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Speaker 2: Welcome to the Tuesday edition of Ballance of Power. I'm
Speaker 2: Joe Matthew live in Washington, where it's all about CPI
Speaker 2: Day today. Everyone up early, including Molly Smith, to put
Speaker 2: pen to paper or I guess type away on the
Speaker 2: numbers here. We're going to dive into this with Molly
Speaker 2: in a second. With the headline not what the administration
Speaker 2: wants to see. Remember the hotter than expected jobs report
Speaker 2: on Friday. Well, now US core inflation is topping forecasts
Speaker 2: again and this has, of course implications for the Federal Reserve.
Speaker 2: Not to mention the outcome of this presidential election. Top
Speaker 2: line and core inflation up four tenths from January. Molly
Speaker 2: Smith set the alarm extra early today as Bloomberg Economics
Speaker 2: editor to crank this out.
Speaker 3: At eight thirty.
Speaker 2: That's got to be a little bit of heartburn, right,
Speaker 2: I mean, when the big ones hit like this the
Speaker 2: job's day, the CPI day, everybody is watching.
Speaker 4: It certainly wakes you up at that hour, for sure, Joe,
Speaker 4: and I gotta say, like, just hearing Charlie run through
Speaker 4: the market trading right now, I'm just baffled at like
Speaker 4: why stocks are up as much as they are. I
Speaker 4: would love to hear what good news investors saw on this,
Speaker 4: because I really didn't see it from my seat.
Speaker 3: Okay, so let's get into it.
Speaker 2: Because you know, on Friday we were talking about the
Speaker 2: push pull of the jobs report, and you know, you
Speaker 2: can find a good story to tell if you look
Speaker 2: at it the right way. In this case, shelters up,
Speaker 2: Gasolina's up, cars up, clothing, airfares.
Speaker 3: Have you tried to book a flight lately? This is
Speaker 3: what people are talking about at home.
Speaker 5: Yeah, exactly.
Speaker 4: So, like you just said, this was just a lot
Speaker 4: of you know, pretty robust reading across the board. I mean,
Speaker 4: I guess if you really wanted to slice and dice it,
Speaker 4: the positive here, so to speak, was that there was
Speaker 4: a bit of a pullback in this really narrow category
Speaker 4: of services inflation that the FED looks at very closely.
Speaker 4: If you've heard people describe core services x housing. So
Speaker 4: this is what this one pulled back a bit from
Speaker 4: like a very strong January reading, but really went more
Speaker 4: from like rising very sharply to still rising pretty quickly.
Speaker 4: So I wouldn't say it was exactly a slam dunk
Speaker 4: in terms of people looking for positive news to take away.
Speaker 4: Maybe that shelter inflation also did come down a bit,
Speaker 4: but shelter combined with gasoline, contributed to over sixty percent
Speaker 4: of the rise in the overall CPI in the month.
Speaker 5: So these are things that people pay.
Speaker 4: For every day. So if you're the average American consumer
Speaker 4: right now, it certainly doesn't make you feel good to
Speaker 4: know that your housing costs and gasoline are still very
Speaker 4: much rising.
Speaker 3: Yeah.
Speaker 2: Right, Is there hope at least in the bullets behind
Speaker 2: energy prices? I mean, obviously gasoline has seasonal factors here,
Speaker 2: or maybe you see some relief in the next couple
Speaker 2: of months or is that wishful thinking.
Speaker 4: It's certainly possible. I mean, this was the first rise
Speaker 4: in the whole energy category that we saw in five months,
Speaker 4: so you know, lately that had been a driver more
Speaker 4: of disinflation on the overall headline. But as you said,
Speaker 4: these things are seasonal you know, patterns can change, and
Speaker 4: also when you see airfares so high, more people might
Speaker 4: want to drive, and then that could drive up the
Speaker 4: you know, demand for gasoline and therefore the price of
Speaker 4: that as well.
Speaker 2: No, and the cycle continues. What can you tell us
Speaker 2: about airfares? The biggest monthly advance? Did I read that right?
Speaker 4: Yes, the biggest monthly advanced since May of twenty two,
Speaker 4: so that one really came up quite a bit in
Speaker 4: the month. And it's interesting because we saw a report
Speaker 4: earlier today from Southwest saying that they're going to have
Speaker 4: to reduce capacity given all of the struggles that they're
Speaker 4: having with fewer Boeing deliveries. As you know, we certainly
Speaker 4: know about that story and how that's been playing out,
Speaker 4: but I think that's something you could I think Ryan
Speaker 4: Air may have also warned of something similar to capacity constraints,
Speaker 4: so that's of course also just going to push up
Speaker 4: prices more so. So I'm not sure if that was
Speaker 4: a factor in the February reading, but certainly could be
Speaker 4: in the months ahead.
Speaker 3: Have you flown since the door blowout, Molly.
Speaker 4: I flew in last month. I did fly, So maybe
Speaker 4: I'm contributing to the problem, but I think about it
Speaker 4: as well in advance, and they were it was like
Speaker 4: a two hundred dollars round trip fair to Atlanta, So
Speaker 4: I think that's pretty good.
Speaker 2: Pretty good. Might be twice that by now? Did you
Speaker 2: try to sit you know, see people getting on the plane.
Speaker 2: They're trying to figure out where the door plug is,
Speaker 2: even if there is one on the plane, and then
Speaker 2: they buckle up before being told. That's a fascinating element
Speaker 2: of this for me.
Speaker 3: I don't know about you.
Speaker 4: Yeah, I mean, look, I would do it too if
Speaker 4: I was nervous that a part of the plane was
Speaker 4: going to blow out when I was, you know, thirty
Speaker 4: thousand feet of the air, So any precaution necessary.
Speaker 2: All right, So we've got PPA by tomorrow. Does this
Speaker 2: take on new meaning because I have to ask you
Speaker 2: about the FED here, of course, Molly Smith. Everybody says
Speaker 2: that this means we're not going to see anything o June.
Speaker 3: At the earliest.
Speaker 4: Yeah, it looks like that's where most of the bets
Speaker 4: are circling around. So we're getting PPI on Thursday. I
Speaker 4: believe in that one's going to be like the last
Speaker 4: major inflation report that we get before the Fed's meeting
Speaker 4: next week. Obviously, don't think really anyone right now is
Speaker 4: expecting a rate cut at that meeting, so that's very
Speaker 4: much penciled in to be a fifth straight hold on
Speaker 4: interest rates. So the PPI is important. This is prices
Speaker 4: paid to U as producer, so it's a measure of
Speaker 4: wholesale inflation. And this is really more important when you're
Speaker 4: talking to economic forecasters because there are categories within the
Speaker 4: PPI that filter into what's known as the PCE, and
Speaker 4: that's the Fed's preferred inflation measure. There were some of
Speaker 4: those parts in the inflation report today as well, So
Speaker 4: a lot of economists say once the PPI numbers come out,
Speaker 4: that's when they start to firm up their estimates for PCE,
Speaker 4: which by the way, is running much lower than the
Speaker 4: CPI does, in part because it doesn't wait shelter as heavily,
Speaker 4: so that one is trending a lot closer to the
Speaker 4: feds two percent target, and that's really more the one
Speaker 4: that drives policy in their opinion.
Speaker 3: Fascinating. She's the smartest person in the room, which.
Speaker 2: Is why we try to talk around times like this
Speaker 2: when the data are so important.
Speaker 3: Molly Smith it's great to see Molly. Thank you.
Speaker 2: We'll connect on the next major data point. I am sure,
Speaker 2: Bloomberg Economics editor, we bring you to the source. I
Speaker 2: hope you get to sleep at some point.
Speaker 3: Molly.
Speaker 2: You know it's primary day because every time we talk
Speaker 2: about this economics stuff, we have to do it against
Speaker 2: the backdrop of politics, and if you're Joe Biden, this
Speaker 2: is topic number one, right unless, of course, I'm told
Speaker 2: that the poll says the border is more important than
Speaker 2: the economy. But we're coming pretty close here, certainly, as
Speaker 2: we head around the rest of the country with primary elections,
Speaker 2: and today we've got some big ones, none bigger or
Speaker 2: more influential, are potentially more revealing than the one in Georgia.
Speaker 2: As I read in the AJAC the Atlanta Journal Constitution,
Speaker 2: Georgia primary could set a presidential rematch, but there is
Speaker 2: more to it than that. As we try to read
Speaker 2: Tea leaves here, results could give both of these men,
Speaker 2: Joe Biden and Donald Trump, insight into the depths of
Speaker 2: their voter support. And that's where we start our conversation
Speaker 2: with Andre Gillespie back with us to talk about Georgia politics,
Speaker 2: and by that I guess I mean national politics, because
Speaker 2: it's pretty hard to separate the two. Associate Professor of
Speaker 2: Political Science at Emory University, it's great to see you.
Speaker 2: What will we learn tonight from Georgia that we can
Speaker 2: apply to the rest of the nation.
Speaker 6: Well, today is a day for both the Democratic and
Speaker 6: the Republican parties to practice there get out the vote
Speaker 6: efforts and their mobilization strategies.
Speaker 7: We know already who's going.
Speaker 6: To win these primaries, and we know that at some
Speaker 6: point tonight, whether it's in Georgia or Mississippi, Donald Trump
Speaker 6: is the thrush across the delegate threshold to be able
Speaker 6: to secure the Republican nomination. That's likely to happen for
Speaker 6: President Biden sometime next week, perhaps Florida or Ohio. But
Speaker 6: since we know that they have no competition anymore, or
Speaker 6: nominal competition at best on the Democratic side, I think
Speaker 6: what we're going to be paying attention to is who
Speaker 6: bothers to show up. It's important in Georgia to keep
Speaker 6: in mind that people have been voting for weeks already
Speaker 6: in early voting. But if we see robust turnout on
Speaker 6: both sides, I think that that is a harbringer of
Speaker 6: how competitive.
Speaker 7: The race is going to be in Georgia, and.
Speaker 6: This election is really going to come down to which
Speaker 6: campaign gets their people out to vote. This isn't about persuasion,
Speaker 6: it is about mobilization.
Speaker 3: You mentioned the early vote.
Speaker 2: I wonder to what extent that might influence the outcome
Speaker 2: with folks voting when Nicki Haley was still in the race.
Speaker 2: Could that bring some noise to these numbers, not to
Speaker 2: Donald Trump's benefit.
Speaker 6: Well, so Georgia has a hybrid system where delegates are allocated.
Speaker 6: The winner gets a certain number of delegates, and then
Speaker 6: delegates are also allocated via congressional district. You know, it
Speaker 6: is possible that Haley could win a district, but as
Speaker 6: we saw on Super Tuesday last week, even in places
Speaker 6: where you would expect Republicans to be more moderate, Donald
Speaker 6: Trump actually did really well in those types of counties.
Speaker 6: So I think it really does become a question of
Speaker 6: whether or not Nikki Haley could still win some delegates
Speaker 6: in say the fifth congressional district, you know, or maybe
Speaker 6: one of the more Democratic leaning districts. Who's to say
Speaker 6: either way, between Georgia or Mississippi, And it's probably more
Speaker 6: likely to be Mississippi. Donald Trump is going to have
Speaker 6: enough delegates to be the presumptive Republican nominee.
Speaker 3: Well, that's interesting.
Speaker 2: You mentioned turnout, and I wonder what the level of
Speaker 2: interest is in Georgia when you go to ground, what
Speaker 2: are people talking about, how are the ads playing, et cetera.
Speaker 7: So you know, it's still pretty early.
Speaker 6: The Biden campaign in particular has just done an ad
Speaker 6: by and so we're gonna see what the fruit of
Speaker 6: that look like in the coming weeks. I think it's
Speaker 6: just really important and symbolic to note that both Donald
Speaker 6: Trump and Joe Biden were in Georgia on Saturday, and
Speaker 6: so I look at that as an unofficial kickoff of
Speaker 6: the twenty twenty four general election cycle.
Speaker 7: The fact that they were.
Speaker 6: Here having competing rallies before a primary election, but during
Speaker 6: the week where it became very very clear that these
Speaker 6: were likely going to be the presumptive nominees, I think
Speaker 6: is symbolically really important. Georgia is a state that Democrats
Speaker 6: cannot lose if they want to continue to hold the
Speaker 6: White House, and it is a state that Republicans wouldn't
Speaker 6: want to lose because it's a psychological blow. So it's
Speaker 6: going to be important until the polls showed that one
Speaker 6: of these candidates has a definitive and consistent lead.
Speaker 2: I'm spending time with Andre Gillespie of Emory University here
Speaker 2: on balance of power. Andre, you were with us back
Speaker 2: in December of twenty two when we came to Atlanta
Speaker 2: for the special Senate election. Of course, Raphael Warnock beat
Speaker 2: herschel Walker, and there was a conversation in the air
Speaker 2: as we spoke to officials like Secretary of Raffensburger, even
Speaker 2: the way your governor was talking at the time of
Speaker 2: a conservative Republican not in the MAGA camp, and there
Speaker 2: was a question about exactly what a Georgia Republican might
Speaker 2: look like. This is a different world. It seems like
Speaker 2: we're in now, isn't it.
Speaker 7: Well, I mean, it is a slightly different circumstance.
Speaker 6: So Brian Kemp and Brad Raffensberger are not MAGA Republicans,
Speaker 6: but they're Republicans and loyal ones at that. You know,
Speaker 6: it is highly unlikely that they're going to endorse Joe Biden,
Speaker 6: or vote for Joe Biden, or even abstain from voting
Speaker 6: in the presidential election. Because of the tension that they
Speaker 6: have had with the Trump campaign. So they, you know,
Speaker 6: may not be walking arm in arm and campaigning in
Speaker 6: lockstep with Donald Trump, but it's highly unusual to expect
Speaker 6: for them to, you know, not ultimately be supportive of
Speaker 6: former President Trump of the Republican nominee.
Speaker 2: Sure, I do hear you, But my god, if you
Speaker 2: went back to that day when we spoke about the
Speaker 2: Senate race, could you have imagined, projecting a year out
Speaker 2: that Donald Trump would be the commanding favorite in the
Speaker 2: Republican primary in Georgia.
Speaker 6: It's not surprising. Primary elections tend to turn out your
Speaker 6: most politically active and your most ideologically extreme voters, and
Speaker 6: so there is a tendency in primary elections for the
Speaker 6: extremes to actually really be the discuss the deciding vote
Speaker 6: in terms of who the nominee is going to be.
Speaker 6: And so in this case, Donald Trump still enjoys high
Speaker 6: levels of support among the base, and so the base
Speaker 6: is turning out in strong numbers to ratify their choice
Speaker 6: for a candidate. It doesn't negate Brian Kemp's operation in
Speaker 6: the state, his history with voters in the state, or
Speaker 6: his incumbency advantage in twenty twenty two, and so you
Speaker 6: can do both at the same time. And so Republicans
Speaker 6: can still support somebody who they've known for years who
Speaker 6: has a strong operation in the state, while at the
Speaker 6: same time supporting this new wave of a Republican candidate
Speaker 6: like Donald Trump and his allies.
Speaker 2: Well, so under could Joe Biden win Georgia again today?
Speaker 2: Would he be able to pull this off again? And
Speaker 2: what will you be looking for tonight to help answer
Speaker 2: that question?
Speaker 6: So, I mean it is a bit of an apples
Speaker 6: to kind of pairs or oranges comparison. But you know,
Speaker 6: if there is very lackluster turnout in the Democratic primary,
Speaker 6: that probably isn't a good warning sign. And so the
Speaker 6: Biden campaign would have to make sure that they are
Speaker 6: redoubling their efforts to set up field offices across the
Speaker 6: state and sending people out to do the hard work
Speaker 6: of talking to voters on their doorsteps and on their
Speaker 6: phones to make sure that they actually do turn out
Speaker 6: to vote in an election. There's still a numerical disadvantage
Speaker 6: for Democrats in the state. What Democrats have been able
Speaker 6: to demonstrate in the last few election cycles, though, is
Speaker 6: that if they're running against a very problematic Republican candidate.
Speaker 6: They may be able to make the case to get
Speaker 6: more Democrats to turn out to vote, but Democrats are
Speaker 6: going to have to find every possible Democratic voter and
Speaker 6: make sure that they actually show up to vote in November,
Speaker 6: otherwise they probably will lose the race.
Speaker 2: Have you heard talk of irregularities, security concerns, anything that
Speaker 2: the secretary has been trying to avoid.
Speaker 7: No, I haven't heard anything.
Speaker 6: I don't expect that they're going to be those types
Speaker 6: of allegations made tonight. You know, it could be in
Speaker 6: part because Donald Trump is expected to coast to victory
Speaker 6: in the state, but it's you know, it's important for
Speaker 6: us to keep in mind that Brad Rathvensberger brings an
Speaker 6: engineer's eye to running elections, and so he has done
Speaker 6: everything humanly possible to make sure that there are no
Speaker 6: errors in the contest and that the vote is counted
Speaker 6: accurately and fairly.
Speaker 7: And I think voters should have confidence in that.
Speaker 2: Well, I'm glad you could come talk to us today.
Speaker 2: I don't know if the apples to pairs comparison. Maybe
Speaker 2: I get to be in the class, but I'm trying
Speaker 2: andrig Gillespie It's great to see you. Happy Primary day
Speaker 2: in Georgia. Come back and see us again.
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Can
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Speaker 5: We are broadcasting to you live from Washington, where, of course,
Speaker 5: inflation data is not just something that Marcus pay attention to.
Speaker 5: It's something the White House pays attention to as well.
Speaker 5: Joe President Biden having to put out a statement in
Speaker 5: reaction to this slightly hot CPI we got today saying,
Speaker 5: as he said in the State of the Union, we
Speaker 5: have more to do to lower costs and give the
Speaker 5: middle class a fair shot.
Speaker 2: That's right, and by that I mean another four years
Speaker 2: to finish the job.
Speaker 3: And that has been the refrain from the White House.
Speaker 2: Maybe we hear more of that if we start to
Speaker 2: see a reacceleration here, I guess it's more of a plateau.
Speaker 2: But it makes us realize that this does not or
Speaker 2: it reminds us that this does not move in a
Speaker 2: straight line, and we wanted to talk to Annawong about that,
Speaker 2: who joined from here in Washington, Bloomberg Economics, chief US economist.
Speaker 2: We're going all the way to the top here. Anna,
Speaker 2: thank you for joining us. How would you characterize this?
Speaker 2: Is it a plateau at four tenths or is there
Speaker 2: something else going on here?
Speaker 8: I think it is a sigh of relief, and that's
Speaker 8: the reason why the market was rallying and response on
Speaker 8: the day of today's CPI release as opposed to January,
Speaker 8: even though the core CPI in January and February are
Speaker 8: the same at zero point four percent. And the reason
Speaker 8: why is because everyone today was watching how the owner's
Speaker 8: equivalence rent inflation is doing. In January, that OEUR category
Speaker 8: jumped and it's supposed to be a stickier form of inflation,
Speaker 8: so everybody was worried. But in today's report we saw
Speaker 8: that it came back on track for disinflation in the
Speaker 8: rest of the year, So that was what caused a
Speaker 8: sigh of relief. And Powell also thinks that rent housing
Speaker 8: rents will be coming down, will be the key driver
Speaker 8: of disinflation this year. So I guess for everybody who's
Speaker 8: you know, driving the market rally today. It is due
Speaker 8: to that relief that one powerful force of disinflation is
Speaker 8: still on track.
Speaker 5: And yet Anna, we're still not at two percent. You
Speaker 5: mentioned Fed Shair Jerome Powell. How is the FED likely
Speaker 5: to look at today's data? Does it provide them any
Speaker 5: real evidence that they need to cut rates anytime soon
Speaker 5: that they should?
Speaker 8: Yeah?
Speaker 2: So you know.
Speaker 8: Also another factor contributing to the high reading today and
Speaker 8: January is this thing called residual seasonality. Generally, businesses like
Speaker 8: to mark up prices in January and February. So I
Speaker 8: think Powell already know this because we heard from him
Speaker 8: in his testimony last week that he said he didn't
Speaker 8: need to see better inflation print. In fact, he even
Speaker 8: said it could be a little little bit worse, because
Speaker 8: I think he expected that the seasonal factors will lead
Speaker 8: to higher January and February reading. And according to our projection,
Speaker 8: so even if inflation continue at this path, and we
Speaker 8: are still likely going to see the twelve month change
Speaker 8: in core PCEE getting down to two point five percent
Speaker 8: or below by middle of.
Speaker 2: The year, Gasoline and shelter contributing to over sixty percent
Speaker 2: here and of the overall monthly advance, one of those
Speaker 2: in terms of energy gas prices could be quite volatile.
Speaker 2: We could actually see some movement there. Is it possible
Speaker 2: that that's the key to a lower reading next month?
Speaker 8: Well, yeah, you're right, Joe. Gasoline is very volatile. We
Speaker 8: just had two months of negative reading, so it could
Speaker 8: be that next month could be up or down. But
Speaker 8: the most importantly, the FED is going to look through
Speaker 8: gasoline and we rather the Fed will be focusing on
Speaker 8: inflation expectations one year ahead. And from New York Fed's
Speaker 8: data yesterday, we saw that inflation expectations is actually coming down.
Speaker 8: So that's what matters for the Fed.
Speaker 5: All right, Annawong, Chief US economists for US at Bloomberg Economics,
Speaker 5: thank you so much as always for joining us, especially
Speaker 5: on CPI Day. But of course it isn't just CPI
Speaker 5: Day here in Washington. It is also Robert her testimony Day.
Speaker 5: As Joe and I were talking about, today is the
Speaker 5: day in which he is appearing before the Judiciary Committee
Speaker 5: along with other guests like the Oversight Committee Chairman Jim Comer,
Speaker 5: who came to ask questions. And it's really showing a
Speaker 5: bit of partisanship. Joe I would say on how exactly
Speaker 5: the Special Council's report related to President Biden is going down,
Speaker 5: depending on what side.
Speaker 9: Of the eye.
Speaker 2: I love that Jim Comer came in so like it
Speaker 2: was like a little like a jazz improv session there
Speaker 2: with the chairman from the Oversight Committee.
Speaker 3: This is interesting.
Speaker 2: Robert Hurts playing defenseyeh today and I neither side seems
Speaker 2: to like what he's saying because he doesn't seem to
Speaker 2: be fulfilling the roles that they were hoping he would today.
Speaker 3: Is that fair well?
Speaker 5: On the one hand, Democrats don't like what he said
Speaker 5: in the report about the presidents and his poor memory
Speaker 5: is Robert Hurr described it. On the other hand, Republicans
Speaker 5: don't like that Robert Hurr made the decision not to
Speaker 5: charge President Biden for wilfully retaining documents when we've seen
Speaker 5: Donald Trump charge in some case in Florida with many
Speaker 5: counts of wilful retention of classified national security information. So
Speaker 5: that's what you're really seeing play out in the room.
Speaker 9: Today, That's right.
Speaker 2: I think Republicans wanted him to talk about this mister
Speaker 2: Magoo that he met, though he's not doing that. Democrats
Speaker 2: don't want to completely blow away his credibility because he
Speaker 2: also decided not to charge Joe Biden. Yes, and sees
Speaker 2: these two cases, the Biden and Trump cases, is being
Speaker 2: very different.
Speaker 5: Well, let's get another voice into this conversation. Joining us
Speaker 5: here in our studio in Washington is former Republican congressman
Speaker 5: from Virginia, Denver. Reglmans. Are always great to see you,
Speaker 5: especially to see you in studio with us table on
Speaker 5: Bloomberg TV at the table and radio at the table. Indeed,
Speaker 5: of course you're not in the room with everybody else today.
Speaker 5: But is anyone getting what they want out of this testimony?
Speaker 5: If it's what's the point of it?
Speaker 9: I think the point is to make sure that they
Speaker 9: get YouTube videos that they can actually show back in
Speaker 9: their districts.
Speaker 5: Okay, So like any other here, Yeah.
Speaker 9: It's like shockingly partisan, right, so you know, and so
Speaker 9: that's what you know, that's what my consultants would tell
Speaker 9: me to do, or my chief right just like Okay, Denver,
Speaker 9: who cares what the world is saying. You're talking to
Speaker 9: your district right now. So what you're saying, like when
Speaker 9: comer comes in, it's the same thing, you know, it's
Speaker 9: a it's click type of politics. It's click politics right now.
Speaker 9: And why I mean, it's really hard to split hairs
Speaker 9: and then try to make the Democrats and Republicans happy.
Speaker 9: And you know, somebody who actually read the Mole report,
Speaker 9: I know that's nuts, but somebody who actually did it,
Speaker 9: I need to read the whole her report. But when
Speaker 9: you try to actually split the middle, or you want to,
Speaker 9: you want to create a narrative on somebody's age or
Speaker 9: memory at that level, and then not charge at the
Speaker 9: same time, I really don't know what they were trying
Speaker 9: to do. And then it's the law. It's either illegal
Speaker 9: or not. Maybe just talk about intent. But it's not
Speaker 9: surprising to me that it's shockingly partisan today.
Speaker 2: His line, I needed to show my work Denver the question,
Speaker 2: of course, why would you go there? Why would you
Speaker 2: even characterize his memory or his physical ability?
Speaker 3: You're not a doctor. Did he make the case for why?
Speaker 9: No? I don't think so. And I think that's the
Speaker 9: thing that surprised me a little bit almost. You know,
Speaker 9: it would be like me, you know, doing investigation. I
Speaker 9: have this new AI company I have now, right, and
Speaker 9: it's like me doing investigation. We get to that final point,
Speaker 9: and I said, well, we would actually go after this person,
Speaker 9: but you know what, actually they meant to steal a
Speaker 9: Snickers bar, not a zero bar from what we can
Speaker 9: see and what we talked about. But on the other hand,
Speaker 9: so since he stole the wrong thing and he's not
Speaker 9: really very good at things, we're just not going to
Speaker 9: charge him. It just doesn't make any sense to me.
Speaker 9: It's you know, and I did something wrong, you didn't,
Speaker 9: or you didn't. And that's the same thing with the
Speaker 9: Mole report. Either you did something wrong, you didn't. And
Speaker 9: I think when they're trying to split the baby and
Speaker 9: it's just politicized right now, I think it's really a
Speaker 9: detriment to the American people, and I think it's actually
Speaker 9: a bit of an insult.
Speaker 5: Well, of course, doing the business of the American people
Speaker 5: is what Congress was elected to do. They are literally
Speaker 5: representatives of each of their districts. So when we think
Speaker 5: about the business they're doing hearings like this, they are
Speaker 5: potentially going to be voting on a TikTok bill tomorrow
Speaker 5: that would see it banned if Byite Dance doesn't divest it.
Speaker 5: And then on the twenty second they're going to try
Speaker 5: to fund the rest of the government, the harder parts
Speaker 5: of the government to fund, including homeland security, the Defense Department.
Speaker 5: Is there work working. Are you confident that they're going
Speaker 5: to be able to do those next six appropriations bills
Speaker 5: when they're also doing things like we're seeing today.
Speaker 9: You know, the short answer is no, not very confident.
Speaker 9: And you know, for instance, when I know some of
Speaker 9: these representatives actually trying to I would say, ferret through
Speaker 9: the TikTok technology or what it actually means to actually
Speaker 9: ban TikTok, or looking at other types of things, I
Speaker 9: don't know if they're behind the door actually talking about
Speaker 9: what other type of operations look with that type of technology.
Speaker 9: When you talk about information operations or radicalization, I don't
Speaker 9: even think they have the ability to digest it. I
Speaker 9: don't think they have the intelligence to do so. I
Speaker 9: think when you're looking at the other bills, it's become
Speaker 9: so partisan. And now what do we have a one
Speaker 9: or two seat separation, maybe three seat separation based on
Speaker 9: who shows up the day. Let me tell you, I
Speaker 9: think it's going to be a knockdown, drag out, and
Speaker 9: I think you're going to see the screamers and the
Speaker 9: partisans really coming to play, and I think it's going
Speaker 9: to be literally insane for allow the saying to watch them.
Speaker 2: I want you to tell us what happened with this
Speaker 2: TikTok thing, because six months ago it was quiet, it
Speaker 2: was crickets. There was this massive effort to block the
Speaker 2: talk we're going to ban it. There were four different bills,
Speaker 2: Democrats and Republicans acting like they liked each other, and
Speaker 2: then they hired lobbyists and dumped millions of dollars on
Speaker 2: the district and.
Speaker 3: The story went away. That in itself is a story
Speaker 3: if you ask me.
Speaker 9: But how did it come back? Well, it's an election year,
Speaker 9: so you know with election year, there's probably some polling
Speaker 9: going on or things like that, or they're getting constituent calls.
Speaker 9: But also you have lobbyists on both sides. I mean,
Speaker 9: you think about TikTok going away, how does that open
Speaker 9: up the market for other competitors? Number one, Donald Trump
Speaker 9: absolutely yesterday. This is about finances. This is about actually
Speaker 9: pay to play. This is rent seeking, right, So that's
Speaker 9: what you're a Look, gosh, I'm being very blunt here.
Speaker 9: I apologize that, but that's what's happening, right, Now the
Speaker 9: thing when you're talking about TikTok, I despise parts of
Speaker 9: TikTok based on the fact I was in information warfare.
Speaker 9: Sort of do that today right with the company that
Speaker 9: we have. When you're talking about and I've told people
Speaker 9: that information wars the forever war. When you're looking at TikTok,
Speaker 9: there's other things I would rather do to look at
Speaker 9: TikTok for data purposes and information rather than totally ban it,
Speaker 9: I think again, But that's nuance now you're talking about
Speaker 9: you actually have to have Republicans and Democrats talking to
Speaker 9: experts in the technical field on the nuance of the
Speaker 9: specific bill. And nuance is not part of this tribalism
Speaker 9: that's going on today. It's like you know, how many
Speaker 9: sticks can I bang together and run through the woods
Speaker 9: and screen you know, painted and bizarre earth paints. You know,
Speaker 9: that's really what they're doing. And so that's what you're
Speaker 9: seeing right now as you're seeing a lobbyist, a massive
Speaker 9: lobby flow coming in that's actually trying to dictate one
Speaker 9: way or the other where Democrats where Republicans are going
Speaker 9: to go on the TikTok situation.
Speaker 5: Well, and of course they in the House will have
Speaker 5: a chance to vote on this measure tomorrow. That's the
Speaker 5: working plan. This goes to the floor on Wednesday. The Senate, though,
Speaker 5: seems much more and some of what you're hearing from
Speaker 5: senators who seem more reluctant about this particular legislation are
Speaker 5: concerns around maybe the First Amendment on constitutionality, also the
Speaker 5: fact that this is a private company specifically being called
Speaker 5: out in a piece of legislation. Are those concerns warranted?
Speaker 9: Well, the thing is, if you're banning TikTok, what does
Speaker 9: that do to Facebook? The senator? You know, the Senate's
Speaker 9: showing some nuance right now. Now you're talking about okay,
Speaker 9: what is the cut off line when you're talking about
Speaker 9: radicalization and statistics or you're talking about ownership of as
Speaker 9: said corporation, and what does that actually do for the
Speaker 9: future of any type of I would say, any type
Speaker 9: of controls on this type of language. I mean that,
Speaker 9: you know, for me, being a First Amendment guy and
Speaker 9: also understanding that there's really bad things happening in the
Speaker 9: radicalization space, there has to be nuance where again, you're
Speaker 9: not really representing the American people. You're representing special interests
Speaker 9: based on what your fundraising looks like, and based on
Speaker 9: what you're pulling and cross tabs looks like. And I
Speaker 9: get it, you want to win your race, but maybe
Speaker 9: do something and tell the truth to the American people.
Speaker 9: Try to have some nuance in your thinking. When you're
Speaker 9: going from nuance that is not a word that no,
Speaker 9: I don't even know if they don't expel that a
Speaker 9: Congress we spend time with someone who knows. The former
Speaker 9: Congressman Denver Riggleman is with us here on Balance of Power.
Speaker 9: We're gonna spend time later today with the President of
Speaker 9: Poland on the later edition of Balance of Power.
Speaker 2: He's meeting with Speaker Mike Johnson right now. The matter
Speaker 2: of Ukraine, of course, is what they're talking about. What
Speaker 2: does Mike Johnson say to a foreign head of state
Speaker 2: like this, coming with an ask when there is absolutely
Speaker 2: no answer.
Speaker 9: He's dancing on eggshells right now. And what he's trying
Speaker 9: to do is use a lot of big syllable words
Speaker 9: to say nothing. That's what's happening behind closed doors right now.
Speaker 9: And you know, I wonder Mike Johnson has got to
Speaker 9: have I don't want to say this in a really
Speaker 9: I come to Jesus on what's going on in Ukraine,
Speaker 9: and I think I think Poland can help him with that.
Speaker 9: There's got to be funding for Ukraine. Anybody who's outside
Speaker 9: of that box right now, I think is in real
Speaker 9: trouble because if we actually take away from Ukraine or
Speaker 9: that support, Poland's going to be very worried about Russia
Speaker 9: right now. So again, I would love to be in
Speaker 9: that discussion right now. You know, my background is Eastern
Speaker 9: European affairs. I deployed there, you know, for Operation Allied
Speaker 9: Force on the Romanian Serbian border. I know a little
Speaker 9: bit about Russia, just a little. But I would love
Speaker 9: to be in there right now. But I can't imagine
Speaker 9: how that conversation is going with Mike Johnson having to
Speaker 9: appeal to the base of his party in the Freedom
Speaker 9: Caucus and talking, you know, to a representative from Poland
Speaker 9: at that level, it's got to be a mind numbingly
Speaker 9: crazy conversation right now.
Speaker 5: Well, and not just the members of his own conference,
Speaker 5: but former President Trump as well, who we know has
Speaker 5: opinions on Ukraine and whether or not the US should
Speaker 5: continue to fund the war. Just make sure the war
Speaker 5: comes to an end in whatever capacity. If you were
Speaker 5: in Poland, if you were part of the Polish government,
Speaker 5: would you fear second Trump administration?
Speaker 7: Should they?
Speaker 9: Anybody saying should? Yeah? And I would say that the
Speaker 9: head of the Freedom Caucus is in mar A Lago,
Speaker 9: by the way, So I mean that's really what we got.
Speaker 9: And I would say that the Speaker actually go to
Speaker 9: mar A Lago before he actually makes any decision going forward,
Speaker 9: because President Trump is the nominee for the presidential race
Speaker 9: in twenty twenty four and could possibly win. So yeah,
Speaker 9: I think I think what you're saying right now, I
Speaker 9: would think that anybody who's saying in the Polish government
Speaker 9: is like, for the for the love of God, we
Speaker 9: hope that Trump doesn't win. Pretty remarkable.
Speaker 2: He's meeting with the President a little bit later on
Speaker 2: before he makes his way here, Kaylee. I suspect that'll
Speaker 2: be a very different conversation, but he'll be able to
Speaker 2: tell the President about what he heard today.
Speaker 9: Absolutely, and I think they're going to be very blunt
Speaker 9: in that conversation. And again I can't believe is the
Speaker 9: United States of America we have a GOP that's mostly
Speaker 9: against Ukraine. Funding. It seems like we're an upside down
Speaker 9: world right now.
Speaker 2: Must be incredible coming back to Washington and walking freely
Speaker 2: as a former congressman.
Speaker 3: Oh yeah, that's right, whatever you want.
Speaker 9: I would rather stick a pencil on my eye than
Speaker 9: be in Congress right now. So I'm happy.
Speaker 3: Uh never, don't be a stranger. Great to see you,
Speaker 3: as great to see it.
Speaker 2: Denver Wrigglelman, the former congressman, former Air Force intelligence, founder
Speaker 2: of RIG Security, and author of The Breach, The Untold
Speaker 2: story of the investigation into January sixth.
Speaker 3: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch
Speaker 1: us live weekdays at noon Eastern on Applecarplay and then
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Speaker 3: Thanks for being with us.
Speaker 2: Tuesday edition of Balance of Power here on Bloomberg TV
Speaker 2: and radio and on YouTube. You can always find the
Speaker 2: podcast if you showed up late, go to Apple, Spotify
Speaker 2: or wherever you do that stuff and subscribe. As we
Speaker 2: focus on the economy, of course, something that is of
Speaker 2: dire concern to the Biden administration. With CPI day, bringing
Speaker 2: hotter than expected inflation, and Kaylee, this is the second
Speaker 2: time in a row we've seen a hotter than expected print,
Speaker 2: getting some folks to wonder, is this bad news for
Speaker 2: Joe Biden? Could we see a reacceleration of inflation that
Speaker 2: would not be out of the question.
Speaker 5: Or could we just see progress in a deceleration of inflation.
Speaker 5: If this all proves sticky, does the price pressure relief
Speaker 5: that has been underway continue? And of course this isn't
Speaker 5: just potentially a problem for political figures like the President
Speaker 5: of the United States, but non political figures as well,
Speaker 5: like say the chairman of the Federal Reserve. Because, of course, Joe,
Speaker 5: the market is still anticipating that by midway through this year,
Speaker 5: the Fed could be cutting interest rates. The problem is,
Speaker 5: if inflation isn't doing what they want, is the Fed
Speaker 5: going to feel comfortable doing that?
Speaker 2: These are big questions when you're trying to plan a campaign,
Speaker 2: nevermind forecast the economy.
Speaker 5: Absolutely, and there are big questions that we pose to
Speaker 5: our guests, like the one joining us now, We're very
Speaker 5: lucky to say. Danny Blinchfeower, a tenured professor of economics
Speaker 5: at Dartmouth College, is with us. Professor, always great to
Speaker 5: have you on Bloomberg TV and radio. When you look
Speaker 5: at the data today, some of the more sticky components
Speaker 5: of inflation potentially that we're watching here, do you see
Speaker 5: signs that policy can or should ease in the not
Speaker 5: so distant future.
Speaker 10: Well, there's nothing in data today. I think that changed
Speaker 10: my view from yesterday. And I always say to people,
Speaker 10: I mean I was a person who sat and said
Speaker 10: interest rates, and I think very often the debate in
Speaker 10: public is not quite the debate the policymakers have, because
Speaker 10: when you change interest rates, that impacts things in about
Speaker 10: eighteen months time, and you always should be thinking what's
Speaker 10: going to happen there? And has this latest piece of
Speaker 10: information changed my view of things? And I think the
Speaker 10: answer to that is no, We're running steady. But the
Speaker 10: problem you're rightly picking it up is that the economy
Speaker 10: has been a puzzle. Inflation has remained stickier than you
Speaker 10: would have thought given the rate rises, and consumer spendings
Speaker 10: remained stickier and held up more than you had thought.
Speaker 10: There are, however, worrying signs, and I would be focused
Speaker 10: on the labor market and also looking at the rest
Speaker 10: of the world because the UK and other European countries
Speaker 10: are clearly in recession. China's pretty slowly. So the answer is,
Speaker 10: I don't think there's much would change my view. That
Speaker 10: big issue still is have those rate rises that have
Speaker 10: been in place for a while now have they fully
Speaker 10: had an effect? And the Fed, I guess we'll be
Speaker 10: sitting waiting and watching. I don't think it rules anything out.
Speaker 10: The market's a little up on the news, but I'm
Speaker 10: worried that something bad is still coming.
Speaker 2: Danny Blanchflower, last time you joined us, we made clear
Speaker 2: that you would have failed me in your economics class.
Speaker 2: So I'm going to be careful here. But based on
Speaker 2: what you just said, if you're saying interest rates, that's
Speaker 2: I'm sorry, I can copy from Kayley's paper in here.
Speaker 2: But if you're eighteen months out on interest rates, that
Speaker 2: would indicate that we're not there yet right, that there
Speaker 2: is more of an impact to come.
Speaker 10: Well, I would have thought so, I mean things if
Speaker 10: you think of that logic a single bank is called
Speaker 10: the forecast to rise and think I mean, in a sense,
Speaker 10: that's what we have to think about. I would like
Speaker 10: to just focus back on some worrying signs. The question
Speaker 10: in a sense, is always the two sets of worrying.
Speaker 10: The seemer confidence predicts recession. The other thing that tells
Speaker 10: you you're in recession particularly is in the labor market.
Speaker 10: And I think very worrying has been the big employment
Speaker 10: drops that you've seen on the household account in the
Speaker 10: last four or five months, even bigger the last six months.
Speaker 10: The declining in and blown on that account is even
Speaker 10: bigger than it was in the last six months in
Speaker 10: twenty oh seven as recession started. So maybe the dream
Speaker 10: world we're in, the positive environment we're in, will continue,
Speaker 10: but there are worrying signs that because that's that in
Speaker 10: a sense, is that is the thing that picks up recession.
Speaker 10: So in a sense that the Fed must always think, well, okay,
Speaker 10: there are worrying signs here. To err on the side
Speaker 10: of actually cutting rates would probably be the right thing
Speaker 10: to do. I probably would, you know, as always known
Speaker 10: as a dove, I would certainly be considering a rate cut.
Speaker 10: I certainly would rule out, as others have suggested, anything
Speaker 10: about a great rise, because the risks I think are
Speaker 10: to the downside and the market.
Speaker 5: See, well, we talked well, Danny, we talked about the
Speaker 5: labor market where you see some concern with the acting
Speaker 5: Labor Secretary here in the US Julie Sue. Just last
Speaker 5: night on Balance of Power. I asked her specifically about wages,
Speaker 5: because she was touting the higher wages that people have
Speaker 5: received in part due to union contracts that have been
Speaker 5: negotiated over the last year, and whether or not that
Speaker 5: could refuel inflation lead to that kind of wage price
Speaker 5: spiral people often talk about. This was her response to
Speaker 5: that question.
Speaker 11: We want to see real wage increases because more money
Speaker 11: in workers' pockets is a good thing. More money in
Speaker 11: the you know, at the kitchen table, right where families
Speaker 11: are making hard decisions about what they're gonna buy and
Speaker 11: how to you know, how to write, how to how
Speaker 11: to live a secure life. You're never gonna hear me
Speaker 11: say that making sure that working people get what they
Speaker 11: deserve is a bad thing. I don't think that we
Speaker 11: have to choose between people families paying prices that they
Speaker 11: can afford and getting wages that are going to allow
Speaker 11: them to feel some security. It's a false choice.
Speaker 5: So she says, it's a false choice, Danny. She also
Speaker 5: went on to tell us that what we're seeing in
Speaker 5: the labor market is the very definition of a soft
Speaker 5: landing that there doesn't need to be a decision made
Speaker 5: between getting inflation under control and potentially breaking the labor market.
Speaker 5: To what extent is that actually true.
Speaker 10: Well, I think that you've started to see some real
Speaker 10: wage growth, and obviously that's a good thing. And I
Speaker 10: think the contrast to the wage price spiral we saw
Speaker 10: in the past was when there were union contracts that
Speaker 10: built in escalator clause. It's automatic escalator clauses, it's inflation.
Speaker 10: We haven't really seen any of that. We've seen a
Speaker 10: little bit emergence of work of power as economies have strengthened,
Speaker 10: and we've seen a little bit of a pickup in
Speaker 10: strike activity across the United States, but I don't think
Speaker 10: there's any evidence of a wage price spiral, and economies
Speaker 10: take a little time to move. The balance of power
Speaker 10: between labor and capital has swung over the last two
Speaker 10: decades so strongly in the favor of capital it would
Speaker 10: be hard to tell people Aha, a slight movement back
Speaker 10: towards labor means that the central bank has to plunge
Speaker 10: in again and make workers worse off. Certainly not something
Speaker 10: in the sense that you'd expect the Biden administration to
Speaker 10: want to see so I think it is really sitting
Speaker 10: holding with expectations that perhaps we will see worsening in
Speaker 10: labor markets, worsening in other things, and the Central Bank
Speaker 10: will have to cut rates, not least because of what's
Speaker 10: going on in the world. Look at what's gone on
Speaker 10: in China. China has just seems to have just come
Speaker 10: out of a deflation situation. But the rest of the
Speaker 10: world is looking at America as a fine place in
Speaker 10: the economy doing well. The last thing they want to
Speaker 10: do is make another error.
Speaker 2: We're talking about today's CPI data and the economy with
Speaker 2: Danny Blanchflower. Lastly, Danny as prices. A big part of
Speaker 2: this CPI report is that the wild card that will
Speaker 2: tell whether Joe Biden has a good economy to tout
Speaker 2: by the end of this campaign.
Speaker 10: Well, I mean, oil prices are a pretty tough one
Speaker 10: to forecast. Given the stuff that's going on in the
Speaker 10: Persian Gulf and the problems that are there. The ability
Speaker 10: to control the global oil price is pretty It's pretty
Speaker 10: Despite what Donald Trump and others say, the President of
Speaker 10: the United States doesn't actually control the global The global
Speaker 10: oil price it's called a global price, and global shocks
Speaker 10: impact it. So I think we'll see. I think that's
Speaker 10: obviously if there was to be a considerable spike in
Speaker 10: the you know, in oil, that would be bad because
Speaker 10: it would be it would impact people, even impact their
Speaker 10: spending because they have to spend more at the pump.
Speaker 10: So yes, I think it's something that you really want
Speaker 10: to be mindful for. But again, once off spikes of
Speaker 10: the oil price and not something that the central bank
Speaker 10: should respond to. It's once off things just will They'll
Speaker 10: spike today, they'll have an effect on inflation today, and
Speaker 10: in twelve months time they'll drop away. But you know,
Speaker 10: these are complicated issues. The central bank has done pretty
Speaker 10: dumb well. I didn't think the economy would be doing
Speaker 10: as well. In a sense, I've been more of a
Speaker 10: doom merchant than I probably should have been. But we'll
Speaker 10: see going forward. Everything rose with an election coming.
Speaker 5: Well, that is the exact place I wanted to go
Speaker 5: with you, Danny, because sure, monetary policy definitely has an
Speaker 5: influence on the economy, but fiscal policy does as well.
Speaker 5: And actually, in the statement that President Biden put out
Speaker 5: addressing today's CPI report, saying there is more work to
Speaker 5: do to bring crisis down. He said, Look, I requested
Speaker 5: a lot of this in my budget, and as we
Speaker 5: heard in the State of the Union last week, the
Speaker 5: idea that he wants to see, you know, tax breaks
Speaker 5: for people who own homes within certain income groups, child care,
Speaker 5: universal pre K, these kinds of things that may not
Speaker 5: actually become reality, but he's at least asking for them.
Speaker 5: I'm coupled with higher taxes on the renchin on companies.
Speaker 5: I'm not sure if you've had a chance to look
Speaker 5: through the budget, but how should we be thinking about
Speaker 5: fiscal policies influence on the economy now and going forward
Speaker 5: if some of these things actually do become a reality.
Speaker 10: Well, I think the reality is that the whole series
Speaker 10: of economics papers, particularly from a famous economist called Ray Fair,
Speaker 10: who talked about how elections are won and how important
Speaker 10: the state of the economy is in determining whether the
Speaker 10: incumbent wins or not. So I don't think the administration
Speaker 10: has missed that fact and understands that if people are
Speaker 10: feeling good on the economy, that the incumbent gets the
Speaker 10: credit for it. And oftentimes you'll see even manipulation in
Speaker 10: the sense that the budget disproportionately spent in places that
Speaker 10: the president would like to win himself and for his
Speaker 10: party to win. So you'd expect to see that right now.
Speaker 10: And in some sense the Congress says, well, look, I
Speaker 10: don't want to do that. I don't want to give
Speaker 10: the incumbent help. But that's really where we are. A
Speaker 10: booming economy is good for the incumbent. If the on
Speaker 10: rate rise, inflation rate rises, then the narrative will be
Speaker 10: the president is to blame for it. But in a
Speaker 10: sense he can say, well, look how good the economy is.
Speaker 10: Look how good it is compared to the rest of
Speaker 10: the world. This does look like a rosy scenario. Vote
Speaker 10: for me, and so this is crucial. This is crucial
Speaker 10: not just the scale of the budget, but who it's
Speaker 10: spent on and where it's spent, and you'd expect it
Speaker 10: to be spent disproportionately if the president could have his
Speaker 10: way in places that are for him to win.
Speaker 3: Let you get back to fishing, Danny.
Speaker 2: It's great to see you, Danny Blanche get back with
Speaker 2: us from Dartmouth College.
Speaker 3: I hope you're well.
Speaker 2: Let's keep tabs with Danny as we work our way
Speaker 2: through the cycle. This is kind of interesting as you've
Speaker 2: started this line of questioning now.
Speaker 9: Kaylee, I feel like we check back every couple.
Speaker 5: Of months thee how it feels absolutely as we should,
Speaker 5: especially as we progress into the summer months when potentially
Speaker 5: we're going to be having more realistic conversation about cutting
Speaker 5: back rates. And he seems to be a little bit
Speaker 5: more worried about what's happening in the labor market than
Speaker 5: we opten here here he went.
Speaker 2: Back to it a couple of times without being asked,
Speaker 2: which is important.
Speaker 3: Yeah, we'll find out about that lag.
Speaker 2: Effect when we get into the middle end of the
Speaker 2: summer when it really does count. To Kayley's point going
Speaker 2: into the debates in the general. Thanks for listening to
Speaker 2: the Balance of Power podcast. Make sure to subscribe if
Speaker 2: you haven't already, at Apple, Spotify, or wherever you get
Speaker 2: your podcasts, and you can find us live every weekday
Speaker 2: from Washington, DC at noontime Eastern at Bloomberg dot com.