Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each
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Speaker 2: Stanley writes in this with equities having round tripped back
Speaker 2: towards first quarter ending levels, markets are anxious to move
Speaker 2: on from tariffs and attempts to anticipate FED policy. Lisa
Speaker 2: joins us now for more. Lisa good Mornick, Good morning.
Speaker 2: How many times have we asked this question? Was it
Speaker 2: all just a bad dream? Can we just move on? So?
Speaker 3: Look, I think investors right now are weary and want
Speaker 3: to move on. They want to look through it. But
Speaker 3: I do think that things have fundamentally changed from the
Speaker 3: Nasdaq peak back on December sixteenth.
Speaker 2: I think the.
Speaker 3: First thing that has changed is it's really clear that
Speaker 3: top line growth among the MAG seven is decelerating, and
Speaker 3: growth investors typically don't like to see deceleration. The second
Speaker 3: thing is we're seeing this arms war with regard to
Speaker 3: cap X spending continuing. If we our latest update on
Speaker 3: looking at free cash flow yields shows MAG seven free
Speaker 3: cash flow years shrinking by about eleven percent. Typically these
Speaker 3: stocks don't tend to do particularly well when their free
Speaker 3: cash flow yield is coming down. And look, we can
Speaker 3: pretend that the deep Seek news doesn't mean anything, but
Speaker 3: we fundamentally think it was the wake up call around
Speaker 3: global engineering, global innovation, and the fact that none of
Speaker 3: us know how the movie ends here on jen Ai,
Speaker 3: who the winners are going to be, how it's going
Speaker 3: to evolve, whether or not large language models very quickly
Speaker 3: become commoditized, and the next you know, phase of the
Speaker 3: buildout is actually much lower data center intensity, much lower
Speaker 3: energy intensity because it's very application based. So nobody knows nothing.
Speaker 3: And I think, right now, this is a market where
Speaker 3: we've had you know, a lot of positioning, technical positioning
Speaker 3: where people felt, hey, you know, I was caught off guard.
Speaker 3: This was a massive surprise. You know, the effective China
Speaker 3: tariff rate is much lower than I penciled. I got
Speaker 3: to plow back in. You've got you know, some of
Speaker 3: the private wealth money and retail money coming in from
Speaker 3: the sidelines. But I think we're going to stall out here.
Speaker 3: I think it's just hard to justify the numbers. You know,
Speaker 3: you've round tripped back to January first on market levels,
Speaker 3: and yet your earnings per share are down six percent.
Speaker 2: So this move I'm fading. What would you rotate out
Speaker 2: of and what would you rotate into?
Speaker 3: Yeah, so you know, we're continuing to uh, you know,
Speaker 3: recommend that folks take some profits in now the new
Speaker 3: leaders again uh in tech uh, and really focus on
Speaker 3: the beneficiaries of deregulation. And so we see that as
Speaker 3: you know, financials, we see it as energy, we see
Speaker 3: it as you know, some of the healthcare names. I
Speaker 3: know for viewers out there, that's gonna sound like a
Speaker 3: big value style bias, uh, but quite frankly, it is.
Speaker 3: You know, while while we're not saying you've got to
Speaker 3: be overweight value, we do think you want value in
Speaker 3: this market because you want some risk premium. I mean,
Speaker 3: there are risks out there and you want to get
Speaker 3: paid uh to be in this market?
Speaker 4: What risks do you want a premium to be paid for?
Speaker 4: And it sounds sort of existential, but it goes to
Speaker 4: the heart of the question of is it inflation or
Speaker 4: is it recession or is it both?
Speaker 2: I think it's a little bit of both.
Speaker 3: I think we're somewhat less freaked out about inflation than
Speaker 3: perhaps we would have been if the tariff rates would
Speaker 3: have held. I think what we're worried about is that
Speaker 3: we're no longer in a fore castable policy backdrop. Right
Speaker 3: as much as we all want to handwring about the FED,
Speaker 3: you know, for the last fifteen years, FED policy has
Speaker 3: been reasonably stable and reasonably well telegraphed, and there haven't
Speaker 3: been massive surprises. I think when we shift to a
Speaker 3: fiscal policy backdrop with this administration, as we've seen, it's
Speaker 3: very easy to experience both negative and positive surprises on policy.
Speaker 3: And that's what I want to get paid for, is
Speaker 3: that at any point, you know, things can take a
Speaker 3: u turn based on the headline.
Speaker 4: How much do the rest of the universe that you
Speaker 4: didn't mention big tech that you're selling on the margins
Speaker 4: or some of the financials and other value stocks that
Speaker 4: you're looking at that aren't exactly value. As you pointed out,
Speaker 4: how much do you think that it really will require
Speaker 4: FED cuts to get the rest of the universe involved
Speaker 4: in some sort of positive momentum.
Speaker 3: I think the rate cuts are absolutely required for small
Speaker 3: cap mid cap I think that universe has suffered profoundly,
Speaker 3: you know, from the higher cost of capital By and large,
Speaker 3: the S and P five hundred, which is predominantly large
Speaker 3: in megacap companies have been pretty isolated. They have very
Speaker 3: healthy balance sheets and for the most part, they haven't
Speaker 3: been inhibited by rates where they are, which is why
Speaker 3: we have multiples where they are.
Speaker 5: Well.
Speaker 4: It raises this question, especially as the fiscal debate heats
Speaker 4: up in Washington, DC, and you alluded to this, and
Speaker 4: there's a question about as we find out how much
Speaker 4: the defthit is going to increase, how much bond markets
Speaker 4: are going to freak out. To use your sophisticated Carlans,
Speaker 4: but there is this question of at what level in
Speaker 4: a thirty year in a ten year yield it becomes
Speaker 4: prohibitive for stocks to really move higher from here and
Speaker 4: really inject some damage.
Speaker 3: Yeah, I mean Look, I think for most of the
Speaker 3: last you know, six to twelve months that you know,
Speaker 3: four fifty on the ten year, a four point five
Speaker 3: percent on the ten year, you know, was kind of
Speaker 3: this stall out threshold. You know, the market seems to
Speaker 3: be battling with it a little bit this week. But look,
Speaker 3: I think if we back up, you know, if we
Speaker 3: get big, big, big deficit numbers coming out of this
Speaker 3: tax bill and that ten year moves into that four
Speaker 3: to seventy five range, I don't see how the market
Speaker 3: has how equity valuations hold here. The math just stops
Speaker 3: making sense.
Speaker 2: Lisa, It's going to see you as always. Thanks for
Speaker 2: dropping by, Lisa, said standing Andrew Homeholt of City writing,
Speaker 2: Wait and sy is the right strategy. The FED can
Speaker 2: now more comfortably stay patient, and we're pushing for the
Speaker 2: next rate cut to come in July and not in
Speaker 2: June as previously thought. Andrew joins us now for more.
Speaker 2: Andrew K. Mornic morning, the question is WHYK go from
Speaker 2: June to July? I should line why the summer?
Speaker 6: Well, I think it's just going to take the FED
Speaker 6: seeing something in the data that makes them worried about.
Speaker 2: What's going on with activity.
Speaker 6: What's going on with the labor market. If you look
Speaker 6: at the soft data, the survey data, it's been misleading
Speaker 6: in the past, but I think it's sending the right
Speaker 6: signal now. I think the hard data are going to turn.
Speaker 6: When the hard data turn, we'll have the FED cutting.
Speaker 6: What exactly that happens, I don't know, but it could
Speaker 6: be July, it could be September. One of these upcoming
Speaker 6: meetings I think.
Speaker 2: You'll discuss at the moment is July. Twice the weakening
Speaker 2: comes before July quite clearly, which made you expect to
Speaker 2: see it in the next couple of months. What gives
Speaker 2: you that belief that's going to happen.
Speaker 6: So I think we're going to start to see things
Speaker 6: in the job market, and that's really what's going to
Speaker 6: be important for the FED. Of course, dual mandate. You
Speaker 6: have to worry about inflation, have to worry about employment.
Speaker 6: We're seeing a low hiring rate in the job market.
Speaker 6: We know now from surveys, from anecdotes that firms are
Speaker 6: pulling back further if anything, on their hiring. We know
Speaker 6: we're going to have some government job cuts. We know
Speaker 6: that unemployment picked up last summer, So you kind of
Speaker 6: put all those things together. I think there's a good
Speaker 6: chance that we see that unemployment rate starting to move
Speaker 6: up again.
Speaker 4: Why do you dismiss all the people who say that
Speaker 4: the job as claims have been low if they haven't
Speaker 4: really ticked up that much. You've seen some of the
Speaker 4: credit card data highlight that people keep sending pretty much
Speaker 4: in a significant amount to the way that they did before.
Speaker 4: Why is that not a leading indicator for you at
Speaker 4: a time where there are very few kind of lynch
Speaker 4: pins to truth along the way.
Speaker 6: Yeah, I mean, I'm not dismissive of the fact that
Speaker 6: the job market has been pretty stable for the last
Speaker 6: six months. Six months plus and four point two percent
Speaker 6: unemployment rate is not about unemployment.
Speaker 5: Rate to be yet.
Speaker 6: I think the issue is that it's been stable, but
Speaker 6: it's been stable in a kind of fragile, uncomfortable way
Speaker 6: with this low hiring rate, with a low layoff rate,
Speaker 6: so you're not likely to lose your job, but if
Speaker 6: you do, it's hard to get hired again. And again
Speaker 6: we have these factors that are probably going to be
Speaker 6: putting people into unemployment, harder for them to get hired again.
Speaker 6: And then you start to see that unemployment rate moving home.
Speaker 4: How do engage how much scarring there has been done
Speaker 4: based in the fact that.
Speaker 7: We are at a higher teriff rate.
Speaker 4: Than we were at the beginning of the year, albeit
Speaker 4: much lower than it was, say on April. Second, do
Speaker 4: you sort of communicate that the scarring is not that
Speaker 4: much less now than it was before the announcement that
Speaker 4: there was going to be a ninety day pause.
Speaker 6: It's all a question about what's the point of comparison.
Speaker 6: I mean, to your point, if we compare this to
Speaker 6: when we had one hundred and forty five percent terrors
Speaker 6: versus China, it was effectively a trade embargo with respect
Speaker 6: to China, and then we were worried about really acute effects.
Speaker 6: Could you actually see less traffic at the ports, less
Speaker 6: jobs at the ports for that reason, less trucking jobs.
Speaker 6: Now it looks like probably that's not going to happen,
Speaker 6: so you kind of take out that extreme acute downside risk,
Speaker 6: but you still have the uncertainty around terrors. We're still
Speaker 6: uncertain about how this is all going to turn out,
Speaker 6: and that we think is leading firms to pull back
Speaker 6: on their hiring decisions.
Speaker 2: The prospective higher prices. Wilmot Basically, Sam, we're close, close
Speaker 2: to passing on higher costs. The Fetter Reserve needs to
Speaker 2: sit there in July be convinced that any kind of
Speaker 2: inflation is not going to be persistent. Is that enough time?
Speaker 5: You know?
Speaker 6: You can't wait until you have total certainty. I think
Speaker 6: that's a very general point that is important to make here.
Speaker 6: If you wait until you see all the data, by definition,
Speaker 6: you've acted too late. So the Federal Reserve is going
Speaker 6: to need to make a decision about where they think
Speaker 6: that trended inflation is STU coun chumpange.
Speaker 2: Isn't that what they're communicating to us?
Speaker 6: That is what they're communicating.
Speaker 2: I don't just unbelief.
Speaker 6: I don't believe them. No, I don't think that you
Speaker 6: can wait until you have perfect clarity on the economy,
Speaker 6: because John, you never have perfect clarity on the economy,
Speaker 6: you'd be waiting forever. They're not going to wait forever.
Speaker 6: They're going to look at that balance of risk. Look
Speaker 6: at the last two inflation reports. We have core PCE
Speaker 6: in the month of March zero point zero three percent
Speaker 6: month on month. In the month of April, we think
Speaker 6: it's going to be zero point one three percent month
Speaker 6: on months, and these are two really soft inflation readings.
Speaker 6: They follow two really strong inflation readings in January and February.
Speaker 6: But that cooling and services inflation I think should be
Speaker 6: giving them a lot of confidence.
Speaker 2: It is a question I wish the interviewers would hamm
Speaker 2: a FED officials on the difference between inflation being short
Speaker 2: lived and more persistent. How do you know and how
Speaker 2: long does it take to find out? How do you know? Well,
Speaker 2: I think you have.
Speaker 6: To make a judgment based on where that inflation is
Speaker 6: coming from and what the underlying drivers of inflation are.
Speaker 6: And this is why the current scenario is so different
Speaker 6: from what we experienced after COVID.
Speaker 5: After COVID, we.
Speaker 6: Had a negative supply shock to the economy. Supply was constrained,
Speaker 6: but we had a positive demand shock. At the same time,
Speaker 6: we had lots of fiscal stimulus coming in. People could
Speaker 6: go out and spend. Now we're in a different scenario
Speaker 6: where you're getting the negative supply shock, but there's no
Speaker 6: positive demand shock happening. Wage growth is cooling, house prices
Speaker 6: have cooled, so you don't have that same inflationary backdrop.
Speaker 4: Is there also the lack of belief in Fedshair J.
Speaker 4: Powell when he laid out in his speech yesterday that
Speaker 4: maybe the FED would look back to their previous framework
Speaker 4: where they truly were targeting two percent inflation, not a range,
Speaker 4: not an average over a period of time, talking about
Speaker 4: how higher real interest rates may reflect the possibility that
Speaker 4: inflation could be more volatile going forward, that we.
Speaker 7: Could be in a period of supply shocks.
Speaker 4: Do you just dismiss that as something that they're not
Speaker 4: going to follow through with emphasizing inflation even at the
Speaker 4: expense of the economy.
Speaker 6: So I think they do need to think seriously about
Speaker 6: how you operate monetary policy in a world where you
Speaker 6: have these larger, more persistent supply shocks. That is a
Speaker 6: real issue that they have to contend with.
Speaker 7: Now.
Speaker 6: Having said that, that doesn't just mean that you keep
Speaker 6: policy rates at restrictive levels at all time. You assess
Speaker 6: the current situation, and again, I think we're in a
Speaker 6: situation here where we have, yes, a negative supply shock
Speaker 6: that's going to reduce growth, that's going to raise inflation,
Speaker 6: but we don't have that demand shock to make inflation persistent,
Speaker 6: and that's what they should be paying attention to.
Speaker 4: Do you think that they will take an average of
Speaker 4: PPI and CPI, look at that core PCEE metric that
Speaker 4: you've just said is probably going to come in lower, and.
Speaker 7: Just extrapolate that out.
Speaker 4: Do you think that they're going to even without some
Speaker 4: sort of pain in a labor market?
Speaker 6: Yeah, I mean you can't just extrapolate that out forever.
Speaker 6: I mean you need to look at what are the
Speaker 6: details of that inflation reading. Where is inflation really going here?
Speaker 6: I think they're looking at shelter inflation that's slowing. They're
Speaker 6: looking at non shelter services and wage growth that feeds
Speaker 6: into that that have slowed. I think that should all
Speaker 6: be reassuring. The question is what happens with goods. We're
Speaker 6: probably going to see some goods inflation because those terrorf rates.
Speaker 6: But that's where you getting back to John's question. That's
Speaker 6: where you say, if the inflation is confined to goods,
Speaker 6: then we should be less concerned about it. That looks
Speaker 6: more like a one time move in the price level.
Speaker 6: That's what Governor Waller has said. I think he's about
Speaker 6: the only FED official that's come out and said.
Speaker 2: Just the net close to making a mistake.
Speaker 6: I think they could be I think they could be.
Speaker 6: I mean, I think they do have time here. They
Speaker 6: do have the luxury of a labor market that's been stable.
Speaker 6: But you can't wait for total clarity. You'll never have
Speaker 6: total clarity.
Speaker 2: The problem is, you know, these mistakes are often borne
Speaker 2: out of the conditioning from the previous experience, and that's
Speaker 2: why we had to wait last time around, because their
Speaker 2: experience was actually downtime policy too soon, which meant they
Speaker 2: waited and then inflation ripped away from them. They made
Speaker 2: a mistake. This time around, they're going to waite for
Speaker 2: different reasons, and they could make a different kind of
Speaker 2: mistake because they could have moved sooner. The opposite way.
Speaker 4: It could lead to a much faster deterioration in the economy,
Speaker 4: which is the reason why George Coknkalvas earlier was saying
Speaker 4: that they're going to be late and they're going to
Speaker 4: move a lot faster. This is what a lot of
Speaker 4: people think right now in markets. We're baking in two
Speaker 4: rate cuts for the remainder of the year because their
Speaker 4: cuts are going to come on the heels of good
Speaker 4: data of disinflation, not necessarily that pain in the economy
Speaker 4: that some people were worried about Andrew.
Speaker 2: It's going to see us, sir. Thanks dropping by Andrew Honholst.
Speaker 2: The city does not believe FED officials when they speak.
Speaker 2: That's my takeaway. Turning from markets to the nation's capital,
Speaker 2: in fighting between House Republicans threatening to delay a much
Speaker 2: anticipated tax bill, the key issue salt Camp increases. One
Speaker 2: man at the center of all of that, among others,
Speaker 2: Congressman Mike Lawler of New York. The congressman joined us
Speaker 2: now from Capitol Hill for more. Congressman, welcome back to
Speaker 2: Bloomberg Survellan, sir, it's good to see you again.
Speaker 5: Thanks for having me.
Speaker 2: Let's talk about progress made this week. Speak of Johnson
Speaker 2: keeps saying we're getting closer and closer. What's your assessment
Speaker 2: of how much progress we've made so far this week?
Speaker 5: Well, finally this week we had the opportunity to sit
Speaker 5: down and go through real numbers and start to have
Speaker 5: a negotiation. And I think that it was long overdue.
Speaker 5: We had been pushing for months to have that conversation
Speaker 5: with the Ways and Means Chairman, with the Speaker, and
Speaker 5: so we finally began that process. And obviously, you know
Speaker 5: this is something that's going to have to be negotiated
Speaker 5: over the weekend to get to hopefully an agreement. When
Speaker 5: it comes to the issue of salt.
Speaker 2: We understand the proposal a tripling of the deduction to
Speaker 2: thirty thousand. Could you give us a sense on how
Speaker 2: far apart you are right now?
Speaker 5: Well, there's a number of issues. Number one, the marriage
Speaker 5: penalty and eliminating that for those filing jointly. Number two,
Speaker 5: you know, there is real concern about reverting to a
Speaker 5: ten thousand dollars cap, which none of us support. That
Speaker 5: is a real challenge. Number Three, The fact is, these
Speaker 5: income limits are a problem four hundred thousand. While it
Speaker 5: may sound like a lot in some areas, in an
Speaker 5: area like mine, that's you know, a cop and a
Speaker 5: teacher who are married and you know, have a combined income.
Speaker 5: So the fact is, we have high property taxes coupled
Speaker 5: with high income taxes, and you'll blow right past a
Speaker 5: thirty thousand dollars cap without a problem. You look at
Speaker 5: my district, three of the four counties that I represent
Speaker 5: are in the top sixteen highest property tax counties in America,
Speaker 5: And so there's a real issue here in terms of
Speaker 5: the numbers, and so we're working through it. You know,
Speaker 5: I've read the art of the deal. I'm not going
Speaker 5: to negotiate in public, but the fact is that, you know,
Speaker 5: we need to make some significant concessions to get to
Speaker 5: a number.
Speaker 4: Congressman, what would you like to see cut to offset
Speaker 4: some of the increases to the salt tax deduction because
Speaker 4: ultimately cell cap, because that's a real concern right now
Speaker 4: for markets is how much does that alone increase the deficit?
Speaker 5: Well, a few things. Number One, any cap is a
Speaker 5: savings okay, because the fact is that the cap on
Speaker 5: salt expires at the end of the year, so we
Speaker 5: are actually giving them a pay for by agreeing to
Speaker 5: a cap. That's number one, and people should recognize that
Speaker 5: as part of these negotiations. Number Two, there's a number
Speaker 5: of levers that can be dealt with here in terms
Speaker 5: of savings versus adjustments within the tax code. That's what
Speaker 5: we're talking about. We're waiting to hear back from the
Speaker 5: Speaker and then be able to make a honest determination
Speaker 5: as to what we can.
Speaker 2: Get to this issue.
Speaker 4: Congressman that as this debate has raged on, there's been
Speaker 4: an argument that you have pioneered saying that moderates make
Speaker 4: the majority for Republicans, and that you need to be
Speaker 4: able to punch above your weight because without you, they
Speaker 4: wouldn't have the position that they actually have. How much
Speaker 4: is this sort of setting the stage for what's to come?
Speaker 4: How much do you see this as a theme that
Speaker 4: we're going to hear about quite a bit as we
Speaker 4: had to the midterms.
Speaker 5: Well, listen, we have a two hundred and twenty seat
Speaker 5: majority and three of us one districts that Kamala Harris won.
Speaker 5: You lose the three of us and you're in the
Speaker 5: minority very quickly. So you know, look, I think the
Speaker 5: reality of this is math. And I certainly respect all
Speaker 5: of my colleagues. They're all here to represent their districts
Speaker 5: as am I and my district has different needs than
Speaker 5: some of my colleagues who are in safer seats, who
Speaker 5: are in a more Republican seats. That's just a reality
Speaker 5: of life. And so to me, this is about a compromise.
Speaker 5: None of us are going to get everything we want
Speaker 5: in this bill or any bill, but all of us
Speaker 5: have to find a way to work together to keep
Speaker 5: the majority and make sure that we're delivering for the
Speaker 5: American people. And our districts, and that's what I'm doing
Speaker 5: in fighting for this issue, fighting to protect Medicaid. I
Speaker 5: have one of the highest district with one of the
Speaker 5: highest number of recipients of Medicaid. There are people who
Speaker 5: rely on these critical programs, and I'm doing everything I
Speaker 5: can throughout this process to protect that, including blocking any
Speaker 5: changes to f MAP, per capita caps, block grants, dish cuts.
Speaker 5: We've been able to do that throughout this process and
Speaker 5: make sure that those who rely on these programs receive
Speaker 5: the benefits that they need, while making sure that we
Speaker 5: eliminate waste, fraud, and abuse, prevent illegal immigrants from receiving
Speaker 5: Medicaid benefits, make sure that able bodied adults without dependence
Speaker 5: are working, we're going to school, and making sure that
Speaker 5: those who are no longer eligible are not continuing to
Speaker 5: receive benefits. Those are common sense reforms that the vast
Speaker 5: majority of the American people's support.
Speaker 2: A Congressman, you mentioned the out of the deal. Let's
Speaker 2: talk about the author of the out of the deal.
Speaker 2: The President's on its way back to Washington. Do you
Speaker 2: have plans to speak to him and you have a
Speaker 2: decent sense of what his position is.
Speaker 5: I will be reaching out to connect with him for sure.
Speaker 5: I think he obviously had a very successful trip in
Speaker 5: the Middle East, brought back significant investment into the United
Speaker 5: States in agreements with Saudi Arabia, UAE, and Cutter, and
Speaker 5: that obviously bodes well for the American economy as we
Speaker 5: move forward. Is a great trip for the President. As
Speaker 5: chair of the Middle East and North Africa Subcommittee, certainly,
Speaker 5: I'm looking forward to getting a readout of more details
Speaker 5: on what occurred on the trip. But I think it
Speaker 5: was a big win for the President, and so he
Speaker 5: comes back obviously on the prespoe of getting you know,
Speaker 5: one big beautiful bill passed, and so we have a
Speaker 5: little bit of work to do still. But I think,
Speaker 5: you know, it's been a very good week for the President.
Speaker 2: I know you've been up all night. I just wanted
Speaker 2: to squeeze in one more question that I think is
Speaker 2: relevant to a lot of our audience. You've co sponsored
Speaker 2: the Trust Act Trusting Congress Act to banstock trading in Congress.
Speaker 2: Can I just say, Congressman, we all find it absolutely
Speaker 2: ridiculous that people in Congress have looser regulations restrictions to
Speaker 2: trade stocks that we do as financial journalists. Congressman, can
Speaker 2: we actually do something about that sometime soon.
Speaker 5: Look, I am in full support. The fact is you're
Speaker 5: here to serve. If you want to make money, leave
Speaker 5: this to me is a very common sense reform to
Speaker 5: make sure that members of Congress or their spouses. We've
Speaker 5: seen some spouses who are prolific traders in recent years.
Speaker 5: The fact is they should not be benefiting from inside
Speaker 5: knowledge or information gleaned from meetings they have, committee hearings
Speaker 5: they hold, or legislation that is pending. And it's just
Speaker 5: a reality of life that anyone in this position is
Speaker 5: provided with more information than the average person, and therefore
Speaker 5: it is imperative to make sure that members of Congress
Speaker 5: or their spouses are not benefiting from that information, and
Speaker 5: all of their assets should be put in a blind
Speaker 5: trust period.
Speaker 2: If that that could have tried. Unless you's not a
Speaker 2: hedge fund, Congressman, appreciate your time, sir, Gonna have a
Speaker 2: busy weekend. I'm sure let's hopefully catch up against you
Speaker 2: in Congressman, like lawa there joining us not to extend
Speaker 2: the conversation, Mam McGinnis at a commitse for a responsible federal budget.
Speaker 2: My welcome back to the program. You've seen the policies
Speaker 2: on the table so far to debate and negotiations continue
Speaker 2: into the weekend. Can you just put a number a
Speaker 2: price to the policies on the table at the moment?
Speaker 1: Oh, well, if they're talking about bumping up the salt
Speaker 1: cap even higher than it already would be at thirty thousand,
Speaker 1: we are talking about massive amounts. Potentially nine hundred billion
Speaker 1: is what it would cost to bring it up to
Speaker 1: the sixty three thousand per individual that they're looking for, which,
Speaker 1: to put it in perspective, that is more than all
Speaker 1: of the new tax cuts in this bill, the no
Speaker 1: tax on tips and auto loans and overtime, all of
Speaker 1: those things. So this request to bring it above thirty thousand,
Speaker 1: which i will make the cases already higher than it
Speaker 1: should be, is an expensive one and it could really
Speaker 1: cause the bill to fall apart.
Speaker 4: Do you think it will cause a bill to fall apart?
Speaker 4: How much momentum is there based on your conversations with
Speaker 4: people on the hill to really get the budget under control,
Speaker 4: given some of the deficit projections that have the fiscal
Speaker 4: deficit going to something like six point four percent as
Speaker 4: a result of the current proposal.
Speaker 1: That is the really central question here, because all of
Speaker 1: the members who are trying to pass this do want
Speaker 1: to extend the tax cuts and they do want to
Speaker 1: make good on the president's promises.
Speaker 7: At the same time.
Speaker 1: There is a large, a large group that has been
Speaker 1: talking about fiscal responsibility for a long time. They were
Speaker 1: kind of under the impression that this would be a
Speaker 1: bill that would do both extend the tax cuts and
Speaker 1: make the fiscal situation better.
Speaker 7: That is clearly not the case, though, And now.
Speaker 1: That they're seeing the numbers that a bill like this
Speaker 1: would add over three trillion dollars to the debt, it
Speaker 1: would bring up deficits by more than six hundred billion
Speaker 1: dollars in the early years.
Speaker 7: Like this, this is doesn't hold together.
Speaker 1: And so the people who care about the fiscal situation,
Speaker 1: many of them talk about it, but the ones who
Speaker 1: were wry about it are really really having heartburn, and
Speaker 1: I am not sure they'll be able to support this bill.
Speaker 7: From where I sit, worrying about the budget deficits. They shouldn't.
Speaker 1: They shouldn't be looking at anything that would actually make
Speaker 1: the fiscal situation worse. Instead, they should be focusing on
Speaker 1: bringing the deficits down, which this would not do no
Speaker 1: matter what the talking points are.
Speaker 4: Maya, you've been worried about the deficit for a long time,
Speaker 4: and a lot of people have too. But you run
Speaker 4: an entity that really focuses on the fiscal deficit and
Speaker 4: how deep it's gotten over the past number of years.
Speaker 4: How different is this moment and this proposal in that
Speaker 4: trajectory in terms of worsening the deficit picture at a
Speaker 4: time when there's some people who are saying deficits can
Speaker 4: be fine as long as they bring in enough revenues
Speaker 4: to offset them.
Speaker 7: Yeah, well, you asked the right question about the tenure.
Speaker 1: Markets are starting to worry the amount of debt that
Speaker 1: we are issuing. Really, as Ray Dalio and others are saying,
Speaker 1: who'd exceed what the appetite for lending us money is?
Speaker 1: And that would be a huge problem because if interest
Speaker 1: rates go up even a little bit, because we already
Speaker 1: have so much debt, those interest payments that we owe
Speaker 1: for it start to snowball.
Speaker 7: And that's where you get into a very serious situation.
Speaker 1: I think markets have wanted tax cuts, and markets want
Speaker 1: fiscal responsibility, and the issue is nobody is willing to
Speaker 1: get behind the kind of savings spending cuts that would
Speaker 1: allow those both to happen at once. So tax cuts
Speaker 1: are going to worsen the situation. Even if they generate
Speaker 1: some growth, which they will, it will not be enough
Speaker 1: to offset the huge amount of barring that comes with
Speaker 1: this bill, and nobody seems to be willing to put
Speaker 1: in place the kinds of spending cuts that will be required. Remember,
Speaker 1: the spending cuts that the House is talking about at
Speaker 1: two trillion dollars is out of a pool of possible
Speaker 1: of total spending over that same period of eighty six
Speaker 1: trillion dollars. So we are not talking about anybody who's
Speaker 1: willing to really put the savings in place that could
Speaker 1: bring the deficit down that's made worse by adding to
Speaker 1: it with the big tax cuts.
Speaker 2: Mike, can you think of a proposal that would be
Speaker 2: both responsible and palatable for House Republicans.
Speaker 1: Well, first, I think they should focus just on TCJA
Speaker 1: extending the tax cuts, not putting in a whole grab
Speaker 1: bag of new ones, particularly tax.
Speaker 7: Cuts that expire after four years.
Speaker 1: I mean, this is a bill where a lot of
Speaker 1: the tax cuts are put in place in the early
Speaker 1: years for four years and a lot of the savers
Speaker 1: don't start until after this presidential term would be over,
Speaker 1: so it's very backloaded in the savings. So I'd get
Speaker 1: rid of those, and I would talk about that separately.
Speaker 1: I would say there's no room in the budget to
Speaker 1: do any of those new tax cuts until we put
Speaker 1: in place a dead deal. But secondly, they just need
Speaker 1: to look at a lot more savings, or they need
Speaker 1: to look at other ways to broaden the tax base
Speaker 1: ways and means oversees fifty trillion dollars. There are so
Speaker 1: many different areas of the budget that we can be
Speaker 1: talking about beyond just the things that the savings that
Speaker 1: they've put in place. I would look at broaden the
Speaker 1: tax space where the tax expenditures run through it.
Speaker 7: It's spending programs.
Speaker 1: Through the tax base, and that loses about twenty trillion
Speaker 1: dollars over the next ten years. So I go back
Speaker 1: to the drawing board. Incremental reforms are not going to
Speaker 1: make this structurally responsible.
Speaker 2: I appreciate your time. As always, we'll be speaking soon,
Speaker 2: no doubt, might AGAINNIS of the Committee. Very responsible federal budget.
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