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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. The

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Speaker 1: week begins with harm Band Halts on Bloomberg Surveillance, any

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Speaker 1: Credit Bank chief US Economists, Good morning to hum the

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Speaker 1: trade happy talk ending as quickly as it started. How

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Speaker 1: do you get any clarity on the direction of travel

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Speaker 1: gun into the G twenty this month? No, we don't,

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Speaker 1: and has been a constant feature of US China trade

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Speaker 1: negotiations that we usually we frequently had positive news that

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Speaker 1: we're being shot down a few days later, a few

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Speaker 1: hours later by another member of the administration. So I mean,

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Speaker 1: really it was not too surprising that this happens. I mean,

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Speaker 1: it's always the timing that you never know. And the

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Speaker 1: market still seems to be gotten on the wrong foot

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Speaker 1: of that. So but but again, the the only the

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Speaker 1: only announcement that we could believe. Then if we see

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Speaker 1: the two presidents showing up in front of the camera

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Speaker 1: was with as signed piece of of of of a contract.

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Speaker 1: Is this back and forth, this apparent contradiction a feature

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Speaker 1: of the negotiations or a buck well, it has been

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Speaker 1: a constant feature, and I think it is the bark

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Speaker 1: even so, I mean, on the you can say it

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Speaker 1: is one of these negotiation tactics of the art of

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Speaker 1: the deal, you know, as I said, good cop, bad

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Speaker 1: cop type of thing, so that the end of the day,

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Speaker 1: but the president can eventually be the good cup when

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Speaker 1: he talks to the Chinese. But you cannot help that.

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Speaker 1: There is also the lack of communication within the administration itself,

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Speaker 1: so that there's not quite an agreement within the senior

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Speaker 1: officials of how to interpret the latest moves and developments.

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Speaker 1: The backgroupd to all of this is global deceleration for

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Speaker 1: the global economy. The United State doesn't appear to be

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Speaker 1: a feature of that thing. Will it be? Yes, it

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Speaker 1: will be. And I mean it's pretty easy to explain

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Speaker 1: why the US has not been a feature of that deceleration.

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Speaker 1: I've been just trying to calculate a cyclically adjusted measure

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Speaker 1: of the fiscal deficit. So if you look at the

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Speaker 1: output gap and you look at the unemployment gap in

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Speaker 1: his his historical correlations would have suggested that we should

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Speaker 1: have a balanced budget at this point. Instead, we're almost

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Speaker 1: running a four percent four percent of GDP deficit. This gap,

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Speaker 1: which is a four percentage point deficit, is the largest

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Speaker 1: that we see since the mid sixties when we had

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Speaker 1: that Kennedy text Cards to Vietnam War, also when the

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Speaker 1: unemployment rate was three point seven percent. So it's it's

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Speaker 1: very easy to explain. It's just a question when the

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Speaker 1: stimulus fates the impact of a similar fate. I think

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Speaker 1: it's we've seen peak grows right now heading into slower

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Speaker 1: grows next year. Were the huge news flow over the weekend,

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Speaker 1: I read a number of things, John. One of the

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Speaker 1: things I read was the chancel of the chequer, Hammond

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Speaker 1: and austerity, and there's a whole different twist on that

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Speaker 1: in Europe and particularly in the United Kingdom. Of harm

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Speaker 1: is that the surprise of this election and into the

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Speaker 1: presidential campaign is we'll have a discussion of austerity into

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Speaker 1: two thousand twenty and far more into two thousand twenty

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Speaker 1: one and two thousand. I can't believe I'm saying two

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Speaker 1: thousand twenty two, John, I didn't. That's a long ways

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Speaker 1: away coming around. It's coming around, coming around. Are we

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Speaker 1: going to have an American austerity discussion? No, No, I

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Speaker 1: think we should have, and I mean austerity sounds sounds harsh,

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Speaker 1: but but again, we we are having a economy running

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Speaker 1: at at full capacity. Um. And as he said that

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Speaker 1: the deficit should be much better, maybe you should even

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Speaker 1: run a surplus. But really the talk right now is, um,

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Speaker 1: if Republicans should keep the majority in Congress in both chambers. Um,

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Speaker 1: there maybe talk about another tax cut, right, I mean,

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Speaker 1: maybe there was just an election campaign, but they're they're

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Speaker 1: talking about more tax cuts. And then there is a

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Speaker 1: talk about if if, if Democrats win the House, about

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Speaker 1: an infrastructure project. I mean, I honestly think that neither

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Speaker 1: of that will happen, but the debate is going in

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Speaker 1: the direction of even more stimulus. I want to continue

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Speaker 1: the conversation on the midterms of just a moment, let's

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Speaker 1: talk about the budget deficit just quickly. You mentioned this

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Speaker 1: comparison to the nineteen sixties at four percent GDP. Just

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Speaker 1: looking at the budget deficit over the last ten years,

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Speaker 1: it's pretty clear that we have hit that level before

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Speaker 1: and multiple times. And stay there. What's the nineteen sixties

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Speaker 1: comparison really about harm. Just explain that a little bit more.

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Speaker 1: The comparison is about is cyclically adjusted deficits, So where

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Speaker 1: the deficit should be given the state of the economy,

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Speaker 1: and where the deficit actually is right, So that is

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Speaker 1: the stimulus over and above what is needed by the economy,

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Speaker 1: if you want, right and this is right now the

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Speaker 1: biggest that we have seen since the Thank you. It's

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Speaker 1: not it's not the absolute deficit, to be clear, It's

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Speaker 1: just important to clarify that point. Harm, Thank you, And

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Speaker 1: let's talk about the mid terms. Then what is your

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Speaker 1: base case. Where the base case has to be that

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Speaker 1: that we see a split Congress, that the Democrats take

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Speaker 1: the House. But I would like to emphasize, and I

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Speaker 1: wouldn't be surprised if Tom talks about Monte Carlo stimulations

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Speaker 1: a bit later, um that there is a strong um

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Speaker 1: or non non negligible chance that Republicans actually do keep

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Speaker 1: the House, because simply if you just look at jerrymandering

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Speaker 1: and all this, I do think that the Democrats need

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Speaker 1: to win the popular vote in the House elections by

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Speaker 1: more than five percentage points. And right now, if you

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Speaker 1: look at the latest polls, the advantage is somewhere between

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Speaker 1: seven and eight. So we are once again in the

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Speaker 1: surrounding area area where where there is a chance that

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Speaker 1: Republicans keep the House. But again, if I have to

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Speaker 1: pick a side, I would not bet against the polls

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Speaker 1: that Democrats win it. But again we should also not

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Speaker 1: underestimate the chance that Republicans keep everything. Well, a lot

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Speaker 1: of people tom are worried about the scenario that the

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Speaker 1: political surprise materialize. It. Two things surprised people, not just

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Speaker 1: the outcome, but the outcome of the outcome. And it

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Speaker 1: wasn't just the President Trump was just the President Trump one.

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Speaker 1: It was that what people expected to happen if President

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Speaker 1: Trump one did not happen. The economy didn't roll over,

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Speaker 1: markets didn't roll over something the York Times. So let's

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Speaker 1: talk about the expected outcome and the outcome of the outcome.

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Speaker 1: Can we just challenge the idea of what happens if

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Speaker 1: the base case materials can't And you're the German here

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Speaker 1: is he younger can't he's on, So we should forecast

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Speaker 1: our forecast. My teacher and psychology said, you can't get

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Speaker 1: a CE and I got a quality D when I

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Speaker 1: studied car'd the outcome of the outcome go Yeah, and

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Speaker 1: again we should forecast or forecast mistake, right, is that

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Speaker 1: basically what you're asking. Um. My view is that the

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Speaker 1: economy ultimately takes over, and and that is as we

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Speaker 1: talked earlier, that we see a grow slow down. I

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Speaker 1: think that is the dominating topic of two thousand nineteen. Yes,

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Speaker 1: there will be noise, maybe mentioned in all days, but

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Speaker 1: by the economy is stronger than political John's good question.

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Speaker 1: Let me give you the outcome of the outcome of

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Speaker 1: the outcome, which is, if we get a bondle slowdown,

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Speaker 1: does it take the gains of the outcome outcome from

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Speaker 1: the guilded of the guilded age? Is the new slowdown

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Speaker 1: really going to affect the broad middle class? Like when

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Speaker 1: things go up, the guilded age makes it, but when

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Speaker 1: things go down the outcome of the outcomes I'm going

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Speaker 1: to the fourth power here now, the outcome of the

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Speaker 1: outcome is a middle class gets hammered. Yes, that's usually

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Speaker 1: the case, just enough that he answered ham fun helps

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Speaker 1: do I guess from any credit? What a week ahead

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Speaker 1: we got coming up? It's exciting, I said, I said

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Speaker 1: to afterthoughts. She's so excited about the elections. I said, yeah,

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Speaker 1: I'll get the elections and FED meeting, and it's just

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Speaker 1: it's one of those magical weeks where it's just crazy.

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Speaker 1: Is it fancy saying that this isn't your normal midterm

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Speaker 1: election and it's got a kind of middle prominential vibe

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Speaker 1: to it. I have the clearest memory of the evening

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Speaker 1: in and the only media that was on when we

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Speaker 1: figured it out with CBS and Dan Rather. Everybody else

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Speaker 1: had gone back to programming, and it came out of

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Speaker 1: essentially came out of nowhere. Is it like ninety four?

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Speaker 1: You know, you don't know till Wednesday? But the answers, Yes,

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Speaker 1: it's just and with all the cultural events and the

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Speaker 1: two president's campaigning, it's really John, it's really exciting. Do

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Speaker 1: you think this is because the president has just generated

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Speaker 1: a whole lot more interested in politics? Yes? I think,

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Speaker 1: you know, whatever anybody's politics. Yes, it is centered uh,

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Speaker 1: uniquely around this unique president, There's no question about that.

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Speaker 1: But just it was fun. This weekend reading, Harm mentioned

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Speaker 1: the Monte Carlo that was Nate Silver INVE eight with

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Speaker 1: a brilliant mathematical dissertation in English about independence. Each district

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Speaker 1: does not independent statistically, there's some correlations which leads to

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Speaker 1: should we go to the fifth power and outcome of

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Speaker 1: the outcome of the outcome of you. Welcome. Luckily we've

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Speaker 1: run out of time. Great to have harm hat and

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Speaker 1: holds of any credit with us. This Monday morning, as

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Speaker 1: we kick off a great week for you, We're in

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Speaker 1: the Bloomberg Interactive Broker studios in New York and now

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Speaker 1: joining us from Tehran. And this is incredibly timely with

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Speaker 1: headlines a bit ago the United States Treasury says the

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Speaker 1: US fully reimposes sanctions on Iran. The Treasury says, over

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Speaker 1: seven persons under Iranian sanctions and joining us someone who

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Speaker 1: has given us incredible service in Tehran, Golner Mountivolity, joins

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Speaker 1: us right now. What will be the immediate reaction, Goldner

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Speaker 1: in your Tehran to this new round of U S sanctions.

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Speaker 1: I think people have known obviously since May that this

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Speaker 1: was coming, and the timings and the wind down periods

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Speaker 1: were announced in advance. So I think it's just been

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Speaker 1: kind of this sort of creeping the sense that you know,

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Speaker 1: this is something that was just going to happen, that

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Speaker 1: they couldn't do. The Iranians themselves or the government couldn't

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Speaker 1: do very much about um. You know, it's the sense

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Speaker 1: of inevitability about the fact that these sanctions came into

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Speaker 1: effect overnight. But of course people are very worried, they're fearful.

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Speaker 1: There's a sense of resignation and exhaustion as well, because

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Speaker 1: they've been here before and they thought they had a

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Speaker 1: nuclear deal that had resolved the situation, and clearly it's

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Speaker 1: it's you know, it's kind of gone backwards again for them.

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Speaker 1: So many people have images or stereotypes of Persia and

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Speaker 1: then around and then the newer around as well. Tehran

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Speaker 1: is over fourteen million people. What does it actually do

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Speaker 1: to business? Well, you know, here I speak to a

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Speaker 1: lot of people in the private sector and people running

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Speaker 1: small businesses, small to medium sized businesses, and something like this,

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Speaker 1: does you know, tremendous or tremendous damished psychologically? You know,

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Speaker 1: we know that the economy hates uncertainty and hates a

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Speaker 1: sense of having no idea what's what's happening, what's going

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Speaker 1: to happen from one day to the next. And when

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Speaker 1: the currency here fluctuates as it has been doing over

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Speaker 1: the past six months, in these kind of huge moves.

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Speaker 1: Then from literally from one day to the next day,

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Speaker 1: you don't know what you can do. You don't know

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Speaker 1: whether you're combine and seeing. You don't know whether your

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Speaker 1: supply is going to be able to sell you anything.

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Speaker 1: You don't know whether you can keep your employees on

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Speaker 1: for the next month. You know, there are small businesses

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Speaker 1: here who haven't paid employees for months, or at least

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Speaker 1: for the past three months. I know of at least

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Speaker 1: one or two like that. These are small businesses. And

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Speaker 1: the other thing is here the SMI community actually really

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Speaker 1: needed the nuclear deal because in Europe a lot of

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Speaker 1: the businesses that can work where they are are also

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Speaker 1: s mmes because they don't need those huge levels of

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Speaker 1: capital that the big you know, upper tier big international

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Speaker 1: banks can't you know, still still can't get involved with

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Speaker 1: in Iran. So that area is really going to be hurt.

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Speaker 1: And you know, that sector is really important for graduates here.

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Speaker 1: You know, Iran produces a huge amount of university graduate

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Speaker 1: most of the women. So you know, it's it's a

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Speaker 1: sad story, particularly for the middle class here. There is

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Speaker 1: the stereotype of Tehran and Iran that doesn't quite meet

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Speaker 1: the reality, specifically the education of the society, and got up,

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Speaker 1: you talk up and bring up the issue of opportunities.

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Speaker 1: Let's just talk about the Joint Comprehensive Plan of Action

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Speaker 1: because it was a multilateral accord and the President and

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Speaker 1: this Treasury has reimposed sanctions on Iran unilaterally. Does that

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Speaker 1: make it different this time around? Or is the reality

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Speaker 1: still the same on the ground. I actually think it

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Speaker 1: makes I think it makes a big difference. I think

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Speaker 1: if there's one area that many Iranians have taken comfort in,

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Speaker 1: it's the fact that this is something that the United

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Speaker 1: States has made an independence This is an independent decision,

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Speaker 1: he said, You mean the latterly that's been made by

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Speaker 1: the United States. They haven't had the Europeans on their side.

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Speaker 1: Quite the opposite, the unit the the Europeans we know

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Speaker 1: are still scrambling to try and get this special purpose

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Speaker 1: vehicle fixed for Iran. And also China and Russia have

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Speaker 1: spoken out and criticized the sanctions that we've had. These

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Speaker 1: countries managed to get waivers out of the US Treasury,

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Speaker 1: and I think that actually has a huge effect um

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Speaker 1: to you know, psychologically, to some extent on on people.

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Speaker 1: But the fact is in practical terms, the US dollar

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Speaker 1: here is a man is a major gauge of confidence

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Speaker 1: of people spending power. UM and and you know, the

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Speaker 1: price of the dollar here has has skyrocketed over the

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Speaker 1: past six months and that has a real tangible impact

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Speaker 1: on people's day to day lives. It really cuts their

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Speaker 1: spending power. And it's happened, you know, with speed. But

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Speaker 1: you know, there is this sense that the United States

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Speaker 1: is isolated in this decision that it's made and that

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Speaker 1: you know, even Rahaney capitalized on this this morning when

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Speaker 1: he said, we've managed to bring the European Europeans on

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Speaker 1: that side on our side, and that's a huge him over.

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Speaker 1: Thank you so much from Tehran? Did I you green

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Speaker 1: with us as we consider the American economy and other

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Speaker 1: things global as well? Megan, Uh, when do you get

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Speaker 1: a better framework of what Q four is? You have

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Speaker 1: to wait till the end of the quarter. Can you

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Speaker 1: begin to really tell here? Well, you can start to

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Speaker 1: see signals in the data early on, UM. I would

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Speaker 1: ignore all the kind of now casts at this stage

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Speaker 1: though it's just you early in the quarter. But for example,

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Speaker 1: things like you know, new foreign orders are coming through

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Speaker 1: much weaker in the I s m th redata, and

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Speaker 1: that's just maybe trade it's starting to bay, so that's

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Speaker 1: giving us some indie ocation things like slightly stronger wage growth,

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Speaker 1: though partly you know, a base effect issue that's suggesting

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Speaker 1: we're going to continue to get kind of incremental wage

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Speaker 1: growth and and therefore an incremental acceleration of inflation. That

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Speaker 1: helps give us a picture. But to really have a

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Speaker 1: sense of kind of what the number is going to

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Speaker 1: come in at for Q four, you've got to wait

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Speaker 1: until a bit later in the quarter, like and what's

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Speaker 1: the danger that the US economy stants to run hot?

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Speaker 1: So I think it's actually pretty low. Um. You know,

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Speaker 1: normally at this late stage in the business cycle, if

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Speaker 1: you had the kind of fiscal stimulus that we've had

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Speaker 1: in the US, you would expect the economy to overheat.

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Speaker 1: But if you're looking at the data, the soft data

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Speaker 1: all absolutely upork, so that suggests maybe the economy is overheating.

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Speaker 1: If you look at the hard data, however, it's pretty

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Speaker 1: decidedly lackluster. So things like retail sales, new bank loans, um,

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Speaker 1: real wage growth even there, they're all looking pretty weak,

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Speaker 1: and so that suggests there aren't actually any indicators in

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Speaker 1: the hard data that we're about to overheat. So I

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Speaker 1: think this business cycle is a bit different, just because

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Speaker 1: it's a lot longer, because we've had so much central

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Speaker 1: bank intervention. Um. So, you know, I would agree we're

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Speaker 1: in the late stage as a business cycle, but we're

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Speaker 1: not going to see the late stage surge in inflation

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Speaker 1: or the overheating um for a while. I don't think

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Speaker 1: so any reason to believe that the Federal Reserve is

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Speaker 1: going to change course in terms of pace of right

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Speaker 1: hikes anytime soon. Magan, No, I don't think so. Um.

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Speaker 1: You know, I think a lot of investors of the

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Speaker 1: teament the set turned a bit more hawkish when J.

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Speaker 1: Pale came out that he thought we were still pretty

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Speaker 1: far away from the neutral rate, and that's suggested we

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Speaker 1: could hike a lot more. I think that's already baked

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Speaker 1: into the assumptions. Um. I do think that the set

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Speaker 1: is constrained, however, no matter what happens with the ten

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Speaker 1: year yields. So if the yield curve flattens, which I expect, actually,

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Speaker 1: then the set's gonna feel really constrained in its hikes

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Speaker 1: because it doesn't want to invert the yield curve. If

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Speaker 1: the yield deepens and the tenure pops up as some

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Speaker 1: people expect, then that actually has the tenure is a

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Speaker 1: heavyweighting and most fine anential conditions in the season. I

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Speaker 1: think that's wrong. I think we should learn how to

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Speaker 1: construct them better. But in the meantime, the FED will

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Speaker 1: see that financial conditions are tightening significant quently and they'll

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Speaker 1: be constrained then too. So either way, the FED has

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Speaker 1: a pretty gradual path seek in and I think that

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Speaker 1: you know, this suggests they're going to continue along that well,

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Speaker 1: Mega Green, what is the the future of investment that

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Speaker 1: you see? One of the themes last week was really

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Speaker 1: beginning to analyze use of cash share buybacks, cash versus

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Speaker 1: actually spending it on tangible things. I don't even know

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Speaker 1: how that works in the service sector. But are we

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Speaker 1: seeing investment? We're not really. We started to see some

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Speaker 1: investment and it came through and capex spending at the

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Speaker 1: turn of the year off the back of the tax bill,

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Speaker 1: so some firms were incentivized spring forward some of their

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Speaker 1: capex spending um and then we saw that stop. And

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Speaker 1: you know, when I speak to FED regional presidents who

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Speaker 1: spend all their time going out and talking to firms

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Speaker 1: and their regions. Um, they'll say that companies are telling

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Speaker 1: them that they were thinking about investing, but actually all

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Speaker 1: of this uncertainty around trade is made them decide, but

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Speaker 1: they're just going to delay and differ. So I think

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Speaker 1: unfortunately trade it kind of offset the benefits of the

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Speaker 1: tax bill in terms of investment. So we're not seeing

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Speaker 1: much indication that we're getting this kind of surgeon investment

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Speaker 1: that lots of people were hoping for. Yeah, John, I

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Speaker 1: think this is just critical. It's really like new administration

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Speaker 1: new thing. The administration is very bullish on a supplied

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Speaker 1: side response to the fiscal stimulus. They believe that you

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Speaker 1: can get really strong output growth without the accompanying inflation

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Speaker 1: that some people might expect to come with it. And

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Speaker 1: they expect that because they think that a lot of

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Speaker 1: this fiscal stimulus is going to go into investment, and

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Speaker 1: if it doesn't happen, Tom, they're going to get a

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Speaker 1: very different economy than the one day they expect. It's

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Speaker 1: just there and it's it's that moving. Megan, do you

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Speaker 1: have a statistic for Q four and Q one GDP? Yeah, so,

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Speaker 1: I you know Q three US three point five. I

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Speaker 1: think three percent growth and Q four would be fantastic.

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Speaker 1: I think it might come in a bit lower than that,

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Speaker 1: and I think similar So the best is behind us.

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Speaker 1: I think UM close to the physical stimulus that we've

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Speaker 1: had coming down the line hit in the first three

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Speaker 1: quarters of this year, and we'll peter out until the

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Speaker 1: end of next year. And then the real question is

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Speaker 1: what is going to happen in terms of physical stimulus

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Speaker 1: UM from then on? Are we going to hit thecial

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Speaker 1: cliff or will the government re up? And that would

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Speaker 1: depend entirely on the midterm election. Meggie Green with this thrill,

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Speaker 1: she's with this with manual life. Jared Bernstein, who was

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Speaker 1: Economic councilor to Vice President Biden, but far more than that,

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Speaker 1: the liberal in Washington that conservatives were forced to read

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Speaker 1: at gunpoint over decades, on our job dynamics, Jared, I

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Speaker 1: wanted to ask you a question I asked earlier this morning,

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Speaker 1: which is, if we have a make America Great against surge,

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Speaker 1: and we all understand that those gains went to the

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Speaker 1: guilded of the Gilded Age, if we get a slow down,

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Speaker 1: do the disadvantages of a slowdown come from those that

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Speaker 1: are gilded or is it asymmetric where they come from

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Speaker 1: the broad middle class? Which is it? At least over

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Speaker 1: the last few decades, it's been pretty asymmetric, and that

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Speaker 1: the folks at the very top of the scale, in

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Speaker 1: part because their fortunes don't rise and fall as much

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Speaker 1: on the job market, have been pretty insulated from the

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Speaker 1: upsidegrounds of the business cycle. Middle and lower income folks

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Speaker 1: have benefited disproportionately from the very low unemployment rates we've had,

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Speaker 1: So if that reverted will take the hit. What would

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Speaker 1: Vice President Biden do? You worked with a gentleman, he

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Speaker 1: would be there in twenty four hours to go to

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Speaker 1: a campaign. He's being quiet for all the Biden reasons.

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Speaker 1: I get that, But what would he say right now

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Speaker 1: in terms of the final message democrats need. I think

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Speaker 1: he would say is that, you really know, one of

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Speaker 1: his themes has always been Who's got your back? And

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Speaker 1: he's really looked at that from the perspective of the

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Speaker 1: middle class, from the perspective of working people from union

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Speaker 1: and I really think I believe he feels that today's government,

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Speaker 1: particularly the Conservative majority, simply doesn't have the backs of

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Speaker 1: middle and lower class, working class folks. And he'd think

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Speaker 1: about policies that would steer more of the growth their way.

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Speaker 1: Jared Burns Bernstein, just to broaden the conversation, maybe just

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Speaker 1: taken the economies of Asia if you don't mind, Do

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Speaker 1: you have any thoughts as to who's got the back

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Speaker 1: of the major economies of Asia, and I'm thinking Australia, Singapore, Malaysia, Indonesia.

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Speaker 1: Did they still feel that the United States has their back?

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Speaker 1: I would suspect that they don't, or at least that

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Speaker 1: the American administration, the Trump administration to than have their back.

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Speaker 1: I mean, this is not exactly breaking news, but this

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Speaker 1: is one of the most protectionist administrations we've seem I

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Speaker 1: think what they would probably look at it, and it

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Speaker 1: is the fact that global trade flows remain strong, and

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Speaker 1: in fact, if anything, the US trade deficit has gotten

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Speaker 1: worse because our dollars strong on a relative growth rates

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Speaker 1: are much stronger than there, so we're pulling in more

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Speaker 1: exports and exporting less. In that sense, Trump's trade war

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Speaker 1: is back prying so on the on the macroeconomic international

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Speaker 1: trade flow level. Uh, you know, they're doing pretty much

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Speaker 1: as they've done, but in terms of trade policy, they've

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Speaker 1: got to be quite nervous. Well, the reason I asked

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Speaker 1: this is because it seems as though the attitude towards

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Speaker 1: China and the economic relationship with China seems to be

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Speaker 1: consistent on Democrat and Republican voices. So I'm trying to

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Speaker 1: understand if you have been to be a country that

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Speaker 1: is caught in the middle and have to choose between

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Speaker 1: the United States and China, how are you gonna make

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Speaker 1: that decision? You know, I think it's a great point,

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Speaker 1: and in fact, one of the things that I've commented

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Speaker 1: on when people have asked me about the outcomes of

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Speaker 1: the mid terms. Suppose the Democrats take the House. Now,

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Speaker 1: from my perspective, that would be a positive thing, so

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Speaker 1: simply because of so much of the bad domestic policy

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Speaker 1: that's been coming down. I think they'd help in that regard.

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Speaker 1: But there's no suggestion that House Democrats would be say,

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Speaker 1: more friendly to international trade than than the current majority.

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Speaker 1: In fact, that it could flip the other way. Well,

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Speaker 1: I mean the flip in the flop and we'll know

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Speaker 1: on Wednesday. I guess where that's going as well, Jared.

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Speaker 1: In terms of legislative input within your economics, but just

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Speaker 1: within your political economics as well. How critical is a

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Speaker 1: barely democratic House from a more dominant Democratic House. Does

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Speaker 1: that really matter? I don't know that that matters. You have,

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Speaker 1: given that the Senate is if the Senate remains Republican, um,

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Speaker 1: I think that the House is going to be putting

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Speaker 1: if the House flips, they're just going to be putting

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Speaker 1: up a ton of legislation that will be more of

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Speaker 1: a signal to their voters than something they expect to

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Speaker 1: get through. Is that an effective program? Well, you know

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Speaker 1: when the Republicans were doing that with the House. Republicans

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Speaker 1: were doing that with Obamacare. They sent up sixty bills

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Speaker 1: to repeal Obamacare that never went anywhere. I was sitting

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Speaker 1: there saying this is an extremely ineffective program. What I

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Speaker 1: should have realized, very naive of me, especially an old

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Speaker 1: timer like myself, is that this wasn't a legislative program.

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Speaker 1: It was a signal to the electorate. And in that sense,

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Speaker 1: I think it may have been somewhat effective. And I

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Speaker 1: think the Democrats want to send a kind of a

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Speaker 1: very different station about a similar strategic one. Where's the

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Speaker 1: investment of asked all day as green as to every

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Speaker 1: harm bundles everybody else. Jared Burnstein, I know your thunderstruck.

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Speaker 1: That thought I heard was you falling off your chair

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Speaker 1: on K Street where you work. What was the idea

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Speaker 1: that there'd be a tax bill and there'd be investment involved.

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Speaker 1: I'm hearing from other people there doesn't seem to be

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Speaker 1: all that investment. Let me guess. Dr Bernstein is not shocked,

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Speaker 1: not a shock. I didn't look before the tax building.

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Speaker 1: As you folks know better than anyone, the price of capital,

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Speaker 1: the price of investment was extremely low. Corporations were already

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Speaker 1: sitting on large chranches of cash, retained earnings, strong profits,

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Speaker 1: so if they wanted to engage in a deep investment push,

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Speaker 1: you know they would have done. So. It's true that

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Speaker 1: the after tax cost of capital is lower now, but

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Speaker 1: we're just not seeing the investment push. And frankly, and

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Speaker 1: this is where your sarcasma definitely lands with me. This

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Speaker 1: has been the case every time we've tried to supply,

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Speaker 1: so I trickle down stuff that just doesn't work. I'm

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Speaker 1: not saying that has no impact on the economy, but

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Speaker 1: the idea that it's going to markedly change growth rates

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Speaker 1: or pay for itself, that's just ludicrous. But at the

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Speaker 1: same time, in addition to campaigns and elections for House

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Speaker 1: and Senate seats and governor's seats, there are lots of

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Speaker 1: ballot initiatives out there to raise financing for municipal bonds

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Speaker 1: to do just the kind of infrastructure that has been

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Speaker 1: talked about at the federal level. States and municipalities are

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Speaker 1: going ahead and doing it anyway. Well, good for them.

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Speaker 1: I mean, and you know what Tom was asking me

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Speaker 1: about private investment. I think where we've dropped the ball

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Speaker 1: is clearly on public investment. And by the way, that's

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Speaker 1: not a liberal or conservative view. I know lots of

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Speaker 1: conservatives Republicans would love us to do much more infrastructure investment,

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Speaker 1: particularly in the public goods that enhanced national productivity. And

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Speaker 1: so I think it would be a great uh endeavor

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Speaker 1: if if public sector or sub national level did more investment.

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Speaker 1: I think one of the challenges there is it infest

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Speaker 1: rates to rising. I mean, it's still a good time

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Speaker 1: to do this, but it was a better time I'm

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Speaker 1: a couple of years ago. Jared, thank you so much.

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Speaker 1: Jared Burns just thrilled to have you with us here.

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Speaker 1: The day before the election, Jared Burstein with his thoughts

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Speaker 1: on economics both left and right, and Jared Burstein with

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Speaker 1: his public service and assisting the vice former vice president.

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Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

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Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

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Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before

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Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

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Speaker 1: Radio