Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: You're listening to the Bloomberg Balance of Power podcast. Catch
Speaker 2: us live weekdays at noon Eastern on Apple car Play
Speaker 2: and then Broun Auto with the Bloomberg Business app. Listen
Speaker 2: on demand wherever you get your podcasts, or watch us
Speaker 2: live on YouTube.
Speaker 3: A one and forty seven page piece of legislation. It's
Speaker 3: the continuing resolution, the stop DAP measure that will keep
Speaker 3: the government open past the deadline of midnight Friday. There's
Speaker 3: a lot of stuff in this thing, from laws around pharmacy,
Speaker 3: benefit managers, what happens with RFK stadium disaster relief, which
Speaker 3: perhaps is the most palatable item in this for a
Speaker 3: lot of lawmakers. And it even gives lawmakers a pay
Speaker 3: raise through a cost of living adjustment that was first
Speaker 3: noted and noticed by Bloomberg Government's Jack Fitzpatrick, who of
Speaker 3: course covers Congress for BIGOV and he's joining me now
Speaker 3: here in Balance of Power on Bloomberg TV and radio. So, Jack,
Speaker 3: this is a monster piece of legislation. How did it
Speaker 3: get so big?
Speaker 4: It gets so big because you need to get people
Speaker 4: to vote for it, and you already know a lot
Speaker 4: of the hardline conservatives and maybe swing district members aren't
Speaker 4: going to vote for it. So when they complain about
Speaker 4: the fact that this is not the right way to legislate,
Speaker 4: it's not a good idea to just drop fifteen hundred
Speaker 4: pages in their lap right before a deadline. When they
Speaker 4: complained that they didn't ask for a pay raise, you say, well,
Speaker 4: you know, if you weren't going to vote for a
Speaker 4: major piece of legislation anyway because you don't see it
Speaker 4: as good governance, then.
Speaker 5: You've played yourself out.
Speaker 4: This is going to the members who represent rural America
Speaker 4: and wanted agricultural economic relief for farmers. It's going it's
Speaker 4: for the members who had hurricanes or wildfires or tornadoes
Speaker 4: or floods and want disaster aid, and a bunch of
Speaker 4: other members who had a bill that they wanted to
Speaker 4: see enacted. Whether it's a measure to try to crack
Speaker 4: down on hidden fees by hotels that's in there. There's
Speaker 4: a wide variety of measures in here, because when you
Speaker 4: get pushback from a number of members, you need to
Speaker 4: say this is going to be bipartisan. We need a
Speaker 4: large base of support. What can we put in this
Speaker 4: bill to get your support, and so there's a lot
Speaker 4: of input, and they're banking on Republicans and Democrats having
Speaker 4: something to vote yes for, even if they complain about
Speaker 4: the broader nature of a fifteen hundred page measure coming
Speaker 4: to them two days before a shutdown.
Speaker 3: Well, so then the next question is going to be
Speaker 3: when they'll have the chance to vote yes or no
Speaker 3: to this. Jack Speaker Johnson just yesterday was saying, I
Speaker 3: want to stick to the usual process. I want this
Speaker 3: to go through the Rules Committee, give everyone seventy two
Speaker 3: hours to read this massive, massive bill. How is this
Speaker 3: actually going to go down?
Speaker 4: This seventy two hour rule seems unlikely now there's not
Speaker 4: an official plan of action in the House. I spoke
Speaker 4: to Mark Amiday, who's a senior member of the Appropriations Committee, yesterday,
Speaker 4: who said, in his opinion, the obvious route is you
Speaker 4: skip the Rules Committee. You don't give people seventy two hours.
Speaker 4: Maybe they can get two days. You know, it came
Speaker 4: out last night. We'll see exactly when they hold the vote.
Speaker 4: But you do this under what's called suspension of the rules,
Speaker 4: which means you skip the Rule Committee and you need
Speaker 4: a two thirds supermajority to get it through rather than
Speaker 4: the simple majority in the House. There is a lot
Speaker 4: of bipartisan interest, so it seems like something that could
Speaker 4: get two thirds in the House and that would speed
Speaker 4: things up. Then though, you have to get it through
Speaker 4: the Senate, and that will require unanimous consent on some
Speaker 4: procedural step. So if anybody really wants to slow this
Speaker 4: down and cause a shutdown, they can. It's a question
Speaker 4: of who that member is and what the mood is
Speaker 4: in the Senate, And I will say members usually want
Speaker 4: to get out of here and go be with their
Speaker 4: families ahead of Christmas. So we'll continue to see if
Speaker 4: anybody wants to play the grinch in the Senate.
Speaker 5: Those jet fumes very powerful thing.
Speaker 3: So even assuming that all of this gets done this
Speaker 3: time around, the government does not shut down right before
Speaker 3: the holidays, we get our Christmas miracle. In that regard Jack,
Speaker 3: then it becomes a question of March, because that's how
Speaker 3: far the can is getting kicked down the road until
Speaker 3: March fourteenth. Given how difficult this seems to have been,
Speaker 3: how much harder is it going to be in March?
Speaker 3: When Johnson, assuming he's stay speaker, is working with an
Speaker 3: even smaller.
Speaker 4: Majority that's a great question. It could be harder because
Speaker 4: of the smaller majority, but it could be easier because one, Republicans,
Speaker 4: when they're in the majority and they have the trifecta,
Speaker 4: have a very clear leader. What the then president now
Speaker 4: President elect Donald Trump says.
Speaker 5: Is the rule for Republicans.
Speaker 4: So if they're trying to wrangle votes and trying to
Speaker 4: get members who are tough to get on board to
Speaker 4: vote for a piece of legislation, if Trump gets involved
Speaker 4: and says, absolutely, you need to support this, or we're
Speaker 4: going to send people after you run against you in
Speaker 4: your primary, that's a better motivator than they have right
Speaker 4: now when they're just asking them to kick the can
Speaker 4: down the road. If you can get Donald Trump and
Speaker 4: Elon Muskin, Vivik Ramaswami, who are not being helpful to
Speaker 4: Mike Johnson right now, to all work in the same direction,
Speaker 4: then they can have a better organization in March potentially
Speaker 4: than they do right now.
Speaker 3: Well, one thing we do know for sure, Jack, is
Speaker 3: that Matt Gates will not be taking part in the
Speaker 3: next Congress. He already resigned from this one. And we
Speaker 3: did get a piece of reporting today around Matt Gates
Speaker 3: and the ethics investigation into him. Apparently the committee did
Speaker 3: secretly vote to release that report even though he is
Speaker 3: no longer a member. What do we know in that
Speaker 3: regard and what precedent would it said if they do
Speaker 3: release the Gates report after he has left the chamber.
Speaker 4: There is an ongoing debate about the degree to which
Speaker 4: this would set a new precedent. Representative Sean cast In,
Speaker 4: a Democrat, who had been pushed for this report to
Speaker 4: come out, has said that there are cases in which
Speaker 4: a member has resigned while under investigation, in which they've
Speaker 4: put the report out and they don't want to set
Speaker 4: the precedent in his argument that you can avoid accountability
Speaker 4: and scrutiny by stepping down right before a report comes out. Ultimately,
Speaker 4: this is up to a vote. It takes a majority
Speaker 4: vote on the committee. We don't know yet who which
Speaker 4: Republican voted in favor of putting this out. I think
Speaker 4: more information will come out about exactly where people stand,
Speaker 4: but you can see that Gates is preparing for it.
Speaker 4: He went on x and was posting about working hard
Speaker 4: and playing hard in his thirties, saying he did not
Speaker 4: do anything illegal. He did say that that can be embarrassing.
Speaker 4: So this is not ideal for him, but obviously his
Speaker 4: course of defending himself and saying that he did not
Speaker 4: do anything legal will continue, and at least there's a
Speaker 4: little bit of convenience to him that if you want
Speaker 4: to bury this news, doing it right before the holidays
Speaker 4: is probably the time.
Speaker 3: All right, Jeff Fitzpatrick Bloomberg, Government Congress Reporter or live
Speaker 3: from Capitol Hill for us today. Jack, thank you very much,
Speaker 3: and we do have a little bit of news coming
Speaker 3: from Congress right now. The other must pass piece of
Speaker 3: legislation that needed to get done before your end, The
Speaker 3: National Defense Authorization Act has just passed the Senate after
Speaker 3: passing the House last week. The Senate voting eighty five
Speaker 3: to fourteen to send that eight hundred and eighty four
Speaker 3: billion dollar package to President Biden's desk. It's assumed Biden
Speaker 3: will sign it. The question is going to be when
Speaker 3: Biden gets a chance to sign this continuing resolution. I
Speaker 3: want to stick on this Matt Gates thing, though, as
Speaker 3: I reassemble or assemble our political panel, our signature one
Speaker 3: at that Rick Davis Stone Court Capital Partner and Republican
Speaker 3: Strategists alongside Jeanie Shanzano, Senior Democracy Fellow at the Center
Speaker 3: for the Study of the Presidency in Congress and Democratic strategist.
Speaker 3: So when we contend with the prospect of this Gates report,
Speaker 3: which I know all three of us have been dying
Speaker 3: to get our eyes on for a long time, now
Speaker 3: being released in the coming days, Rick, I do have
Speaker 3: to wonder, considering he is no longer a member of
Speaker 3: the House and has withdrawn his name for consideration for
Speaker 3: Attorney General, what will the ultimate impact of this actually be.
Speaker 6: Well, there is a current underneath a lot of this
Speaker 6: in Capitol Hill where people think he's going to show
Speaker 6: up next year and get sworn in, because he did
Speaker 6: get elected to another term. So even though he resigned
Speaker 6: his former term, he is still eligible to take his seat.
Speaker 6: And it wouldn't surprise me that part of the motivation
Speaker 6: of the Ethics Committee is to release his report to
Speaker 6: ensure that he doesn't change his mind and show up
Speaker 6: and get sworn in as a member of the one
Speaker 6: hundred and nineteenth Congress. And so when those possibilities exist,
Speaker 6: people try to take some risks in order to stop
Speaker 6: these kinds of things from happening.
Speaker 5: As if he could hear us.
Speaker 3: I just got a fundraising email from Matt Gates that
Speaker 3: hit my inbox talking about how help is needed. He's
Speaker 3: in the fight for his life, defending his name and honor.
Speaker 3: He says, instead of spending a wonderful Christmas holiday with
Speaker 3: my family, I'm forced to fight, fight, fight to defend myself.
Speaker 3: If he's still friend raising, that does lead me believe
Speaker 3: he does have future political ambitions that he's thinking about
Speaker 3: deploying cash for. And maybe it's ultimately that, say Gubinatorial
Speaker 3: Canvasy in Florida, that this ethics report will matter most.
Speaker 1: For Yeah, that's right. I mean, this is somebody who
Speaker 1: has spent his entire life in politics, his adult life,
Speaker 1: and you know, it's hard to believe he would be
Speaker 1: removed from that of his own accord, and so we
Speaker 1: certainly think he wants to get back into it, even
Speaker 1: though he had to withdraw his name or he decided
Speaker 1: to withdraw his name. And his response on X about
Speaker 1: this report that is coming out is long and it
Speaker 1: is very very telling. Like Taylor Swift, he talks about
Speaker 1: this as you know, activities that were in a different
Speaker 1: era of his life in his thirties when he was
Speaker 1: working hard and playing hard. He admits two things, although
Speaker 1: not certainly not anything criminal, but that are very unbecoming
Speaker 1: of somebody as a member of the House and a
Speaker 1: member of Congress. And so I think the release of
Speaker 1: this report is going to underscore for many people that
Speaker 1: this is somebody who, if he chooses to run again
Speaker 1: or tries, to Rick's point, to come back to Congress,
Speaker 1: which I really doubt, they're going to have to raise
Speaker 1: serious questions about that this is somebody who admits two things,
Speaker 1: again not criminal, but that are very very telling about
Speaker 1: who he is.
Speaker 3: And of course all of these concerns percolating around past
Speaker 3: conduct and character around Matt Gates or why he is
Speaker 3: no longer an active nominee for the second Trump administration
Speaker 3: never even got to a hearing. And Rick, we've been
Speaker 3: wondering if any other nominees might meet the same feet
Speaker 3: in pulling the Gates, if you will, of withdrawing themselves
Speaker 3: from nomination before they can risk being voted down. One
Speaker 3: of the nominees we've had greatest concern about, perhaps earlier
Speaker 3: this month, if less so now, is Pete Hegseth, who's
Speaker 3: been tapped to be the next Secretary of Defense, and
Speaker 3: according to CNN, Senator Roger Ricker, who of course will
Speaker 3: lead the committee hearing, says that hearing is set for
Speaker 3: January fourteenth, almost a full week before Trump takes office.
Speaker 3: How much drama could that bring just six days before
Speaker 3: Donald Trump takes his oath at the Capitol.
Speaker 6: Yeah, I think it's going to end at an element
Speaker 6: of scrutiny on Washington that this time of year, during
Speaker 6: a inaugural period is usually just happy, happy, joy joy.
Speaker 6: That hearing will not be happy, happy, joy joy. The
Speaker 6: biggest hurdle that Hegsath has is he's made representations to
Speaker 6: the senators he's meeting with that the stories about him
Speaker 6: are lives and that he has reformed his drinking, but
Speaker 6: that the relationships discussed in the public domain aren't true.
Speaker 6: If in his FBI report those things become more factual,
Speaker 6: he's going to have a hard time explaining why he
Speaker 6: said things were untrue when they came back in an
Speaker 6: FBI background check is becoming fact and so that is
Speaker 6: his vulnerability in that hearing, is members bringing those things
Speaker 6: up and asking him those questions directly.
Speaker 3: So, Genie, what do you make of the timing this
Speaker 3: January fourteenth date. I fully understand trying to get as
Speaker 3: much of the cabinet in there as possible so they
Speaker 3: can be ready on day one when the President moves
Speaker 3: into the White House. But Pete Hegseth one of the
Speaker 3: first to go at least at this point.
Speaker 1: Yeah, I mean, you know, it does make sense. I mean,
Speaker 1: we do need a secretary of Defense in place, so
Speaker 1: you know, the world is fraught with a lot of
Speaker 1: challenges for the incoming administration. They should be ready. But
Speaker 1: you know, to add another element to what these hearings
Speaker 1: on the fourteenth can bring about, we heard Lindsey Graham
Speaker 1: over the weekend saying, you know, the reason he's supporting
Speaker 1: hag set at this point is because those allegations against
Speaker 1: him were anonymous, and you know, to Rick's point, do
Speaker 1: they come about in an FBI check, He's four answer to.
Speaker 1: But also imagine now he has apparently released this woman
Speaker 1: who made these allegations against him from her privacy of
Speaker 1: their privacy agreement, and imagine if she decides to come
Speaker 1: forward or doesn't decide is called up. We could have
Speaker 1: really really difficult hearings for Pete Hegseth and his family
Speaker 1: at that time, So you know, these would be Kavanaugh Lake,
Speaker 1: these would be Clarence Thomas Lake, if indeed you see
Speaker 1: a witness like that come forward, which is very very
Speaker 1: possible since he has said or as lawyer has said,
Speaker 1: she is now released from their agreement to maintain privacy.
Speaker 3: We just have a minute left here, Rick, but we've
Speaker 3: discussed the continuing resolution that was released last night, that
Speaker 3: fact that Elon Musk and Viviak Ramaswami you are not
Speaker 3: happy with it. Elon Musk just putting out a new
Speaker 3: post on X that says, the more I learn, the
Speaker 3: more obvious it becomes that this spending bill is a crime.
Speaker 3: He's not being shy here, Rick, Do you think anyone
Speaker 3: will be heeding his voice.
Speaker 6: Yeah, Typically in Washington, when you stick your neck out
Speaker 6: that far, it gets chopped off. And he's way too
Speaker 6: new to this game in the sense of, you know,
Speaker 6: having this sort of public posture is the head of
Speaker 6: Doge and the Trump whisperer for all intensive purposes for
Speaker 6: the last month to really get that far out in
Speaker 6: front of this Now, I get it, it's his brand,
Speaker 6: But does he back Donald Trump in a position of
Speaker 6: calling up Johnson and saying, you know, we're not going
Speaker 6: to pass this bill. I mean, like there are real
Speaker 6: serious consequences to this kind of behavior, and I would
Speaker 6: have said absolutely no chance that this bill could be
Speaker 6: interrupted at this stage. But if if Ramaswami and Elon
Speaker 6: Musk launch a campaign against this bill, they might be
Speaker 6: able to get Donald Trump to throw it under the
Speaker 6: bus and we could have a serious government shutdown right
Speaker 6: before Christmas.
Speaker 3: All right, Rick Davis and Jeanie Shanze no our signature
Speaker 3: political panel. Thank you both so much.
Speaker 2: You're listening to the Bloomberg Balance of Power podcast Ken
Speaker 2: just live weekdays at noon Eastern on Applecarplay and then
Speaker 2: ron Oto with the Bloomberg Business app. You can also
Speaker 2: listen live on Amazon Alexa from our flagship New York station,
Speaker 2: Just Say Alexa play Bloomberg eleven thirty.
Speaker 3: On the nineteenth of January, we could see TikTok bands
Speaker 3: in the US, unless, of course, they can successfully get
Speaker 3: that blocked, as they've asked the Supreme Court to step
Speaker 3: in here after, of course, the appeals court District Court
Speaker 3: here in DC.
Speaker 5: The federal court.
Speaker 3: Did not agree with the company's contention that the law
Speaker 3: passed by Congress that would see it banned if it's
Speaker 3: not divested here in the US violates the right to
Speaker 3: free speech in the First Amendment. The Supreme Court says
Speaker 3: today they will hear TikTok's arguments, and they're scheduled for
Speaker 3: January tenth, which leaves just nine days of wiggle room
Speaker 3: here if the ban is indeed to be halted by
Speaker 3: the deadline. So joining me now for more is Bloomberg's
Speaker 3: Greg Store, who covers the Supreme Court for US. He's
Speaker 3: here in the Washington, d C. Studio. So, Greg, it's
Speaker 3: one thing for the Court to hear arguments on the
Speaker 3: tenth How quickly could they rule?
Speaker 5: Could they do so before the nineteenth?
Speaker 7: They certainly could, just as one example, Bush Vigor back
Speaker 7: in two thousand was a case that they turned around
Speaker 7: in just a day or maybe a day and a half.
Speaker 7: So they certainly have the ability to do that. There
Speaker 7: is the issue of, you know, whatever happens with this law,
Speaker 7: folks are going to need little time to plan their
Speaker 7: actions accordingly. You know, the companies that are involved with TikTok,
Speaker 7: like Oracle, which hosted on its servers.
Speaker 8: So one would imagine the court will be sensitive.
Speaker 3: To that well, it then raises the question on what
Speaker 3: the Court's view of this entire case, maybe when it
Speaker 3: is TikTok intends a First Amendment issue. The District Court
Speaker 3: of Appeals basically said, no, it's not. Congress was well
Speaker 3: within its authority, including on national security grounds, to put
Speaker 3: this law into place. It was a three to zero decision.
Speaker 3: Is there any indication the Supreme Court, which yes, as
Speaker 3: a conservative majority, would view it differently.
Speaker 8: Yeah, this is one where I'm not going to do
Speaker 8: much predicting. Yet.
Speaker 7: It was, as you said, a three to nothing decision
Speaker 7: from the Federal Appeals Court here in Washington, including two
Speaker 7: Republican appointed judges in the majority there, and they basically
Speaker 7: said national security Trump's free speech in this case, that
Speaker 7: Congress had legitimate concerns that the Chinese government was getting
Speaker 7: access to Americans data and would be manipulating was manipulating
Speaker 7: content what people see on TikTok, And the court said
Speaker 7: we're going to defer to Congress's judgment on that, and
Speaker 7: that Trump's the free speech cluse.
Speaker 3: So if the Supreme Court were to view things differently,
Speaker 3: which again obviously we can't predict for certain, but what
Speaker 3: would that do to congressional authority if they were to say, actually, no,
Speaker 3: the lawmakers in the legislative branch did not have this authority,
Speaker 3: and the judicial branch knocks it down.
Speaker 8: Yeah, that's a really good question.
Speaker 7: You know, this is a court and the court has,
Speaker 7: you know, over the century, has always been very deferential
Speaker 7: on national security grounds. That's not its area of expertise.
Speaker 7: So it would certainly be a very big deal where
Speaker 7: the court to say that, But we'd want to look
Speaker 7: at what the decision actually says. You know, they could
Speaker 7: try to write it in a way that sort of says,
Speaker 7: you know, maybe Congress went a little farther than it
Speaker 7: needed to. It's got legitimate concern So there are ways
Speaker 7: the court could at least try to narrow that ruling.
Speaker 7: But unquestionably it would be a major.
Speaker 3: Decision, So the outcome wouldn't necessarily be binary, like TikTok
Speaker 3: is banned starting the nineteenth or not. Could there be
Speaker 3: some nuance here, like a lengthening of the window for
Speaker 3: TikTok to divest or asking Congress to rewrite the law
Speaker 3: to address certain concerns.
Speaker 8: Yeah, that so a couple of things there.
Speaker 7: One they would certainly they could certainly leave open the
Speaker 7: possibility of Congress rewriting the law. They wouldn't, you know,
Speaker 7: ask them to, but they would suggest that it could
Speaker 7: be fixed.
Speaker 8: The second thing that they could do is TikTok has
Speaker 8: asked for.
Speaker 7: What they originally were asking for, was a temporary block
Speaker 7: of the law, as you said, scheduled to go into
Speaker 7: effect on January the nineteenth, and they said, you know,
Speaker 7: block it for now and let the new administration come in.
Speaker 7: Donald Trump this week said he has a warm spot
Speaker 7: for TikTok because he thinks that it helped him in
Speaker 7: the election. Yeah, you know, the Trump administration would be
Speaker 7: in charge of enforcing the law. So TikTok, you know,
Speaker 7: is at least hoping to kind of extend the window
Speaker 7: into the Trump administration. So the Supreme Court could say,
Speaker 7: as part of its ruling, we're upholding the law, but
Speaker 7: we're going to temporarily block it for a longer period
Speaker 7: of time to let everybody kind of, you know, figure
Speaker 7: out how they're going to deal with stuff. The Court
Speaker 7: does have some tools at its disposal.
Speaker 3: All right, Well, well, look forward to seeing the developments with
Speaker 3: this one. January tenth, again the date to write on
Speaker 3: your calendars, Bloomberg's Greg store covering the court for us.
Speaker 5: Thank you.
Speaker 2: You're listening to the Bloomberg Balance of Power podcast kens
Speaker 2: just Live weekdays at noon Eastern on Applecarplay, and then
Speaker 2: broud Otto with the Bloomberg Business App. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 3: So we want to get more into the expectations here
Speaker 3: and what exactly economically twenty twenty five could bring and
Speaker 3: turn to Joe Livornia. He is chief economist with smb
Speaker 3: Necosecurities SMBC rathern Eco Securities America. He also was the
Speaker 3: chief economist at the National Economic Council during the first
Speaker 3: Trump administration. Joe, welcome back to Bloomberg. Happy Fed day
Speaker 3: to you, Thanks for being here. So you think the
Speaker 3: booming equity market is more to do with expectations around
Speaker 3: monetary policy than say, expectations of Donald Trump taking office
Speaker 3: in January and everything that that will bring.
Speaker 9: No, I don't believe that to be the case. I
Speaker 9: think the Fed has to be much more careful the
Speaker 9: money supply and credit creation. We've seen M two growth
Speaker 9: accelerate in the last three months to almost a six
Speaker 9: percent rate. The small caps and the financials and certain
Speaker 9: sectors are very enthusiastic about President elect Trump coming back.
Speaker 9: We see that in a small business survey where you've
Speaker 9: just seen massive, basically vertical jumps and things like good
Speaker 9: time to expand and expectations the economy improves. No, I
Speaker 9: just think this is a part of a bigger narrative
Speaker 9: where the FED just has not done a very good
Speaker 9: job signaling its intentions and has been wrongfooted many times
Speaker 9: on inflation. And I'm just worried in the short term
Speaker 9: by the FED easing more and potentially getting more money
Speaker 9: and credit creation, they make a potentially sticky inflation problem worse.
Speaker 3: Well, Joe, you and I have had several conversations about
Speaker 3: the future of inflation and the role, if anything, tariffs
Speaker 3: could play in that. I know you see higher tariffs
Speaker 3: as effectively bringing a one time price increase. They should
Speaker 3: be viewed holistically with everything else economically the President elect
Speaker 3: would like to pursue. But I guess my question for
Speaker 3: you is how do you think the FED views it?
Speaker 3: If it is a price increase, they ultimately see what
Speaker 3: is the reaction function for monetary policy.
Speaker 9: That's I'm happy you raise that question because I think
Speaker 9: the I'm very bullish on growth next year, think inflation
Speaker 9: will moderate because I see President President elect Trump's policies
Speaker 9: as expanding the supply side of the economy. It's potential productivity,
Speaker 9: basically its ability to produce the things that we want. However,
Speaker 9: I think the FED has taking a much more demand
Speaker 9: side Canesian approach. They view the inflation process as not
Speaker 9: really a money and credit phenomenon, but rather where the
Speaker 9: unemployment is relative to NEHRU or where the output gap is.
Speaker 9: So that my fear is that they're going to look
Speaker 9: at a tariff increase as being inflationary when it's not,
Speaker 9: and when they should maybe be easing next year because
Speaker 9: productive output increases. Instead they hold pat and that would
Speaker 9: obviously set in motion a negative a reaction in markets
Speaker 9: in the broader economy well, and.
Speaker 3: When we consider the global economy, there's also the consideration
Speaker 3: on not just what tariffs mean for higher prices in
Speaker 3: the US potentially, but also if we are seeing higher
Speaker 3: tariffs and it results in a if not outright decoupling,
Speaker 3: a lessening of the trade relationship between the US and China,
Speaker 3: the world's two largest economies, what the wider economic ramifications
Speaker 3: of that could be not just here at home.
Speaker 9: Yeah, I'm not worried about that because I think you've
Speaker 9: already seen when President elect Trump talked about twenty five
Speaker 9: percent tariffs on Canada and Mexico. There were quickly talks
Speaker 9: where both respective leaders either went to see President Trump
Speaker 9: in person or had conversations shortly thereafter, as reported in
Speaker 9: the news. So I think again this is a negotiation.
Speaker 9: Tariffs will be a very powerful, important tool that will
Speaker 9: be used. I just think it's incorrect to look at
Speaker 9: them as being inflationary, which I think some on the
Speaker 9: FED will look at, and I think that would be
Speaker 9: a monetary policy error, especially if we're cutting regulations and
Speaker 9: oil prices and energy more broadly speaking, falls. That's where
Speaker 9: you can get some real improvement on the pricing side,
Speaker 9: because you get these second and third order effects when
Speaker 9: energy prices fall, the inverse of what we had when
Speaker 9: inflation surged back in twenty one and twenty two, when
Speaker 9: oil prices were higher, you'll get the opposite.
Speaker 3: Joe. Finally, I want to ask you about something else
Speaker 3: in the news today, which is that we got the
Speaker 3: text last night of a mammoth government funding continuing resolution
Speaker 3: that there's been a lot of pushback from Elon Musk.
Speaker 5: The vik Ramaswami don't like this. Now.
Speaker 3: The President of the Elect's soun Donald Trump Junior says, the
Speaker 3: American people didn't vote for this, They voted for the opposite.
Speaker 3: They voted for transparency. This cannot pass just quickly.
Speaker 1: Joe.
Speaker 3: If we were to somehow stumble into a shutdown here
Speaker 3: before the holidays, do you expect it would have a
Speaker 3: real economic impact.
Speaker 9: No. I love the fact that we're trying to get
Speaker 9: rid of this pork barrel legislation and we're actually trying
Speaker 9: to do something productive that's a bypar is an issue.
Speaker 9: I don't look for the government to shut down. I
Speaker 9: think ultimately the government will be open around the holidays,
Speaker 9: and I'm hopeful that whatever we get on the budget resolution,
Speaker 9: it'll be basically pushed.
Speaker 8: To next year.
Speaker 9: We're a more comprehensive, better form bill than probably what's
Speaker 9: out there right now. You know what it comes out at.
Speaker 9: In other words, I like what's happening. I think it's
Speaker 9: important we have to have this discussion.
Speaker 3: And we still have a minute left here, Joe, So
Speaker 3: if you could ask the FED share Jerome Powell one
Speaker 3: question in the press conference today, Assuming that what they
Speaker 3: do deliver is a twenty five basis point rate cut.
Speaker 9: What would it be Well, I would like to get
Speaker 9: some more information on where the Fed thinks that's neutral
Speaker 9: is and how they compare that to where financial conditions are.
Speaker 9: Because monetary policy has not tightened effectively for most of
Speaker 9: the economy. We've seen basically the cost of capital fall
Speaker 9: quite dramatically because of the rise and equity prices, and
Speaker 9: in very tight credit conditions. So why are you easing
Speaker 9: policy when you could just wait? And why are we
Speaker 9: so worried about what investors who are betting on FED
Speaker 9: fund in the FED Fund's futures market? Why are we
Speaker 9: so worried about disappointing those expectations. Wouldn't it be better
Speaker 9: if policy was perhaps a little bit more two way
Speaker 9: on the risk. Why is it that investors can't lose
Speaker 9: money sometimes or why can't they be disappointed on where
Speaker 9: monetary policy wants to go. I don't understand that. I
Speaker 9: think the FED has done a really terrible job of
Speaker 9: setting policy in a way that's led to major misallocations
Speaker 9: of capital because they believe that they can't let wall
Speaker 9: straight down I think that's ultimately very unproductive, and I
Speaker 9: worry that if the FED does cut today, as they
Speaker 9: likely will, you actually might get a more negative reaction
Speaker 9: ultimately in the bond market than they just not cut
Speaker 9: and let the market kind of evolve as I think
Speaker 9: it will in a positive fashion. But I first want
Speaker 9: to see inflation go lower, and the FEDS you do that, all.
Speaker 3: Right, Joe Lavornia, thanks for joining us here on Bloomberg.
Speaker 2: Thanks for listening to the Balance of Power podcast. Make
Speaker 2: sure to subscribe if you haven't already.
Speaker 8: An Apple spot of