Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch us
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Speaker 2: Welcome to the Monday edition of Bloomberg Sound On. We're
Speaker 2: back in Washington. I'm Joe Matthew and glad you joined us.
Speaker 2: It's been an important couple of days here over the
Speaker 2: course of the weekend. I want to bring you up
Speaker 2: to date for starters on what is happening in Israel.
Speaker 2: Our top story today on the Fastest Show in Politics,
Speaker 2: as Israel widens the offensive in Gaza, remembering, of course,
Speaker 2: the truce fell apart last week and they've had a
Speaker 2: couple of days to plan what everyone's calling the next
Speaker 2: phase here the IDF expanding operations across Gaza and looking
Speaker 2: to the south now with the expectation of a ground
Speaker 2: invasion of southern Gaza imminently as many of the territors,
Speaker 2: the territories two point two million people being urged to evacuate,
Speaker 2: and in many cases it's again which is starting to
Speaker 2: create a lot of confusion, remembering the first evacuation was
Speaker 2: to the south, but of course in many cases Hamas
Speaker 2: followed the civilians there, and the IDF is now following them.
Speaker 2: They've been dropping leaflets, they've been issuing maps now marking
Speaker 2: zones that have been broken into more than two thousand blocks,
Speaker 2: to try to give people a sense of where they
Speaker 2: should be going. And it's all coming against the call
Speaker 2: for restraint here in the US from the administration, from
Speaker 2: members of Congress as well as the Pentagon. Here we
Speaker 2: heard from the Secretary of Defense, Lloyd Austin, who is
Speaker 2: speaking at an event here, the Secretary at a keynote
Speaker 2: speech the Reagan National Defense Forum in Simi Valley. This
Speaker 2: is from over the weekend, the sec def Floyd Austin.
Speaker 3: Here, that's kind of a fight. The center of gravity
Speaker 3: is the civilian population, and if you drive them into
Speaker 3: the arms of the enemy, you replace a technical victory
Speaker 3: with a strategic defeat. So I have repeatedly made clear
Speaker 3: to Israel's leaders that protecting Palestinian civilians and Gaza is
Speaker 3: both a moral responsibility and a strategic imperative.
Speaker 4: That's where we start our conversation with Brett Bruin.
Speaker 2: I'm glad to say he's with US today, A longtime
Speaker 2: diplomat now President of the Global Situation Room here in Washington,
Speaker 2: D C. Brett, What are your thoughts as we appear
Speaker 2: to be walking into phase two now and it could
Speaker 2: be one that is even more deadly for civilians living
Speaker 2: in the Palestinian area here, specifically Gaza.
Speaker 5: Well, I think it's important, Joe, to account for what
Speaker 5: Israel sees as their top priority, and that is to reduce,
Speaker 5: if not eliminate, Hamas's capability for attacking them. And important
Speaker 5: to bear in mind that those attacks continue. In fact,
Speaker 5: they were what broke the ceasefire between Israel and Hamas.
Speaker 5: So Israel sees this very much through the lens of
Speaker 5: we have to to protect our population, we have to
Speaker 5: protect civilians. And at the same time, you know Secretary
Speaker 5: Austin's admonishment or advice to Israel, I don't know that
Speaker 5: it goes very far, because on the one hand, yes,
Speaker 5: is repeating the obvious, but on the other Israel would
Speaker 5: look to the US, look to the UK, to others
Speaker 5: who had operations in Iraq, Afghanistan and contented with many
Speaker 5: of the same issues. And yet we would not necessarily
Speaker 5: have taken kindly to the Israelies telling us how we
Speaker 5: should carry out those attacks.
Speaker 4: I really get it.
Speaker 2: But to the Secretary's point, it might not really matter
Speaker 2: what the US has to say here if the math
Speaker 2: is correct that we've heard from any number of analysts
Speaker 2: here in.
Speaker 4: Congressman Seth Molton mentioned himself, you.
Speaker 2: Know, for every member of hamas you kill is not
Speaker 2: as important as how many civilians you kill and how
Speaker 2: many terrorists you create.
Speaker 5: Bread without question, and you know, having served on a
Speaker 5: contingency operating base in a rock outside of to create
Speaker 5: very far in that military operation and how heavy you
Speaker 5: go into those military operations has a direct link to
Speaker 5: the support that you enjoy from the local population. And yet,
Speaker 5: at the same time, and this is where I think
Speaker 5: it's really important for listeners of sent on, many of
Speaker 5: whom are policy makers, and work up on the hill,
Speaker 5: what is the alternative? What is the solution or the
Speaker 5: strategy that you're proposing, Because we've seen a number of
Speaker 5: members of Congress saying, well, they simply should create a
Speaker 5: coalition of allies and they should establish a two state solution.
Speaker 5: But it's the question of how you get there. And
Speaker 5: I haven't heard anyone yet articulate that in a cogent way.
Speaker 3: Game.
Speaker 2: I do understand that as we spend time with Brett Bruin,
Speaker 2: I also wonder about our own assets in the region. Here, Brett,
Speaker 2: it was quite a wild weekend for the US Navy,
Speaker 2: shooting down three drones during an extended attack in the
Speaker 2: Red Sea, the Pentagon saying that US forces are considering
Speaker 2: all appropriate responses to the attacks, a string of attacks
Speaker 2: on commercial vessels, they say, representing a direct threat to
Speaker 2: international commerce and maritime security.
Speaker 4: Is this not a new front?
Speaker 5: It is, without question and perhaps the most clear and
Speaker 5: present danger that American forces in the region have faced
Speaker 5: in recent years. And Joe I think it raises a
Speaker 5: critical question for Congress, which still has to resolve the
Speaker 5: longer term budget implications, as well as obviously the appointment
Speaker 5: of several senior military positions. Why are we handicapping ourselves
Speaker 5: we engaged in some of these other distractions when the
Speaker 5: focus ought to be on the safety of our soldiers,
Speaker 5: our naval forces, which at the moment clearly are facing
Speaker 5: significant threats.
Speaker 2: Significant threats from Iran backed militants. We should be specific
Speaker 2: about this, and we've seen this come from Houthi rebels
Speaker 2: in Yemen, for instance, repeatedly, how much more concerned are
Speaker 2: you about the situation there as we have two carrier
Speaker 2: strike groups in the region.
Speaker 4: Bred about what we might see next.
Speaker 5: I think that Iran is taking advantage of this moment
Speaker 5: to engage and in fact, to accelerate some of its activities.
Speaker 5: Let's not forget they're obviously still quite frustrated with the
Speaker 5: fact that they were not able to achieve sanctions relief
Speaker 5: under the Bided administration. They're cognizant of the fact we're
Speaker 5: heading into another presidential as well as congressional cycle. These factors,
Speaker 5: I fear Joe are going to lead us to seeing
Speaker 5: more efforts not only within the region, but more broadly
Speaker 5: from Iran as they're trying to increase the pressure on
Speaker 5: Washington to provide them with some sort of sanctions relief.
Speaker 2: Bredi's great to have you, Global Situation Room, President, a
Speaker 2: former diplomat with us again here on Bloomberg Sound on
Speaker 2: a voice we frequently rely on at times like these,
Speaker 2: trying to feel our way through what the next steps
Speaker 2: might be.
Speaker 3: Here.
Speaker 2: US Central Command says those attacks on the US vessel
Speaker 2: in the Red Sea were quote fully enabled by Iran
Speaker 2: unquote in response to the Israel Hamas war, and they
Speaker 2: don't even necessarily think that the warship was targeted. They
Speaker 2: may have been going after commercial vessels, but that is still,
Speaker 2: of course not going to be workable. Here as we
Speaker 2: assemble our panel for their thoughts on an important weekend,
Speaker 2: Rick Davis and Genie Shanzano join now Bloomberg Politics con Try, Rick,
Speaker 2: how concerned are you with is continued attack. We'll get
Speaker 2: to the situation on the ground in Gaza, but the
Speaker 2: continued attacks on US warships in that area, in some
Speaker 2: cases with sophisticated weaponry, well, I think.
Speaker 6: That it undermines or underlines a lot of the discussion
Speaker 6: we've been having about the current concerns you mentioned about
Speaker 6: opening up multiple fronts, you know, whether it's through Lebanon
Speaker 6: in the West Bank, or through the Hoodies or directly
Speaker 6: with others from Syria that are all part of a
Speaker 6: terror ring supplied by Iran. And the fact that we
Speaker 6: are leaning in on this attack and saying that the
Speaker 6: Hoodies were directly coordinating with Iran Is I think raises
Speaker 6: the bar quite a bit on us response. Our job,
Speaker 6: our Navy's job is to keep sea lanes open in
Speaker 6: that part of the world. So whether they're attacking our
Speaker 6: ships in a military way or commercial vessels, it makes
Speaker 6: no difference to the US Navy that they're there to
Speaker 6: protect both commercial vessels and civilian lives and they're going
Speaker 6: to do that. And as I understand too, there were
Speaker 6: a number of drones coming too close to the naval vessels.
Speaker 6: Whether they were monitoring, attacking, or what, we don't know,
Speaker 6: but my understanding is that the Navy responded as if
Speaker 6: it was a lethal attack, and as well they should.
Speaker 6: The Hoodies have been known to take on much bigger
Speaker 6: foes in these kind of hit and run episodes.
Speaker 4: They've been trying to board tankers in the area.
Speaker 2: They've attacked US ships before, Genie, should we be more
Speaker 2: focused on what's happening here in the tertiary zone around Israel.
Speaker 4: We're talking a lot about.
Speaker 2: What's happening on the ground right now in Gaza, But
Speaker 2: our ships are being attacked, that's right.
Speaker 7: And the who Thi's taken public responsibility for these attacks,
Speaker 7: and the USS Carnee involved it all day Sunday, they say,
Speaker 7: over seven hour hours addressing these attacks. And you know
Speaker 7: whether or not the USS corney or the United States was,
Speaker 7: you know, the focus or the target. The reality is
Speaker 7: they were under attack and defending, as Rick said, these
Speaker 7: ship lanes, and so we have no choice and let's
Speaker 7: just go back to when this all started. Right after
Speaker 7: October seventh, the administration said, in addition to getting our
Speaker 7: American hostages back and doing what we can for civilians
Speaker 7: and non humanitarian grounds, our number one focus has got
Speaker 7: to be containment. We cannot get dragged into this any further.
Speaker 7: So while that happens Sunday, what is Bloomberg reporting today,
Speaker 7: Vladimir putin coming to Saudia Ragia a very rare trip
Speaker 7: for somebody in the midst of a war. So you
Speaker 7: couple that all together in this issue of containment, very
Speaker 7: very concerning as it looks like we are getting dragged
Speaker 7: and pulled potentially into this further, and that is something
Speaker 7: that is not in the United States interest.
Speaker 2: As far as what's happening in Gaza, Rick, should we
Speaker 2: be asking about another truce? This is the first thing
Speaker 2: that most folks ask when they talk to administration officials.
Speaker 2: It's coming up obviously with lawmakers here because it appears
Speaker 2: that everybody's gone home negotiators have left the table, they've
Speaker 2: left cutter, or we beyond the point of a truce
Speaker 2: or a pause being rebuilt to get the rest of
Speaker 2: these hostages out.
Speaker 8: I don't think so.
Speaker 6: I mean it required pretty significant hostilities, the Israeli army
Speaker 6: moving into Gaza in order to facilitate the first discussion
Speaker 6: of a hostage release, and maybe that's what it'll take
Speaker 6: this time too. I would say that all the discussion
Speaker 6: this weekend about civilian casualties. Of course there should be
Speaker 6: a moral imperative to say civilian lives, but these are
Speaker 6: also civilians who have fostered a relationship with with Hamas,
Speaker 6: who have been trained since they we're in school as
Speaker 6: young children to hate and want to kill Israel and
Speaker 6: to hate the United States. So it's not like we're
Speaker 6: in a benign environment where these people are victims of Hamas.
Speaker 6: They have been supporting Hamas as long as Hamas has
Speaker 6: been their government, and it's just a very unusual situation
Speaker 6: where a terrorist organization is running a country.
Speaker 2: It is a pretty remarkable genie, and we haven't figured
Speaker 2: out the funding situation here. We'll get into this a
Speaker 2: little bit more coming up later in the hour.
Speaker 3: Here.
Speaker 2: But if Congress can't get out of its own way
Speaker 2: to figure out a funding package for Israel, will this
Speaker 2: conversation move on to something else? Does Tel Aviv actually
Speaker 2: need the money that we've been talking about here? I'm
Speaker 2: trying to get a sense of the urgency because the
Speaker 2: White House says time is running out in Ukraine. I
Speaker 2: don't hear that claim about Israel.
Speaker 7: We don't hear it. But it is critically important that
Speaker 7: the United States Congress step up and not step on
Speaker 7: its own foot as you were talking about, and get
Speaker 7: this funding done. You know, it may not be as
Speaker 7: critical right this moment. They will be able to proceed
Speaker 7: without it, but it is important that we give the
Speaker 7: funding and we do it, but it's got to be
Speaker 7: done properly, and that means the United States policy has
Speaker 7: got to be clear, and that is you know what
Speaker 7: you hear so much feedback on in New York just
Speaker 7: over the weekend, more and more demonstrations and people need
Speaker 7: to be heard on this. The administration has to be
Speaker 7: clear before that funding goes out as to what we expect,
Speaker 7: and that means the funding has to be given in
Speaker 7: line with our priorities and policies. There can't be a
Speaker 7: blank check with there never should be when it comes
Speaker 7: to giving public money to another country.
Speaker 2: Sure, as we're reminded, that is typically the case when
Speaker 2: we're giving funding to a country like Israel or Ukraine,
Speaker 2: and we're going to talk ahead about exactly what the
Speaker 2: path might be here, not just strings attached, but what
Speaker 2: a border deal could happen. I guess those might be
Speaker 2: considered strings and if Israel and Ukraine can move at once,
Speaker 2: because we've got a new message from the White House.
Speaker 2: The Budget Director has sent a letter up to the
Speaker 2: Hill saying Ukraine is out of time and if it's
Speaker 2: not handled now, we'll be out of money. We'll talk
Speaker 2: about that next with Rick Davis and Jeanie Shanzano on
Speaker 2: the Monday edition of Sound On.
Speaker 4: I'm Joe Matthew. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch the
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Speaker 2: The Budget Director at the White House has sent a
Speaker 2: letter up to Capitol Hill about Ukraine, and it's not great.
Speaker 2: Shilanda Young writes, without congressional action, by the end of
Speaker 2: the year, we will run out of rec sources to
Speaker 2: procure more weapons and equipment for Ukraine. The very simple
Speaker 2: line quote, we are out of money to support Ukraine,
Speaker 2: and she points in this letter interestingly to specific defense
Speaker 2: systems that are being made in key states. Hello Republicans, Alabama, Georgia, Texas.
Speaker 2: That's where a lot of this money would go, of course,
Speaker 2: to American defense contractors. But if it all hinges on
Speaker 2: a deal surrounding the border. We didn't have a good weekend.
Speaker 2: Talks apparently fell apart on Friday, and we just crossed
Speaker 2: a headline on the terminal here sent a GOP moving
Speaker 2: in wrong direction on border. So let's reassemble the panel
Speaker 2: for their take. Rick Davis and Genie Shanzano joint of
Speaker 2: course Bloomberg Politics contributors. Shilanda Young, the budget director. Genie
Speaker 2: is pretty serious in this note. She says there is
Speaker 2: no magical pot of funding available to meet this moment.
Speaker 2: We are out of money and nearly out of time.
Speaker 2: Will it have an impact?
Speaker 7: On the debate, it should and I think it will.
Speaker 7: And she makes a critically important point about where this
Speaker 7: money is coming from and going to rather, and it's
Speaker 7: a point that the President has been trying to stress.
Speaker 7: He tried to stress it in his oval or in
Speaker 7: his Oval Office address. The administration has been trying to
Speaker 7: make it. I'm glad Sholan Dejung is making it now
Speaker 7: because it is critically important. This money is not just
Speaker 7: going out of the United States to another country with
Speaker 7: no positive impact on the United States beyond the issue
Speaker 7: of autocracy, which is critical enough and defending democracy, it
Speaker 7: also is a boon to our economy. So they're trying
Speaker 7: to make that important, important argument. And of course now
Speaker 7: they are facing in the House a speaker who has
Speaker 7: twice voted against funding but as now publicly said he
Speaker 7: will support it provided we get something on border. So
Speaker 7: you know, the message has reached somebody who has been
Speaker 7: on the fence on this in the past, and they
Speaker 7: know that. But they're trying to reach over even the
Speaker 7: heads of the leaders, to the representatives from the Red
Speaker 7: States and make this case and also obviously to people
Speaker 7: living in the Red States who depend on these jobs
Speaker 7: in the defense industry and others. It's a really important
Speaker 7: argument for them to be making vociferously at this point
Speaker 7: because time is running out.
Speaker 2: As they say, we'll get into the border potential at
Speaker 2: least for a border deal here in just a second, Rick,
Speaker 2: But I wonder your thoughts on the message. There's another
Speaker 2: line that jumps out here. By the end of the year,
Speaker 2: we will run out of resources to procure more weapons
Speaker 2: and equipment for Ukraine and to provide equipment from US
Speaker 2: military stocks.
Speaker 4: So we now know we've drawn down.
Speaker 2: Our supplies as far as we can here. There does
Speaker 2: seem to be more information here than we've heard recently. Basically,
Speaker 2: by the end of the year, we are out will
Speaker 2: that motivates skeptical Republicans.
Speaker 6: You know, look, I mean, it helps put pressure on
Speaker 6: skeptical Republicans. It helps also support Ukraine itself in the
Speaker 6: sense that you know, we're trying to get this through
Speaker 6: before the end of the year, and it sends a
Speaker 6: message to the Europeans that you know, if in fact
Speaker 6: you can't count on us, you need to be prepared
Speaker 6: to fill the vacuum. Europe's done a good job of
Speaker 6: supporting Ukraine. There are issues with Ukraine funding in Europe,
Speaker 6: just like there are here. And I think the White
Speaker 6: House is doing the right thing by putting everybody on
Speaker 6: notice that the war's going to continue whether or not
Speaker 6: we get this package passed before the end of the year.
Speaker 6: I'm hopeful that Langford center Langford is right. On a
Speaker 6: Sunday show, he said he could get it done before
Speaker 6: the end of the year, and that would make I
Speaker 6: think a big impact.
Speaker 4: Here is Senator James Langford.
Speaker 2: As Rick mentioned his take on talks, He's been at
Speaker 2: the center of these negotiations.
Speaker 9: A reason that this hasn't been done in decades because
Speaker 9: it's hard, it's very technical work, and there's a lot
Speaker 9: of challenges that are in it, and anytime you deal
Speaker 9: with border security, there are a lot of complicating features
Speaker 9: in this.
Speaker 5: So we're going through very, very detailed work.
Speaker 2: Speaking on ABC this week, Genie, it's his job, I guess,
Speaker 2: to sound optimistic here as one of the lead negotiators.
Speaker 7: Are you you know he did. I was stunned by
Speaker 7: how optimistic he sounded, pleasantly surprised, and of course then
Speaker 7: we hear democrats walked away. The reality is, you know,
Speaker 7: obviously as usual in the Senate, as hard as this is,
Speaker 7: you can imagine them coming to an agreement, But it
Speaker 7: is this push in my mind from the House for
Speaker 7: Hr Two that is going to make this a non
Speaker 7: starter in the Senate. And I think that's where we
Speaker 7: have to see movement. You know, things always look worse
Speaker 7: before they get better in Congress, so hopefully that's the
Speaker 7: case here. But to Langford's point and the history, we know,
Speaker 7: we have been talking about Congress moving forward on immigration
Speaker 7: for decades to no avail. If they can do this
Speaker 7: with on the books eight days left in the House
Speaker 7: session before they end in December, I will be stunned
Speaker 7: and happy beyond. But I am not as optimistic as Langford,
Speaker 7: and I do hope I'm wrong, But how do you
Speaker 7: do this? And if they don't do it now, how
Speaker 7: they do it in an election year? You know, it's
Speaker 7: almost unthinkable in my mind.
Speaker 2: We're spending time with Rick and Jeanie on Bloomberg Sound
Speaker 2: On It's the Monday edition, and we're glad you're with
Speaker 2: us here on the radio, on the satellite, or on YouTube.
Speaker 2: Of course, the Republican majority in the House, Rick is
Speaker 2: dealing with a slightly smaller majority here, and I have
Speaker 2: to ask you both about George Santos's exit last week,
Speaker 2: because one of the first things he did was retweet
Speaker 2: a video from this program from sound On, and I
Speaker 2: want to bring you back to the interview we had.
Speaker 2: I guess it was Thursday, the day he was expelled,
Speaker 2: with Nicole Malia Takis, his colleague from New York who
Speaker 2: called for his removal. Here she is just to jog
Speaker 2: the memory the Republican from New York.
Speaker 10: We have to take action and remove him now. He
Speaker 10: will have his day in court as it relates to
Speaker 10: the criminal charges, but in terms of being able to
Speaker 10: continue his service in Congress, we believe we have seen
Speaker 10: enough and that he does not merit to continue serving
Speaker 10: in this body, and his constituents do deserve better.
Speaker 4: Well. Lo and behold.
Speaker 2: That was posted to Twitter, and George Santos reposted it
Speaker 2: with quite the message. He writes, let's talk about hypocrisy.
Speaker 2: Can someone ask to call Molly as stock tips? When
Speaker 2: did she become a savant in stock trading? He goes
Speaker 2: on to accuse her of insider trading and more. It
Speaker 2: gets very personal to the extent that I wouldn't be
Speaker 2: comfortable reading this on the air and he hasn't stopped there.
Speaker 2: He's in a back and forth now with Representative Brandon Williams,
Speaker 2: who he refers to as drunken Brandon Williams and refers
Speaker 2: to assault charges.
Speaker 4: Here on Twitter.
Speaker 2: I'm not even sure what to ask what you think
Speaker 2: about this, Rick, But you've got an arsonist here. It
Speaker 2: looks like who's going to try to out lawmakers as
Speaker 2: long as he can. Could this be a problem for
Speaker 2: the Republican conference?
Speaker 6: I love that phrase, he's a political arsonist and so yeah,
Speaker 6: I mean, will he be a problem for Republican lawmakers? No,
Speaker 6: they've turned the page. No one's going to pay any
Speaker 6: attention to this guy. Is he full of fabrications, lies,
Speaker 6: and innuendo. Absolutely, That's how he got into this trouble.
Speaker 6: So I don't think anybody's going to take seriously much
Speaker 6: of what he says. And frankly, I suspect he probably
Speaker 6: has to turn his attention to his legal problems, you know,
Speaker 6: which is the only thing you know that keeps him
Speaker 6: from right now wearing an orange jumpsuit for the rest
Speaker 6: of his life. So we'll see how it all ends
Speaker 6: with the fabulous. But no, I don't think anybody on
Speaker 6: Capitol Hill is spending ten minutes on this one today.
Speaker 2: Well, Genie, I'm just glad to know he's watching you
Speaker 2: and Rick on YouTube here, and I guess he's got
Speaker 2: a lot of time to do that now to the
Speaker 2: former congressman, we're on one to three every day. The
Speaker 2: media might care though, if you keep lobbing Molotov cocktails
Speaker 2: like this, they're going.
Speaker 4: To follow up on some of them.
Speaker 2: Genie, Well, that could be uncomfortable for a few members
Speaker 2: of Congress, couldn't it.
Speaker 7: Absolutely, And that's what he promised when he was leaving.
Speaker 7: And I urge everybody to go back and listen to
Speaker 7: what Nicole Maliatak has told you. She had a lot
Speaker 7: of courage to say it. She is absolutely right. We
Speaker 7: know why he is lobbing these absolutely unsubstantiated claims against her.
Speaker 7: I only wish her own leadership had the fortitude and
Speaker 7: the strength to vote with her to throw him out,
Speaker 7: because that's absolutely the right decision in this case. Although
Speaker 7: I should say now that he's out here right, he
Speaker 7: has more time to listen to and watch sound on
Speaker 7: so there's always a benefit here, you know.
Speaker 2: I guess that's good for anybody. Rick Davis We'll keep
Speaker 2: you posted on where this goes. But is one less
Speaker 2: seat rick an actual game changer for Speaker Johnson when
Speaker 2: it's already that tight, does it matter?
Speaker 6: You know, Look, if he's going to try and pass
Speaker 6: legislation on party line votes, sure that really makes it tough.
Speaker 6: We'll see that coming up. If he decides to go
Speaker 6: forward with impeachment against the President and the Secretary of
Speaker 6: Homeland Security, that can be a party line vote where
Speaker 6: only a couple of members could scuttle the efforts that
Speaker 6: he have to put that on the agenda. So sure
Speaker 6: it doesn't help in one single bit.
Speaker 1: You're listening to the Bloomberg Sound on podcast catch us
Speaker 1: live weekdays at one Eastern on Bloomberg dot com, the
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Speaker 4: If you're with us on the radio on the satellite.
Speaker 2: We welcome you to the Monday edition with a very
Speaker 2: direct message coming from the White House today on funding
Speaker 2: for Ukraine. We're going to talk to Jack Fitzpatrick about this.
Speaker 2: As budget Director Salanda Young sends a letter under knowing
Speaker 2: certain terms here it reads, we are out of money
Speaker 2: to Ukraine. You can't get much more direct than that
Speaker 2: without congressional action, She writes, by the end of the
Speaker 2: year will be out of resources to brook here more
Speaker 2: weapons and equipment for Ukraine, and to provide equipment from
Speaker 2: US military stocks, which we've been doing for both Ukraine
Speaker 2: and Israel. Let's bring Jack Fitzpatrick into the conversation from
Speaker 2: Bloomberg Government, He joins, sort of at this time every week,
Speaker 2: It's nice to see you, Happy Monday. We've got a
Speaker 2: lot of things I want to talk to you about
Speaker 2: the border situation as well, but of course it all.
Speaker 4: Ties into Ukraine. Who's that letter for?
Speaker 8: That is for Congress.
Speaker 11: That is a legislative deadline to the speaker, though, who's
Speaker 11: the audience? Yeah, to the speaker, to anybody who could
Speaker 11: be pressured, and it maybe effectively it's more to senators
Speaker 11: because they are taking the lead in negotiations, but they
Speaker 11: have to go back and forth between Senate Republicans and
Speaker 11: House Republicans. Our colleagues who have covered this very closely,
Speaker 11: have heard from people close to the situation that since
Speaker 11: last week when Speaker Johnson spoke to Senate Republicans, things
Speaker 11: have not moved in the right direction. And so it's
Speaker 11: a combination of Senate Republicans, the Speaker to Congress because
Speaker 11: they didn't have a deadline yet. And I don't say
Speaker 11: that to undermine you know, I'm not pushing back that
Speaker 11: it's an actual deadline, but in terms of legislation, Congress
Speaker 11: needs an end date, and they didn't have one until now.
Speaker 11: They're being told by the White House if this doesn't
Speaker 11: happen by the it's not happened, I.
Speaker 2: Fill in the blank. Seems like they could have done
Speaker 2: that earlier. But we've been asking a lot of folks,
Speaker 2: even on this program. There is no magical pot of funding.
Speaker 2: She your rights available to meet this moment. We're out
Speaker 2: of money and nearly out of time. But if that
Speaker 2: hinges on a deal over the border and it's tied
Speaker 2: somehow to funding for Israel. To your point, Ukraine's timeline
Speaker 2: is not Congress's timeline here, right.
Speaker 11: I mean, this letter from the White House seeks to
Speaker 11: align them and say, Congress, you need to get something
Speaker 11: done in time to actually be useful to Ukraine. Now,
Speaker 11: it's important to keep in mind that if this really
Speaker 11: melts down and it does not seem to be going
Speaker 11: very well, right now, these negotiations and the border talks
Speaker 11: include everything because the Ukraine hinges on the border talks.
Speaker 11: Currently leadership is planning to tie Israel funding into that.
Speaker 11: If the border talks don't strike a deal, there will
Speaker 11: have to be conversations about what alternatives are there. Does
Speaker 11: Israel move alone? Is there any way to help Ukraine
Speaker 11: in a more scaled back way other than the request
Speaker 11: from the White House. We haven't gotten to those alternate paths,
Speaker 11: so right now they are just saying the pressure's on
Speaker 11: for all of this, which hinges on a border deal
Speaker 11: to happen in the next few weeks.
Speaker 2: James Langford was on the Sunday Shows ABC this week.
Speaker 2: He was asked about it sounded we talked about this
Speaker 2: with Rick and Genie a while ago, surprisingly optimistic considering
Speaker 2: what everyone's hearing, the headlines that are even crossing the
Speaker 2: terminal today. Granted this is twenty four hours ago. Here's
Speaker 2: what he said.
Speaker 9: There's a reason that this hasn't been done in decades
Speaker 9: because it's hard, it's very technical work, and there's a
Speaker 9: lot of challenges that are in it, and anytime you
Speaker 9: deal with border security there are a lot of complicating
Speaker 9: features in this So we're going through very, very detailed
Speaker 9: work and.
Speaker 2: It wasn't just border security where we're talking about Jack.
Speaker 2: We're talking about, you know, actually changing asylum law along
Speaker 2: with some other very controversial proposals. Is it changing form
Speaker 2: as we're going here, or have they walked away from
Speaker 2: the table.
Speaker 11: Well, there's a lot that is still moving. The core
Speaker 11: issue that they're not just discussing funds for border security
Speaker 11: measure per se has not changed. And that's the major
Speaker 11: challenge is if you get into asylum policy and then
Speaker 11: a disagreement over that has led to what about parole opportunities?
Speaker 11: And is parole used to undermine any of these changes?
Speaker 11: It's very complex.
Speaker 4: Role was a big sticking point.
Speaker 11: This is much more complex and difficult then you know,
Speaker 11: if you remember the shutdown over border wall funding, that
Speaker 11: was a fight over how much money. This is way
Speaker 11: more complex than aure and that fundamentally has not changed.
Speaker 11: That's been the big issue here.
Speaker 2: And we have how many legislative days to figure this out?
Speaker 2: I mean, is his optimism shared by the leadership that
Speaker 2: this is done by the end.
Speaker 5: Of the year.
Speaker 11: Langford seems a lot more optimistic than other people, and
Speaker 11: that played out even on Twitter or x. Today he
Speaker 11: posted again that talks are continuing. If you compare and
Speaker 11: contrast that post to Mike Johnson's post about the White
Speaker 11: House not making significant concessions, Langford is the optimistic one.
Speaker 11: They're supposed to be in session until December fifteenth. Congress
Speaker 11: has a way of pushing that back and missing one
Speaker 11: mini deadline and making another deadline. So you know, the
Speaker 11: end of the calendar year is the real deadline. Before Christmas,
Speaker 11: I guess is functionally the deadline.
Speaker 2: When do we start talking about another cr.
Speaker 11: While they fund the government. Yes, they have the supplemental
Speaker 11: They have until January nineteenth for four bills, February second
Speaker 11: for eight bills. They they are not making a lot
Speaker 11: of progress on funding the government. They need to agree
Speaker 11: to top line levels, at least the basics of how
Speaker 11: much they're going to spend for each of the twelve
Speaker 11: bills between the House and Senate. I've asked a number
Speaker 11: of times. They have not made progress on that. The
Speaker 11: more emergency issue is still Ukraine funding, because if the
Speaker 11: deadline effectively is the end of the year, that's a
Speaker 11: lot way before January nineteenth. If not for that, they
Speaker 11: could have tied them together. But apparently that's not the case.
Speaker 4: Boy.
Speaker 2: Okay, cr call Kevin McCarthy, right, see how that's going
Speaker 2: to go. Great to talk to you, Jack. Good luck
Speaker 2: this week. I know everyone's flying back into town. Jack Fitzpatrick.
Speaker 2: Of course, I have Bloomberg Government with us here on
Speaker 2: Bloomberg Sound on, and I want to pull you back
Speaker 2: now as we cast our eyes to the other end
Speaker 2: of Pennsylvania Avenue, the White House and the talk of
Speaker 2: recession that hasn't materialized yet. Remember Bloomberg Economics said one
Speaker 2: hundred percent chance we go into a recession this year.
Speaker 2: The anniversary of that call, I believe, just passed, and
Speaker 2: so now they you know, it's easy to say, hey,
Speaker 2: well what never happened, guys, unless it started already. We're
Speaker 2: going to bring in Tom Orley from Bloomberg Economics to
Speaker 2: talk about this in a moment.
Speaker 4: Remember, let's go back through time.
Speaker 3: Here.
Speaker 4: Here's Joe Biden in June. This is the twentieth.
Speaker 5: Every month is going to be a recession. Next Monthenxus,
Speaker 5: there's two.
Speaker 10: Thirds of the economists and the major leaders in the
Speaker 10: bags think we're not.
Speaker 5: Going to have a recession.
Speaker 2: Okay, let's fast forward a month. This is mid July
Speaker 2: now and the Treasury Secretary Janet Yellen, talking about this call,
Speaker 2: the constant questions about the recession.
Speaker 12: Growth is slowed, but our labor market continues to be
Speaker 12: quite strong. I don't expect a recession. I think that
Speaker 12: we're on a good path to bringing inflation down. The
Speaker 12: most recent inflation data, we're quite encouraging that we're making
Speaker 12: progress on getting inflation down. But as I'd hoped and expected,
Speaker 12: that would occur in the context of a strong labor market,
Speaker 12: and we continue to see that.
Speaker 2: Yeah, Goldilock's economy right, steady, sustainable growth, as we've discussed
Speaker 2: with members of the administration and with the economists who
Speaker 2: support that view. But then I read the writings of
Speaker 2: Anna Wong this morning at Bloomberg Economics. We have long
Speaker 2: argued a recession will begin toward the end of this year,
Speaker 2: and the reason data corroborate that view. So are we
Speaker 2: in when already? Is the question for Tom Orlick, who
Speaker 2: joins us at the table now from Bloomberg Economics.
Speaker 4: Tom, it's great to see you.
Speaker 2: You've put a lot of time into this research and
Speaker 2: you're feeling pretty good about your call. Did a recession
Speaker 2: begin in October.
Speaker 13: So I think it's important to stay take a step
Speaker 13: back on this, Joe, you can pull the in off
Speaker 13: the ledge. Let's not forget that it wasn't so long
Speaker 13: ago that the United States was suffering from ten percent
Speaker 13: close to ten percent inflation. Now, how does the Federal
Speaker 13: Reserve deal with inflation? Well, it deals with inflation by squeezing.
Speaker 8: Demand in the economy.
Speaker 13: And when you squeeze demand in the economy, what happens
Speaker 13: You raise unemployment and the economy goes into a recession.
Speaker 13: So our expectation, our forecast, the call, long standing call
Speaker 13: from Anna and her team, which you mentioned, is for
Speaker 13: the US to go into a mild recession starting around
Speaker 13: now and stretching into the first part of next year. Now,
Speaker 13: if that's what happens, that would be an extraordinarily lucky
Speaker 13: escape for the US economy. If you told economists back
Speaker 13: when inflation was pushing towards double digits, you can get
Speaker 13: out of this with just the mildest of downturns. I
Speaker 13: think pretty much anyone, including Janet Yellen, probably would have
Speaker 13: taken that offer. That's our expectation, and when we look
Speaker 13: at the unemployment data, which has already edged up from
Speaker 13: its trough of I think three point five percent up
Speaker 13: to three point nine percent. What we're seeing is labor
Speaker 13: market signals which are pretty firmly aligning with that view.
Speaker 2: Last time we had two months of contraction, we were
Speaker 2: told that it was not a recession. I think a
Speaker 2: lot of people actually learned a lot about economics over
Speaker 2: the course of those weeks. Many were politically motivated to
Speaker 2: say that that's crazy, but most economists agreed that the
Speaker 2: stars did not align to show a recession, even with
Speaker 2: the contraction that we saw. How would you qualify it
Speaker 2: then give us an advanced view of what that would
Speaker 2: look like.
Speaker 13: So I think that the layman's understanding of a recession
Speaker 13: is its two sequential quarters.
Speaker 8: Solves forgiving contraction in the economy.
Speaker 13: Right, So two negative GDP prints in a row. Frankly,
Speaker 13: that's not a bad definition of a recession, but it's
Speaker 13: not the definition which the US follows. The US has
Speaker 13: a group of sort of very very senior econom missed
Speaker 13: at the NBER, and their job is to look at
Speaker 13: a bunch of different data. How much spending is going on,
Speaker 13: how much investment is going on, what's happening in labor
Speaker 13: markets and make a judgment about whether the US economy
Speaker 13: is in recession or not posthumously exactly. They don't do
Speaker 13: it in real time. Now, that brings us to the
Speaker 13: question of these recession rules, right, Probably the most famous
Speaker 13: of them the Psalm rule, named for Claudia sam formerly
Speaker 13: a FED economist now I think one of the contributors
Speaker 13: to Bloomberg opinion. And what Claudiusalm noticed is well, if
Speaker 13: there's an increase in unemployment from its trough by about
Speaker 13: zero point five percentage points, then almost always that's a
Speaker 13: signal that the US economy isn't about to go into
Speaker 13: a recession, it's already in a recession. Where are we now, Well,
Speaker 13: the unemployment rate hasn't quite increased zero point five percentage points,
Speaker 13: but it's already increased zero point four percentage points, and
Speaker 13: we expect it to make up that remaining distance in
Speaker 13: the payrolls print this Friday.
Speaker 2: It's interesting that we talk about soft landing. Nobody's really
Speaker 2: qualified what that would look like either. Is it possible
Speaker 2: that a mild recession you're describing is a bit of
Speaker 2: a soft landing.
Speaker 13: So it's interesting, Joe, I mean if you follow the
Speaker 13: kind of macroeconomic debate on Twitter, it's kind of knives
Speaker 13: out right, and the soft landing optimists have got their
Speaker 13: knives out, the hard landing pessimists have got their knives out.
Speaker 13: But if you look at what actually the soft landing
Speaker 13: optimists and the hard landing pessimists are forecasting, there's not
Speaker 13: a vast gulf between them, right, The soft landing optimists
Speaker 13: would concede that the economy is going to slow and
Speaker 13: the unemployment, which has already drifted up a bit, will
Speaker 13: probably drift up a little bit higher. The hard landing pessimists,
Speaker 13: and that's the camp we're in, say, yeah, it's going
Speaker 13: to slow and there's going to be a mild contraction.
Speaker 8: And guess what.
Speaker 13: Employment isn't going to drift up to four point twenty
Speaker 13: four point three, it's going to drift up all the
Speaker 13: way to five percent.
Speaker 2: Okay, So maybe there's not that much difference between the two,
Speaker 2: is what you're suggesting. So there's a fine line between
Speaker 2: a horror and a soft landing the way you're describing them.
Speaker 13: Yeah, I think if we let's imagine we were in
Speaker 13: a world where let's imagine we were in a world
Speaker 13: where the economy was growing at a steady two percent
Speaker 13: pace and there was a zero point five percent variation
Speaker 13: from one quarter to the next. Right, I think most people,
Speaker 13: most people in the markets, would not regard that as
Speaker 13: an incredibly consequential move. It's the fact of where we
Speaker 13: are in the cycle, right, It's where we are in
Speaker 13: the cycle as the fared approaches the end of its tightening,
Speaker 13: as unemployment starts to drift up, which means that that
Speaker 13: margin of difference between the optimists and the pessimists right
Speaker 13: now also happens to be the margin of difference between
Speaker 13: a soft landing at a mild recess.
Speaker 1: Credible.
Speaker 2: You know, this is good news for Joe Biden. It
Speaker 2: might sound contrarian, but that means the recession's done before
Speaker 2: the campaign gets real the general election in the middle
Speaker 2: of next year.
Speaker 13: So I think folks who think deeply about the relationship
Speaker 13: between politics and the economy and the elections, what they
Speaker 13: tend to say is that views on the economy get
Speaker 13: baked in about.
Speaker 8: Six months before the vote.
Speaker 13: There you go, right, So, from Biden's perspective, what's happening
Speaker 13: right now is important, yes, But what is going to
Speaker 13: be really important is what's happening in May, June, July
Speaker 13: next year. Now, if our call plays out, what could
Speaker 13: be happening is the beginning.
Speaker 8: Of a recovery?
Speaker 2: Yes, and that's something. Don't be a stranger, Tom Orloker.
Speaker 2: We always love talking to Tom from Bloomberg Economics.
Speaker 4: The call us out.
Speaker 2: What do you think we're in a recession right now?
Speaker 2: Ask your neighbor. You might be surprised by the answer.
Speaker 2: I'm Joe, Matthew and Washington. This is sound On.
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