WEBVTT - US Inflation Stays Firm, Trump Cabinet 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:12.119 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.200 --> 0:00:14.920 weekdays at ten am Eastern on Apple card Playing and 0:00:15.040 --> 0:00:17.919 Broid Auto with the Bloomberg Business App. Listen on demand 0:00:17.960 --> 0:00:22.280 wherever you get your podcasts, or watch us live on YouTube. 0:00:23.200 --> 0:00:24.439 Jeffrey Cleveland joints us here. 0:00:24.480 --> 0:00:26.960 He's the chief econosces of Payden and Regal. He's out 0:00:26.960 --> 0:00:31.639 there in La. I have no idea where he is today. Hey, Jeffrey, 0:00:31.720 --> 0:00:34.160 talk to us about inflation. What are you feeling about 0:00:34.200 --> 0:00:37.880 inflation these days? Is it whipped? Is it under controlled? 0:00:37.960 --> 0:00:40.000 Do we have to be concerned about it? What did 0:00:40.000 --> 0:00:41.240 the cpidea to tell you today? 0:00:42.880 --> 0:00:45.120 Well, Hi Paul, first of all, coming to you from London. 0:00:45.479 --> 0:00:45.760 Nice. 0:00:45.800 --> 0:00:48.760 That is the uh pinal name England in the background. 0:00:48.920 --> 0:00:52.040 So yeah, a little bit different than you today. But 0:00:52.440 --> 0:00:55.800 CPI is it dead yet? I don't think inflation is 0:00:55.920 --> 0:00:58.040 dead yet, but we're moving in the right direction. I 0:00:58.080 --> 0:01:02.040 think the key number this morning point three, the month 0:01:02.080 --> 0:01:06.440 to month change in core CPI that rounded up to 0:01:06.520 --> 0:01:08.520 point three, so it was actually unrounded. 0:01:08.560 --> 0:01:09.760 It was like point two eight. 0:01:10.600 --> 0:01:13.640 That implies in our you know, quick math, something like 0:01:13.680 --> 0:01:18.160 a point two reading on the Fed's preferred gauge of inflation, 0:01:18.280 --> 0:01:21.039 the core PCE, which will get later this month. 0:01:21.160 --> 0:01:25.360 So point two percent on core pc is roughly consistent 0:01:25.400 --> 0:01:27.319 with the Fed's inflation target. 0:01:27.600 --> 0:01:30.279 So I think this does keep the FED on track 0:01:31.000 --> 0:01:33.520 to cut again at the December meeting. 0:01:33.560 --> 0:01:36.080 That's the that's the key takeaway from the report for me. 0:01:36.959 --> 0:01:41.000 There's been debate about rate cuts and how they may 0:01:41.080 --> 0:01:44.600 sloan the coming months, possibly to every other meeting pays 0:01:44.720 --> 0:01:47.559 starting in twenty twenty five. We've also had some commentary 0:01:47.800 --> 0:01:51.080 from FED officials this week, like Neil Cashkari talking about 0:01:51.120 --> 0:01:54.920 how high productivity points to higher neutral level. Before they 0:01:54.960 --> 0:01:57.640 were thinking it was around three percent, now could potentially 0:01:57.680 --> 0:02:00.240 be higher than that. Just given that they're way on 0:02:00.280 --> 0:02:03.400 what potential fiscal policy will come out of Washington over 0:02:03.400 --> 0:02:05.920 the next year. Where do you view the pace of 0:02:06.000 --> 0:02:07.240 recuts in the coming months. 0:02:08.600 --> 0:02:10.680 Yeah, we see another one in December, as I said, 0:02:10.720 --> 0:02:12.640 and then I do think they slow the pace of 0:02:12.720 --> 0:02:14.959 cuts in twenty twenty five, so maybe they go to 0:02:15.120 --> 0:02:18.440 once per quarter, so you get four over the balance 0:02:18.480 --> 0:02:21.000 of twenty twenty five. And yeah, I mean as you 0:02:21.080 --> 0:02:23.800 get closer to the range where you think neutral is 0:02:23.840 --> 0:02:26.959 that maybe you can slow down as you approach, as 0:02:26.960 --> 0:02:30.360 you approach the station, something like that. It's really hard 0:02:30.400 --> 0:02:34.720 to say where neutral is. Our guess is somewhere around 0:02:34.720 --> 0:02:36.880 three and a half percent. I think that's a good 0:02:36.880 --> 0:02:39.480 bet at this point, maybe a bit lower. 0:02:39.760 --> 0:02:40.480 We'll have to see. 0:02:40.480 --> 0:02:43.560 That is notably higher than we would have told you 0:02:44.320 --> 0:02:46.560 pre COVID, so we probably would have been around two 0:02:46.560 --> 0:02:50.000 and a half percent at that time. So it's I 0:02:50.040 --> 0:02:51.400 think you can make a good argument that it's a 0:02:51.440 --> 0:02:53.440 little bit higher, But I think you could also argue 0:02:53.440 --> 0:02:56.320 that nobody actually knows with any degree of certainty. 0:02:56.360 --> 0:02:57.520 So we'll have to see. 0:02:58.040 --> 0:03:01.240 Jeffrey, we're going to get retail sales on Friday. A 0:03:01.440 --> 0:03:04.840 what are you looking for there? And B what's your 0:03:04.840 --> 0:03:06.040 sense of the consumer out there? 0:03:07.440 --> 0:03:11.440 I continue to be excited, elated. 0:03:11.560 --> 0:03:13.360 I mean the strength of the consumer. It's holding up 0:03:13.440 --> 0:03:13.959 very nicely. 0:03:14.000 --> 0:03:14.240 Paul. 0:03:14.720 --> 0:03:16.640 Through all the data that we've seen thus far this 0:03:16.760 --> 0:03:20.160 year for US have paid and regal, the most important 0:03:20.320 --> 0:03:22.880 data point is aggregate consumer income. 0:03:23.040 --> 0:03:26.280 I mentioned that probably one hundred times on this program. 0:03:26.560 --> 0:03:29.680 It's still growing, Paul, five percent in nominal terms, five 0:03:29.760 --> 0:03:32.680 percent year on year as of the latest set of data. 0:03:33.400 --> 0:03:35.800 That's important because when the US consumer. 0:03:35.400 --> 0:03:39.240 Has income, they tend to spend and that keeps GDP going, 0:03:39.280 --> 0:03:41.840 and that's what we're seeing we've been seeing, so I 0:03:41.840 --> 0:03:44.280 think you'll see that reflected in retail sales. The only 0:03:44.320 --> 0:03:46.520 caveat that I always give the clients is that retail 0:03:46.520 --> 0:03:49.760 sales is really mostly goods and so it's a subset 0:03:49.840 --> 0:03:53.720 of overall consumer spending, so don't get too fixated on 0:03:53.760 --> 0:03:56.840 any one month of retail sales. We think the US 0:03:56.840 --> 0:03:58.840 consumer is in solid shape. 0:03:59.520 --> 0:04:01.880 Looking at the GDP now model for the fourth quarter, 0:04:01.920 --> 0:04:03.600 I know it can be volatile, but so far it's 0:04:03.640 --> 0:04:07.400 around two and a half percent growth there, and obviously 0:04:07.400 --> 0:04:10.160 we're going to have more earnings that are geared toward 0:04:10.240 --> 0:04:13.000 the consumer next week, including Walmart here when it comes 0:04:13.040 --> 0:04:15.240 to more of the crucial holiday quarter, which usually is 0:04:15.280 --> 0:04:19.320 the gangbuster quarter that powers consumer spending in more than 0:04:19.360 --> 0:04:21.640 two thirds of GDP growth, How are you viewing the 0:04:21.680 --> 0:04:22.680 final months of the year. 0:04:24.440 --> 0:04:27.760 Yeah, I've been pretty upbeat on our US GDB call 0:04:27.839 --> 0:04:31.200 all year relative to consensus. Right now, we think Q 0:04:31.279 --> 0:04:33.720 four to Q four for twenty twenty four, GDP is 0:04:33.720 --> 0:04:36.679 going to be about two point four percent, and if 0:04:37.200 --> 0:04:39.520 the fourth quarter comes in as you say, as that 0:04:39.600 --> 0:04:43.599 now cast implies, there's potentially some upside risk even to 0:04:43.800 --> 0:04:47.520 our optimistic take. So that's very good news, especially if 0:04:47.600 --> 0:04:49.680 you go back to I don't know this time last year, 0:04:50.080 --> 0:04:52.800 a lot of prognosticators, a lot of investors were saying 0:04:52.839 --> 0:04:55.760 that our recession was inevitable, that given the fact that 0:04:55.800 --> 0:04:58.080 the FED had heightd as much as they had that 0:04:58.320 --> 0:05:00.320 with a lag we were going to see a down, 0:05:00.760 --> 0:05:03.239 and we just really have it. The consumers remain resilient 0:05:03.279 --> 0:05:06.080 and GDP growth looks great, So I think, for me, 0:05:06.480 --> 0:05:08.640 what's the moral of the story here? We have a 0:05:08.680 --> 0:05:12.400 situation that we've had maybe five times in the last 0:05:12.680 --> 0:05:15.040 three or four decades, where the FED is cutting rates 0:05:15.320 --> 0:05:19.039 so becoming less restrictive, and the economy is still growing 0:05:19.320 --> 0:05:20.360 at a pretty good clip. 0:05:20.920 --> 0:05:23.120 When those two things are moving in the right. 0:05:23.000 --> 0:05:26.520 Direction, it's good for risk assets, So you know, equities, 0:05:26.600 --> 0:05:29.760 large cap, small cap, whatever you want us equities, but 0:05:29.800 --> 0:05:32.120 also credit sectors in the bond market, and we have 0:05:32.120 --> 0:05:34.200 a very good high yield strategy. I think that will 0:05:34.240 --> 0:05:37.360 continue to do very well given the GDP backdrop and 0:05:37.400 --> 0:05:38.680 the fetter reserves actions. 0:05:38.760 --> 0:05:40.560 All right, Jeffrey, thank you so much for joining us. 0:05:40.680 --> 0:05:43.120 By the way, go to the Royal Arms pub Bank 0:05:43.120 --> 0:05:45.320 Street mentioned my name. They will take good care of you. 0:05:45.400 --> 0:05:48.839 Jeffrey Cleveland, Chief economisce paid in and regal. He's over 0:05:48.839 --> 0:05:53.600 there in London seeing clients and doing the good work there. 0:05:54.200 --> 0:05:58.080 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:58.160 --> 0:06:01.680 weekdays at ten am Eastern, Apple card Play and royd 0:06:01.720 --> 0:06:04.880 Otto with a Bloomberg business. You can also listen live 0:06:04.960 --> 0:06:08.120 on Amazon Alexa from our flagship New York station, Just 0:06:08.200 --> 0:06:12.520 Say Alexa playing Bloomberg eleven thirty the type. 0:06:12.520 --> 0:06:15.160 Backdown to Washington, d C. Lard Davison joins us. 0:06:15.440 --> 0:06:18.520 She's a politics editor for Bloomberg NEWSDWN in Washington. 0:06:19.120 --> 0:06:20.320 Laura, A lot to cover here. 0:06:20.720 --> 0:06:24.960 President elect Trump in Washington speaking to lawmakers earlier today. 0:06:25.440 --> 0:06:28.240 What's the feeling in DC as to We're start getting 0:06:28.240 --> 0:06:30.800 more and more information on some of his cabinet picks, 0:06:31.120 --> 0:06:34.440 on some of the people he's appointing to special positions, 0:06:34.440 --> 0:06:37.159 whether it's Elon Musk or you know, in the Tzar 0:06:37.360 --> 0:06:38.280 type positions. 0:06:38.320 --> 0:06:40.000 What's the feeling in DC this morning? 0:06:41.040 --> 0:06:43.880 So there's certainly been a couple surprises. Late last night, 0:06:44.000 --> 0:06:46.520 there was a pick for the Department of Defense, Peter Hegseth, 0:06:46.560 --> 0:06:49.040 who is a Fox News personality. He does have a 0:06:49.080 --> 0:06:52.160 military background, but this one raised a lot of eyebrows 0:06:52.200 --> 0:06:54.000 around the world of people having to actually google and 0:06:54.040 --> 0:06:55.680 figure out who is this guy. 0:06:56.240 --> 0:06:57.880 So that was one of the surprises. 0:06:57.920 --> 0:07:00.800 We also see some other key loyal going into other 0:07:00.880 --> 0:07:03.359 national security posts, someone like John Ratcliffe, who is the 0:07:03.360 --> 0:07:07.039 Director of National Intelligence. During Trump's first term, he will 0:07:07.640 --> 0:07:08.000 take on. 0:07:08.000 --> 0:07:08.960 To lead the CIA. 0:07:09.279 --> 0:07:11.200 Of course, earlier in the week we saw Christy Nome 0:07:11.280 --> 0:07:14.360 installed at DHS, and also Tom Holman, who will be 0:07:14.360 --> 0:07:16.000 in one of those ZAR positions at the White House 0:07:16.040 --> 0:07:19.840 overseeing immigration and sort of these mass deportations that Trump 0:07:19.880 --> 0:07:22.760 has talked about. So where we've seen these appointments go 0:07:22.840 --> 0:07:24.000 is where you can kind of get a sense of 0:07:24.000 --> 0:07:25.840 what Trump wants to do in his early days. So 0:07:26.280 --> 0:07:28.720 immigration is going to be high on that list national security, 0:07:29.160 --> 0:07:33.080 but also this new what they're calling DOGE or the 0:07:33.120 --> 0:07:36.280 Department of Government Efficiencies. Of course, this is the sort 0:07:36.320 --> 0:07:38.640 of position that Elon Musk has dreamed up for himself. 0:07:38.760 --> 0:07:41.400 The Vekraamaswami will be joining him there. This is not 0:07:41.520 --> 0:07:44.920 an actual cabinet job. This isn't an actual department, sort 0:07:44.920 --> 0:07:47.440 of a presidential commission, which means its powers and. 0:07:47.480 --> 0:07:48.720 Scope will be more limited. 0:07:49.160 --> 0:07:51.080 But we can't expect that we'll see Elon Musk around. 0:07:51.080 --> 0:07:53.680 He's actually today with Trump in Washington, and he was 0:07:53.720 --> 0:07:56.240 at a meeting with House Republicans just a couple hours ago. 0:07:56.760 --> 0:07:59.480 I'm glad you brought up a Vicroamaswami, who's also supposed 0:07:59.520 --> 0:08:02.960 to co lead that new Department of Government Efficiency, because 0:08:02.960 --> 0:08:05.080 he said in a post on X this morning that 0:08:05.120 --> 0:08:08.200 a federal government needs a massive downsizing. What type of 0:08:08.200 --> 0:08:10.239 influence do you think he could wield on the president? 0:08:11.680 --> 0:08:13.600 So far, his influence has been massive. You know, he's 0:08:13.600 --> 0:08:15.520 been at mar A Lago helping make some of these 0:08:15.560 --> 0:08:18.760 key picks. He's been joining phone calls with foreign leaders. 0:08:19.400 --> 0:08:21.520 Musk himself says he thinks he can cut about two 0:08:21.520 --> 0:08:24.080 trillion dollars from the federal budget. It's unclear if he 0:08:24.120 --> 0:08:25.880 wants to do that in one year or spread over 0:08:26.320 --> 0:08:29.080 a longer period, but two trillion dollars is a massive amount. 0:08:29.080 --> 0:08:31.800 That would basically be sort of all of the government spending. 0:08:32.080 --> 0:08:34.520 You know that isn't you know, Medicare, Medicaid, some of 0:08:34.520 --> 0:08:37.760 those entitlement programs, you know, financing the debt, those sorts 0:08:37.800 --> 0:08:39.760 of things. So this is a really big task that 0:08:39.800 --> 0:08:41.719 he wants to do, but he'll probably find it's a 0:08:41.760 --> 0:08:43.439 little bit more difficult than what he did at Twitter, 0:08:43.480 --> 0:08:45.080 for example. You can't just kind of come in and 0:08:45.120 --> 0:08:47.520 start firing people. There are This is the federal government, 0:08:47.559 --> 0:08:49.920 so there are more rules and regulations and guardrails in check. 0:08:50.920 --> 0:08:55.959 Okay, from that big picture topic to another one, deportations. 0:08:56.280 --> 0:09:00.280 Is there any plan coalescing around what the score of 0:09:00.280 --> 0:09:03.840 those might look like, how they might actually get it done? 0:09:06.200 --> 0:09:09.080 So far, not much, but there's a lot of questions 0:09:09.120 --> 0:09:11.319 about logistically what this will look like and who is 0:09:11.360 --> 0:09:13.080 going to pay for this. You know, Trump has said 0:09:13.240 --> 0:09:16.080 he wants to deport somewhere between fifteen and twenty million people. 0:09:16.559 --> 0:09:18.520 You know, there is some money and some things that 0:09:18.559 --> 0:09:21.560 the agencies like Department handle onmeland Security could start doing, 0:09:21.800 --> 0:09:23.800 but it is very likely that they're going to need 0:09:23.880 --> 0:09:26.040 money from Congress to really get this off the ground. 0:09:26.440 --> 0:09:28.880 Of course, Congress is looking like it will be held 0:09:28.920 --> 0:09:31.720 in Republican hands, but still, you know, it's government spending. 0:09:32.280 --> 0:09:34.280 You know, in many cases needs sixty votes in the Senate, 0:09:34.320 --> 0:09:35.920 they might be able to get it by with just fifty, 0:09:36.000 --> 0:09:38.520 meaning they can do it with just Republicans. But spending 0:09:38.520 --> 0:09:39.920 a lot of money, and Trump is said he wants 0:09:39.960 --> 0:09:42.040 to spend as much money as it'll take. That's going 0:09:42.080 --> 0:09:43.880 to be probably one of the first policy fights we 0:09:43.920 --> 0:09:47.640 see play out in Washington Post January twentieth, Lord. 0:09:47.559 --> 0:09:49.400 Davison, thank you so much for joining us, Lord Davison. 0:09:49.440 --> 0:09:53.960 She's a politics editor for Bloomberg News from Washington, DC. 0:09:55.440 --> 0:09:59.319 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:09:59.360 --> 0:10:02.480 weekdays ten am Eastern on Apple card Playing and broun 0:10:02.520 --> 0:10:05.600 Otto with the Bloomberg Business app. Listen on demand wherever 0:10:05.679 --> 0:10:09.480 you get your podcasts, or watch us live on YouTube. 0:10:10.559 --> 0:10:15.280 Jessman, She's sitting in steal outing back Monday, which is 0:10:15.280 --> 0:10:17.960 the good news. Paul Sweeney live here on Bloomberg Interactive 0:10:17.960 --> 0:10:21.760 Broker Studio. We're streaming live on YouTube seever, YouTube dot 0:10:21.800 --> 0:10:24.560 com search Bloomberg Podcast and that's where you will find 0:10:24.640 --> 0:10:29.240 us lots of political discussion this hour. Again, President like 0:10:29.320 --> 0:10:32.640 Trump in Washington, DC, meeting with President Biden in the 0:10:32.720 --> 0:10:35.640 White house. We had a little couple I guess a 0:10:35.679 --> 0:10:38.079 minute or so of some sound from those two great. 0:10:38.080 --> 0:10:39.960 It was brief, brief, but they did do this. 0:10:39.960 --> 0:10:43.440 Being presumably there media behind closed doors and getting things 0:10:43.640 --> 0:10:44.240 done here. 0:10:44.360 --> 0:10:45.680 Henrietta tres joins us. 0:10:45.720 --> 0:10:47.920 She is managing partner and director of Economic Policy at 0:10:47.960 --> 0:10:53.320 Data Partners. Henrietta, what do you make of the last 0:10:54.000 --> 0:10:59.120 I guess eight days from last Tuesday, you know, with 0:10:59.280 --> 0:11:01.760 some perspect to here what happened? 0:11:03.040 --> 0:11:05.040 Well, I think some of the most exciting things to 0:11:05.040 --> 0:11:07.320 happen is coming out from my conversations with folks on 0:11:07.320 --> 0:11:10.520 the Trump transition team as they're trying to staff up, 0:11:11.240 --> 0:11:13.520 really enjoying the sort of parlor game of who's going 0:11:13.520 --> 0:11:17.120 to be nominated in which key positions. I think there 0:11:17.320 --> 0:11:21.000 is a lot of enthusiasm and anticipation around who might 0:11:21.040 --> 0:11:23.079 be the next Treasury Secretary. That's where a lot of 0:11:23.120 --> 0:11:26.360 our clients are focused, a lot of conversation around what 0:11:26.720 --> 0:11:30.160 the role for former Ambassador Lithheiser might be. 0:11:30.600 --> 0:11:31.959 As the new trades. 0:11:31.600 --> 0:11:36.160 Are there's really just sort of this brilliant feel of 0:11:36.760 --> 0:11:39.040 you know, now we get to really put into effect 0:11:39.160 --> 0:11:41.800 all of the things that the Trump campaign hoped they'd 0:11:41.840 --> 0:11:46.199 be able to do. Obviously optimistic and hope or enthusiastic 0:11:46.200 --> 0:11:48.640 about the fact that they got the House at long 0:11:48.720 --> 0:11:50.480 last and declared in their favor. 0:11:50.679 --> 0:11:54.439 So just a lot of enthusiasm and excitement is what. 0:11:54.360 --> 0:11:57.320 I'm getting out of the Trump camp today, Henrietta. 0:11:57.400 --> 0:11:59.600 Of course, there are a lot of questions about tax 0:11:59.600 --> 0:12:02.760 as well as trade policies. When you're speaking with your clients, 0:12:02.800 --> 0:12:04.880 who do they feel like would be best to lead 0:12:04.960 --> 0:12:05.960 the Treasury Department? 0:12:08.000 --> 0:12:09.400 Best is a relative term. 0:12:10.040 --> 0:12:14.480 I think if it came to Bob Lintheiser, for whatever reason, 0:12:14.800 --> 0:12:17.200 he has made pretty clear that he wants that role, 0:12:17.240 --> 0:12:19.839 I think the market would respond very negatively to that. 0:12:19.880 --> 0:12:24.600 He's obviously very supportive of tariffs and extraordinarily competent, as 0:12:24.600 --> 0:12:26.520 we saw from the Section three oh one tariff in 0:12:26.559 --> 0:12:29.480 the trade war with the US and China. That's something 0:12:29.480 --> 0:12:31.480 that they would very much anticipate if he came in 0:12:31.520 --> 0:12:33.720 at Treasury, which is, you know, on the street, the 0:12:33.720 --> 0:12:37.240 most important and powerful position in the entire administration. So 0:12:37.320 --> 0:12:40.160 I think that if Bob Laittheiser were to be Treasury Secretary, 0:12:40.360 --> 0:12:43.720 there would be a lot of trepidation and anxiety on 0:12:43.760 --> 0:12:45.920 the street for Scott Bessett, who has. 0:12:45.800 --> 0:12:48.920 Been making the rounds for months now on Wall. 0:12:48.720 --> 0:12:52.440 Street, there is an understanding that he would prefer sort 0:12:52.480 --> 0:12:55.480 of a gradual approach to tariff's, but it still raises 0:12:55.480 --> 0:12:57.800 a lot of eyebrows when you hear him say directly, 0:12:58.080 --> 0:13:01.640 I think that every month tariff shooting five percent. Those are, 0:13:01.679 --> 0:13:04.560 of course tireffs that are passed directly onto the US consumer. 0:13:04.840 --> 0:13:07.640 So there's there's really a lot of anxiety around tyriffs 0:13:07.720 --> 0:13:10.280 in general. There's also a lot of attention around this 0:13:10.360 --> 0:13:15.720 idea that Elon Musk, with his potential new commission, could 0:13:15.720 --> 0:13:18.360 trim two trillion dollars in federal spending over the next 0:13:18.400 --> 0:13:22.199 four years. That's a non starter. That's not how governing be. 0:13:22.320 --> 0:13:25.600 The appropriations process works. That requires sixty votes in the 0:13:25.640 --> 0:13:28.040 Senate and two hundred and eighteen in the House, neither 0:13:28.120 --> 0:13:31.080 of which are going to be achievable. So there is 0:13:31.160 --> 0:13:33.400 a lot of focus there just on understanding the realm 0:13:33.440 --> 0:13:34.080 of the possible. 0:13:34.679 --> 0:13:36.000 But obviously this is an. 0:13:35.840 --> 0:13:41.840 Ex official committee, and Congress generally doesn't cotton two outside 0:13:41.840 --> 0:13:43.520 committees of out elected officials. 0:13:44.120 --> 0:13:46.040 Henriette with a little bit of hindsight here and Given 0:13:46.080 --> 0:13:49.520 what we know with the House, how much of a 0:13:49.559 --> 0:13:53.120 red wave is this election season. 0:13:54.320 --> 0:13:57.360 Well, the House is definitely a huge problem, especially since, 0:13:57.360 --> 0:13:59.440 as you just mentioned, Trump is taking at least two 0:13:59.600 --> 0:14:02.480 of the House members with him to the White House. 0:14:02.840 --> 0:14:05.320 So based on the numbers that we have right now, 0:14:05.360 --> 0:14:08.079 the majority for the Republicans in the House is going 0:14:08.120 --> 0:14:10.040 to be even smaller than it was this last cycle. 0:14:10.720 --> 0:14:12.920 I think two three four seats is what we're looking 0:14:13.000 --> 0:14:15.680 at this point. So governing is going to be incredibly difficult, 0:14:15.679 --> 0:14:18.480 and they have some really heavy lifts to tackle. One 0:14:18.480 --> 0:14:20.280 of the things that we're focused on a lot right 0:14:20.320 --> 0:14:22.080 now is how much can they do? How much can 0:14:22.120 --> 0:14:24.720 they do on the tariffront in terms of collecting revenue 0:14:24.760 --> 0:14:27.600 in from tariffs and factoring that into the tax bill. 0:14:28.560 --> 0:14:32.640 It's worth remembering that Congress has not legislated on tariffs 0:14:32.680 --> 0:14:35.000 in eighty years, and there's a reason for that. 0:14:35.040 --> 0:14:35.960 It's really difficult. 0:14:36.040 --> 0:14:39.200 It leads to material ramifications and trade wars with not 0:14:39.240 --> 0:14:42.080 just China, but also retaliation from the EU and other 0:14:42.160 --> 0:14:46.280 nations that we impose tariffs on. By actually voting on tariffs, 0:14:46.600 --> 0:14:50.240 that puts House members in particular in a unique position 0:14:50.320 --> 0:14:54.400 to be railed against by their voters in the upcoming 0:14:54.440 --> 0:14:57.920 midtorm election. So there's going to be a really hard 0:14:58.040 --> 0:15:01.760 road ahead to pull a tax together just in general. 0:15:02.040 --> 0:15:04.440 And once you or if you do add terrifts to 0:15:04.520 --> 0:15:07.720 the equation, it becomes even more difficult. With scant majorities 0:15:07.760 --> 0:15:10.160 of two, three four seats, you're really going to struggle 0:15:10.200 --> 0:15:10.680 on that one. 0:15:10.800 --> 0:15:13.160 What about when it comes to the debt ceiling because 0:15:13.200 --> 0:15:16.000 a lot of this won't transition until early next year, 0:15:16.160 --> 0:15:19.160 So when you're coming up against potential deadlines around the holidays, 0:15:19.200 --> 0:15:20.240 how could this shape out? 0:15:21.400 --> 0:15:21.680 Yeah? 0:15:21.720 --> 0:15:24.359 So I think early discussion that I've had with Republican 0:15:24.440 --> 0:15:26.840 Senate staff in particular, is that they would join the 0:15:26.880 --> 0:15:28.480 debt ceiling with the tax bill. 0:15:28.800 --> 0:15:31.440 That has some advantages and some disadvantages. 0:15:31.520 --> 0:15:33.920 The biggest advantage is that it gives you a deadline 0:15:34.080 --> 0:15:37.280 of probably July of next year to pass the tax bill. 0:15:37.320 --> 0:15:39.800 If you combine the two of those issues together, you 0:15:39.880 --> 0:15:42.560 can pass a bil via reconciliation that does not require 0:15:42.680 --> 0:15:46.680 any Democratic votes. So Republicans can forego any negotiations with 0:15:46.720 --> 0:15:50.040 Democrats and pass a debt ceiling bill on their own terms. 0:15:50.360 --> 0:15:53.720 That is, of course something that House Republicans have not 0:15:53.840 --> 0:15:57.360 acted to do in almost two decades. They have perpetually 0:15:57.400 --> 0:16:01.840 relied on majority support for debt seil hikes and appropriations 0:16:01.880 --> 0:16:05.080 bills from the Democratic Conference, even when they're in the minority. 0:16:05.600 --> 0:16:08.040 We've seen that play out repeatedly in the last couple 0:16:08.080 --> 0:16:11.640 of years. So I think the debt ceiling potentially riding 0:16:11.680 --> 0:16:13.960 along with the tax bill has the advantage of making 0:16:14.000 --> 0:16:17.600 the tax bill an urgent must pass thing much earlier 0:16:17.600 --> 0:16:20.880 in the year than otherwise would be achievable July versus December. 0:16:21.440 --> 0:16:24.000 But it is a very heavy political lift. 0:16:24.160 --> 0:16:27.000 And to do the debt ceiling be a reconciliation, you 0:16:27.080 --> 0:16:29.920 must increase an authorization by a specific dollar figure. 0:16:30.120 --> 0:16:33.480 You cannot suspend it through May twenty twenty eight. 0:16:33.640 --> 0:16:35.960 You have to provide a one and a half two 0:16:36.040 --> 0:16:40.040 trillion dollar debt ceiling hikes specifically, and that will equate 0:16:40.080 --> 0:16:42.880 to a debt ceiling of thirty four thirty five trillion dollars, 0:16:42.880 --> 0:16:46.360 which is a very hard vote for, in particular Republican 0:16:46.440 --> 0:16:47.960 members of the House to take. 0:16:48.760 --> 0:16:51.760 Henryetta my civics is a little rusty here. Remind us, 0:16:52.480 --> 0:16:56.920 how do we replace a member of the House or 0:16:56.960 --> 0:16:59.200 the Senate that joins an administration. 0:17:00.000 --> 0:17:00.720 How does that happen. 0:17:01.760 --> 0:17:04.399 It's different for every state. They have different rules around 0:17:04.440 --> 0:17:06.959 when it has to be achieved. Whether there's a special election, 0:17:07.040 --> 0:17:08.760 that depends how close you are to the election, But 0:17:08.840 --> 0:17:11.200 in general, it's up to the state and the local 0:17:11.240 --> 0:17:13.840 governing officials in that state at the governor's level, to 0:17:13.920 --> 0:17:17.200 pick up a replacement in the interim. They will also 0:17:17.280 --> 0:17:20.280 call special elections. That's going to be in each state's 0:17:20.359 --> 0:17:20.840 by laws. 0:17:22.080 --> 0:17:25.399 That's interesting. So as far as what that means moving forward, 0:17:25.440 --> 0:17:29.360 what's the timetable on when those seats would be filled. 0:17:30.400 --> 0:17:31.760 Well, they're going to want to get them filled as 0:17:31.760 --> 0:17:34.280 fast as possible, particularly in states where there's going to 0:17:34.280 --> 0:17:37.040 be a Republican replacement. I think the easiest way to 0:17:37.040 --> 0:17:39.800 look at this is probably from the United States Senate standpoint, 0:17:40.240 --> 0:17:42.480 because so many Senators are likely to go up to 0:17:42.560 --> 0:17:45.040 the administration, not just JD. Vance, who's obviously now the 0:17:45.119 --> 0:17:48.680 Vice president elect, but also a whole host of senators 0:17:48.720 --> 0:17:53.000 like Marco Rubio, potentially Tom Cotton, Bill Haggerty, Marsha Blackburn, 0:17:53.480 --> 0:17:57.840 every one of those state officials who's in a position 0:17:57.920 --> 0:18:02.640 to replace or with a special interim appointment, a senator. 0:18:02.400 --> 0:18:03.639 Is going to be in a position to do that. 0:18:03.680 --> 0:18:07.000 So, whether that's maybe Ron De Santis, the speculation right 0:18:07.000 --> 0:18:08.879 now is that Laura Trump is in the offing to 0:18:08.920 --> 0:18:10.639 replace Rubio, those are going to be things that they 0:18:10.640 --> 0:18:12.840 want to do quickly, because even on the Senate side, 0:18:13.040 --> 0:18:16.320 you only have fifty three seat majority for Republicans. If 0:18:16.359 --> 0:18:19.800 they lose a whole host of members that go probably 0:18:19.800 --> 0:18:22.200 in January and February up to the White House when 0:18:22.200 --> 0:18:25.639 they get confirmed, you're going to need those replacements immediately, 0:18:25.800 --> 0:18:29.359 otherwise you won't have functional majorities. So they're going to 0:18:29.400 --> 0:18:32.000 all do that very quickly on the House side in particular. 0:18:32.560 --> 0:18:35.760 So, Henriette, given what we know about the makeup of 0:18:35.800 --> 0:18:37.480 both houses of Congress, what do you think is on 0:18:37.520 --> 0:18:40.760 the to do list for Congress in twenty twenty five. 0:18:42.600 --> 0:18:44.440 Well, we're going to get through the lame duck session here, 0:18:44.440 --> 0:18:46.679 We're going to do an emergency spending bill for the 0:18:46.840 --> 0:18:51.080 hurricanes Helene and Milton. There's still going to be an NDAA, 0:18:51.320 --> 0:18:54.240 there's still a farm bill component. There's going to be 0:18:54.280 --> 0:18:58.200 efforts to pass a very small focused tax bill providing 0:18:58.240 --> 0:18:59.639 tax and senates for home rebuilding. 0:18:59.680 --> 0:19:00.680 After disasters. 0:19:01.000 --> 0:19:03.760 But into next year, you should expect Congress to do 0:19:04.680 --> 0:19:07.200 really the two things that they have to do, which 0:19:07.240 --> 0:19:10.360 is the debt ceiling and a tax bill, and then 0:19:10.400 --> 0:19:12.480 beyond that very little. It's very much going to be 0:19:12.480 --> 0:19:15.520 focused on the appropriations process, which, as I mentioned, does 0:19:15.560 --> 0:19:18.280 not leave room for cutting federal spending because you're going 0:19:18.359 --> 0:19:21.000 to have to get ten to twenty Democrats in the 0:19:21.040 --> 0:19:24.200 Senate and maybe as many as eighty to one hundred. 0:19:23.880 --> 0:19:24.439 In the House. 0:19:24.800 --> 0:19:28.080