WEBVTT - Trump Tariff Threats and Debt Concerns Weigh on Markets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.000 us live on YouTube. 0:00:27.080 --> 0:00:27.840 We're gonna look. 0:00:27.720 --> 0:00:30.960 Here right now with Stephen Stanley at the American economy. 0:00:31.040 --> 0:00:36.879 Stephen Stanley's just fabulous. It taken Fisherian macroeconomics and bringing 0:00:36.960 --> 0:00:39.160 it down to where we are right now. 0:00:40.159 --> 0:00:42.559 There's been an underestimation of GDP. 0:00:43.200 --> 0:00:49.279 Is a productivity miracle still in place? You know. 0:00:49.360 --> 0:00:52.520 I think that there's been a lot of talk about 0:00:52.560 --> 0:00:56.480 a big acceleration productivity, and of course AI is a 0:00:56.520 --> 0:00:59.720 big part of that conversation, and I think we might 0:00:59.760 --> 0:01:02.400 get there, but I don't think we're there yet. It 0:01:02.440 --> 0:01:05.120 takes a long time for these sorts of revolutions to 0:01:06.920 --> 0:01:08.840 kind of take hold in the economy. You think back 0:01:08.840 --> 0:01:11.360 to the nineties and how long it was after the 0:01:11.480 --> 0:01:14.520 NASDAC began to shoot up until the productivity numbers actually 0:01:14.600 --> 0:01:17.480 showed it. So I think at the moment productivity is 0:01:18.520 --> 0:01:22.480 okay but not great. And you know, the question is 0:01:22.959 --> 0:01:25.760 when and by how much might it accelerate going forward? 0:01:25.920 --> 0:01:29.000 The split between hard and soft data. Michael McKee's completely 0:01:29.040 --> 0:01:33.360 focused on this right now. One shows oomph, the other not. 0:01:33.800 --> 0:01:34.640 Which is right. 0:01:35.440 --> 0:01:38.760 Well, I think at this point generally I'm a big 0:01:38.800 --> 0:01:43.039 believer in the hard data, and for example, I think 0:01:43.040 --> 0:01:46.280 that the correlation between consumer confidence and consumer spending is 0:01:46.319 --> 0:01:50.480 pretty weak over time. But when things are moving fast, 0:01:51.320 --> 0:01:54.160 sometimes the soft data is telling you something and in 0:01:54.160 --> 0:01:56.720 a more timely manner than the hard data. And I 0:01:56.800 --> 0:02:00.400 think right now we're just waiting for the hammer to 0:02:00.480 --> 0:02:04.040 drop from the impact of tariffs, and you can see 0:02:04.040 --> 0:02:06.280 that in the soft data. You haven't seen it yet 0:02:06.280 --> 0:02:09.200 in the hard data. I'm very interested to see what 0:02:09.240 --> 0:02:12.480 the May data look like, because I have to say 0:02:12.520 --> 0:02:15.800 I was surprised at how little, really, almost not at all, 0:02:16.120 --> 0:02:20.799 the April hard data was affected by tariffs. We had, 0:02:21.000 --> 0:02:23.680 you know, the employment number was good, retail sales was fine, 0:02:24.040 --> 0:02:27.720 the CPI was normal. So I am expecting to see 0:02:27.720 --> 0:02:30.040 some of that washed through in the May data. 0:02:30.080 --> 0:02:32.919 Are you concerned about inflation, are you concerned about slowing 0:02:32.919 --> 0:02:35.320 economic growth associated with the tariffs, or are they just 0:02:35.400 --> 0:02:38.520 so I don't know, I mean, they're out there, and 0:02:38.560 --> 0:02:40.960 there are some real tariffs on real goods and services. 0:02:41.360 --> 0:02:43.040 How do you expect that the blow through? 0:02:43.680 --> 0:02:46.239 Well, my hope is that on both counts, both of 0:02:46.360 --> 0:02:49.680 inflation and for growth, that the impact will be mostly temporary. 0:02:49.880 --> 0:02:52.800 We'll see, I mean, obviously all of this remains to 0:02:52.840 --> 0:02:56.400 be seen at this point, but certainly, I think for 0:02:56.440 --> 0:02:58.880 the FED, the key question is, I think on the 0:02:58.880 --> 0:03:05.320 inflation side, really focused on how long the inflation impetus lasts. 0:03:06.000 --> 0:03:09.399 So what's our federal reserve to do, if anything, as 0:03:09.440 --> 0:03:10.960 a result of some of this uncertainty. 0:03:11.360 --> 0:03:14.080 Well, right now I think they're you know, as they've said, 0:03:14.080 --> 0:03:16.160 they're being patient, they're in wait and see mode. I 0:03:16.160 --> 0:03:20.720 think they feel like they're in relatively good position coming 0:03:20.760 --> 0:03:22.760 into the But you know, before any of the tariff 0:03:22.800 --> 0:03:26.560 stuff began, the idea was, Okay, we're modestly restrictive, and 0:03:26.600 --> 0:03:28.600 that's where we want to be because inflation is above 0:03:28.600 --> 0:03:31.320 our target. We need to see more progress on inflation. 0:03:32.160 --> 0:03:35.560 That all that whole narrative was interrupted by the tariff situation, 0:03:35.720 --> 0:03:38.640 and now you know, we'll we'll see how long that 0:03:38.680 --> 0:03:41.200 inflation data continues to run high. 0:03:41.360 --> 0:03:42.680 This is what surveillance is about. 0:03:42.680 --> 0:03:46.880 We got Blanchard coming on on Stanley Fisher with all 0:03:46.960 --> 0:03:51.360 that excellence of academic theory and thinking about where we're going. 0:03:51.880 --> 0:03:54.160 You are a definitive. 0:03:53.400 --> 0:03:57.800 Acclaim market economist out of Washington and Lee. Do the 0:03:57.880 --> 0:04:03.160 models that Blenchard and Fisher invented, codified and move forward? 0:04:03.560 --> 0:04:06.400 Are they working today? Or is the FED and others? 0:04:06.440 --> 0:04:08.160 Are we just making it up as we go? 0:04:08.920 --> 0:04:09.160 Well? 0:04:09.200 --> 0:04:12.200 I think that, you know, certainly the models provide a 0:04:12.240 --> 0:04:16.640 good backdrop on how to interpret things, but there's always 0:04:16.720 --> 0:04:22.640 something new, right every every cycle, every episode. Right now, technology, well, 0:04:22.680 --> 0:04:26.360 I think it's the it's the uncertainty around policy right 0:04:26.520 --> 0:04:28.839 in the moment, in the short term, you know, in 0:04:28.839 --> 0:04:30.840 the long run, as you say, I mean, technology is 0:04:31.480 --> 0:04:34.679 a big question. But I think in the near tournament's 0:04:34.680 --> 0:04:37.680 the uncertainty around policy and how that's likely to impact 0:04:37.720 --> 0:04:38.320 the economy. 0:04:38.440 --> 0:04:46.159 Steven Sandley, thank you so much, greatly appreciate him. 0:04:46.200 --> 0:04:49.760 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:04:49.839 --> 0:04:53.040 weekday afternoons from seven to ten am Eastern Listen on 0:04:53.080 --> 0:04:56.760 Applecarplay and Android Auto with the Bloomberg Business app, or 0:04:56.920 --> 0:04:58.360 watch us live on YouTube. 0:04:58.480 --> 0:05:02.720 Charles Schwarz, Kathy Jones, who had an eventful weekend of 0:05:02.839 --> 0:05:06.279 ambiguity a weeker dollar, but the news flow it was 0:05:06.320 --> 0:05:08.679 sort of incomplete this weekend. 0:05:08.720 --> 0:05:10.640 There was this, that, and the other thing. 0:05:11.120 --> 0:05:14.280 Do we have confidence in acquiring full faith in credit 0:05:14.960 --> 0:05:17.400 out the curve this morning? I just don't see it. 0:05:17.560 --> 0:05:19.599 Yeah, we don't go We're not going out the curve 0:05:19.720 --> 0:05:23.440 very far. And the reason is simply that there is 0:05:23.480 --> 0:05:27.080 all that uncertainty. The risk premium has increased, the term 0:05:27.120 --> 0:05:28.920 premium has moved up, So you do you get paid 0:05:28.960 --> 0:05:31.960 a little bit more to take that risk, But I 0:05:31.960 --> 0:05:34.920 don't think you get paid enough until we get some 0:05:35.040 --> 0:05:39.360 sort of clarity. And clarity is the word at this 0:05:40.080 --> 0:05:41.320 the fad uses all the time. 0:05:41.360 --> 0:05:42.040 It's a word we. 0:05:42.000 --> 0:05:45.560 All want to use because we're waiting to see where 0:05:45.560 --> 0:05:46.160 a policy goes. 0:05:46.200 --> 0:05:49.440 I mean clarity. Friday, Paul had I had clarity. The 0:05:49.520 --> 0:05:52.960 Knicks are on a roll, things are great, red Sox 0:05:53.040 --> 0:05:56.160 maybe who would win one game? And then boom June 0:05:56.240 --> 0:06:01.240 came along. Everything changed and it to me it's this morning. 0:06:00.960 --> 0:06:03.839 Book absolutely is Kathy. 0:06:03.960 --> 0:06:04.360 I mean. 0:06:06.080 --> 0:06:08.640 Credit risk? Do I need to take credit risk here? 0:06:08.680 --> 0:06:10.760 When I considered it to your treasure and get almost 0:06:10.760 --> 0:06:12.360 four percent here you. 0:06:12.320 --> 0:06:14.320 Don't necessarily have to, but I don't think it's a 0:06:14.320 --> 0:06:17.760 big problem if you do. In investment grade credit, we're 0:06:17.839 --> 0:06:20.480 I'm pretty cautious on high yield, growing. 0:06:20.160 --> 0:06:23.080 More cautious some of the best performance. 0:06:22.720 --> 0:06:24.960 It has because the coupon is that okay, So you know, 0:06:25.000 --> 0:06:28.000 we're really meandering in terms of the rates right now, 0:06:28.080 --> 0:06:30.560 just going sideways, up and down, up and down. They're 0:06:30.600 --> 0:06:34.719 going sideways, but that puts the emphasis and returns on 0:06:34.760 --> 0:06:38.080 the coupon. So high yield has high coupons, so that's 0:06:38.560 --> 0:06:42.160 performing well. The other area that's performing well is international, 0:06:42.240 --> 0:06:45.760 and that's because the dollar is weakened. But otherwise you're 0:06:45.760 --> 0:06:48.279 earning the coupon. That's all that's going on right now. 0:06:48.440 --> 0:06:52.239 What's the important driver for the fixed income market today? 0:06:52.440 --> 0:06:54.400 It doesn't feel like it's the FED. It feels like 0:06:54.400 --> 0:06:57.240 it might be more of I don't know, t tariffs 0:06:57.360 --> 0:06:59.560 and tax bills and things like that. How do you 0:06:59.560 --> 0:07:03.360 think about Washington, DC as you think about the bond market. 0:07:03.520 --> 0:07:06.240 I try not to think, but good to see as 0:07:06.320 --> 0:07:10.920 much as possible, But obviously it's the factor there. I 0:07:10.960 --> 0:07:13.560 think at the end of the day, treasure yields are 0:07:13.640 --> 0:07:17.200 driven by what the Fed's doing, what inflation's doing, what 0:07:17.280 --> 0:07:20.760 economic growth is doing. And I do think in the 0:07:20.840 --> 0:07:24.320 long run, if we do have these tariffs, and that's 0:07:24.360 --> 0:07:27.480 the question mark, what will the tariffs be, how long, 0:07:27.600 --> 0:07:31.800 how big, we will get slower economic growth and we'll 0:07:31.840 --> 0:07:35.920 get lower inflation from that. But the offsets are that 0:07:36.040 --> 0:07:39.440 tariffs initially bump up prices and give us that inflation, 0:07:40.040 --> 0:07:42.800 and a week or dollar gives us some important inflation. 0:07:43.000 --> 0:07:46.440 So this is why we're going nowhere. Because you have 0:07:46.600 --> 0:07:49.760 one one policy that does one thing, you have another 0:07:49.800 --> 0:07:51.040 policy does another thing. 0:07:51.320 --> 0:07:52.840 So do we just are we kind of in a 0:07:52.880 --> 0:07:54.920 trading range here? For the treasuries, I mean, what do 0:07:55.000 --> 0:07:57.080 I do here? I guess I just buy them and 0:07:57.120 --> 0:07:57.920 clip the coupons. 0:07:57.960 --> 0:08:01.400 I guess, yeah. I think you stay benchmark are lower 0:08:01.600 --> 0:08:04.720 in terms of duration. There's not really a lot of 0:08:05.680 --> 0:08:08.600 enough reward for the risk to go too far out 0:08:08.680 --> 0:08:12.400 the curve. A same story and credit. You get paid 0:08:12.440 --> 0:08:15.640 pretty decently in investment grade credit. If you want to 0:08:15.680 --> 0:08:17.640 take risk in high yield, I just say stay at 0:08:17.640 --> 0:08:20.520 the upper end of high yield, and then you can 0:08:20.560 --> 0:08:23.480 look at international Because we do see the dollar continuing 0:08:23.520 --> 0:08:24.679 to weaken from here. 0:08:24.840 --> 0:08:26.440 I look at this and I want you to talk 0:08:26.480 --> 0:08:28.840 about Lizzie Saunders world. I know, you know, you get it. 0:08:28.840 --> 0:08:32.719 There's a Chinese wall, folks, between what Kathy Jones is doing. 0:08:32.760 --> 0:08:33.400 But there isn't. 0:08:34.240 --> 0:08:38.200 And the answer is there's dividend or share buyback as 0:08:38.200 --> 0:08:42.160 a yield proxy. There's the enthusiasms peoples this weekend, Paul 0:08:42.280 --> 0:08:44.240 saying heavy into mag seven. 0:08:44.240 --> 0:08:47.240 Da da da da da. Folks, these are just opinions here. 0:08:47.280 --> 0:08:50.240 Now, do you sense a point where there is a 0:08:50.360 --> 0:08:55.120 shift to people finding value in the coupon versus the 0:08:55.200 --> 0:08:56.520 game of equities? 0:08:56.800 --> 0:08:59.199 Yeah, we do. We see a lot of investors who 0:08:59.240 --> 0:09:02.760 have just gotten very cautious because of the volatility in 0:09:02.800 --> 0:09:06.640 the equity market and they have and the concern about 0:09:06.640 --> 0:09:09.240 all these policies and not knowing where it goes. So 0:09:09.280 --> 0:09:13.679 we have seen people shifting more into fixed income, clipping 0:09:13.679 --> 0:09:17.640 the coupon, reducing some of the volatility and risk in 0:09:17.679 --> 0:09:18.359 the portfolio. 0:09:19.280 --> 0:09:22.679 So again to my Federal Reserve, they can just sit 0:09:22.720 --> 0:09:25.439 on their hands for there a while. Now it seems like. 0:09:25.559 --> 0:09:27.640 Yeah, it looks like that's the name of the game. 0:09:27.720 --> 0:09:30.199 They sit on their hands for a while. Maybe September, 0:09:30.800 --> 0:09:33.600 wait and see if unemployment goes up. I mean that's 0:09:33.640 --> 0:09:36.000 going to be They've talked about the dual mandate a lot, 0:09:36.200 --> 0:09:37.760 and that's going to be the driver. 0:09:37.920 --> 0:09:42.480 I think undergraduate from Northwestern and an NBA from Northwestern. 0:09:42.600 --> 0:09:43.600 There are other schools out. 0:09:43.480 --> 0:09:48.000 There, you now, I mean, yes, I know, but I'm 0:09:48.040 --> 0:09:49.680 on Midwestern A. 0:09:50.080 --> 0:09:53.120 I've never asked you this. Did you study with Robert Gordon? 0:09:53.480 --> 0:09:54.280 Yes? 0:09:54.840 --> 0:09:58.560 Tell our audience, folks, we more in Stanley Fisher. The 0:09:58.800 --> 0:10:04.439 giant of midw growth economics was Robert Gordon. Massive influence. 0:10:04.480 --> 0:10:07.760 Good morning, Jim Glass and formerly with JP Morgan out 0:10:07.760 --> 0:10:10.920 on the left coast. Tell me about being in a 0:10:10.960 --> 0:10:14.679 classroom with the great Midwest growth economist. 0:10:14.800 --> 0:10:19.120 Yeah, he was a fantastic professor, so smart and so nice. 0:10:19.200 --> 0:10:22.320 He believed in the manufacturing process. Did he believe that 0:10:22.400 --> 0:10:26.520 manufacturing was different and it created a multiplier of jobs, 0:10:26.559 --> 0:10:29.960 just different than all these other service sector Bologney jobs 0:10:30.160 --> 0:10:34.079 like what Paul and I do me. 0:10:34.760 --> 0:10:37.160 Yeah, No, I think he did believe in that. You remember, 0:10:37.360 --> 0:10:40.600 you know, growing up in the Midwest, the rust belt 0:10:40.640 --> 0:10:42.559 and all that, and I think he had a real 0:10:42.600 --> 0:10:45.880 affinity for that and felt that the widening of the 0:10:45.920 --> 0:10:48.679 trade deficit. The loss of those jobs which were right 0:10:48.960 --> 0:10:52.400 producing solid middle class incomes was a big problem. 0:10:52.600 --> 0:10:54.720 We'll touch on this today, Kathy Joes, thank you so 0:10:54.840 --> 0:10:57.920 much for those comments, Professor Gordon. With the death the 0:10:57.960 --> 0:11:01.280 passing of Stanley a fisherman, we'll find some other people 0:11:01.280 --> 0:11:03.920 in the coming days to speak to, honest. 0:11:04.559 --> 0:11:08.440 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:11:08.480 --> 0:11:11.880 starting at seven am Eastern on Applecarplay and Android Auto 0:11:11.920 --> 0:11:14.880 with the Bloomberg Business App. You can also listen live 0:11:14.960 --> 0:11:18.520 on Amazon Alexa from our flagship New York station, Just 0:11:18.600 --> 0:11:21.080 say Alexa Play Bloomberg eleven thirty. 0:11:21.240 --> 0:11:24.240 Joining us justin di you are this morning is Maya 0:11:24.320 --> 0:11:29.120 McGuinness Committee for Responsible Federal Budget. We're thrilled Mia mckindness, 0:11:29.120 --> 0:11:32.120 really an authority on the mess we're in, could join 0:11:32.240 --> 0:11:38.199 us here. Maya. The critics of your world say CBO 0:11:38.440 --> 0:11:42.000 is too gloomy in their growth, and that we will 0:11:42.040 --> 0:11:46.080 continue to grow our way out of this mess, or 0:11:46.160 --> 0:11:47.400 at least sustain it. 0:11:47.960 --> 0:11:48.719 Do you buy it? 0:11:50.240 --> 0:11:55.640 Yeah, there's a lot of CBO bashing going on these days. No, certainly, 0:11:55.720 --> 0:11:57.760 I wish it were true. I think everyone wishes that 0:11:57.800 --> 0:12:00.600 you could cut taxes and that would unleash such huge 0:12:00.600 --> 0:12:03.480 growth that it would fix our fiscal problems. But clearly 0:12:03.520 --> 0:12:06.559 that's not the case. There are a number of outside 0:12:06.679 --> 0:12:09.880 estimators who are looking at the tax bill, the reconciliation bill, 0:12:09.920 --> 0:12:11.680 and trying to figure out what the effects on economic 0:12:11.720 --> 0:12:12.360 growth would be. 0:12:12.760 --> 0:12:13.920 And here's the way it works. 0:12:14.000 --> 0:12:18.760 Tax cuts have positive effects on growth, but not enough 0:12:18.800 --> 0:12:22.880 to generate enough revenues that they offset all of the 0:12:23.000 --> 0:12:26.600 loss from the tax cuts themselves, usually about twenty percent. 0:12:27.000 --> 0:12:29.880 The problem is that this tax bill in particular isn't 0:12:29.880 --> 0:12:32.199 as pro growth as what we saw in twenty seventeen 0:12:32.320 --> 0:12:33.480 the corporate tax rate cuts. 0:12:33.520 --> 0:12:34.800 Those were very pro growth. 0:12:34.920 --> 0:12:37.199 This less so chops up the tax base in a 0:12:37.240 --> 0:12:40.280 lot of ways, and our debt is now so large 0:12:40.600 --> 0:12:44.640 that the negative effects of that even outweigh those positive 0:12:44.640 --> 0:12:47.000 effects of tax cuts. So the bashing is just like 0:12:47.480 --> 0:12:49.040 angry parents yelling at the ref. 0:12:49.640 --> 0:12:51.320 I love that sounds like my weekend. 0:12:52.120 --> 0:12:53.080 Maa McGuinness. 0:12:53.320 --> 0:12:56.920 Henrietta Trees was with us, And the basic idea is 0:12:56.960 --> 0:12:59.760 we dashed to the Senate for the big, beautiful bill, 0:13:00.360 --> 0:13:03.720 that there will be moderate Republicans out there to save 0:13:03.880 --> 0:13:08.280 the budget. Day does that beast exist or are they prehistoric? 0:13:08.360 --> 0:13:10.120 And they off the room. 0:13:10.760 --> 0:13:12.920 Yeah, no, I wish that's how I thought it were 0:13:12.920 --> 0:13:15.160 going to play out. I'm worried because I think the 0:13:15.200 --> 0:13:18.240 moderate Republicans, just like we saw in the House, may 0:13:18.280 --> 0:13:20.400 actually be pushing to make the bill worse. So the 0:13:20.440 --> 0:13:24.360 bill has a tax cuts and the medium spending cuts, 0:13:24.640 --> 0:13:26.400 and what you're seeing from the moderates is they're more 0:13:26.440 --> 0:13:31.360 concerned about fewer spending cuts than more fiscal responsibility. And 0:13:31.400 --> 0:13:33.600 then on the very conservative side, where you have people 0:13:33.640 --> 0:13:35.640 who are willing to do the spending cuts you would need, 0:13:35.880 --> 0:13:38.880 they also are more prone to believe the myths of 0:13:38.920 --> 0:13:41.600 the fairy tale that growth can fix everything and you 0:13:41.640 --> 0:13:43.960 don't have to make any structural changes. So the problem 0:13:44.040 --> 0:13:46.720 is nobody makes hard choices in the budget anymore. We 0:13:46.760 --> 0:13:49.760 can do tax Right's stop. 0:13:50.120 --> 0:13:51.599 Paul wants to get in here, But I'm going to 0:13:51.640 --> 0:13:55.080 ask the rude question, by what did God's name happened 0:13:55.400 --> 0:13:59.199 in Washington? Where is the adultness of this debate? 0:14:00.880 --> 0:14:05.240 You know what killed adultness? I think partisan polarization. We 0:14:05.360 --> 0:14:10.640 are so much more focused on Republican versus Democratic preferences 0:14:10.960 --> 0:14:13.120 than we are How you fix the country. It's not 0:14:13.200 --> 0:14:15.840 just fiscal we're not fixing any of the big problems 0:14:15.840 --> 0:14:18.520 where there's anything you actually have to do, because the 0:14:18.559 --> 0:14:21.160 political calculation of don't let that other side have a 0:14:21.200 --> 0:14:25.080 win is outweighing the calculations of compromise and country first. 0:14:25.120 --> 0:14:28.960 And I'm deeply concerned about it. Just like polarizations undermining 0:14:29.000 --> 0:14:32.320 everything are weak fiscal positions keeping us from being prepared 0:14:32.360 --> 0:14:34.960 for the AI race we're in. Then you need to 0:14:35.000 --> 0:14:39.200 fix our social contract, global national security issues that are 0:14:39.280 --> 0:14:41.320 riskier than they used to be, all of these things. 0:14:41.720 --> 0:14:44.680 I think our polarization is put so much stand in 0:14:44.680 --> 0:14:47.000 the wheels. We're not getting anything done, and that's not 0:14:47.200 --> 0:14:51.080 allowing the adults to come forward. They exist behind closed doors. 0:14:51.080 --> 0:14:53.680 They're talking about it, but politically it's not rewarded right 0:14:53.720 --> 0:14:57.040 now in this populist and polarized moment, and we got 0:14:57.080 --> 0:14:58.240 to figure out a fix for that. 0:14:59.000 --> 0:15:01.640 I've been in this market sas nineteen eighty six. Nobody 0:15:01.680 --> 0:15:04.920 cares about deficits in a national debt. Why should we 0:15:05.800 --> 0:15:06.240 real estate? 0:15:06.320 --> 0:15:09.760 Well, you know, the bond market is starting to be 0:15:09.800 --> 0:15:11.480 a bit of a reminder. We actually are hearing so 0:15:11.480 --> 0:15:12.360 many more reminders. 0:15:12.400 --> 0:15:12.840 I'm with you. 0:15:12.920 --> 0:15:16.120 It's been just deafening in terms of people being concerned 0:15:16.120 --> 0:15:18.280 about it other than those of us who work on 0:15:18.320 --> 0:15:20.560 this all the time for the past years. But you're 0:15:20.600 --> 0:15:24.440 hearing many more concerns right now, with warnings, with downgrades, 0:15:24.480 --> 0:15:28.240 with problems in the bond markets, with other countries looking 0:15:28.320 --> 0:15:30.520 at the US debt and thinking this isn't as great 0:15:30.640 --> 0:15:32.640 a this isn't as sure thing as it used to be. 0:15:32.760 --> 0:15:35.440 We have the reserve currency where the safe haven. The 0:15:35.480 --> 0:15:37.440 central Bank did a lot that kept rates down for 0:15:37.480 --> 0:15:41.400 a long time. Many of these trends could gradually be shifting. 0:15:41.680 --> 0:15:44.160 And the whole point is we should not wait to 0:15:44.200 --> 0:15:46.760 find out if and when we get ourselves into trouble. 0:15:47.000 --> 0:15:49.240 We should fix the situation where we still have all 0:15:49.280 --> 0:15:50.160 of those privileges. 0:15:50.200 --> 0:15:52.880 And it's much easier to do so as long as 0:15:52.880 --> 0:15:55.680 people keep showing up at our debt auctions. Maya we 0:15:55.720 --> 0:15:57.840 don't have a problem. What do you say to those folks? 0:15:58.520 --> 0:16:00.960 Yeah, I say that those folks made that argument, and 0:16:01.000 --> 0:16:04.400 as a result, we borrowed more when interest rates were low. 0:16:04.720 --> 0:16:07.200 We now have trillions more in debt, and just small 0:16:07.280 --> 0:16:11.440 increases in interest rates have huge impacts on our interest 0:16:11.480 --> 0:16:13.560 payments as a result, which is why it's the largest 0:16:13.560 --> 0:16:15.920 growing part of the budget, the second line item in 0:16:15.960 --> 0:16:19.280 the budget. Those interest payments are much more possible to 0:16:19.400 --> 0:16:22.360 changing interest rates because of the arguments. Don't worry, be happy, 0:16:22.480 --> 0:16:24.280 keep borrowing. We shouldn't have done it then and we 0:16:24.320 --> 0:16:24.960 shouldn't now. 0:16:25.200 --> 0:16:26.840 My don't be a stranger. We got to get you 0:16:26.920 --> 0:16:28.520 on he or somehow. This is going to get worser 0:16:28.560 --> 0:16:32.239 through this summer. And articulate as always with the Committee 0:16:32.280 --> 0:16:35.520 for a Responsible Federal Budget. Brilliant work, Miami Guinness. 0:16:40.960 --> 0:16:44.840 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:16:44.880 --> 0:16:47.880 starting at seven am Eastern on Apple Cockplay and Android 0:16:47.920 --> 0:16:50.960 Auto with the Bloomberg Business app. You can also watch 0:16:51.000 --> 0:16:53.960 us live every weekday on YouTube and always on the 0:16:53.960 --> 0:16:55.040 Bloomberg Terminal. 0:16:55.160 --> 0:17:01.280 Billion years ago, I decided I wouldn't learn Senate parliamentarian rules. 0:17:01.320 --> 0:17:04.560 Paul good idea. It's just like the only one that 0:17:04.600 --> 0:17:06.840 ever nailed this was Robert bird Well. 0:17:06.880 --> 0:17:09.479 I don't know we have of the Virginia. I mean, 0:17:10.320 --> 0:17:13.119 Henrietta Trace is in studio now to explain. 0:17:13.520 --> 0:17:17.879 Henrietta. I thought a quiet weekend for our elected officials. 0:17:17.920 --> 0:17:21.920 They're all pondering what's next for the Senate. Is they 0:17:21.920 --> 0:17:26.760 look at a big, beautiful bill the parliamentary the procedure 0:17:26.920 --> 0:17:28.360 of it, Will it be smooth? 0:17:29.600 --> 0:17:29.840 Yeah? 0:17:29.840 --> 0:17:33.520 The parliamentarian is one of my favorite jobs for sure, 0:17:33.560 --> 0:17:35.880 So I will take on that burden for you because 0:17:35.920 --> 0:17:36.920 I think it's a blast. 0:17:37.640 --> 0:17:39.760 The Senators are about to come in hot. 0:17:39.840 --> 0:17:42.560 It is all eyes on them for the next four 0:17:42.600 --> 0:17:46.760 to six weeks, and they have trillions of dollars literally 0:17:47.240 --> 0:17:53.280 with taxes, the medicaid cuts, all the various. 0:17:53.040 --> 0:17:55.240 Sanctions packages, and the tariff bills. 0:17:55.280 --> 0:17:57.880 All these pieces are before them right now and all 0:17:57.920 --> 0:17:58.879 eyes are going to be on them. 0:17:58.880 --> 0:18:01.520 The parliamentarian is going to be very busy, as you know. 0:18:01.600 --> 0:18:04.320 The Democrats and the Republicans get an opportunity to go 0:18:04.400 --> 0:18:06.679 before her and explain what it is they'd like to 0:18:06.680 --> 0:18:08.920 see taken out this bill. It's really a game of 0:18:08.960 --> 0:18:10.879 who knows the rule is the best who's the best 0:18:11.359 --> 0:18:14.800 player right now? And that really makes million dollar difference, 0:18:14.880 --> 0:18:17.040 billions of dollars difference thirteen years. 0:18:17.359 --> 0:18:23.200 Elizabeth McDonough m ACD. Elizabeth McDonough is the most powerful 0:18:23.280 --> 0:18:28.879 person in America. Who's that she's a parliamentary. It's like 0:18:29.040 --> 0:18:30.919 Alice at Wonderland. I mean, they have to go in 0:18:30.960 --> 0:18:32.000 front of her, Henrietta. 0:18:32.040 --> 0:18:36.199 Are we going to hear from the Democrats ever in 0:18:36.240 --> 0:18:38.679 this congress? Here, it's such a time for the Democrats 0:18:38.680 --> 0:18:41.520 to make themselves useful at all. 0:18:42.359 --> 0:18:44.240 I mean, it would be about time. 0:18:44.359 --> 0:18:48.440 I continues to be shocked at how absent Democrats are. 0:18:49.080 --> 0:18:52.119 I mean, Republicans are putting taxes on cans of beer? 0:18:52.400 --> 0:18:54.720 How is that not an immediate talking point? But here 0:18:54.760 --> 0:18:59.240 we have over the weekend, Majority Minority Leader Schumer sending 0:18:59.240 --> 0:19:01.080 a letter to his college saying, hey, y'all, it's time 0:19:01.119 --> 0:19:02.840 to get in the game. And as you point out, 0:19:02.840 --> 0:19:05.119 Elizabeth McDonough has been in the Senate since the nineteen 0:19:05.200 --> 0:19:08.919 nineties and has worked for some really esteemed folks and 0:19:09.119 --> 0:19:11.120 is now going to be the key arbiter or Democrats 0:19:11.160 --> 0:19:12.840 are going to go in there and say X, Y 0:19:12.840 --> 0:19:16.280 and Z is not permissible. Strike it from the bill, 0:19:16.480 --> 0:19:19.960 and that's going to hit the tax plans of the 0:19:20.000 --> 0:19:22.399 Republican Conference. One of the reasons that the bill has 0:19:22.440 --> 0:19:25.240 to get more expensive and that even more to the deficit, 0:19:25.280 --> 0:19:29.119 is because it doesn't have an economic impact by using 0:19:29.160 --> 0:19:31.480 the current policy baseline, which is the strategy that Senate 0:19:31.520 --> 0:19:34.520 Republicans are going to use, which will effectively write off 0:19:34.520 --> 0:19:36.800 three point eight trillion dollars worth of this package and 0:19:36.840 --> 0:19:40.760 say the cost is zero. You cannot pass legislation through 0:19:40.840 --> 0:19:45.080 reconciliation instructions unless it has a budget impact, So they 0:19:45.119 --> 0:19:46.639 kind of shoot themselves in the foot here. You get 0:19:46.680 --> 0:19:48.800 three point eight trillion dollars in free money, but it's 0:19:48.800 --> 0:19:51.240 not permissible under reconciliation. So that's going to be one 0:19:51.280 --> 0:19:53.040 of the core things that Democrats try to go off 0:19:53.080 --> 0:19:56.760 the works with with the parliamentarian and Leader Thoon. And 0:19:56.800 --> 0:19:59.119 it's about time DEM's getting the game. So yeah, I 0:19:59.440 --> 0:20:01.159 would be watching both for that. 0:20:01.200 --> 0:20:03.359 Who is a Democratic voice? Would you say? Is it 0:20:03.720 --> 0:20:06.560 Senator Chuck Schumer or is there somebody else in Democratic 0:20:06.600 --> 0:20:09.840 Party that I don't know? Maybe they're looking to step 0:20:09.920 --> 0:20:10.280 up here. 0:20:11.400 --> 0:20:13.600 I mean, I think the Democratic Party is at war 0:20:13.640 --> 0:20:16.399 with itself, trying to figure out if mckem Jeffries is 0:20:16.400 --> 0:20:20.080 the kind of speaker or minority leader that Nancy Pelosi 0:20:20.119 --> 0:20:24.520 could be or was. Certainly that's shown some lacking components. 0:20:24.720 --> 0:20:25.600 At a minimum. 0:20:25.720 --> 0:20:27.720 The party over there on the House side is warring 0:20:27.760 --> 0:20:30.080 between the young folks and the older folks, and they 0:20:30.119 --> 0:20:33.320