WEBVTT - Tillerson Should Resign, Haass Says 0:00:09.720 --> 0:00:12.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 0:00:13.560 --> 0:00:16.560 David Gura. Daily we bring you insight from the best 0:00:16.560 --> 0:00:22.279 of economics, finance, investment, and international relations. Find Bloomberg Surveillance 0:00:22.320 --> 0:00:27.000 on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 0:00:27.320 --> 0:00:33.879 on the Bloomberg. So much to talk about with Jared Bernstein, 0:00:33.920 --> 0:00:36.720 former economic advisor, device president Joe Biden, now a Senior 0:00:36.760 --> 0:00:39.040 Fellow at the Center on Budget and Policy Priorities. He 0:00:39.120 --> 0:00:41.120 joins Tom in our Bloomberg ninety one one news room 0:00:41.159 --> 0:00:44.760 down in Washington, d C. And Tom a great interview. Uh. 0:00:44.880 --> 0:00:46.920 Stand Fisher is still a believer, still believes we're gonna 0:00:46.920 --> 0:00:49.520 have higher inflation. He really does. I mean, Jared walked 0:00:49.560 --> 0:00:51.559 in the Durance. So what do you think? This is 0:00:51.600 --> 0:00:54.200 always and really this goes as Jared knows back to 0:00:54.240 --> 0:00:56.960 the history of stand Fisher through the seventies and eighties 0:00:57.000 --> 0:01:01.360 as someone always airing towards an normalization rates in a 0:01:01.400 --> 0:01:04.840 time of accommodation. And I'll be honest between the lines, 0:01:04.880 --> 0:01:08.280 and it's always that kind of interview with a fedeficial Uh, David, 0:01:08.360 --> 0:01:11.280 it was that kind of interview. We were ultra accommodative 0:01:11.360 --> 0:01:15.480 and we're less ultra accommodative right now. Thank you to 0:01:15.520 --> 0:01:18.319 the many people listening with senting some worth these uh 0:01:18.680 --> 0:01:23.640 sending kind notes they were listening to, Really, David a 0:01:23.720 --> 0:01:27.720 time of transition, which means that Jared Bernstein is absolutely 0:01:27.760 --> 0:01:29.880 the perfect person to speak to. Now for those of 0:01:29.880 --> 0:01:32.840 you that don't know Jared Bernstein, as I've said for years, 0:01:32.840 --> 0:01:36.280 as a liberal, conservatives must listen to a force at 0:01:36.280 --> 0:01:39.920 the Economic Policy Institute for years is public service to 0:01:40.040 --> 0:01:44.720 Vice President Biden. Yes he's a liberal economist. Oh my word, 0:01:45.640 --> 0:01:48.080 don't mention it on air. And now at the Center 0:01:48.240 --> 0:01:54.600 on Budget Administration, h Jared, how far is a divide 0:01:54.600 --> 0:01:58.360 between liberal and conservative economists? I would suggest it's not 0:01:58.480 --> 0:02:00.800 as wide as the media put. I mean, this is 0:02:00.840 --> 0:02:03.840 gonna sound a little annoying to people, but you know, 0:02:03.880 --> 0:02:07.440 Paul Krugman says, the facts have a liberal bias. Uh So, 0:02:07.640 --> 0:02:10.600 I really do try to go by the numbers. So 0:02:10.680 --> 0:02:13.080 when I when I look at take the Federal Reserve, 0:02:13.120 --> 0:02:16.239 for example, when I look at inflation, I form a view. 0:02:16.280 --> 0:02:21.639 Their inflation obviously very quiescent. So the normalization campaign should 0:02:21.720 --> 0:02:23.880 move very very slowly in my view, when I look 0:02:23.880 --> 0:02:26.360 at tax policy, I look at I look at the numbers, 0:02:26.360 --> 0:02:28.520 and that's how how we make our call. I think 0:02:28.639 --> 0:02:31.639 too often in economics we have ideology trumping data, and 0:02:31.680 --> 0:02:33.920 I just try to avoid that. Jack Berson, help us 0:02:33.960 --> 0:02:36.640 mark this moment that Tom mentioning the transition we're seeing 0:02:36.680 --> 0:02:38.960 at the Fed stand Fisher here with just days left 0:02:39.160 --> 0:02:41.880 in that role before he moves on to whatever's next. 0:02:42.120 --> 0:02:44.480 There's a lot of transition happening here. I mentioned the 0:02:44.520 --> 0:02:47.080 vacancies at the top of the show. How how transformative 0:02:47.080 --> 0:02:51.480 a moment is this. I think it's potentially quite transformative, 0:02:51.480 --> 0:02:54.360 and I actually think this is a somewhat difficult time 0:02:54.360 --> 0:02:57.560 to be going through so many transitions. The Federal Reserve 0:02:57.800 --> 0:03:01.480 is involved in a very delicate ask right now. Obviously 0:03:01.520 --> 0:03:04.960 I'm talking about unwinding the very large balance sheet, but 0:03:05.040 --> 0:03:09.160 also the kind of data driven normalization campaign. You know 0:03:09.240 --> 0:03:14.600 you've got essentially Janet Yellen at the wheel communicating I 0:03:14.639 --> 0:03:19.600 think very clearly to markets, giving I think extremely useful 0:03:19.680 --> 0:03:23.840 forward guidance, talking about the data, talking about the models, 0:03:24.120 --> 0:03:27.120 and at a time like this, to be replacing sciety 0:03:27.120 --> 0:03:30.080 of your starting team with with unknowns, I think it 0:03:30.160 --> 0:03:34.160 creates a potentially creates a level of uncertainty that is 0:03:34.200 --> 0:03:36.840 potentially damaging. It's one of the reasons, by the way, 0:03:36.880 --> 0:03:40.080 that I've really been stressing the importance of Donald Trump 0:03:40.160 --> 0:03:43.720 reappointing Janet Yellen. Uh. That might sound like an outside 0:03:43.720 --> 0:03:45.840 the box idea, but as we all know, she still 0:03:45.920 --> 0:03:47.920 is a frontrunner. What do you make is as you 0:03:47.960 --> 0:03:49.480 watch a call it a parlor game. As you watch 0:03:49.520 --> 0:03:51.480 all of this play out, the reports of Kevin warsh 0:03:51.480 --> 0:03:53.160 head into the White House to meet with the President, 0:03:53.200 --> 0:03:56.120 tour J. Powell having a conversation with him and with 0:03:56.160 --> 0:03:58.840 the Treasury Secretary as what are you looking for? How 0:03:58.840 --> 0:04:00.680 do you how do you you try to figure out 0:04:00.720 --> 0:04:02.840 how do you try to piece together what their perspective 0:04:02.840 --> 0:04:06.160 on monetary policy is? Well, look, I mean we parlor 0:04:06.200 --> 0:04:07.960 game is the right word, and and and we we 0:04:08.080 --> 0:04:12.400 do in Washington have this unfortunate tendency of kind of uh, 0:04:12.440 --> 0:04:15.080 you know, going through the entrails of anything having to 0:04:15.120 --> 0:04:18.719 do with the Federal Reserve. I think the best advice 0:04:18.839 --> 0:04:20.799 when it comes to all of this is to ignore 0:04:20.839 --> 0:04:23.719 it all for the most part, because Donald Trump is 0:04:23.839 --> 0:04:26.640 completely unpredictable and you can't figure out what he's going 0:04:26.680 --> 0:04:28.840 to do based on a meeting he's had with someone else. 0:04:29.080 --> 0:04:30.919 The better idea is to kind of think through the 0:04:31.000 --> 0:04:33.880 substance what would make most sense, and for those of 0:04:33.960 --> 0:04:36.480 us with some sort of a public voice to to 0:04:36.480 --> 0:04:38.280 to put that forth. And that's what I've been trying 0:04:38.279 --> 0:04:40.800 to do in this reappoint yelling campaign. There's so many 0:04:40.839 --> 0:04:44.680 themes to talk about, and with you and with your 0:04:44.720 --> 0:04:49.320 true expertise and fiscal dynamics, How urgent do you feel, 0:04:49.400 --> 0:04:53.159 Jared to get a score on a nine page tax 0:04:53.240 --> 0:04:56.560 reform proposal or is it just a media frenzy and 0:04:56.600 --> 0:05:00.200 we wait till sometime next year. You know it is 0:05:00.400 --> 0:05:03.200 urgent in the following sense. I mean we are uh 0:05:03.640 --> 0:05:07.000 you mentioned fiscal or fiscal constraints. We are a country 0:05:07.320 --> 0:05:11.279 that's simply based on our aging demographics alone, we're going 0:05:11.320 --> 0:05:14.440 to need more revenues down the road, not less. So 0:05:14.640 --> 0:05:17.640 when I hear the Republicans putting forth a bill that 0:05:17.720 --> 0:05:21.960 threatens to lose at least two trillion over ten years 0:05:22.000 --> 0:05:25.719 based on pretty conventional score keeping based on the details 0:05:25.760 --> 0:05:29.440 we know so far, that strikes me as extremely problematic. 0:05:29.520 --> 0:05:31.680 So yes, we we definitely need to pay attention to 0:05:31.720 --> 0:05:34.600 those numbers. I mean, within into the numbers, and I've 0:05:34.640 --> 0:05:36.839 seen one point five trillion and it goes out to 0:05:36.880 --> 0:05:39.120 two point four trillion is maybe the high point I've 0:05:39.160 --> 0:05:42.080 seen in different punditry explained to our audience what that 0:05:42.200 --> 0:05:45.279 number actually is. I mean, I guess it's a tenth 0:05:45.320 --> 0:05:47.760 of our fiscal budget. But what does it mean to 0:05:47.800 --> 0:05:49.839 a pro like you, Well, I mean in terms of 0:05:50.160 --> 0:05:52.200 you really should scale those numbers by g d P 0:05:52.440 --> 0:05:54.760 and uh, you know, over a ten year period, we're 0:05:54.800 --> 0:05:57.039 talking about the percent maybe less than a percent of 0:05:57.080 --> 0:05:59.720 g d P. But what we're what we're what we're 0:05:59.720 --> 0:06:01.919 talking about from my perspective is the fact that the 0:06:01.920 --> 0:06:04.560 Congressional Budget Office tells us And on this point, I 0:06:04.600 --> 0:06:07.080 don't think there's really any argumentation at all that over 0:06:07.120 --> 0:06:09.160 the next ten years we're going to need two and 0:06:09.200 --> 0:06:11.840 a half percent of GDP more revenue to meet our 0:06:11.880 --> 0:06:16.719 obligations VISA B, Social Security, medicare other some of these 0:06:17.000 --> 0:06:19.920 larger government programs of social insurance programs, if you will. 0:06:20.279 --> 0:06:23.320 So the idea that we can somehow meet our promises 0:06:23.360 --> 0:06:28.320 at the same time that we cut taxes uh that severely. 0:06:28.520 --> 0:06:31.479 It's just it's just not arithmetic, it's just it's just fantasy. 0:06:31.480 --> 0:06:33.320 And then when you start talking about how how growth 0:06:33.360 --> 0:06:35.200 effects are going to make up the difference, you know, 0:06:35.279 --> 0:06:38.160 nobody who's not being paid to believe that believes it. 0:06:38.600 --> 0:06:40.440 Let me bring things full circle here. We're gonna come 0:06:40.440 --> 0:06:42.080 back with you for another block as well. But Tom 0:06:42.080 --> 0:06:44.839 asked you about the difference between liberal economics and conservative economics. 0:06:44.880 --> 0:06:46.520 Let me ask you about the state of non partisan 0:06:46.520 --> 0:06:49.160 economic analysis in Washington, d C. We're all struck by 0:06:49.160 --> 0:06:51.159 this story about a paper being pulled from the Treasury 0:06:51.160 --> 0:06:54.919 Department website recently at tax analysis paper, the conclusions of 0:06:54.920 --> 0:06:57.480 which ran contrary to what the Treasury Secretary thinks about 0:06:57.600 --> 0:07:00.320 tax reform. I'm struck by what's been said about the 0:07:00.320 --> 0:07:03.360 Tax Policy Centers analysis of this proposal that was released 0:07:03.440 --> 0:07:06.080 last week, Kevin Brady saying the analysis a work of 0:07:06.120 --> 0:07:08.520 fiction that Stephen King would have been proud of were 0:07:08.520 --> 0:07:11.200 in hatched, the Chairman of the Senate Finance Committee saying 0:07:11.200 --> 0:07:14.040 here that no respectable academic or researcher was willing to 0:07:14.040 --> 0:07:17.560 have their name associated with something so haphazardly cobbled together. 0:07:17.600 --> 0:07:19.560 I think Donald Marin, former head of the CBO might 0:07:19.560 --> 0:07:23.120 take exception to that. What's the state of nonpartisan analysis? 0:07:23.160 --> 0:07:25.960 And washingtond see how imperiled is it? You know that 0:07:25.960 --> 0:07:28.120 that litany you just ran through. I gotta say, it's 0:07:28.160 --> 0:07:32.320 just downright depressing to me, because you've seen a tax 0:07:32.360 --> 0:07:35.720 on the Congressional Budget Office, on the nonpartisan Tax Policy Center. 0:07:35.760 --> 0:07:38.640 By the way, I recently found out that the three 0:07:38.680 --> 0:07:41.840 top directors of the of the TPC, the Tax Policy Center, 0:07:42.000 --> 0:07:44.760 all used to work for Republicans. And so these these 0:07:44.760 --> 0:07:47.800 are by the numbers folks, and they don't have a 0:07:47.840 --> 0:07:52.000 thumb on the scale. Now Washington is filled with partisan economics. 0:07:52.000 --> 0:07:54.360 You know, I think it was Manuchin the other day, 0:07:54.360 --> 0:07:57.160 said Treasury Sectary. Manuchin said, I can get lots of 0:07:57.200 --> 0:07:59.960 economists on TV to endorse my plan and to tell 0:08:00.120 --> 0:08:02.600 you that it will pay for itself. That's true, but 0:08:02.680 --> 0:08:04.600 that doesn't mean that the plan will pay for itself. 0:08:04.640 --> 0:08:07.480 That just means that they can cherry pick the opinions 0:08:07.480 --> 0:08:10.800 they want. I was I was just very quickly here, Jared, 0:08:10.840 --> 0:08:12.600 and will come back. Wonderful to have you with us 0:08:12.600 --> 0:08:15.760 for this half already get started in Washington. I would 0:08:15.960 --> 0:08:19.440 just you and whole seeking or and maybe modestly different pages. 0:08:19.840 --> 0:08:22.520 But there's Douglas Holtekin the other day saying the vector 0:08:22.520 --> 0:08:24.920 on deficit to GDP is five six and he was 0:08:24.960 --> 0:08:28.160 the first one who said seven percent of GDP. Do 0:08:28.200 --> 0:08:31.720 you share the same concern that the vector that we're 0:08:31.720 --> 0:08:35.320 seeing now could continue out to something newsworthy. Yeah, Doug 0:08:35.320 --> 0:08:37.040 and I share this view of Doug is in a 0:08:37.360 --> 0:08:39.880 he's a good example of an economist on the other 0:08:39.920 --> 0:08:42.280 side of the aisle who I I very much respect, 0:08:42.320 --> 0:08:44.760 and he's like myself and like, by the way, lots 0:08:44.800 --> 0:08:48.000 of economists on from from a more conservative perspective to 0:08:48.000 --> 0:08:50.960 whom I've discussed about this. We are all worried about 0:08:51.000 --> 0:08:53.440 the impact of this tax plan on deficits and debt. 0:08:53.640 --> 0:08:56.080 And it just shows you that these alleged deficit hawks 0:08:56.120 --> 0:08:58.080 there chicken hawks when it comes to the real deal. 0:08:58.480 --> 0:09:01.480 This is what we love to do, Bloomberg surveillance folks. 0:09:01.559 --> 0:09:05.080 David Gern New York. I'm Tim Keen FM News bureau 0:09:05.320 --> 0:09:08.480 in Washington. To have the Vice Chairman of the Fed 0:09:08.559 --> 0:09:10.440 with us, and then to follow up with one of 0:09:10.440 --> 0:09:14.960 the great analysts of monetary and fiscal economics in Washington, 0:09:15.040 --> 0:09:20.040 Jared Bernstein, of the Center on Budget and Policy UH 0:09:20.200 --> 0:09:23.200 priorities as well. Thrilled to have them with us UH 0:09:23.320 --> 0:09:25.600 this morning. We've talked a lot about monetary policy. Jared, 0:09:25.679 --> 0:09:28.720 let me ask you about the debate over tax reform. 0:09:29.200 --> 0:09:31.240 We've seen one page go to two pages, go to 0:09:31.320 --> 0:09:33.520 nine pages. We've seen the framework sent up to Capitol 0:09:33.600 --> 0:09:36.200 Hill senator or in hatch saying the Senate Finance committees 0:09:36.200 --> 0:09:38.480 where this thing is going to be written. What are 0:09:38.480 --> 0:09:40.600 you gonna be watching for as you as you look 0:09:40.600 --> 0:09:45.120 for points of agreement and disagreement among the Republican ranks particularly, Actually, 0:09:45.120 --> 0:09:47.520 there's a very important thing to be watching for this 0:09:47.720 --> 0:09:51.800 very day. Republicans are suggesting now that they're going to 0:09:51.840 --> 0:09:54.439 give up on their repeal of the state and local 0:09:54.679 --> 0:09:57.839 tax deduction. That is, they were going to repeal UH 0:09:57.960 --> 0:10:01.040 this deduction in order to help pay for their for 0:10:01.080 --> 0:10:04.240 their tax cut. Now they're either cutting that back or 0:10:04.240 --> 0:10:06.320 they're going to leave it in place. So the thing 0:10:06.400 --> 0:10:10.000 to watch for is will they now cut their ask 0:10:10.200 --> 0:10:13.559 in terms of the magnitude of the tax cut because 0:10:13.600 --> 0:10:15.640 they're cutting a pay for as they lose part of 0:10:15.640 --> 0:10:18.240 a pay for, the arithmetic would suggest they'd have to 0:10:18.280 --> 0:10:21.120 cut back what they're asking for in tax cuts. If 0:10:21.160 --> 0:10:25.400 they don't, it's a signal that they're really completely detached 0:10:25.440 --> 0:10:28.840 from any concerns about the deficit or dead implications of 0:10:28.880 --> 0:10:31.800 this plan. Even if they do, those implications are already 0:10:31.840 --> 0:10:35.280 quite negative. The leaders you're watching here, I mentioned Senator Hatch, 0:10:35.520 --> 0:10:37.360 Chairman Kevin Brady, the chairman of the House Ways and 0:10:37.360 --> 0:10:41.199 Means Committee, obviously working on this issue very minute in 0:10:41.240 --> 0:10:43.920 details as well. Are you looking to them? Are you 0:10:44.000 --> 0:10:46.640 looking to to House Speaker Paul Ryan? Are you even 0:10:46.679 --> 0:10:49.080 casting your eyes the Little West looking at the White 0:10:49.120 --> 0:10:51.240 House as well? I'm not so much looking at the 0:10:51.240 --> 0:10:53.360 White House because they're kind of distracted with a bunch 0:10:53.360 --> 0:10:55.400 of other things, And I'm not so much looking at 0:10:55.600 --> 0:10:58.320 the quote Big six, the architects of the plan. What 0:10:58.400 --> 0:11:01.560 I'm looking at is the Republican Caucus. Remember it with 0:11:01.600 --> 0:11:05.160 the Republican Caucus that brought down their attempt to repeal 0:11:05.800 --> 0:11:09.280 the Affordable Care Act. And it's not a slam dunk 0:11:09.320 --> 0:11:11.720 that they're going to have their be able to muster 0:11:11.800 --> 0:11:14.200 their troops behind them on the tax cut either. So 0:11:14.280 --> 0:11:16.200 that's where I think you want to look if you're 0:11:16.200 --> 0:11:18.480 trying to figure out where this is going, I mean, 0:11:18.760 --> 0:11:21.400 within all of this. And I guess I'm touching back 0:11:21.440 --> 0:11:23.560 to the sixties because I've been watching the ken Burns, 0:11:23.559 --> 0:11:26.880 the Vietnam War, the effort, which folks, is spectacular. If 0:11:26.920 --> 0:11:29.280 you like tri X film from Eastman Codec, you'll love 0:11:29.360 --> 0:11:32.400 the black and white photos are just breathtaking what they've 0:11:32.440 --> 0:11:36.240 done in the restoration of another time and place. The 0:11:36.480 --> 0:11:39.920 arch fear of your world. Jared Bernstein is, Oh, no, 0:11:40.320 --> 0:11:44.960 we're gonna have the Walter Hellers sixties runaway inflation. Remember 0:11:44.960 --> 0:11:49.960 that phrase whip inflation. Now we're miles from that, aren't we. Yeah, 0:11:50.440 --> 0:11:54.079 We're miles from the arch Republican fear, aren't we? Yeah? 0:11:54.240 --> 0:11:57.439 I think we are. And Uh, it's interesting gets back 0:11:57.480 --> 0:11:59.800 to our where we started our discussion. I think you 0:11:59.840 --> 0:12:02.559 have have to be very careful if you're administering monetary 0:12:02.600 --> 0:12:06.600 policy to not be fighting really old wars. Uh and 0:12:06.600 --> 0:12:10.000 and and Actually Cherry Yellen was quite articulate about this 0:12:10.040 --> 0:12:12.000 in a speech he gave last week to the to 0:12:12.120 --> 0:12:14.800 the Nave, which people said it was an important speech. 0:12:14.880 --> 0:12:17.040 I found it to be very important because she really 0:12:17.120 --> 0:12:20.280 was scratching her head about the underlying model. And I 0:12:20.320 --> 0:12:23.400 think saying quite clearly, we really have to think the 0:12:23.480 --> 0:12:27.120 fundamental forces driving inflation. So to the extent that you're 0:12:27.160 --> 0:12:32.239 pulling monetary policy based on memories of runaway sixties and seventies, 0:12:32.520 --> 0:12:35.280 I would recommend that you you do a pretty serious 0:12:35.320 --> 0:12:38.199 rethink on that. I wanna untilt here in the final 0:12:38.240 --> 0:12:43.280 minute that we've got with you two democratic eco politics. 0:12:43.320 --> 0:12:46.800 You did public service with Vice President Biden. Some say 0:12:46.880 --> 0:12:49.680 that Joe will take another run at it. Do we 0:12:49.760 --> 0:12:53.760 need to see democratic economic theory move from a progressive 0:12:53.920 --> 0:12:57.800 East coast, left coast mentality to something more Scoop Jackson, 0:12:57.960 --> 0:13:01.280 something more mainstream, something more Joe Biden. Do you see 0:13:01.320 --> 0:13:04.720 any evidence of that? I do in the following sense, 0:13:04.760 --> 0:13:07.880 I think that you know, Joe Biden in particular had 0:13:07.880 --> 0:13:10.840 a way of connecting with a lot of a set 0:13:10.840 --> 0:13:12.960 of voters who turned out to be decisive in in 0:13:13.040 --> 0:13:17.000 the last election. Sent kind of center left folks from 0:13:17.000 --> 0:13:20.720 both the Democrats and the Republican Party had ignored those concerns, 0:13:20.720 --> 0:13:25.480 particularly around globalization, for really decades on end, so putting 0:13:25.520 --> 0:13:28.079 policy aside because I think it's a different discussion. You 0:13:28.200 --> 0:13:32.040 definitely someone who can connect with with with blue collar voters. 0:13:32.160 --> 0:13:35.199 Did you see any evidence of that? Uh? And by 0:13:35.280 --> 0:13:37.720 in terms of I mean it's too early, I mean 0:13:37.760 --> 0:13:39.520 to me, it's too early, right kind of wait for 0:13:39.520 --> 0:13:41.280 the mid terms. Yeah, And I think I think we 0:13:41.360 --> 0:13:43.160 have to wait wait for the I think the policy 0:13:43.240 --> 0:13:45.400 question is actually very interesting as well, which is that 0:13:45.600 --> 0:13:47.840 you know, should Democrats attack to the center, should they 0:13:47.840 --> 0:13:50.280 attack to the left? And I tend to think that, Uh, 0:13:50.320 --> 0:13:53.400 there are a lot of folks asking Democrats, really, what 0:13:53.480 --> 0:13:56.320 have you got to answer for the fact that even 0:13:56.360 --> 0:13:58.240 as we close in on full employment, there are a 0:13:58.240 --> 0:14:00.440 lot of folks are being left behind. And that's a 0:14:00.480 --> 0:14:03.040 really tough question. I got about fourteen more questions. We 0:14:03.040 --> 0:14:05.319 will do it again with Jared Bernstein in the Center 0:14:06.040 --> 0:14:09.280 on budget and policy priorities as well. Let me do 0:14:09.320 --> 0:14:11.000 a day to check a little weight to the tape 0:14:11.040 --> 0:14:12.960 after this day, that day, in the next day of 0:14:13.040 --> 0:14:17.079 record highs, reminding where the TAO is twenty two thousand, 0:14:17.160 --> 0:14:23.040 sixty one spur and the vix stunning nine point six nine. 0:14:23.560 --> 0:14:27.800 Sherman Greenspan would call that a quite essence. VIX from 0:14:27.960 --> 0:14:31.359 New York, from Washington, stay with us. This is Bloomberg. 0:14:42.640 --> 0:14:44.440 Steve Rattner with us here in our Bloomberg LEMN three 0:14:44.520 --> 0:14:46.920 studios in New York. He's the chairman of Willed ADVISORIESET, 0:14:46.960 --> 0:14:50.160 managing Michael Bloomberg's personal and philanthropic assets. Michael Bloomer, of course, 0:14:50.440 --> 0:14:54.760 the majority owner of the eponymous Brig LP, which owns 0:14:54.840 --> 0:14:56.960 Bloomberg Grady, among other properties. That Steve great to have 0:14:57.000 --> 0:14:58.400 you with us here. We've been talking a little bit 0:14:58.400 --> 0:15:00.960 about a tax reform in the budget throughout the morning. 0:15:01.120 --> 0:15:03.520 Give us your perspective on what we've gotten so far. 0:15:04.160 --> 0:15:06.120 It's safe to say there's more detail. I suppose it's 0:15:06.120 --> 0:15:09.600 all relative here. We've got nine pages plenty of unanswered questions. 0:15:10.080 --> 0:15:12.800 Lawmakers are now charged with writing this thing, translating that 0:15:12.840 --> 0:15:15.520 into hundreds, if not more than a thousand pages of legislation. 0:15:16.080 --> 0:15:17.920 What are you watching? What are you most keenly interested 0:15:17.960 --> 0:15:20.880 in seeing how things are getting hammered down? I think 0:15:20.920 --> 0:15:23.440 the most interesting recent development, which I believe I heard 0:15:23.440 --> 0:15:25.960 on Bloomberg Radio this morning, is the question about the 0:15:26.000 --> 0:15:29.560 state and local tax deduction, Because that is UH that 0:15:29.680 --> 0:15:31.720 was going to create a pay for of one point 0:15:31.720 --> 0:15:35.440 eight or one point nine trillion dollars, essentially funding a 0:15:35.560 --> 0:15:38.160 very large portion of the corporate tax cuts. There has 0:15:38.200 --> 0:15:42.480 been enormous pushback. The politics are ugly. There's uh anywhere 0:15:42.480 --> 0:15:45.680 from forty to fifty. I have heard different numbers Republicans 0:15:45.800 --> 0:15:47.840 in high tax states who are going to have trouble 0:15:47.960 --> 0:15:50.320 voting for this, starting with people like Peter King on 0:15:50.360 --> 0:15:53.960 Long Island. And if they lose that or have to 0:15:54.000 --> 0:15:58.280 carve it back substantially, Uh, it really calls into serious 0:15:58.360 --> 0:16:01.120 question what is already a difficult problem of the deficit 0:16:01.480 --> 0:16:03.960 aspects of this plan. You know, we had to we 0:16:04.000 --> 0:16:06.920 had this conversation about healthcare that it was so closely 0:16:06.920 --> 0:16:10.000 tied the reconciliation process. We're seeing that used here again. 0:16:10.240 --> 0:16:12.440 What are the consequences of that? And and and does 0:16:12.440 --> 0:16:15.560 this the hope for tax reform have longevity if if 0:16:15.560 --> 0:16:17.600 that process can't be used, if if we can't stick 0:16:17.640 --> 0:16:20.040 to this very short timetable that's been laid out by 0:16:20.080 --> 0:16:22.560 Republicans on the whole, Well, I think the short time 0:16:22.600 --> 0:16:26.680 table and reconciliation are slightly disconnected. Reconciliation requires it to 0:16:26.760 --> 0:16:29.119 be done within the budget. Year doesn't. But the Republicans 0:16:29.120 --> 0:16:31.960 wanted done this year because the politics are such that 0:16:32.040 --> 0:16:34.600 next year will be very very difficult. The only way 0:16:34.640 --> 0:16:37.640 this will happen is through reconciliation. I don't you can 0:16:37.640 --> 0:16:40.560 see how difficult it has been the for the Republicans 0:16:40.600 --> 0:16:43.040 to put together fifty votes for any of the various 0:16:43.040 --> 0:16:46.560 healthcare proposals. Imagine trying to put together sixty votes across 0:16:46.600 --> 0:16:50.160 party lines for any tax care attacks that cut proposal. 0:16:50.200 --> 0:16:52.720 It's just not going to happen. So what the Republicans 0:16:52.800 --> 0:16:55.560 have to do is try to get fifty people in 0:16:55.600 --> 0:16:57.640 their party to agree on this thing. And it's going 0:16:57.680 --> 0:16:59.640 to be tough. And just one last point is, of course, 0:17:00.120 --> 0:17:02.720 within reconciliation, it has to be it has to be 0:17:02.720 --> 0:17:05.720 budget neutral. After the ten uere window or else those 0:17:05.720 --> 0:17:08.560 tax cuts expired. And I think this general agreement that 0:17:08.640 --> 0:17:10.840 it's one thing to monkey around with individuals and say 0:17:10.840 --> 0:17:12.960 your tax cuts are gonna expire. If you do that 0:17:13.000 --> 0:17:15.119 with business, you're probably losing a large part of the 0:17:15.160 --> 0:17:18.480 benefit you're getting by cutting the taxes in the first place. Steve, 0:17:18.560 --> 0:17:23.240 whatever anybody's politics, a lot of people taking in and 0:17:24.000 --> 0:17:28.280 rethinking or the new thinking of Ken Burns, the Vietnam War, 0:17:28.640 --> 0:17:32.520 and within that is in concept of month after month 0:17:32.640 --> 0:17:35.840 after month in the White House around that table the 0:17:35.880 --> 0:17:39.399 best and brightest. You are as qualified as anyone in 0:17:39.400 --> 0:17:42.280 this nation to talk about the best and brightest. They 0:17:42.320 --> 0:17:44.639 were so frustrated that they bring you in his bizar. 0:17:45.560 --> 0:17:47.040 I don't know if the czar is the best and 0:17:47.040 --> 0:17:51.600 the brightest, But are we just moved on from actual 0:17:51.800 --> 0:17:56.600 merit and skill sets? Is being an item of importance 0:17:56.720 --> 0:18:00.480 an economics stand fisher, or if we have we given 0:18:00.560 --> 0:18:05.320 up on the concept of best and brightest? Well, obviously 0:18:05.400 --> 0:18:07.359 I have. I have a bit of a bias about this. 0:18:07.480 --> 0:18:10.880 I think the current president has appointed many people who 0:18:10.920 --> 0:18:13.200 no one would regard among the best and brightest. He's 0:18:13.200 --> 0:18:16.840 appointed some who people would regard, whether it's Jim Mattison 0:18:17.040 --> 0:18:20.240 or hr McMaster or John Kelly, who people would regard 0:18:20.240 --> 0:18:23.280 as among the best and the brightest. I think, I 0:18:23.320 --> 0:18:27.000 think again, I'm perhaps biased. I think President Obama did 0:18:27.040 --> 0:18:29.520 have a team, uh an all star team for the 0:18:29.560 --> 0:18:33.639 most part of people advising and helping him. So, okay, 0:18:33.600 --> 0:18:35.800 I hope we go back to the best of the brightest. 0:18:35.840 --> 0:18:38.040 I hope we hope we just fill these empty jobs 0:18:38.119 --> 0:18:40.840 because we need people. We need good people down there. 0:18:40.880 --> 0:18:43.760 But the problem, of course, at the moment is Again, 0:18:43.800 --> 0:18:46.880 this may sound like a political Statement's not meant that way. 0:18:47.160 --> 0:18:49.000 Nobody is going willing to go to work in the 0:18:49.040 --> 0:18:52.520 Trump administration right this minute. The Ratner charm is that 0:18:52.600 --> 0:18:56.399 you follow up pundentry with actual hard nails work. You know, 0:18:56.480 --> 0:19:00.000 real reports that you put together call from other sources 0:19:00.080 --> 0:19:03.399 is of great acuity. What is the Ratner acuity on 0:19:03.520 --> 0:19:06.560 tax reform? What is the distinction you've come up with, 0:19:06.680 --> 0:19:08.840 or I should say, what you're going to look forward 0:19:08.840 --> 0:19:12.320 to into two eight. One of the things that has 0:19:12.359 --> 0:19:14.960 struck me about this a tax bill, which I don't 0:19:15.000 --> 0:19:18.159 think the White House has really disputed, is that in fact, 0:19:18.320 --> 0:19:20.119 and we don't have all the details, but based on 0:19:20.200 --> 0:19:23.639 what we know, it's something like a three hundred billion 0:19:23.680 --> 0:19:27.720 dollar tax increase for individuals as a whole and something 0:19:27.760 --> 0:19:30.200 like a two and a half billion dollar tax cut 0:19:30.359 --> 0:19:33.720 for companies as a whole. A lot of that through 0:19:33.760 --> 0:19:36.600 the pass throughs, which BA which, contrary to what the 0:19:36.600 --> 0:19:40.960 White House says, essentially benefits high income tax payers. And 0:19:41.119 --> 0:19:43.800 I understand and agree with the importance of cutting the 0:19:43.880 --> 0:19:46.840 corporate tax rate and reforming the torque corporate tax code, 0:19:47.200 --> 0:19:49.560 but there's an element of fairness in this that seems 0:19:49.600 --> 0:19:51.159 to be missing, and I think that's what you're going 0:19:51.240 --> 0:19:53.400 to see a lot of pushback on from both parties. 0:19:53.720 --> 0:19:56.200 From a fiscal perspective, how do you fix the problem 0:19:56.240 --> 0:19:59.680 like get Puerto Rico. We're seeing this in acute focus now, 0:20:00.040 --> 0:20:03.399 President saying yesterday that the island's debt needs to be 0:20:03.440 --> 0:20:07.000 wiped out. Uh, that doesn't seem feasible to me. But 0:20:07.080 --> 0:20:08.800 it's safe to say that what we've seen happen here 0:20:08.800 --> 0:20:11.840 with this hurricane two weeks ago, has heightened the problems 0:20:11.840 --> 0:20:14.560 this island has already been facing for some time now. 0:20:15.040 --> 0:20:17.720 From from an investing perspective, what's the way out here 0:20:17.720 --> 0:20:20.000 for this this this part of the United States. Well, 0:20:20.040 --> 0:20:24.160 it's a restructuring problem. And I don't I the President, 0:20:24.280 --> 0:20:27.159 you know, not not uncharacteristically, it's just sort of waving 0:20:27.160 --> 0:20:29.119 his hand and saying stuff that frankly doesn't make a 0:20:29.119 --> 0:20:30.760 lot of sense. As you know, we just went through 0:20:30.800 --> 0:20:34.560 a very painful restructure in Puerto Rico. UM reduced the 0:20:34.600 --> 0:20:37.040 debt somewhat, it's still a lot of debt, I don't 0:20:37.040 --> 0:20:40.600 think frankly, however horrible this hurricane has been. The Puerto 0:20:40.720 --> 0:20:43.440 Ricans are entitled to simply have their debt wiped out. 0:20:43.880 --> 0:20:46.960