Speaker 9: is losing Joe Rogan, that is a problem. People in

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Speaker 9: the United States don't feel like they want to be

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Speaker 9: carrying around their papers and showing them to federal agents.

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Speaker 10: But it's not just immigration.

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Speaker 9: It is chaos from Doze, it is chaos from Liberation Day.

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Speaker 9: The list goes on and on, and the American public

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Speaker 9: as they look at Venezuela, look at around and elsewhere,

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Speaker 9: are scratching their heads and saying, what does all this

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Speaker 9: chaos have to do with me being able to afford groceries,

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Speaker 9: pay my energy bills? And that is what Democrats need

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Speaker 9: to focus on. So to me, it is all about affordability.

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Speaker 9: The immigration stuff lays into that because of the chaos

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Speaker 9: that has erupted and kept the president from focusing on

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Speaker 9: what he should be doing, which is making our lives

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Speaker 9: more affordable.

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Speaker 2: I'm curious to hear from you, Sarah on this potential

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Speaker 2: legislative solution here. This is the House Republican offer to

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Speaker 2: the Senate. You were in the room, I'm guessing when

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Speaker 2: this happened. Just bill, as I mentioned, would order the

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Speaker 2: Department to fund body cameras for Immigration enforcement agents, but

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Speaker 2: there would also be training on de escalation. This is

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Speaker 2: something the partnership supports.

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Speaker 8: Most of the members do they want to a little

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Speaker 8: more details, but yes, I mean, if you saw the

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Speaker 8: latest some of the ice they were not properly trained.

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Speaker 8: They have to going back now and catching them and

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Speaker 8: training them, so that helps. I think the body cams

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Speaker 8: are great, especially after the tragedy and the other thing.

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Speaker 8: The main street members looking as like maybe you don't

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Speaker 8: have to wear masks, Like maybe you can walk up

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Speaker 8: and you identify yourself and talk with the people without

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Speaker 8: having a mask on and scaring them. So these are

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Speaker 8: changes that we're hoping we'll work through, and we think

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Speaker 8: the American.

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Speaker 2: People we have cooperative, very cooper. Yeah, yeah, absolutely, Genie,

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Speaker 2: what do you think of this idea that the masking

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Speaker 2: issue alone is a huge one. Wouldn't that make a

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Speaker 2: big difference?

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Speaker 10: It absolutely would.

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Speaker 9: That has been a huge issue It has been brought

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Speaker 9: up over and over again. When police approach us on

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Speaker 9: the streets, people can ask for numbers, they can see

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Speaker 9: their faces. That would certainly go a long way. And

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Speaker 9: I think this gets back to something actually that Donald

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Speaker 9: Trump has talked about, which is execution of policy matters,

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Speaker 9: training matters. You know, Donald Trump too wanted to withdraw

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Speaker 9: troops from Afghanistan, but criticized Joe Biden for the way

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Speaker 9: in which he executed that.

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Speaker 10: The same thing goes here.

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Speaker 9: The American public want to have immigration addressed, but they

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Speaker 9: want it done in a way that makes sense, that

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Speaker 9: is constitutional, that is keeping in line with our principles,

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Speaker 9: and done by responsible, well trained public officials. So that's

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Speaker 9: what the President needs to focus on when it comes

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Speaker 9: to this. And I said to you before, Joe, and

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Speaker 9: I'll say it again. I think Christy Noan presents him

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Speaker 9: with a real problem. And I know she has an

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Speaker 9: intent to run in twenty eight, but I would suggest

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Speaker 9: that she may be one who takes a fall on

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Speaker 9: this and not Steven Miller as much.

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Speaker 2: Wow. Interesting the tip sheets can't seem to get enough

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Speaker 2: for that story here. You know, It's interesting, Sarah, this

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Speaker 2: was such a big issue. On the campaign trail, this

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Speaker 2: was constantly in competition with the economy, immigration, economy that

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Speaker 2: led voters to make their decisions. Will that be the

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Speaker 2: case on the midterm campaign cycle as well.

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Speaker 8: I think now that the border is closed, as long

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Speaker 8: as we can fix the ISA, you know, tweak it

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Speaker 8: a little bit, it's all going to come down to

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Speaker 8: the economy main keybo. Yeah, it's affordability. People vote their pocketbooks,

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Speaker 8: They vote their budgets. Their groceries are so expensive when

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Speaker 8: you go to the grocery store, I mean ACI, Now

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Speaker 8: that's inspired it costs more money for your Yeah. So

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Speaker 8: there's a lot of issues around around affordability that I

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Speaker 8: think was going to be decide the election.

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Speaker 2: We're going to talk a lot more about the ACA

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Speaker 2: matter in our second hour, and I'm very curious to

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Speaker 2: hear from you on where you think we are. A

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Speaker 2: lot of folks seem to think this thing is blown

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Speaker 2: up for now, check back next year. But with regard

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Speaker 2: to the economy and the some of the ideas the

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Speaker 2: President's putting forth have given some Republicans some heartburn. Capping

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Speaker 2: interest rates on credit cards, telling companies what to do

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Speaker 2: when it comes to dividends, and buybacks. There are more

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Speaker 2: worthies came from banning institutional buyers from the housing market.

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Speaker 2: Does the Main Street Partnership feel aligned with what many

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Speaker 2: see as populous progressive ideas.

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Speaker 8: They want to know more information that came up in

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Speaker 8: the discussions, like we're actually agreeing with Elizabeth Warren here,

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Speaker 8: that's a little.

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Speaker 2: Makes them a little nervous.

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Speaker 8: And I realized, like, really, in capping at ten percent,

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Speaker 8: is it going to take people who they can't they

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Speaker 8: can't get loans, you know, I mean it could really

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Speaker 8: crush especially the lower income people or the people trying

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Speaker 8: to start businesses. They won't get access to capital.

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Speaker 2: So that's a problem.

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Speaker 8: So we the members really want to know more information,

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Speaker 8: like what are we talking about and moving forward? But

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Speaker 8: I think ten percent is not realistic. I think it

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Speaker 8: could be fifteen, maybe twenty percent. They're comfortable with a cap,

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Speaker 8: but maybe a little larger one ten ten as little.

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Speaker 2: Sounds like this room for negotiation here is there's.

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Speaker 8: There's discussion happening, a very good discussion. No one's yelling

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Speaker 8: at each other, just like, Okay, these are good ideas.

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Speaker 8: Let's let's keep talking them through and see if we

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Speaker 8: can come up with the compromise.

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Speaker 2: You know, the President's got a new one today, Genie,

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Speaker 2: because we're going to get much more into the funding debate,

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Speaker 2: as I mentioned in our next hour, allowing people to

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Speaker 2: tap their four to oh one case savings to generate

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Speaker 2: a down payment on a home. I don't know how

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Speaker 2: fidelity is going to feel about this, but would it work?

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Speaker 10: Yeah, I can guess how they're going to feel about it.

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Speaker 7: You know.

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Speaker 9: I think it is part and personal of like a

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Speaker 9: whole bevy of populist ideas that he's thrown out there.

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Speaker 9: I think one of the problems about all of this

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Speaker 9: is the messaging coming from the President himself. On the

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Speaker 9: one hand, he says this week that there's no inflation,

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Speaker 9: he gives himself a triple a plus for the economy.

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Speaker 9: He says affordability is a hoax. Then why is he

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Speaker 9: throwing out one after the other of these populist proposals.

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Speaker 9: Why is he telling people not to pay for more,

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Speaker 9: not to get.

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Speaker 10: As much dolls?

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Speaker 9: Why does he have you know, this agriculture sect Kerry

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Speaker 9: talking about depression era meals for three dollars. So you

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Speaker 9: had these messages coming out of the White House on

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Speaker 9: the economy that make no sense. The American public know

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Speaker 9: how they feel about the economy. It is not working

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Speaker 9: for them. He is underwater on that and he needs

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Speaker 9: to take people where they're at as opposed to trying

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Speaker 9: to tell him it is great. And oh, by the way,

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Speaker 9: don't buy as many dollars and get your three dollars

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Speaker 9: affordability meal.

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Speaker 2: Three dollars meal is a riot. Just thirty seconds left.

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Speaker 2: Sounds like it's time for a State of the Union address.

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Speaker 8: Be very interesting one this pecond.

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Speaker 2: I can't even imagine. Stay with us on Balance of Power.

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Speaker 2: We'll have much more coming up after this.

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Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

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Speaker 1: us live weekdays at noon and five pm Eastern on Appa, Cocklay,

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Speaker 1: and Android Auto with the Bloomberg Business App. Listen on

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Speaker 1: demand wherever you get your podcasts, or watch us live

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Speaker 1: on YouTube.

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Speaker 2: As we always say on Friday's Charlie, it has been

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Speaker 2: a week. Can you imagine it was this week? We

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Speaker 2: heard about the J. Powell investigation. That was on Monday.

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Speaker 2: Washington woke up to the news, then Wall Street woke

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Speaker 2: up to the news, and everybody said, what's going on here?

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Speaker 2: The DOJ criminal investigation. The President said he knew nothing

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Speaker 2: about that. Wall Street has so far had an enormous

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Speaker 2: amount of patience with not so much in Congress, where

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Speaker 2: Democrats and Republicans have stood up to defend the FED

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Speaker 2: share in the face of a possible criminal indictment. David

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Speaker 2: Weston talks about this and more on this week's edition

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Speaker 2: of Bloomberg Wall Street Week, sitting down with Bill Dudley

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Speaker 2: as a matter of fact, to get his take on

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Speaker 2: of the former New York Fed President Bloomberg contributor not

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Speaker 2: only about the investigation into Powell, but actually what goes

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Speaker 2: on inside the FOMC meeting. Let's listen.

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Speaker 11: As I understood the chair, he was saying, you're accusing

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Speaker 11: us in order to have influence over our minds acolity exactly.

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Speaker 2: He said pretext.

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Speaker 12: So I think the key word in his statement was

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Speaker 12: this is a pretext because this is a way of

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Speaker 12: putting pressure on me to lower interest rates and I'm

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Speaker 12: not having.

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Speaker 11: It, which takes us into the room as it were

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Speaker 11: for the FMC when they're voting.

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Speaker 2: And how it really works.

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Speaker 11: I mean, you've been in the room and whenever we

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Speaker 11: ask somebody who's on the Fed they say, oh no, no,

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Speaker 11: we pay no attention to politics. Absolutely not. Doesn't affect us.

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Speaker 11: But you are human beings. I mean, it must play

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Speaker 11: in the back of your mind somewhere, even if it's

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Speaker 11: not discussed in the meeting.

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Speaker 12: Well, if you know, you can look at the federals

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Speaker 12: or transcripts of all the FMC meetings release lag of

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Speaker 12: five years and you won't see any discussion about political consideration.

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Speaker 12: So I think that's actually true. But you know, you're

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Speaker 12: certainly right in the sense that if the administration is

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Speaker 12: putting tremendous pressure on the FED to do something, that

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Speaker 12: makes it a little bit more difficult for the FED

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Speaker 12: to deliver what the administration actually wants because it creates

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Speaker 12: the idea of are they doing it because they think

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Speaker 12: this is appropriate for the economy, or are they caving

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Speaker 12: to the administration's pressure.

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Speaker 11: Us inside the room when the FONC meets, because historically

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Speaker 11: it's sort of been like secret, we don't know what's

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Speaker 11: going on.

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Speaker 12: You have the transcripts, and I think thescripts tramp trips

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Speaker 12: are pretty accurate about what the meetings are like. You know,

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Speaker 12: basically what happens at a meeting is typically you have

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Speaker 12: a briefing from from the from the system open manager

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Speaker 12: about what's going on in markets. Then you have a

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Speaker 12: briefing from on the economy from the staff, and then

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Speaker 12: briefing on international staff. And then you have a go

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Speaker 12: around and everyone talks about their views on the economic outlook.

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Speaker 12: And then at every meeting you also have the same

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Speaker 12: thing happened on ENTREPI staff presents here's the options, and

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Speaker 12: then people talk about their views on Montrepols. Then sometimes

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Speaker 12: there's a special topic, so there's a third thing that

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Speaker 12: they take up and discuss, like maybe you know, the

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Speaker 12: balance sheet for example, or financial stability risks for example.

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Speaker 2: But it's a pretty collegial place.

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Speaker 12: I mean, you know, if you you know, people want

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Speaker 12: to understand the views of others. People aren't yelling and

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Speaker 12: screaming and arguing, you know, vociferously. It's it's very respectful

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Speaker 12: and you know, people spend you know, quite a bit

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Speaker 12: of time, you know, when the meeting's not in place

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Speaker 12: actually you know, you know, talking in the halls at coffee,

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Speaker 12: you know, having a cup of coffee on the break

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Speaker 12: or at the breakfast or lunch. So I would say,

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Speaker 12: you know, I find it to be quite collegial, you know,

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Speaker 12: And I think that's and I think that makes the

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Speaker 12: institution function better a.

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Speaker 11: Collegiate place where one in Lisa Cook and now two

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Speaker 11: in the chair J Powell, are under very public attack,

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Speaker 11: a personal attack, and I think.

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Speaker 12: People are feeling there, you know, that could be me.

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Speaker 12: So I think, you know, there's quite a bit of

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Speaker 12: sympathy for what those two people are going through. So

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Speaker 12: I think, yeah, I think the Federal Reserve leadership, you know,

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Speaker 12: including you know, all the f O and C participants

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Speaker 12: are pretty you are very sympathetic to where Paul's coming from.

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Speaker 12: And I think they feel really good about what he

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Speaker 12: did and said it had to say in his his

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Speaker 12: video message this past weekend.

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Speaker 2: A lot more where that came from. And you can

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Speaker 2: watch or listen to the full conversation with former New

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Speaker 2: York Fed President Bill Dudley on the new edition of

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Speaker 2: Bloomberg Wall Street Week with our colleague David Weston. That's

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Speaker 2: at six pm Wall Street Time here on Bloomberg TV

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Speaker 2: and Radio. Really interesting to hear what goes on in

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Speaker 2: that room. So they don't burn incense, there's no closing prayer.

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Speaker 2: It's where we start our conversation with Katie Richards, as

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Speaker 2: we mentioned with us in studio today, senior strategic advisor

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Speaker 2: at the Groundwork Collaborative, former official director of the State

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Speaker 2: Local Fiscal Recovery Funds at the US Department of the

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Speaker 2: Treasury and the Biden administration. Kitty, I hope years going well.

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Speaker 2: Great to see you, Great to see you.

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Speaker 13: Thanks for having me.

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Speaker 2: You ever want to be in the room for one

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Speaker 2: of these meetings to see what actually goes on.

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Speaker 13: I mean, it'd be fascinating, give you a fly on

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Speaker 13: the wall, right especially they're full of really competent staff.

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Speaker 13: As he was saying, yeah, so you know, I think

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Speaker 13: it's a really interesting place to learn a lot about

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Speaker 13: what's going on in the economy.

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Speaker 2: Suld say so, and criminal investigations in the situation, it

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Speaker 2: was really amazing to sit here and think just now.

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Speaker 2: That was only on Monday when we learned about this

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Speaker 2: investigation into j Powell. He's been getting pretty high remarks

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Speaker 2: in the way he's handling this politically. Are you surprised

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Speaker 2: that the market from a financial standpoint is so calm?

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Speaker 13: I am, unfortunately not surprised anymore, because this is a

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Speaker 13: pattern that we've seen the Trump administration.

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Speaker 10: But I think it's.

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Speaker 13: A really big problem. When you think about FED independence,

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Speaker 13: it can sound very dry and esoteric, and then we

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Speaker 13: look at the market and CEO there isn't really much

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Speaker 13: of a reaction. But unfortunately this is the kind of

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Speaker 13: thing that can have really far reaching implications, and sometimes

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Speaker 13: it can be kind of nothing, nothing, nothing, and then

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Speaker 13: all at once. And I see the investigation into the

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Speaker 13: FED chair as part of a piece of the firing

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Speaker 13: of Lisa Cook, which we're going to be getting more

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Speaker 13: information from the Supreme Court on soon, and also with

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Speaker 13: some of the other kind of more shocking moves at

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Speaker 13: the President is making, announcing that tariff policy might be

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Speaker 13: set in order to encourage our European allies to allow

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Speaker 13: us to annex sovereign territory from another country. These are

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Speaker 13: really the kinds of things that we don't expect to

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Speaker 13: happen in a place like the United States. And it's

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Speaker 13: not that it's going to drive mortgage rates up tomorrow,

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Speaker 13: but the tail risk on this kind of behavior and

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Speaker 13: people really losing confidence in the robustness of the American

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Speaker 13: economy and our status as a safe place to invest

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Speaker 13: are very very large. And I really think that it's

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Speaker 13: important to think about how something like losing our status

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Speaker 13: as reserve currency for many countries and losing our status

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Speaker 13: as the place where money runs to when there's any

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Speaker 13: uncertainty could impact our ability. I need to fund really

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Speaker 13: important things through the government, our ability for people to

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Speaker 13: get those mortgages at reasonable prices. You know, the United

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Speaker 13: States has had very low bargaining costs or very low

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Speaker 13: borrowing costs for decades now, partly because of our status

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Speaker 13: in the world, and if we lose that, it's going

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Speaker 13: to cost the government and the American people real money.

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Speaker 2: You know who wait in on the argument over FED

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Speaker 2: independence was Jamie Dimon, of course. JP Morgan spoke to

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Speaker 2: David Rubinstein on Bloomberg yesterday in New York. Listen to

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Speaker 2: what he said.

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Speaker 14: Everyone I know, including the Presidentized Dates, says we need

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Speaker 14: an independent FED board. Most people I know, including the

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Speaker 14: Presidentized Dates, speak up about their opinion, which they're free

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Speaker 14: to do. Some say more aggressively than others.

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Speaker 2: That's their right.

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Speaker 14: The question is only about when certain things take place,

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Speaker 14: and think of lawsuits and stuff like that, does it

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Speaker 14: chip away at that independence? So some spectrum, so you

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Speaker 14: can say a little bit, you you a lot, but

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Speaker 14: you don't want to ship away too much because if

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Speaker 14: you ship away too much, in my view, is in

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Speaker 14: my opinion, it will drive rates higher, not lower.

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Speaker 2: That's all really seen that to some extent already, haven't we.

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Speaker 13: That's right, And it's a combination of as mister Diamond

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Speaker 13: was saying, the sort of like you get a little

607
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Speaker 13: bit here, a little bit there, drip drip drip rates

608
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Speaker 13: go up a bit. Some of that is about just

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Speaker 13: the question of the Fed's ability to control what's going

610
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Speaker 13: on with interest rates, right, because one of the things

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Speaker 13: the Fed does is provide confidence to investors that they're

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Speaker 13: going to, for example, get inflation under control, and that

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Speaker 13: makes investors think, oh, we can demand a little bit

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Speaker 13: lower interest rate.

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Speaker 10: The Fed's got it under control.

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Speaker 13: That kind of confidence can have those small but meaningful effects,

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Speaker 13: and over time, as that erodes, you have problems. And

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Speaker 13: then there's a bigger question of what if we really

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Speaker 13: squander the goodwill of nations all across the world and

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Speaker 13: start to look like a place that is not safe

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Speaker 13: for investment. And that's something that I never would have

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Speaker 13: thought that you and I would be talking about. But

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Speaker 13: some of these moves are really scary.

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Speaker 2: So I want to ask you about some of the

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Speaker 2: proposals that the President has put out in the name

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Speaker 2: of affordability, because if interest rates aren't dropping, the President

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Speaker 2: says prices are and have already begun falling. We see,

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Speaker 2: of course, different things at the grocery store and in

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Speaker 2: different elements of the economy here, but some of the

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Speaker 2: more recent proposals he's put out, and we're going to

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Speaker 2: hear about this, I guess next week at Davos, for instance,

632
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Speaker 2: tapping four oh one k's to make a down payment

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Speaker 2: on a home, banning institutional buyers from the housing market,

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Speaker 2: both of those to loosen housing or I guess, lower prices,

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Speaker 2: although it could also raise prices if you increase demand

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Speaker 2: but not supply. But other things like happing interest rates

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Speaker 2: on credit cards that we've heard the President put forth,

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Speaker 2: stopping defense contractors from using taxpayer dollars to pay out dividends.

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Speaker 2: None of these are associated with conservative politics, but would

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Speaker 2: they work?

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Speaker 13: So I think I'd like to put some of these

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Speaker 13: in a few different buckets. But you know, to talk

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Speaker 13: about capping credit card interest rates and getting private equity

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Speaker 13: out of the housing market, those are things that you're right,

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Speaker 13: They don't come out of conservative politics. They actually come

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Speaker 13: out of progressive think tanks and places like the place

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Speaker 13: that I work.

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Speaker 2: You were.

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Speaker 13: You know, when I hear those things coming from Donald Trump,

650
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Speaker 13: what I want to do is look at the actual

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Speaker 13: record of his administration, because right now we're talking about

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Speaker 13: truth social posts, not policy moving through Congress. And you know,

653
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Speaker 13: on things like credit card interest rates, what is actually

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Speaker 13: going on with the regulation of banks? What is his

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Speaker 13: administration actually doing about private equity? And the answer is

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Speaker 13: they're sort of opening up the store and saying, you know,

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Speaker 13: we're going to allow mergers to go through that are

658
00:34:08,440 --> 00:34:13,120
Speaker 13: going to raise costs for people. We're deregulating every market

659
00:34:13,160 --> 00:34:16,319
Speaker 13: that we can get our hands on. So, you know,

660
00:34:16,440 --> 00:34:20,120
Speaker 13: I would be fascinated to see the president actually.

661
00:34:19,719 --> 00:34:23,759
Speaker 2: Push a legislative proposal. He's got legislation to do this

662
00:34:23,960 --> 00:34:27,359
Speaker 2: very interest rate capping idea when it comes to credit cards.

663
00:34:27,400 --> 00:34:30,080
Speaker 2: He was on the phone with Elizabeth Warren talking about

664
00:34:30,080 --> 00:34:32,799
Speaker 2: this the other day. That doesn't mean they're going to pass, right,

665
00:34:33,200 --> 00:34:36,560
Speaker 2: but it also reminds us of the struggle that this administration,

666
00:34:36,719 --> 00:34:38,640
Speaker 2: like the last one, is having lowering prices.

667
00:34:38,800 --> 00:34:41,359
Speaker 13: That's right, and you know, I did want to talk

668
00:34:41,400 --> 00:34:43,359
Speaker 13: a little bit about tapping into four oh one case

669
00:34:43,400 --> 00:34:46,040
Speaker 13: for housing. Well, I think it's a really great example

670
00:34:46,120 --> 00:34:50,359
Speaker 13: of something that's going to be really appealing to the

671
00:34:50,680 --> 00:34:53,839
Speaker 13: small number of people in this country who have enough

672
00:34:53,840 --> 00:34:55,480
Speaker 13: in a four oh one K for a down payment

673
00:34:55,520 --> 00:34:59,320
Speaker 13: on a house and otherwise can't afford to purchase a house.

674
00:34:59,640 --> 00:35:02,760
Speaker 13: That is a an extraordinarily small set of people, because

675
00:35:03,880 --> 00:35:08,359
Speaker 13: only about half of working Americans even participate in an

676
00:35:08,400 --> 00:35:15,920
Speaker 13: employer sponsored retirement plan. Among those, the balances for people

677
00:35:16,000 --> 00:35:18,280
Speaker 13: who are in the kind of first time home buyer

678
00:35:18,800 --> 00:35:23,680
Speaker 13: stage of life tend to be very low. And the

679
00:35:23,719 --> 00:35:26,800
Speaker 13: people who really really benefit from four oh one k's

680
00:35:27,400 --> 00:35:31,400
Speaker 13: are people who are high income, where the tax benefit

681
00:35:31,760 --> 00:35:35,359
Speaker 13: is a really big benefit to them, and who have

682
00:35:35,440 --> 00:35:37,319
Speaker 13: a lot of extra money lying around that they're not

683
00:35:37,440 --> 00:35:40,040
Speaker 13: using to make bills that they can then put into

684
00:35:40,080 --> 00:35:42,520
Speaker 13: a four oh one K and get that tax benefit.

685
00:35:42,920 --> 00:35:47,120
Speaker 13: And so for those people who are already wealthy, it's

686
00:35:47,160 --> 00:35:49,319
Speaker 13: going to be fantastic to be able to withdraw some

687
00:35:49,400 --> 00:35:52,480
Speaker 13: money tax free from a tax preferred account and invest

688
00:35:52,480 --> 00:35:56,040
Speaker 13: it in a housing asset that then when you sell it,

689
00:35:56,040 --> 00:35:58,800
Speaker 13: it's your primary residence, so you get five hundred thousand

690
00:35:58,800 --> 00:36:02,359
Speaker 13: cap gains tax free. But for a person who is

691
00:36:02,880 --> 00:36:06,960
Speaker 13: struggling to make rent every week and working in a

692
00:36:07,040 --> 00:36:10,680
Speaker 13: you know, middle wage job, like a working class person,

693
00:36:11,239 --> 00:36:13,000
Speaker 13: this isn't going to help them afford to buy their

694
00:36:13,040 --> 00:36:13,359
Speaker 13: first hand.

695
00:36:13,440 --> 00:36:16,880
Speaker 2: Really interesting, boy, We've learned a lot, as always from

696
00:36:17,000 --> 00:36:19,840
Speaker 2: Kitty Richards. None of these ideas do anything to increase

697
00:36:19,880 --> 00:36:22,240
Speaker 2: the supply of housing as well, which we can note

698
00:36:22,320 --> 00:36:25,879
Speaker 2: from the Groundwork Collaborative. Many thanks Kitty for comparing notes

699
00:36:25,880 --> 00:36:28,040
Speaker 2: with us here. Stay with us on Balance of Power.

700
00:36:28,080 --> 00:36:29,839
Speaker 2: We'll have much more coming up after this.

701
00:36:34,120 --> 00:36:37,600
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

702
00:36:37,680 --> 00:36:40,759
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703
00:36:40,840 --> 00:36:44,080
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704
00:36:44,120 --> 00:36:47,160
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705
00:36:47,200 --> 00:36:51,720
Speaker 1: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

706
00:36:53,040 --> 00:36:56,160
Speaker 2: It's all about affordability around here. The President talking about

707
00:36:56,160 --> 00:36:59,120
Speaker 2: your electricity bill, as we just discussed with Sheep. You know,

708
00:36:59,120 --> 00:37:01,520
Speaker 2: they're the busy writing State of the Union address right now,

709
00:37:01,520 --> 00:37:06,000
Speaker 2: but they're also writing a big speech for next week. Davos. Yeah,

710
00:37:06,040 --> 00:37:08,440
Speaker 2: they'll be up there with Bloomberg surveillance hanging out with

711
00:37:08,520 --> 00:37:12,200
Speaker 2: Donald Trump talking, I guess about domestic issues, and I'm

712
00:37:12,239 --> 00:37:15,360
Speaker 2: not sure exactly how that resonates with the crowd in Davos.

713
00:37:15,400 --> 00:37:19,200
Speaker 2: But the President is out with more plans. You heard

714
00:37:19,239 --> 00:37:23,920
Speaker 2: about the Great Healthcare Plan yesterday. That's not me opining,

715
00:37:23,960 --> 00:37:25,759
Speaker 2: that's actually the name of it. Remember we had the big,

716
00:37:25,840 --> 00:37:29,400
Speaker 2: beautiful bill. Now we've got the Great Healthcare Plan. A

717
00:37:29,520 --> 00:37:33,359
Speaker 2: set of cost cutting ideas is how it's being described.

718
00:37:34,160 --> 00:37:37,120
Speaker 2: A video by the President says he's calling on Congress

719
00:37:37,120 --> 00:37:42,359
Speaker 2: to pass this framework into law without delay. The problem is, well,

720
00:37:42,400 --> 00:37:47,640
Speaker 2: there's no paper, there's no legislative text, there's no timeline

721
00:37:47,680 --> 00:37:52,600
Speaker 2: for congressional action. There's really not much more than a

722
00:37:52,680 --> 00:37:56,440
Speaker 2: concept of a plan as to how this would move

723
00:37:56,480 --> 00:37:59,680
Speaker 2: through Congress. Administration official stats of broad architecture. That's another

724
00:37:59,680 --> 00:38:04,600
Speaker 2: one framework, broad architecture. And we've got this roundtable this morning,

725
00:38:04,680 --> 00:38:08,040
Speaker 2: the President talking about the Great Healthcare Plan. We're just

726
00:38:08,120 --> 00:38:10,680
Speaker 2: not sure exactly what it is going to be, so

727
00:38:10,760 --> 00:38:12,480
Speaker 2: hold that thought. We're going to talk a little bit

728
00:38:12,560 --> 00:38:15,480
Speaker 2: later on with Catherine Clark about the effort to revive

729
00:38:15,480 --> 00:38:18,880
Speaker 2: Obamacare subsidies. That's another part of the affordability discussion that

730
00:38:18,880 --> 00:38:22,120
Speaker 2: at least Democrats are having in most cases, then is

731
00:38:22,160 --> 00:38:26,200
Speaker 2: the idea to help the housing market by unlocking your

732
00:38:26,440 --> 00:38:28,720
Speaker 2: four to oh one k Have you heard about this yet?

733
00:38:29,080 --> 00:38:31,200
Speaker 2: So one of the big stories today. This is what

734
00:38:31,239 --> 00:38:34,439
Speaker 2: the President's going to announce in Davos. I'm pretty sure

735
00:38:34,440 --> 00:38:35,960
Speaker 2: most of the people in Davos are not going to

736
00:38:36,040 --> 00:38:37,719
Speaker 2: have to raid their four to oh one case, but

737
00:38:37,840 --> 00:38:40,400
Speaker 2: maybe you will, and the President thinks you ought to

738
00:38:40,440 --> 00:38:43,640
Speaker 2: be able to do it without penalty. Listen to him

739
00:38:43,920 --> 00:38:47,279
Speaker 2: before the Economic Club of Detroit in.

740
00:38:47,160 --> 00:38:50,040
Speaker 15: The coming weeks, I will be laying out even more.

741
00:38:49,880 --> 00:38:52,440
Speaker 2: Plans to help bring back affordability.

742
00:38:52,520 --> 00:38:55,640
Speaker 15: As part of those efforts at Davos next week, I'm

743
00:38:55,680 --> 00:38:59,960
Speaker 15: going to provide much more detail about our housing powers

744
00:39:00,320 --> 00:39:02,319
Speaker 15: so that every American who wants to own a home

745
00:39:02,360 --> 00:39:05,040
Speaker 15: will be able to afford one. This will include a

746
00:39:05,080 --> 00:39:08,920
Speaker 15: ban on large institutional investors buying up single family homes

747
00:39:08,920 --> 00:39:11,239
Speaker 15: all over the country and making it impossible for people

748
00:39:11,280 --> 00:39:13,319
Speaker 15: to buy all.

749
00:39:13,480 --> 00:39:16,760
Speaker 2: Yeah, that was the first salvo. Ban institutional buyers perked

750
00:39:16,840 --> 00:39:20,319
Speaker 2: up Elizabeth Warren's ears. She already proposed that a lot

751
00:39:20,400 --> 00:39:23,600
Speaker 2: of these populist ideas are coming from the left, which

752
00:39:23,640 --> 00:39:26,160
Speaker 2: is why they are not getting support in many cases

753
00:39:26,160 --> 00:39:29,600
Speaker 2: from Republican lawmakers. Kind of like capping interest rates on

754
00:39:29,680 --> 00:39:31,520
Speaker 2: credit cards. But here you go with the four oh

755
00:39:31,600 --> 00:39:34,839
Speaker 2: one K story. You better believe that Bloomberg News has

756
00:39:34,880 --> 00:39:38,880
Speaker 2: the details. Will unveil a plan next week letting savers

757
00:39:38,920 --> 00:39:41,239
Speaker 2: in four oh one K retirement plans to use at

758
00:39:41,280 --> 00:39:44,319
Speaker 2: least some of their money for down payments on a

759
00:39:44,440 --> 00:39:49,520
Speaker 2: home purchase. Kevin Hassett on Fox Business. President will put

760
00:39:49,520 --> 00:39:51,719
Speaker 2: the final plan out next week. But yeah, we're going

761
00:39:51,800 --> 00:39:56,160
Speaker 2: to let people deploy assets from the four oh one K,

762
00:39:56,600 --> 00:39:58,719
Speaker 2: he says. Suppose you put ten percent down on a home,

763
00:39:58,760 --> 00:40:00,799
Speaker 2: you take ten percent of the equity the home, you

764
00:40:00,880 --> 00:40:02,319
Speaker 2: put it in as an asset in the four oh

765
00:40:02,360 --> 00:40:04,640
Speaker 2: one K, then your four oh one K will grow

766
00:40:04,719 --> 00:40:07,160
Speaker 2: over time. I don't understand that. We'll see how this

767
00:40:07,200 --> 00:40:13,520
Speaker 2: all comes together now. Fidelity feels about that. I also

768
00:40:13,520 --> 00:40:15,719
Speaker 2: wonder how Peter Atwater feels about all of this. The

769
00:40:15,800 --> 00:40:17,879
Speaker 2: last time Peter was with us, we were talking about

770
00:40:17,920 --> 00:40:20,200
Speaker 2: the K shaped economy. It was really something in the

771
00:40:20,280 --> 00:40:24,879
Speaker 2: daily conversation and that hasn't changed since. But it has

772
00:40:25,280 --> 00:40:28,680
Speaker 2: only grown louder with the President now on the affordability track.

773
00:40:28,719 --> 00:40:32,560
Speaker 2: He's president of Financial Insights, author of the Confidence Map,

774
00:40:32,680 --> 00:40:36,239
Speaker 2: charting a path from chaos to clarity, and the man

775
00:40:36,280 --> 00:40:40,359
Speaker 2: who made this concept of the K shaped economy mainstream. Peter,

776
00:40:40,440 --> 00:40:42,799
Speaker 2: it's great to have you. Welcome back to Bloomberg. I

777
00:40:42,800 --> 00:40:45,440
Speaker 2: hope your year is off well. I'm going to stop

778
00:40:45,480 --> 00:40:47,120
Speaker 2: talking for a while because I want to hear from

779
00:40:47,120 --> 00:40:50,759
Speaker 2: you on this. President Trump has not been sounding a

780
00:40:50,800 --> 00:40:54,520
Speaker 2: lot like a conservative when it comes to the issue

781
00:40:54,520 --> 00:40:56,719
Speaker 2: of affordability, and I know he doesn't like to use

782
00:40:56,719 --> 00:40:58,560
Speaker 2: that word, but have any of the plans that I've

783
00:40:58,560 --> 00:41:04,359
Speaker 2: described here to close the K Joe, thanks for having

784
00:41:04,440 --> 00:41:04,880
Speaker 2: me back.

785
00:41:05,920 --> 00:41:08,680
Speaker 16: When I last talked to you, I was lamenting that

786
00:41:08,880 --> 00:41:12,360
Speaker 16: neither side of the political aisle was paying attention to

787
00:41:12,400 --> 00:41:17,160
Speaker 16: the K shaped economy. Now we have an arms race

788
00:41:17,200 --> 00:41:21,480
Speaker 16: on affordability ahead of the midterms. So I look at

789
00:41:21,520 --> 00:41:24,480
Speaker 16: all of these proposals left and right with a couple

790
00:41:24,520 --> 00:41:29,799
Speaker 16: of thoughts. One is, politicians are not moving to become socialist,

791
00:41:30,200 --> 00:41:34,000
Speaker 16: They're becoming survivalists. They know they need the bottom of

792
00:41:34,040 --> 00:41:39,320
Speaker 16: the K to support them in November. What they still

793
00:41:39,400 --> 00:41:42,480
Speaker 16: don't yet appreciate is the mindset of those at the bottom,

794
00:41:42,760 --> 00:41:46,320
Speaker 16: they're in me here now mode, which means that everything

795
00:41:46,400 --> 00:41:49,160
Speaker 16: that they hear from the left and right need to

796
00:41:49,200 --> 00:41:53,880
Speaker 16: flow through three filters. Does it fit me? Is it immediate?

797
00:41:54,480 --> 00:41:59,240
Speaker 16: Is it tangible? And there I see struggles on both sides.

798
00:42:00,320 --> 00:42:04,960
Speaker 16: There are a lot of great intentions, plans, frameworks, as

799
00:42:04,960 --> 00:42:08,040
Speaker 16: you just said, you just said, But those at the

800
00:42:08,120 --> 00:42:14,280
Speaker 16: bottom they want me here now, me here now.

801
00:42:15,040 --> 00:42:18,239
Speaker 2: What do they think when the President calls affordability a

802
00:42:18,320 --> 00:42:21,560
Speaker 2: Democrat hoax? Or is that just the noise Peter does

803
00:42:21,600 --> 00:42:26,239
Speaker 2: something like what I'm describing to try to unlock savings

804
00:42:26,280 --> 00:42:28,799
Speaker 2: to buy a home, to try to cap interest rates

805
00:42:28,840 --> 00:42:32,400
Speaker 2: on credit cards? Does that resonate with people at the

806
00:42:32,400 --> 00:42:33,080
Speaker 2: bottom of the K.

807
00:42:34,160 --> 00:42:38,279
Speaker 16: It resonates so long as it's real and as long

808
00:42:38,320 --> 00:42:40,160
Speaker 16: as it fits. So let's talk about the four oh

809
00:42:40,239 --> 00:42:44,080
Speaker 16: one K piece. The Bureau of Labor Statistics last year

810
00:42:44,160 --> 00:42:47,480
Speaker 16: said that fifty six of them, sixty fifty six percent

811
00:42:47,520 --> 00:42:51,600
Speaker 16: of Americans have four oh one K plans through their employer,

812
00:42:52,280 --> 00:42:56,239
Speaker 16: which would suggest that about half of Americans don't have

813
00:42:56,280 --> 00:42:59,480
Speaker 16: the plan and would not qualify to begin with. I

814
00:42:59,520 --> 00:43:01,800
Speaker 16: don't think it's a hard stretch to think that most

815
00:43:01,840 --> 00:43:05,440
Speaker 16: of that forty four percent sits at the bottom. So again,

816
00:43:05,960 --> 00:43:10,120
Speaker 16: may be well intended, but it's not targeting the group

817
00:43:10,200 --> 00:43:11,920
Speaker 16: that needs this relief the most.

818
00:43:13,800 --> 00:43:16,480
Speaker 2: Don't we need to build more homes? How does this

819
00:43:16,560 --> 00:43:18,480
Speaker 2: help us increase supply?

820
00:43:19,600 --> 00:43:21,520
Speaker 16: Well, that was going to be my second point. A

821
00:43:21,520 --> 00:43:24,040
Speaker 16: lot of the efforts that I see or focused on demand.

822
00:43:24,640 --> 00:43:27,839
Speaker 16: That's not the way to solve an inflation problem. If

823
00:43:27,880 --> 00:43:31,920
Speaker 16: the issue is affordability, we need to boost supply. Sadly,

824
00:43:31,960 --> 00:43:34,319
Speaker 16: if we increase demand, all we're going to end up

825
00:43:34,320 --> 00:43:37,719
Speaker 16: doing is boosting inflation in the product that's for sale.

826
00:43:38,960 --> 00:43:41,160
Speaker 2: Yeah. So, I don't know if you heard about what

827
00:43:41,160 --> 00:43:44,319
Speaker 2: the Independent was calling the depression meal. This week, the

828
00:43:44,360 --> 00:43:48,680
Speaker 2: Agriculture Secretary Secretary Rollins was at this idea. She said

829
00:43:48,680 --> 00:43:51,120
Speaker 2: they ran a thousand simulations at the White House, Peter

830
00:43:51,560 --> 00:43:55,880
Speaker 2: a thousand simulations and found that you could pay three

831
00:43:56,040 --> 00:44:00,560
Speaker 2: dollars for a meal of a piece of chicken, a

832
00:44:00,640 --> 00:44:07,959
Speaker 2: piece of broccoli, a single corn tortilla, and one other thing.

833
00:44:08,800 --> 00:44:11,200
Speaker 2: We're not sure what the other thing is. We're pretty

834
00:44:11,200 --> 00:44:13,799
Speaker 2: sure it's not a prime rib. But that kind of

835
00:44:13,920 --> 00:44:18,600
Speaker 2: talk resonates how at the bottom of the k I

836
00:44:18,680 --> 00:44:19,920
Speaker 2: don't think it resonates at all.

837
00:44:20,080 --> 00:44:23,040
Speaker 16: I think all that does is to reinforce the scarcity

838
00:44:23,080 --> 00:44:26,480
Speaker 16: that those at the bottom feel. Moreover, it does so

839
00:44:26,600 --> 00:44:30,240
Speaker 16: at a time where they are all too aware.

840
00:44:30,280 --> 00:44:32,800
Speaker 2: Of the over abundance above them.

841
00:44:33,239 --> 00:44:37,040
Speaker 16: I look at the K shape dynamic today boarding an airplane,

842
00:44:37,760 --> 00:44:39,960
Speaker 16: and those at the back of the plane are walking

843
00:44:40,040 --> 00:44:44,520
Speaker 16: past row after row after row of business class seats

844
00:44:44,640 --> 00:44:48,200
Speaker 16: before they arrive at their destination. And I think that

845
00:44:48,719 --> 00:44:53,960
Speaker 16: policymakers especially need to be careful about reminding those who

846
00:44:54,040 --> 00:44:58,560
Speaker 16: don't have enough today how little they have relative to

847
00:44:58,600 --> 00:45:00,799
Speaker 16: those around them.

848
00:45:00,920 --> 00:45:06,360
Speaker 2: You know, there's a literal interpretation of what you're talking

849
00:45:06,480 --> 00:45:08,600
Speaker 2: about here, Peter. I think it was Delta Airlines just

850
00:45:08,680 --> 00:45:11,520
Speaker 2: last week and its earnings report said bookings in the

851
00:45:11,560 --> 00:45:17,040
Speaker 2: main cabin are down, bookings in first class are through

852
00:45:17,080 --> 00:45:19,080
Speaker 2: the roof. They can't keep up with it to the

853
00:45:19,080 --> 00:45:22,120
Speaker 2: point where they're going to start expanding first class sections

854
00:45:22,400 --> 00:45:24,399
Speaker 2: in airplanes. This is the manifestation of.

855
00:45:24,320 --> 00:45:24,520
Speaker 5: The K.

856
00:45:26,200 --> 00:45:28,920
Speaker 16: Absolutely and they expect sixty percent of their revenues to

857
00:45:28,920 --> 00:45:29,880
Speaker 16: come from the front.

858
00:45:29,680 --> 00:45:33,759
Speaker 2: Of the plane. I imagine, yeah, And I.

859
00:45:33,680 --> 00:45:37,680
Speaker 16: Think for those at the bottom, they're seeing lots of

860
00:45:37,760 --> 00:45:41,719
Speaker 16: things being handed out to those above them. They see

861
00:45:41,760 --> 00:45:44,920
Speaker 16: the benefits of the one Beautiful Bill and other things.

862
00:45:46,360 --> 00:45:49,600
Speaker 16: They're challenging both sides of the aisle to respond, and

863
00:45:50,320 --> 00:45:54,040
Speaker 16: I think left and right need to take note of

864
00:45:54,680 --> 00:45:58,000
Speaker 16: the messages from the new mayor of New York. As

865
00:45:58,040 --> 00:46:01,760
Speaker 16: I said, it's not a socialist message, it's a survivalist message.

866
00:46:01,800 --> 00:46:04,200
Speaker 2: And how do they help those at the bottom.

867
00:46:04,600 --> 00:46:07,400
Speaker 16: And I think the challenge, given the breadth of the

868
00:46:07,480 --> 00:46:13,680
Speaker 16: k today is creating a slave of two masters environment

869
00:46:13,840 --> 00:46:17,359
Speaker 16: where to help those at the bottom, They're ultimately going

870
00:46:17,400 --> 00:46:19,279
Speaker 16: to need to take something from the top. And we

871
00:46:19,320 --> 00:46:22,040
Speaker 16: saw that with the credit card proposal. We've seen that

872
00:46:22,080 --> 00:46:26,560
Speaker 16: with the some of the housing proposals. And that's a

873
00:46:26,719 --> 00:46:30,880
Speaker 16: tough thing to a tough march to walk. If you

874
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Speaker 16: are a administration that uses the stock market is a barometer.

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Speaker 2: Success, you know, I've asked this before, Peter. If the

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Speaker 2: Supreme Court strikes down the tariff regime, does that spare

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Speaker 2: the bottom of the k? And therefore, politically speaking the administration.

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Speaker 16: Now I think the bottom of the k it only

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Speaker 16: spares them to the extent that they see the benefit.

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Speaker 16: And it's unclear now that prices have a yested for

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Speaker 16: the tariffs, whether we will see the full array of

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Speaker 16: retailers now reduce prices as a result, or to those

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Speaker 16: who are making things or in the middle sees the

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Speaker 16: opportunity really something.

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Speaker 2: Peter, It's great to have you back and I appreciate it.

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Speaker 2: Don't be a stranger. Peter Atwater, the President of Financial Insights,

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Speaker 2: with us live on Bloomberg. Check out his book The

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Speaker 2: Confidence Map. Really interesting to hear the insights of Peter

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Speaker 2: Atwater as the case shaped economy becomes part of the

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Speaker 2: daily conversation here in Washington and on Wall Street. Thanks

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00:47:39,760 --> 00:47:42,919
Speaker 2: for listening to the Balance of Power podcast. Make sure

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Speaker 2: to subscribe if you haven't already, at Apple, Spotify, or

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00:47:45,880 --> 00:47:48,560
Speaker 2: wherever you get your podcasts, and you can find us

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00:47:48,600 --> 00:47:52,120
Speaker 2: live every weekday from Washington, DC at noontime Eastern at

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Speaker 2: Bloomberg dot com.