1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,280 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Lisa Shamadana Morgan 10 00:00:37,320 --> 00:00:40,120 Speaker 2: Stanley writes in this with equities having round tripped back 11 00:00:40,159 --> 00:00:42,959 Speaker 2: towards first quarter ending levels, markets are anxious to move 12 00:00:43,000 --> 00:00:46,800 Speaker 2: on from tariffs and attempts to anticipate FED policy. Lisa 13 00:00:46,840 --> 00:00:48,960 Speaker 2: joins us now for more. Lisa good Mornick, Good morning. 14 00:00:49,000 --> 00:00:50,600 Speaker 2: How many times have we asked this question? Was it 15 00:00:50,600 --> 00:00:53,400 Speaker 2: all just a bad dream? Can we just move on? So? 16 00:00:53,840 --> 00:00:56,840 Speaker 3: Look, I think investors right now are weary and want 17 00:00:56,840 --> 00:00:59,680 Speaker 3: to move on. They want to look through it. But 18 00:00:59,720 --> 00:01:03,160 Speaker 3: I do think that things have fundamentally changed from the 19 00:01:03,240 --> 00:01:06,320 Speaker 3: Nasdaq peak back on December sixteenth. 20 00:01:06,360 --> 00:01:06,800 Speaker 2: I think the. 21 00:01:06,760 --> 00:01:10,560 Speaker 3: First thing that has changed is it's really clear that 22 00:01:10,640 --> 00:01:14,360 Speaker 3: top line growth among the MAG seven is decelerating, and 23 00:01:14,480 --> 00:01:18,240 Speaker 3: growth investors typically don't like to see deceleration. The second 24 00:01:18,240 --> 00:01:22,440 Speaker 3: thing is we're seeing this arms war with regard to 25 00:01:22,480 --> 00:01:28,120 Speaker 3: cap X spending continuing. If we our latest update on 26 00:01:28,200 --> 00:01:32,240 Speaker 3: looking at free cash flow yields shows MAG seven free 27 00:01:32,240 --> 00:01:37,520 Speaker 3: cash flow years shrinking by about eleven percent. Typically these 28 00:01:37,520 --> 00:01:40,559 Speaker 3: stocks don't tend to do particularly well when their free 29 00:01:40,560 --> 00:01:44,080 Speaker 3: cash flow yield is coming down. And look, we can 30 00:01:44,200 --> 00:01:48,480 Speaker 3: pretend that the deep Seek news doesn't mean anything, but 31 00:01:48,560 --> 00:01:52,240 Speaker 3: we fundamentally think it was the wake up call around 32 00:01:52,360 --> 00:01:56,800 Speaker 3: global engineering, global innovation, and the fact that none of 33 00:01:56,840 --> 00:02:00,360 Speaker 3: us know how the movie ends here on jen Ai, 34 00:02:00,600 --> 00:02:02,680 Speaker 3: who the winners are going to be, how it's going 35 00:02:02,720 --> 00:02:06,600 Speaker 3: to evolve, whether or not large language models very quickly 36 00:02:06,680 --> 00:02:10,560 Speaker 3: become commoditized, and the next you know, phase of the 37 00:02:10,600 --> 00:02:15,000 Speaker 3: buildout is actually much lower data center intensity, much lower 38 00:02:15,120 --> 00:02:20,400 Speaker 3: energy intensity because it's very application based. So nobody knows nothing. 39 00:02:20,840 --> 00:02:24,880 Speaker 3: And I think, right now, this is a market where 40 00:02:24,919 --> 00:02:28,440 Speaker 3: we've had you know, a lot of positioning, technical positioning 41 00:02:28,480 --> 00:02:31,720 Speaker 3: where people felt, hey, you know, I was caught off guard. 42 00:02:32,440 --> 00:02:36,880 Speaker 3: This was a massive surprise. You know, the effective China 43 00:02:36,960 --> 00:02:39,720 Speaker 3: tariff rate is much lower than I penciled. I got 44 00:02:39,720 --> 00:02:42,600 Speaker 3: to plow back in. You've got you know, some of 45 00:02:42,360 --> 00:02:45,720 Speaker 3: the private wealth money and retail money coming in from 46 00:02:45,720 --> 00:02:48,960 Speaker 3: the sidelines. But I think we're going to stall out here. 47 00:02:49,000 --> 00:02:51,920 Speaker 3: I think it's just hard to justify the numbers. You know, 48 00:02:51,960 --> 00:02:56,680 Speaker 3: you've round tripped back to January first on market levels, 49 00:02:56,760 --> 00:02:59,360 Speaker 3: and yet your earnings per share are down six percent. 50 00:02:59,560 --> 00:03:02,840 Speaker 2: So this move I'm fading. What would you rotate out 51 00:03:03,040 --> 00:03:04,919 Speaker 2: of and what would you rotate into? 52 00:03:05,680 --> 00:03:09,200 Speaker 3: Yeah, so you know, we're continuing to uh, you know, 53 00:03:09,320 --> 00:03:13,280 Speaker 3: recommend that folks take some profits in now the new 54 00:03:13,360 --> 00:03:17,280 Speaker 3: leaders again uh in tech uh, and really focus on 55 00:03:17,360 --> 00:03:21,880 Speaker 3: the beneficiaries of deregulation. And so we see that as 56 00:03:22,080 --> 00:03:25,119 Speaker 3: you know, financials, we see it as energy, we see 57 00:03:25,160 --> 00:03:27,800 Speaker 3: it as you know, some of the healthcare names. I 58 00:03:27,880 --> 00:03:30,560 Speaker 3: know for viewers out there, that's gonna sound like a 59 00:03:30,600 --> 00:03:34,600 Speaker 3: big value style bias, uh, but quite frankly, it is. 60 00:03:35,760 --> 00:03:38,080 Speaker 3: You know, while while we're not saying you've got to 61 00:03:38,080 --> 00:03:41,760 Speaker 3: be overweight value, we do think you want value in 62 00:03:41,800 --> 00:03:44,600 Speaker 3: this market because you want some risk premium. I mean, 63 00:03:44,640 --> 00:03:46,720 Speaker 3: there are risks out there and you want to get 64 00:03:46,760 --> 00:03:49,040 Speaker 3: paid uh to be in this market? 65 00:03:49,200 --> 00:03:51,920 Speaker 4: What risks do you want a premium to be paid for? 66 00:03:52,200 --> 00:03:54,640 Speaker 4: And it sounds sort of existential, but it goes to 67 00:03:54,640 --> 00:03:57,200 Speaker 4: the heart of the question of is it inflation or 68 00:03:57,280 --> 00:03:59,040 Speaker 4: is it recession or is it both? 69 00:04:00,200 --> 00:04:01,360 Speaker 2: I think it's a little bit of both. 70 00:04:01,400 --> 00:04:05,119 Speaker 3: I think we're somewhat less freaked out about inflation than 71 00:04:05,200 --> 00:04:09,000 Speaker 3: perhaps we would have been if the tariff rates would 72 00:04:09,040 --> 00:04:11,560 Speaker 3: have held. I think what we're worried about is that 73 00:04:11,640 --> 00:04:17,479 Speaker 3: we're no longer in a fore castable policy backdrop. Right 74 00:04:17,520 --> 00:04:20,359 Speaker 3: as much as we all want to handwring about the FED, 75 00:04:21,320 --> 00:04:24,120 Speaker 3: you know, for the last fifteen years, FED policy has 76 00:04:24,200 --> 00:04:29,000 Speaker 3: been reasonably stable and reasonably well telegraphed, and there haven't 77 00:04:29,040 --> 00:04:32,760 Speaker 3: been massive surprises. I think when we shift to a 78 00:04:32,800 --> 00:04:37,760 Speaker 3: fiscal policy backdrop with this administration, as we've seen, it's 79 00:04:38,000 --> 00:04:43,000 Speaker 3: very easy to experience both negative and positive surprises on policy. 80 00:04:43,680 --> 00:04:46,440 Speaker 3: And that's what I want to get paid for, is 81 00:04:46,440 --> 00:04:49,400 Speaker 3: that at any point, you know, things can take a 82 00:04:49,480 --> 00:04:51,240 Speaker 3: u turn based on the headline. 83 00:04:51,440 --> 00:04:53,520 Speaker 4: How much do the rest of the universe that you 84 00:04:53,560 --> 00:04:56,160 Speaker 4: didn't mention big tech that you're selling on the margins 85 00:04:56,400 --> 00:04:58,520 Speaker 4: or some of the financials and other value stocks that 86 00:04:58,560 --> 00:05:01,159 Speaker 4: you're looking at that aren't exactly value. As you pointed out, 87 00:05:01,720 --> 00:05:04,039 Speaker 4: how much do you think that it really will require 88 00:05:04,120 --> 00:05:06,560 Speaker 4: FED cuts to get the rest of the universe involved 89 00:05:06,560 --> 00:05:08,560 Speaker 4: in some sort of positive momentum. 90 00:05:08,800 --> 00:05:13,799 Speaker 3: I think the rate cuts are absolutely required for small 91 00:05:13,839 --> 00:05:18,200 Speaker 3: cap mid cap I think that universe has suffered profoundly, 92 00:05:18,440 --> 00:05:21,119 Speaker 3: you know, from the higher cost of capital By and large, 93 00:05:21,120 --> 00:05:23,960 Speaker 3: the S and P five hundred, which is predominantly large 94 00:05:23,960 --> 00:05:27,599 Speaker 3: in megacap companies have been pretty isolated. They have very 95 00:05:27,640 --> 00:05:30,080 Speaker 3: healthy balance sheets and for the most part, they haven't 96 00:05:30,120 --> 00:05:33,279 Speaker 3: been inhibited by rates where they are, which is why 97 00:05:33,320 --> 00:05:34,920 Speaker 3: we have multiples where they are. 98 00:05:35,200 --> 00:05:35,360 Speaker 5: Well. 99 00:05:35,400 --> 00:05:38,000 Speaker 4: It raises this question, especially as the fiscal debate heats 100 00:05:38,040 --> 00:05:40,000 Speaker 4: up in Washington, DC, and you alluded to this, and 101 00:05:40,040 --> 00:05:42,080 Speaker 4: there's a question about as we find out how much 102 00:05:42,080 --> 00:05:44,200 Speaker 4: the defthit is going to increase, how much bond markets 103 00:05:44,200 --> 00:05:47,919 Speaker 4: are going to freak out. To use your sophisticated Carlans, 104 00:05:48,000 --> 00:05:50,520 Speaker 4: but there is this question of at what level in 105 00:05:50,560 --> 00:05:53,120 Speaker 4: a thirty year in a ten year yield it becomes 106 00:05:53,120 --> 00:05:55,400 Speaker 4: prohibitive for stocks to really move higher from here and 107 00:05:55,560 --> 00:05:57,039 Speaker 4: really inject some damage. 108 00:05:57,360 --> 00:05:59,640 Speaker 3: Yeah, I mean Look, I think for most of the 109 00:05:59,720 --> 00:06:02,200 Speaker 3: last you know, six to twelve months that you know, 110 00:06:02,320 --> 00:06:05,159 Speaker 3: four fifty on the ten year, a four point five 111 00:06:05,160 --> 00:06:07,320 Speaker 3: percent on the ten year, you know, was kind of 112 00:06:07,320 --> 00:06:10,520 Speaker 3: this stall out threshold. You know, the market seems to 113 00:06:10,520 --> 00:06:13,760 Speaker 3: be battling with it a little bit this week. But look, 114 00:06:13,800 --> 00:06:16,600 Speaker 3: I think if we back up, you know, if we 115 00:06:16,680 --> 00:06:19,800 Speaker 3: get big, big, big deficit numbers coming out of this 116 00:06:19,920 --> 00:06:23,400 Speaker 3: tax bill and that ten year moves into that four 117 00:06:23,400 --> 00:06:25,760 Speaker 3: to seventy five range, I don't see how the market 118 00:06:26,000 --> 00:06:29,520 Speaker 3: has how equity valuations hold here. The math just stops 119 00:06:29,560 --> 00:06:30,320 Speaker 3: making sense. 120 00:06:30,560 --> 00:06:32,360 Speaker 2: Lisa, It's going to see you as always. Thanks for 121 00:06:32,400 --> 00:06:45,720 Speaker 2: dropping by, Lisa, said standing Andrew Homeholt of City writing, 122 00:06:45,760 --> 00:06:48,080 Speaker 2: Wait and sy is the right strategy. The FED can 123 00:06:48,120 --> 00:06:51,279 Speaker 2: now more comfortably stay patient, and we're pushing for the 124 00:06:51,320 --> 00:06:54,000 Speaker 2: next rate cut to come in July and not in 125 00:06:54,120 --> 00:06:56,520 Speaker 2: June as previously thought. Andrew joins us now for more. 126 00:06:56,560 --> 00:06:58,840 Speaker 2: Andrew K. Mornic morning, the question is WHYK go from 127 00:06:58,880 --> 00:07:00,960 Speaker 2: June to July? I should line why the summer? 128 00:07:01,680 --> 00:07:03,640 Speaker 6: Well, I think it's just going to take the FED 129 00:07:03,720 --> 00:07:06,839 Speaker 6: seeing something in the data that makes them worried about. 130 00:07:06,560 --> 00:07:07,680 Speaker 2: What's going on with activity. 131 00:07:07,680 --> 00:07:09,520 Speaker 6: What's going on with the labor market. If you look 132 00:07:09,520 --> 00:07:12,200 Speaker 6: at the soft data, the survey data, it's been misleading 133 00:07:12,240 --> 00:07:13,800 Speaker 6: in the past, but I think it's sending the right 134 00:07:13,840 --> 00:07:16,360 Speaker 6: signal now. I think the hard data are going to turn. 135 00:07:16,640 --> 00:07:18,760 Speaker 6: When the hard data turn, we'll have the FED cutting. 136 00:07:19,000 --> 00:07:22,200 Speaker 6: What exactly that happens, I don't know, but it could 137 00:07:22,240 --> 00:07:24,680 Speaker 6: be July, it could be September. One of these upcoming 138 00:07:24,680 --> 00:07:25,440 Speaker 6: meetings I think. 139 00:07:25,240 --> 00:07:28,160 Speaker 2: You'll discuss at the moment is July. Twice the weakening 140 00:07:28,200 --> 00:07:30,760 Speaker 2: comes before July quite clearly, which made you expect to 141 00:07:30,800 --> 00:07:32,880 Speaker 2: see it in the next couple of months. What gives 142 00:07:32,880 --> 00:07:34,080 Speaker 2: you that belief that's going to happen. 143 00:07:34,240 --> 00:07:35,920 Speaker 6: So I think we're going to start to see things 144 00:07:35,920 --> 00:07:37,800 Speaker 6: in the job market, and that's really what's going to 145 00:07:37,800 --> 00:07:39,920 Speaker 6: be important for the FED. Of course, dual mandate. You 146 00:07:40,000 --> 00:07:42,120 Speaker 6: have to worry about inflation, have to worry about employment. 147 00:07:42,440 --> 00:07:45,560 Speaker 6: We're seeing a low hiring rate in the job market. 148 00:07:45,920 --> 00:07:49,880 Speaker 6: We know now from surveys, from anecdotes that firms are 149 00:07:50,120 --> 00:07:52,800 Speaker 6: pulling back further if anything, on their hiring. We know 150 00:07:52,800 --> 00:07:54,920 Speaker 6: we're going to have some government job cuts. We know 151 00:07:54,960 --> 00:07:57,720 Speaker 6: that unemployment picked up last summer, So you kind of 152 00:07:57,720 --> 00:07:59,360 Speaker 6: put all those things together. I think there's a good 153 00:07:59,440 --> 00:08:01,280 Speaker 6: chance that we see that unemployment rate starting to move 154 00:08:01,360 --> 00:08:01,720 Speaker 6: up again. 155 00:08:01,800 --> 00:08:03,600 Speaker 4: Why do you dismiss all the people who say that 156 00:08:03,680 --> 00:08:06,040 Speaker 4: the job as claims have been low if they haven't 157 00:08:06,040 --> 00:08:08,360 Speaker 4: really ticked up that much. You've seen some of the 158 00:08:08,400 --> 00:08:11,560 Speaker 4: credit card data highlight that people keep sending pretty much 159 00:08:12,080 --> 00:08:14,440 Speaker 4: in a significant amount to the way that they did before. 160 00:08:15,000 --> 00:08:17,720 Speaker 4: Why is that not a leading indicator for you at 161 00:08:17,720 --> 00:08:19,840 Speaker 4: a time where there are very few kind of lynch 162 00:08:19,880 --> 00:08:21,800 Speaker 4: pins to truth along the way. 163 00:08:21,960 --> 00:08:23,680 Speaker 6: Yeah, I mean, I'm not dismissive of the fact that 164 00:08:23,680 --> 00:08:25,960 Speaker 6: the job market has been pretty stable for the last 165 00:08:25,960 --> 00:08:28,400 Speaker 6: six months. Six months plus and four point two percent 166 00:08:28,480 --> 00:08:30,960 Speaker 6: unemployment rate is not about unemployment. 167 00:08:30,480 --> 00:08:31,280 Speaker 5: Rate to be yet. 168 00:08:31,480 --> 00:08:33,560 Speaker 6: I think the issue is that it's been stable, but 169 00:08:33,600 --> 00:08:37,440 Speaker 6: it's been stable in a kind of fragile, uncomfortable way 170 00:08:37,480 --> 00:08:39,760 Speaker 6: with this low hiring rate, with a low layoff rate, 171 00:08:39,840 --> 00:08:41,840 Speaker 6: so you're not likely to lose your job, but if 172 00:08:41,840 --> 00:08:43,880 Speaker 6: you do, it's hard to get hired again. And again 173 00:08:43,920 --> 00:08:45,439 Speaker 6: we have these factors that are probably going to be 174 00:08:45,440 --> 00:08:48,199 Speaker 6: putting people into unemployment, harder for them to get hired again. 175 00:08:48,320 --> 00:08:50,400 Speaker 6: And then you start to see that unemployment rate moving home. 176 00:08:50,280 --> 00:08:52,760 Speaker 4: How do engage how much scarring there has been done 177 00:08:52,960 --> 00:08:53,880 Speaker 4: based in the fact that. 178 00:08:53,840 --> 00:08:55,320 Speaker 7: We are at a higher teriff rate. 179 00:08:55,240 --> 00:08:57,120 Speaker 4: Than we were at the beginning of the year, albeit 180 00:08:57,360 --> 00:09:01,040 Speaker 4: much lower than it was, say on April. Second, do 181 00:09:01,120 --> 00:09:03,600 Speaker 4: you sort of communicate that the scarring is not that 182 00:09:03,760 --> 00:09:08,920 Speaker 4: much less now than it was before the announcement that 183 00:09:08,920 --> 00:09:10,319 Speaker 4: there was going to be a ninety day pause. 184 00:09:10,640 --> 00:09:12,840 Speaker 6: It's all a question about what's the point of comparison. 185 00:09:12,920 --> 00:09:14,520 Speaker 6: I mean, to your point, if we compare this to 186 00:09:14,559 --> 00:09:16,320 Speaker 6: when we had one hundred and forty five percent terrors 187 00:09:16,400 --> 00:09:18,880 Speaker 6: versus China, it was effectively a trade embargo with respect 188 00:09:18,920 --> 00:09:21,600 Speaker 6: to China, and then we were worried about really acute effects. 189 00:09:21,760 --> 00:09:24,960 Speaker 6: Could you actually see less traffic at the ports, less 190 00:09:25,040 --> 00:09:27,440 Speaker 6: jobs at the ports for that reason, less trucking jobs. 191 00:09:27,720 --> 00:09:30,000 Speaker 6: Now it looks like probably that's not going to happen, 192 00:09:30,080 --> 00:09:34,160 Speaker 6: so you kind of take out that extreme acute downside risk, 193 00:09:34,400 --> 00:09:36,960 Speaker 6: but you still have the uncertainty around terrors. We're still 194 00:09:37,000 --> 00:09:38,640 Speaker 6: uncertain about how this is all going to turn out, 195 00:09:38,840 --> 00:09:40,720 Speaker 6: and that we think is leading firms to pull back 196 00:09:40,760 --> 00:09:41,760 Speaker 6: on their hiring decisions. 197 00:09:41,840 --> 00:09:45,600 Speaker 2: The prospective higher prices. Wilmot Basically, Sam, we're close, close 198 00:09:45,640 --> 00:09:48,440 Speaker 2: to passing on higher costs. The Fetter Reserve needs to 199 00:09:48,480 --> 00:09:51,360 Speaker 2: sit there in July be convinced that any kind of 200 00:09:51,400 --> 00:09:54,000 Speaker 2: inflation is not going to be persistent. Is that enough time? 201 00:09:54,760 --> 00:09:54,960 Speaker 5: You know? 202 00:09:55,040 --> 00:09:58,040 Speaker 6: You can't wait until you have total certainty. I think 203 00:09:58,120 --> 00:10:00,640 Speaker 6: that's a very general point that is important to make here. 204 00:10:01,280 --> 00:10:03,760 Speaker 6: If you wait until you see all the data, by definition, 205 00:10:04,000 --> 00:10:06,840 Speaker 6: you've acted too late. So the Federal Reserve is going 206 00:10:06,880 --> 00:10:08,520 Speaker 6: to need to make a decision about where they think 207 00:10:08,520 --> 00:10:10,320 Speaker 6: that trended inflation is STU coun chumpange. 208 00:10:10,440 --> 00:10:12,079 Speaker 2: Isn't that what they're communicating to us? 209 00:10:12,400 --> 00:10:13,479 Speaker 6: That is what they're communicating. 210 00:10:13,480 --> 00:10:14,400 Speaker 2: I don't just unbelief. 211 00:10:14,640 --> 00:10:16,720 Speaker 6: I don't believe them. No, I don't think that you 212 00:10:16,760 --> 00:10:19,160 Speaker 6: can wait until you have perfect clarity on the economy, 213 00:10:19,160 --> 00:10:21,760 Speaker 6: because John, you never have perfect clarity on the economy, 214 00:10:21,760 --> 00:10:23,680 Speaker 6: you'd be waiting forever. They're not going to wait forever. 215 00:10:23,920 --> 00:10:25,959 Speaker 6: They're going to look at that balance of risk. Look 216 00:10:25,960 --> 00:10:28,440 Speaker 6: at the last two inflation reports. We have core PCE 217 00:10:28,679 --> 00:10:30,920 Speaker 6: in the month of March zero point zero three percent 218 00:10:30,960 --> 00:10:33,320 Speaker 6: month on month. In the month of April, we think 219 00:10:33,320 --> 00:10:35,600 Speaker 6: it's going to be zero point one three percent month 220 00:10:35,640 --> 00:10:38,480 Speaker 6: on months, and these are two really soft inflation readings. 221 00:10:38,520 --> 00:10:41,679 Speaker 6: They follow two really strong inflation readings in January and February. 222 00:10:41,960 --> 00:10:44,400 Speaker 6: But that cooling and services inflation I think should be 223 00:10:44,400 --> 00:10:45,520 Speaker 6: giving them a lot of confidence. 224 00:10:45,559 --> 00:10:47,360 Speaker 2: It is a question I wish the interviewers would hamm 225 00:10:47,360 --> 00:10:50,160 Speaker 2: a FED officials on the difference between inflation being short 226 00:10:50,160 --> 00:10:53,440 Speaker 2: lived and more persistent. How do you know and how 227 00:10:53,440 --> 00:10:56,320 Speaker 2: long does it take to find out? How do you know? Well, 228 00:10:56,600 --> 00:10:57,199 Speaker 2: I think you have. 229 00:10:57,160 --> 00:10:59,480 Speaker 6: To make a judgment based on where that inflation is 230 00:10:59,520 --> 00:11:02,440 Speaker 6: coming from and what the underlying drivers of inflation are. 231 00:11:02,640 --> 00:11:04,720 Speaker 6: And this is why the current scenario is so different 232 00:11:04,760 --> 00:11:06,439 Speaker 6: from what we experienced after COVID. 233 00:11:06,640 --> 00:11:07,320 Speaker 5: After COVID, we. 234 00:11:07,320 --> 00:11:10,599 Speaker 6: Had a negative supply shock to the economy. Supply was constrained, 235 00:11:10,840 --> 00:11:13,320 Speaker 6: but we had a positive demand shock. At the same time, 236 00:11:13,360 --> 00:11:15,800 Speaker 6: we had lots of fiscal stimulus coming in. People could 237 00:11:15,800 --> 00:11:18,360 Speaker 6: go out and spend. Now we're in a different scenario 238 00:11:18,400 --> 00:11:20,400 Speaker 6: where you're getting the negative supply shock, but there's no 239 00:11:20,480 --> 00:11:24,040 Speaker 6: positive demand shock happening. Wage growth is cooling, house prices 240 00:11:24,040 --> 00:11:26,880 Speaker 6: have cooled, so you don't have that same inflationary backdrop. 241 00:11:27,440 --> 00:11:29,760 Speaker 4: Is there also the lack of belief in Fedshair J. 242 00:11:29,960 --> 00:11:32,240 Speaker 4: Powell when he laid out in his speech yesterday that 243 00:11:32,360 --> 00:11:35,160 Speaker 4: maybe the FED would look back to their previous framework 244 00:11:35,320 --> 00:11:38,480 Speaker 4: where they truly were targeting two percent inflation, not a range, 245 00:11:38,679 --> 00:11:41,240 Speaker 4: not an average over a period of time, talking about 246 00:11:41,240 --> 00:11:43,800 Speaker 4: how higher real interest rates may reflect the possibility that 247 00:11:43,840 --> 00:11:46,280 Speaker 4: inflation could be more volatile going forward, that we. 248 00:11:46,280 --> 00:11:48,000 Speaker 7: Could be in a period of supply shocks. 249 00:11:48,320 --> 00:11:50,760 Speaker 4: Do you just dismiss that as something that they're not 250 00:11:50,760 --> 00:11:53,360 Speaker 4: going to follow through with emphasizing inflation even at the 251 00:11:53,400 --> 00:11:54,480 Speaker 4: expense of the economy. 252 00:11:54,920 --> 00:11:57,679 Speaker 6: So I think they do need to think seriously about 253 00:11:57,720 --> 00:12:00,240 Speaker 6: how you operate monetary policy in a world where you 254 00:12:00,320 --> 00:12:03,840 Speaker 6: have these larger, more persistent supply shocks. That is a 255 00:12:03,880 --> 00:12:05,600 Speaker 6: real issue that they have to contend with. 256 00:12:05,960 --> 00:12:06,160 Speaker 7: Now. 257 00:12:06,280 --> 00:12:08,560 Speaker 6: Having said that, that doesn't just mean that you keep 258 00:12:08,559 --> 00:12:11,320 Speaker 6: policy rates at restrictive levels at all time. You assess 259 00:12:11,320 --> 00:12:13,680 Speaker 6: the current situation, and again, I think we're in a 260 00:12:13,720 --> 00:12:16,920 Speaker 6: situation here where we have, yes, a negative supply shock 261 00:12:17,200 --> 00:12:20,199 Speaker 6: that's going to reduce growth, that's going to raise inflation, 262 00:12:20,559 --> 00:12:23,520 Speaker 6: but we don't have that demand shock to make inflation persistent, 263 00:12:23,520 --> 00:12:24,920 Speaker 6: and that's what they should be paying attention to. 264 00:12:25,040 --> 00:12:27,320 Speaker 4: Do you think that they will take an average of 265 00:12:27,440 --> 00:12:30,720 Speaker 4: PPI and CPI, look at that core PCEE metric that 266 00:12:30,760 --> 00:12:33,640 Speaker 4: you've just said is probably going to come in lower, and. 267 00:12:33,720 --> 00:12:35,120 Speaker 7: Just extrapolate that out. 268 00:12:35,240 --> 00:12:37,160 Speaker 4: Do you think that they're going to even without some 269 00:12:37,200 --> 00:12:39,320 Speaker 4: sort of pain in a labor market? 270 00:12:39,600 --> 00:12:41,800 Speaker 6: Yeah, I mean you can't just extrapolate that out forever. 271 00:12:41,920 --> 00:12:43,600 Speaker 6: I mean you need to look at what are the 272 00:12:43,640 --> 00:12:46,680 Speaker 6: details of that inflation reading. Where is inflation really going here? 273 00:12:46,840 --> 00:12:49,600 Speaker 6: I think they're looking at shelter inflation that's slowing. They're 274 00:12:49,640 --> 00:12:53,400 Speaker 6: looking at non shelter services and wage growth that feeds 275 00:12:53,400 --> 00:12:55,640 Speaker 6: into that that have slowed. I think that should all 276 00:12:55,679 --> 00:12:58,280 Speaker 6: be reassuring. The question is what happens with goods. We're 277 00:12:58,280 --> 00:13:00,959 Speaker 6: probably going to see some goods inflation because those terrorf rates. 278 00:13:01,520 --> 00:13:04,880 Speaker 6: But that's where you getting back to John's question. That's 279 00:13:04,880 --> 00:13:07,439 Speaker 6: where you say, if the inflation is confined to goods, 280 00:13:07,720 --> 00:13:09,480 Speaker 6: then we should be less concerned about it. That looks 281 00:13:09,520 --> 00:13:11,400 Speaker 6: more like a one time move in the price level. 282 00:13:11,520 --> 00:13:13,680 Speaker 6: That's what Governor Waller has said. I think he's about 283 00:13:13,720 --> 00:13:15,520 Speaker 6: the only FED official that's come out and said. 284 00:13:15,600 --> 00:13:16,959 Speaker 2: Just the net close to making a mistake. 285 00:13:17,760 --> 00:13:19,320 Speaker 6: I think they could be I think they could be. 286 00:13:19,400 --> 00:13:21,160 Speaker 6: I mean, I think they do have time here. They 287 00:13:21,240 --> 00:13:23,920 Speaker 6: do have the luxury of a labor market that's been stable. 288 00:13:24,000 --> 00:13:26,679 Speaker 6: But you can't wait for total clarity. You'll never have 289 00:13:26,760 --> 00:13:27,520 Speaker 6: total clarity. 290 00:13:27,679 --> 00:13:30,280 Speaker 2: The problem is, you know, these mistakes are often borne 291 00:13:30,280 --> 00:13:33,079 Speaker 2: out of the conditioning from the previous experience, and that's 292 00:13:33,120 --> 00:13:35,920 Speaker 2: why we had to wait last time around, because their 293 00:13:35,960 --> 00:13:39,560 Speaker 2: experience was actually downtime policy too soon, which meant they 294 00:13:39,559 --> 00:13:41,760 Speaker 2: waited and then inflation ripped away from them. They made 295 00:13:41,800 --> 00:13:44,080 Speaker 2: a mistake. This time around, they're going to waite for 296 00:13:44,120 --> 00:13:45,880 Speaker 2: different reasons, and they could make a different kind of 297 00:13:45,920 --> 00:13:48,559 Speaker 2: mistake because they could have moved sooner. The opposite way. 298 00:13:48,480 --> 00:13:51,920 Speaker 4: It could lead to a much faster deterioration in the economy, 299 00:13:51,920 --> 00:13:54,280 Speaker 4: which is the reason why George Coknkalvas earlier was saying 300 00:13:54,320 --> 00:13:55,680 Speaker 4: that they're going to be late and they're going to 301 00:13:55,679 --> 00:13:57,480 Speaker 4: move a lot faster. This is what a lot of 302 00:13:57,480 --> 00:13:59,880 Speaker 4: people think right now in markets. We're baking in two 303 00:14:00,120 --> 00:14:01,959 Speaker 4: rate cuts for the remainder of the year because their 304 00:14:01,960 --> 00:14:03,800 Speaker 4: cuts are going to come on the heels of good 305 00:14:03,880 --> 00:14:07,640 Speaker 4: data of disinflation, not necessarily that pain in the economy 306 00:14:07,679 --> 00:14:09,400 Speaker 4: that some people were worried about Andrew. 307 00:14:09,400 --> 00:14:11,840 Speaker 2: It's going to see us, sir. Thanks dropping by Andrew Honholst. 308 00:14:11,840 --> 00:14:14,480 Speaker 2: The city does not believe FED officials when they speak. 309 00:14:14,640 --> 00:14:28,920 Speaker 2: That's my takeaway. Turning from markets to the nation's capital, 310 00:14:29,000 --> 00:14:31,960 Speaker 2: in fighting between House Republicans threatening to delay a much 311 00:14:32,000 --> 00:14:35,880 Speaker 2: anticipated tax bill, the key issue salt Camp increases. One 312 00:14:35,960 --> 00:14:38,440 Speaker 2: man at the center of all of that, among others, 313 00:14:38,600 --> 00:14:41,560 Speaker 2: Congressman Mike Lawler of New York. The congressman joined us 314 00:14:41,560 --> 00:14:43,920 Speaker 2: now from Capitol Hill for more. Congressman, welcome back to 315 00:14:43,920 --> 00:14:45,800 Speaker 2: Bloomberg Survellan, sir, it's good to see you again. 316 00:14:46,480 --> 00:14:47,400 Speaker 5: Thanks for having me. 317 00:14:47,680 --> 00:14:50,120 Speaker 2: Let's talk about progress made this week. Speak of Johnson 318 00:14:50,160 --> 00:14:53,080 Speaker 2: keeps saying we're getting closer and closer. What's your assessment 319 00:14:53,080 --> 00:14:55,440 Speaker 2: of how much progress we've made so far this week? 320 00:14:56,840 --> 00:14:59,880 Speaker 5: Well, finally this week we had the opportunity to sit 321 00:15:00,080 --> 00:15:05,480 Speaker 5: down and go through real numbers and start to have 322 00:15:05,720 --> 00:15:09,360 Speaker 5: a negotiation. And I think that it was long overdue. 323 00:15:09,400 --> 00:15:13,120 Speaker 5: We had been pushing for months to have that conversation 324 00:15:13,400 --> 00:15:17,200 Speaker 5: with the Ways and Means Chairman, with the Speaker, and 325 00:15:17,880 --> 00:15:22,520 Speaker 5: so we finally began that process. And obviously, you know 326 00:15:22,600 --> 00:15:25,120 Speaker 5: this is something that's going to have to be negotiated 327 00:15:25,680 --> 00:15:32,040 Speaker 5: over the weekend to get to hopefully an agreement. When 328 00:15:32,080 --> 00:15:34,040 Speaker 5: it comes to the issue of salt. 329 00:15:34,080 --> 00:15:36,960 Speaker 2: We understand the proposal a tripling of the deduction to 330 00:15:37,040 --> 00:15:39,480 Speaker 2: thirty thousand. Could you give us a sense on how 331 00:15:39,560 --> 00:15:41,600 Speaker 2: far apart you are right now? 332 00:15:43,000 --> 00:15:45,280 Speaker 5: Well, there's a number of issues. Number one, the marriage 333 00:15:45,320 --> 00:15:52,520 Speaker 5: penalty and eliminating that for those filing jointly. Number two, 334 00:15:53,480 --> 00:15:57,240 Speaker 5: you know, there is real concern about reverting to a 335 00:15:57,320 --> 00:16:02,240 Speaker 5: ten thousand dollars cap, which none of us support. That 336 00:16:02,400 --> 00:16:07,840 Speaker 5: is a real challenge. Number Three, The fact is, these 337 00:16:07,840 --> 00:16:12,800 Speaker 5: income limits are a problem four hundred thousand. While it 338 00:16:12,840 --> 00:16:16,640 Speaker 5: may sound like a lot in some areas, in an 339 00:16:16,680 --> 00:16:20,400 Speaker 5: area like mine, that's you know, a cop and a 340 00:16:20,480 --> 00:16:25,280 Speaker 5: teacher who are married and you know, have a combined income. 341 00:16:25,440 --> 00:16:30,080 Speaker 5: So the fact is, we have high property taxes coupled 342 00:16:30,120 --> 00:16:33,720 Speaker 5: with high income taxes, and you'll blow right past a 343 00:16:33,840 --> 00:16:38,280 Speaker 5: thirty thousand dollars cap without a problem. You look at 344 00:16:38,400 --> 00:16:41,640 Speaker 5: my district, three of the four counties that I represent 345 00:16:41,840 --> 00:16:45,800 Speaker 5: are in the top sixteen highest property tax counties in America, 346 00:16:45,840 --> 00:16:49,040 Speaker 5: And so there's a real issue here in terms of 347 00:16:49,080 --> 00:16:52,480 Speaker 5: the numbers, and so we're working through it. You know, 348 00:16:52,560 --> 00:16:54,040 Speaker 5: I've read the art of the deal. I'm not going 349 00:16:54,080 --> 00:16:58,240 Speaker 5: to negotiate in public, but the fact is that, you know, 350 00:16:58,640 --> 00:17:02,880 Speaker 5: we need to make some significant concessions to get to 351 00:17:03,560 --> 00:17:04,040 Speaker 5: a number. 352 00:17:04,320 --> 00:17:07,680 Speaker 4: Congressman, what would you like to see cut to offset 353 00:17:07,920 --> 00:17:11,280 Speaker 4: some of the increases to the salt tax deduction because 354 00:17:11,359 --> 00:17:14,120 Speaker 4: ultimately cell cap, because that's a real concern right now 355 00:17:14,160 --> 00:17:17,920 Speaker 4: for markets is how much does that alone increase the deficit? 356 00:17:19,600 --> 00:17:23,480 Speaker 5: Well, a few things. Number One, any cap is a 357 00:17:23,560 --> 00:17:27,440 Speaker 5: savings okay, because the fact is that the cap on 358 00:17:27,560 --> 00:17:30,359 Speaker 5: salt expires at the end of the year, so we 359 00:17:30,400 --> 00:17:34,159 Speaker 5: are actually giving them a pay for by agreeing to 360 00:17:34,240 --> 00:17:37,840 Speaker 5: a cap. That's number one, and people should recognize that 361 00:17:38,040 --> 00:17:42,400 Speaker 5: as part of these negotiations. Number Two, there's a number 362 00:17:42,400 --> 00:17:44,919 Speaker 5: of levers that can be dealt with here in terms 363 00:17:44,920 --> 00:17:49,679 Speaker 5: of savings versus adjustments within the tax code. That's what 364 00:17:49,680 --> 00:17:51,760 Speaker 5: we're talking about. We're waiting to hear back from the 365 00:17:51,800 --> 00:17:57,160 Speaker 5: Speaker and then be able to make a honest determination 366 00:17:57,400 --> 00:17:59,000 Speaker 5: as to what we can. 367 00:17:58,880 --> 00:18:00,600 Speaker 2: Get to this issue. 368 00:18:00,640 --> 00:18:04,159 Speaker 4: Congressman that as this debate has raged on, there's been 369 00:18:04,160 --> 00:18:07,800 Speaker 4: an argument that you have pioneered saying that moderates make 370 00:18:07,880 --> 00:18:10,639 Speaker 4: the majority for Republicans, and that you need to be 371 00:18:10,640 --> 00:18:12,800 Speaker 4: able to punch above your weight because without you, they 372 00:18:12,800 --> 00:18:16,160 Speaker 4: wouldn't have the position that they actually have. How much 373 00:18:16,240 --> 00:18:18,280 Speaker 4: is this sort of setting the stage for what's to come? 374 00:18:18,320 --> 00:18:19,919 Speaker 4: How much do you see this as a theme that 375 00:18:19,920 --> 00:18:21,720 Speaker 4: we're going to hear about quite a bit as we 376 00:18:21,760 --> 00:18:22,639 Speaker 4: had to the midterms. 377 00:18:24,000 --> 00:18:26,600 Speaker 5: Well, listen, we have a two hundred and twenty seat 378 00:18:26,800 --> 00:18:33,600 Speaker 5: majority and three of us one districts that Kamala Harris won. 379 00:18:34,520 --> 00:18:36,600 Speaker 5: You lose the three of us and you're in the 380 00:18:36,640 --> 00:18:41,040 Speaker 5: minority very quickly. So you know, look, I think the 381 00:18:41,160 --> 00:18:46,800 Speaker 5: reality of this is math. And I certainly respect all 382 00:18:46,840 --> 00:18:50,600 Speaker 5: of my colleagues. They're all here to represent their districts 383 00:18:50,680 --> 00:18:54,560 Speaker 5: as am I and my district has different needs than 384 00:18:54,600 --> 00:18:57,760 Speaker 5: some of my colleagues who are in safer seats, who 385 00:18:57,760 --> 00:19:01,639 Speaker 5: are in a more Republican seats. That's just a reality 386 00:19:01,680 --> 00:19:05,920 Speaker 5: of life. And so to me, this is about a compromise. 387 00:19:06,320 --> 00:19:08,359 Speaker 5: None of us are going to get everything we want 388 00:19:08,920 --> 00:19:12,760 Speaker 5: in this bill or any bill, but all of us 389 00:19:12,800 --> 00:19:15,960 Speaker 5: have to find a way to work together to keep 390 00:19:15,960 --> 00:19:19,359 Speaker 5: the majority and make sure that we're delivering for the 391 00:19:19,400 --> 00:19:22,520 Speaker 5: American people. And our districts, and that's what I'm doing 392 00:19:22,640 --> 00:19:27,560 Speaker 5: in fighting for this issue, fighting to protect Medicaid. I 393 00:19:27,600 --> 00:19:31,119 Speaker 5: have one of the highest district with one of the 394 00:19:31,200 --> 00:19:35,600 Speaker 5: highest number of recipients of Medicaid. There are people who 395 00:19:35,640 --> 00:19:38,560 Speaker 5: rely on these critical programs, and I'm doing everything I 396 00:19:38,640 --> 00:19:43,480 Speaker 5: can throughout this process to protect that, including blocking any 397 00:19:43,600 --> 00:19:47,320 Speaker 5: changes to f MAP, per capita caps, block grants, dish cuts. 398 00:19:47,960 --> 00:19:51,480 Speaker 5: We've been able to do that throughout this process and 399 00:19:51,600 --> 00:19:56,359 Speaker 5: make sure that those who rely on these programs receive 400 00:19:56,440 --> 00:20:00,679 Speaker 5: the benefits that they need, while making sure that we 401 00:20:00,760 --> 00:20:05,440 Speaker 5: eliminate waste, fraud, and abuse, prevent illegal immigrants from receiving 402 00:20:05,520 --> 00:20:09,280 Speaker 5: Medicaid benefits, make sure that able bodied adults without dependence 403 00:20:09,960 --> 00:20:14,200 Speaker 5: are working, we're going to school, and making sure that 404 00:20:14,240 --> 00:20:18,679 Speaker 5: those who are no longer eligible are not continuing to 405 00:20:18,720 --> 00:20:21,960 Speaker 5: receive benefits. Those are common sense reforms that the vast 406 00:20:22,000 --> 00:20:23,880 Speaker 5: majority of the American people's support. 407 00:20:24,040 --> 00:20:26,080 Speaker 2: A Congressman, you mentioned the out of the deal. Let's 408 00:20:26,080 --> 00:20:28,000 Speaker 2: talk about the author of the out of the deal. 409 00:20:28,040 --> 00:20:30,119 Speaker 2: The President's on its way back to Washington. Do you 410 00:20:30,119 --> 00:20:32,080 Speaker 2: have plans to speak to him and you have a 411 00:20:32,080 --> 00:20:33,520 Speaker 2: decent sense of what his position is. 412 00:20:35,200 --> 00:20:39,199 Speaker 5: I will be reaching out to connect with him for sure. 413 00:20:40,040 --> 00:20:42,840 Speaker 5: I think he obviously had a very successful trip in 414 00:20:42,880 --> 00:20:46,959 Speaker 5: the Middle East, brought back significant investment into the United 415 00:20:46,960 --> 00:20:53,600 Speaker 5: States in agreements with Saudi Arabia, UAE, and Cutter, and 416 00:20:53,640 --> 00:20:58,440 Speaker 5: that obviously bodes well for the American economy as we 417 00:20:58,520 --> 00:21:01,760 Speaker 5: move forward. Is a great trip for the President. As 418 00:21:02,040 --> 00:21:05,520 Speaker 5: chair of the Middle East and North Africa Subcommittee, certainly, 419 00:21:05,880 --> 00:21:09,639 Speaker 5: I'm looking forward to getting a readout of more details 420 00:21:09,680 --> 00:21:12,440 Speaker 5: on what occurred on the trip. But I think it 421 00:21:12,600 --> 00:21:15,119 Speaker 5: was a big win for the President, and so he 422 00:21:15,200 --> 00:21:19,800 Speaker 5: comes back obviously on the prespoe of getting you know, 423 00:21:20,040 --> 00:21:23,440 Speaker 5: one big beautiful bill passed, and so we have a 424 00:21:23,480 --> 00:21:25,440 Speaker 5: little bit of work to do still. But I think, 425 00:21:26,040 --> 00:21:28,120 Speaker 5: you know, it's been a very good week for the President. 426 00:21:28,200 --> 00:21:29,560 Speaker 2: I know you've been up all night. I just wanted 427 00:21:29,560 --> 00:21:31,359 Speaker 2: to squeeze in one more question that I think is 428 00:21:31,400 --> 00:21:34,360 Speaker 2: relevant to a lot of our audience. You've co sponsored 429 00:21:34,400 --> 00:21:39,040 Speaker 2: the Trust Act Trusting Congress Act to banstock trading in Congress. 430 00:21:39,080 --> 00:21:42,040 Speaker 2: Can I just say, Congressman, we all find it absolutely 431 00:21:42,080 --> 00:21:46,200 Speaker 2: ridiculous that people in Congress have looser regulations restrictions to 432 00:21:46,720 --> 00:21:50,680 Speaker 2: trade stocks that we do as financial journalists. Congressman, can 433 00:21:50,720 --> 00:21:53,280 Speaker 2: we actually do something about that sometime soon. 434 00:21:54,520 --> 00:21:57,480 Speaker 5: Look, I am in full support. The fact is you're 435 00:21:57,480 --> 00:22:00,440 Speaker 5: here to serve. If you want to make money, leave 436 00:22:01,920 --> 00:22:05,960 Speaker 5: this to me is a very common sense reform to 437 00:22:06,080 --> 00:22:09,800 Speaker 5: make sure that members of Congress or their spouses. We've 438 00:22:09,840 --> 00:22:14,480 Speaker 5: seen some spouses who are prolific traders in recent years. 439 00:22:14,520 --> 00:22:18,040 Speaker 5: The fact is they should not be benefiting from inside 440 00:22:18,119 --> 00:22:24,160 Speaker 5: knowledge or information gleaned from meetings they have, committee hearings 441 00:22:24,200 --> 00:22:28,159 Speaker 5: they hold, or legislation that is pending. And it's just 442 00:22:28,200 --> 00:22:32,359 Speaker 5: a reality of life that anyone in this position is 443 00:22:33,440 --> 00:22:38,200 Speaker 5: provided with more information than the average person, and therefore 444 00:22:38,880 --> 00:22:42,240 Speaker 5: it is imperative to make sure that members of Congress 445 00:22:42,359 --> 00:22:46,800 Speaker 5: or their spouses are not benefiting from that information, and 446 00:22:47,040 --> 00:22:49,280 Speaker 5: all of their assets should be put in a blind 447 00:22:49,280 --> 00:22:50,080 Speaker 5: trust period. 448 00:22:50,200 --> 00:22:51,720 Speaker 2: If that that could have tried. Unless you's not a 449 00:22:51,760 --> 00:22:54,480 Speaker 2: hedge fund, Congressman, appreciate your time, sir, Gonna have a 450 00:22:54,480 --> 00:22:56,960 Speaker 2: busy weekend. I'm sure let's hopefully catch up against you 451 00:22:56,960 --> 00:23:08,680 Speaker 2: in Congressman, like lawa there joining us not to extend 452 00:23:08,720 --> 00:23:12,280 Speaker 2: the conversation, Mam McGinnis at a commitse for a responsible federal budget. 453 00:23:12,280 --> 00:23:14,360 Speaker 2: My welcome back to the program. You've seen the policies 454 00:23:14,359 --> 00:23:17,280 Speaker 2: on the table so far to debate and negotiations continue 455 00:23:17,280 --> 00:23:19,399 Speaker 2: into the weekend. Can you just put a number a 456 00:23:19,440 --> 00:23:21,320 Speaker 2: price to the policies on the table at the moment? 457 00:23:22,680 --> 00:23:25,919 Speaker 1: Oh, well, if they're talking about bumping up the salt 458 00:23:25,920 --> 00:23:28,920 Speaker 1: cap even higher than it already would be at thirty thousand, 459 00:23:29,240 --> 00:23:33,320 Speaker 1: we are talking about massive amounts. Potentially nine hundred billion 460 00:23:33,400 --> 00:23:34,760 Speaker 1: is what it would cost to bring it up to 461 00:23:34,800 --> 00:23:38,480 Speaker 1: the sixty three thousand per individual that they're looking for, which, 462 00:23:38,560 --> 00:23:41,440 Speaker 1: to put it in perspective, that is more than all 463 00:23:41,520 --> 00:23:44,320 Speaker 1: of the new tax cuts in this bill, the no 464 00:23:44,560 --> 00:23:47,879 Speaker 1: tax on tips and auto loans and overtime, all of 465 00:23:47,920 --> 00:23:51,919 Speaker 1: those things. So this request to bring it above thirty thousand, 466 00:23:52,000 --> 00:23:54,280 Speaker 1: which i will make the cases already higher than it 467 00:23:54,320 --> 00:23:57,639 Speaker 1: should be, is an expensive one and it could really 468 00:23:58,200 --> 00:23:59,439 Speaker 1: cause the bill to fall apart. 469 00:24:00,000 --> 00:24:02,159 Speaker 4: Do you think it will cause a bill to fall apart? 470 00:24:02,280 --> 00:24:04,960 Speaker 4: How much momentum is there based on your conversations with 471 00:24:05,000 --> 00:24:08,119 Speaker 4: people on the hill to really get the budget under control, 472 00:24:08,160 --> 00:24:10,959 Speaker 4: given some of the deficit projections that have the fiscal 473 00:24:10,960 --> 00:24:13,720 Speaker 4: deficit going to something like six point four percent as 474 00:24:13,720 --> 00:24:15,119 Speaker 4: a result of the current proposal. 475 00:24:16,560 --> 00:24:19,800 Speaker 1: That is the really central question here, because all of 476 00:24:19,800 --> 00:24:21,800 Speaker 1: the members who are trying to pass this do want 477 00:24:21,840 --> 00:24:24,040 Speaker 1: to extend the tax cuts and they do want to 478 00:24:24,080 --> 00:24:25,879 Speaker 1: make good on the president's promises. 479 00:24:26,320 --> 00:24:27,400 Speaker 7: At the same time. 480 00:24:27,280 --> 00:24:30,199 Speaker 1: There is a large, a large group that has been 481 00:24:30,240 --> 00:24:33,199 Speaker 1: talking about fiscal responsibility for a long time. They were 482 00:24:33,280 --> 00:24:35,000 Speaker 1: kind of under the impression that this would be a 483 00:24:35,000 --> 00:24:37,240 Speaker 1: bill that would do both extend the tax cuts and 484 00:24:37,280 --> 00:24:38,879 Speaker 1: make the fiscal situation better. 485 00:24:39,320 --> 00:24:41,600 Speaker 7: That is clearly not the case, though, And now. 486 00:24:41,440 --> 00:24:43,600 Speaker 1: That they're seeing the numbers that a bill like this 487 00:24:43,640 --> 00:24:46,600 Speaker 1: would add over three trillion dollars to the debt, it 488 00:24:46,640 --> 00:24:50,080 Speaker 1: would bring up deficits by more than six hundred billion 489 00:24:50,160 --> 00:24:51,880 Speaker 1: dollars in the early years. 490 00:24:51,960 --> 00:24:55,560 Speaker 7: Like this, this is doesn't hold together. 491 00:24:55,720 --> 00:24:58,360 Speaker 1: And so the people who care about the fiscal situation, 492 00:24:58,440 --> 00:24:59,800 Speaker 1: many of them talk about it, but the ones who 493 00:24:59,800 --> 00:25:02,639 Speaker 1: were wry about it are really really having heartburn, and 494 00:25:02,640 --> 00:25:04,680 Speaker 1: I am not sure they'll be able to support this bill. 495 00:25:04,920 --> 00:25:07,920 Speaker 7: From where I sit, worrying about the budget deficits. They shouldn't. 496 00:25:08,080 --> 00:25:10,520 Speaker 1: They shouldn't be looking at anything that would actually make 497 00:25:10,520 --> 00:25:14,040 Speaker 1: the fiscal situation worse. Instead, they should be focusing on 498 00:25:14,080 --> 00:25:17,160 Speaker 1: bringing the deficits down, which this would not do no 499 00:25:17,160 --> 00:25:18,640 Speaker 1: matter what the talking points are. 500 00:25:18,880 --> 00:25:21,240 Speaker 4: Maya, you've been worried about the deficit for a long time, 501 00:25:21,280 --> 00:25:22,960 Speaker 4: and a lot of people have too. But you run 502 00:25:23,280 --> 00:25:27,080 Speaker 4: an entity that really focuses on the fiscal deficit and 503 00:25:27,119 --> 00:25:29,719 Speaker 4: how deep it's gotten over the past number of years. 504 00:25:30,040 --> 00:25:33,200 Speaker 4: How different is this moment and this proposal in that 505 00:25:33,320 --> 00:25:37,199 Speaker 4: trajectory in terms of worsening the deficit picture at a 506 00:25:37,240 --> 00:25:39,600 Speaker 4: time when there's some people who are saying deficits can 507 00:25:39,640 --> 00:25:41,840 Speaker 4: be fine as long as they bring in enough revenues 508 00:25:41,880 --> 00:25:43,040 Speaker 4: to offset them. 509 00:25:43,400 --> 00:25:46,040 Speaker 7: Yeah, well, you asked the right question about the tenure. 510 00:25:46,400 --> 00:25:49,480 Speaker 1: Markets are starting to worry the amount of debt that 511 00:25:49,520 --> 00:25:53,080 Speaker 1: we are issuing. Really, as Ray Dalio and others are saying, 512 00:25:53,359 --> 00:25:56,520 Speaker 1: who'd exceed what the appetite for lending us money is? 513 00:25:56,560 --> 00:25:58,840 Speaker 1: And that would be a huge problem because if interest 514 00:25:58,960 --> 00:26:02,120 Speaker 1: rates go up even a little bit, because we already 515 00:26:02,160 --> 00:26:05,880 Speaker 1: have so much debt, those interest payments that we owe 516 00:26:05,920 --> 00:26:07,600 Speaker 1: for it start to snowball. 517 00:26:07,640 --> 00:26:10,000 Speaker 7: And that's where you get into a very serious situation. 518 00:26:10,400 --> 00:26:13,000 Speaker 1: I think markets have wanted tax cuts, and markets want 519 00:26:13,040 --> 00:26:16,600 Speaker 1: fiscal responsibility, and the issue is nobody is willing to 520 00:26:16,640 --> 00:26:19,600 Speaker 1: get behind the kind of savings spending cuts that would 521 00:26:19,640 --> 00:26:23,240 Speaker 1: allow those both to happen at once. So tax cuts 522 00:26:23,280 --> 00:26:26,080 Speaker 1: are going to worsen the situation. Even if they generate 523 00:26:26,119 --> 00:26:28,520 Speaker 1: some growth, which they will, it will not be enough 524 00:26:28,520 --> 00:26:30,679 Speaker 1: to offset the huge amount of barring that comes with 525 00:26:30,680 --> 00:26:33,280 Speaker 1: this bill, and nobody seems to be willing to put 526 00:26:33,320 --> 00:26:36,600 Speaker 1: in place the kinds of spending cuts that will be required. Remember, 527 00:26:36,680 --> 00:26:39,520 Speaker 1: the spending cuts that the House is talking about at 528 00:26:39,560 --> 00:26:42,720 Speaker 1: two trillion dollars is out of a pool of possible 529 00:26:42,720 --> 00:26:45,920 Speaker 1: of total spending over that same period of eighty six 530 00:26:46,040 --> 00:26:49,800 Speaker 1: trillion dollars. So we are not talking about anybody who's 531 00:26:49,840 --> 00:26:52,560 Speaker 1: willing to really put the savings in place that could 532 00:26:52,560 --> 00:26:55,439 Speaker 1: bring the deficit down that's made worse by adding to 533 00:26:55,480 --> 00:26:56,719 Speaker 1: it with the big tax cuts. 534 00:26:56,880 --> 00:26:59,199 Speaker 2: Mike, can you think of a proposal that would be 535 00:26:59,200 --> 00:27:02,720 Speaker 2: both responsible and palatable for House Republicans. 536 00:27:04,080 --> 00:27:06,760 Speaker 1: Well, first, I think they should focus just on TCJA 537 00:27:06,800 --> 00:27:09,160 Speaker 1: extending the tax cuts, not putting in a whole grab 538 00:27:09,200 --> 00:27:11,399 Speaker 1: bag of new ones, particularly tax. 539 00:27:11,160 --> 00:27:13,040 Speaker 7: Cuts that expire after four years. 540 00:27:13,280 --> 00:27:15,199 Speaker 1: I mean, this is a bill where a lot of 541 00:27:15,200 --> 00:27:17,280 Speaker 1: the tax cuts are put in place in the early 542 00:27:17,359 --> 00:27:19,680 Speaker 1: years for four years and a lot of the savers 543 00:27:19,720 --> 00:27:23,160 Speaker 1: don't start until after this presidential term would be over, 544 00:27:23,280 --> 00:27:26,000 Speaker 1: so it's very backloaded in the savings. So I'd get 545 00:27:26,080 --> 00:27:28,080 Speaker 1: rid of those, and I would talk about that separately. 546 00:27:28,359 --> 00:27:30,639 Speaker 1: I would say there's no room in the budget to 547 00:27:30,680 --> 00:27:32,640 Speaker 1: do any of those new tax cuts until we put 548 00:27:32,680 --> 00:27:35,000 Speaker 1: in place a dead deal. But secondly, they just need 549 00:27:35,040 --> 00:27:37,320 Speaker 1: to look at a lot more savings, or they need 550 00:27:37,359 --> 00:27:40,240 Speaker 1: to look at other ways to broaden the tax base 551 00:27:40,359 --> 00:27:44,439 Speaker 1: ways and means oversees fifty trillion dollars. There are so 552 00:27:44,520 --> 00:27:46,800 Speaker 1: many different areas of the budget that we can be 553 00:27:46,880 --> 00:27:50,200 Speaker 1: talking about beyond just the things that the savings that 554 00:27:50,240 --> 00:27:52,560 Speaker 1: they've put in place. I would look at broaden the 555 00:27:52,600 --> 00:27:55,080 Speaker 1: tax space where the tax expenditures run through it. 556 00:27:55,080 --> 00:27:56,720 Speaker 7: It's spending programs. 557 00:27:56,280 --> 00:28:00,679 Speaker 1: Through the tax base, and that loses about twenty trillion 558 00:28:00,720 --> 00:28:03,360 Speaker 1: dollars over the next ten years. So I go back 559 00:28:03,400 --> 00:28:05,760 Speaker 1: to the drawing board. Incremental reforms are not going to 560 00:28:05,800 --> 00:28:07,280 Speaker 1: make this structurally responsible. 561 00:28:07,720 --> 00:28:10,240 Speaker 2: I appreciate your time. As always, we'll be speaking soon, 562 00:28:10,320 --> 00:28:13,719 Speaker 2: no doubt, might AGAINNIS of the Committee. Very responsible federal budget. 563 00:28:14,400 --> 00:28:17,960 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 564 00:28:18,000 --> 00:28:21,320 Speaker 2: in markets, economics, Angiot Politics. You can watch the show 565 00:28:21,359 --> 00:28:24,320 Speaker 2: live on Bloomberg TV weekday mornings from six am to 566 00:28:24,440 --> 00:28:28,200 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify, 567 00:28:28,320 --> 00:28:30,560 Speaker 2: or anywhere else you listen, and as always, on the 568 00:28:30,600 --> 00:28:33,119 Speaker 2: Bloomberg Terminal and the Bloomberg Business Out