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Speaker 2: Eyes on Munich today, there are a couple of important
Speaker 2: stories that we're following. You've you've got negotiations, of course,
Speaker 2: that are getting underway in Munich with regard to Ukraine.
Speaker 2: You've also got an important deadline tomorrow in Gaza that
Speaker 2: we're going to be talking to Michael Allen about. Here,
Speaker 2: a high noon deadline put forth by Donald Trump said
Speaker 2: all hell will break out if hostages are not released,
Speaker 2: and hamas had been dragging its feet on the idea
Speaker 2: of a continued release. Here it appears it will be
Speaker 2: on schedule. Very unclear how many hostages and what condition
Speaker 2: they will be in. Michael Allen is Managing director of
Speaker 2: Beaking Global Strategies and spent time as special assistant to
Speaker 2: President George W. Bush as part of his national security team.
Speaker 2: It's great to see you, Welcome back. Good to see Jeff.
Speaker 2: So we want to talk about a couple of things here,
Speaker 2: and we'll start in Munich. I know you're no stranger
Speaker 2: to the Munich Security Conference, and it is now apparently
Speaker 2: the staging ground for at least the opening salvo in
Speaker 2: talks over Ukraine. Jd Vance is talking about a lot
Speaker 2: of things today, including the idea of American troops being
Speaker 2: on the table in Ukraine. Do you buy that?
Speaker 3: Wow?
Speaker 4: I was shocked by the inclusion of that in jd
Speaker 4: Vance's remarks. Of course, he means I believe a tripwire
Speaker 4: force part of some sort of peacekeeping operation, but just
Speaker 4: two days after Hegseth dismissed that there would be US
Speaker 4: soldiers involved in such an arrangement. It was definitely a
Speaker 4: surprise to see Vice President Vance come in and say, well,
Speaker 4: not only US troops, but sanctions as well are on
Speaker 4: the table.
Speaker 2: So he's trying to talk tough against Russia. They're trying
Speaker 2: to compel I guess Vladimir Putin to the table. But
Speaker 2: Donald Trump was on the phone with him for an
Speaker 2: hour and a half the other day. What they talk.
Speaker 4: About, well, well, they talked about Ukraine. Certainly, it sounds
Speaker 4: like the President also talked about wanting to get rid
Speaker 4: of nuclear weapons. And they even talked about artificial intelligence,
Speaker 4: but I think Ukraine was the most thing they talked about.
Speaker 4: And I think he's trying to induce Putin to the table.
Speaker 4: Maybe they meet in the Middle East in the coming weeks.
Speaker 4: But I think it's Trump starting to set the conditions
Speaker 4: under which he can get into a real negotiation.
Speaker 2: He says, Vladimir Putin wants to get out Russia wants
Speaker 2: to get out of this thing. Do you believe that?
Speaker 2: Is he looking for an off ramp? How come he
Speaker 2: couldn't find one with Joe Biden.
Speaker 4: I believe it most that Putin's looking for is a
Speaker 4: brief cease fire in order to re you know, Tavik
Speaker 4: have his arms back.
Speaker 2: With doubt his motivations entirely.
Speaker 4: Well, because I don't think the underlying problems with why
Speaker 4: there is a war going to be addressed, and which
Speaker 4: is that Ukraine. He doesn't want them to exist. He
Speaker 4: sees them as a security threat. He doesn't like NATO
Speaker 4: approaching his orders. So Putin's been suffering. He needs more arms,
Speaker 4: He needs time for his economy to recover. It's starting
Speaker 4: to go down and down, And so I think at
Speaker 4: most he would want to cease fire a peace agreement.
Speaker 2: I doubt it. The idea of going back to pre
Speaker 2: twenty fourteen boundaries Crimea included. Yeah, Secretary of Defense says unrealistic.
Speaker 2: He had to walk back some of those remarks. Is
Speaker 2: he right?
Speaker 4: I think it's unrealistic to expect them to vacate Crimea
Speaker 4: or really almost any territory.
Speaker 2: That they already lost goes to Russia.
Speaker 4: I'm afraid that at least half the don boss might
Speaker 4: go to Russia, and maybe they put it in some
Speaker 4: special status and try to say that there'll be a
Speaker 4: vote sometime in the future, just to surrounds familiar Yeah,
Speaker 4: to preserve some sort of face saving arrangement for Zelenski.
Speaker 4: But yeah, it's hard to imagine. Can you see Russian
Speaker 4: troops rolling back from any of the territory that they've
Speaker 4: already gotten, Maybe only if they're trading Kursk and that's
Speaker 4: the Russian territory that the Ukrainians have set.
Speaker 2: Up camp testing. That was a pretty smart move Ileski.
Speaker 2: Just big picture, then this does not sound like Michael Allen,
Speaker 2: who expects this war to end. Well, certainly not on
Speaker 2: day one, but in the initial stages of this new presidence.
Speaker 4: I can't see it ending for a long period of time.
Speaker 4: I mean this could come back again. I mean we
Speaker 4: had twenty fourteen and then we had twenty twenty two,
Speaker 4: and I think Vladimir Putin's got very serious designs on
Speaker 4: this particular piece of territory. I'm hopeful that we won't
Speaker 4: have a third war. If you will, if we have
Speaker 4: a real European peacekeeping force, a real trip wire there,
Speaker 4: we have to do actual security guarantees. If not NATO,
Speaker 4: then they need to have some assurances that the West
Speaker 4: will be there for them. Because what Zelensky needs is
Speaker 4: he needs to have his country back. He needs to
Speaker 4: feel safe enough, and companies need to feel safe enough
Speaker 4: to go there and invest and attract his refugees back.
Speaker 4: And if it feels like a cheap ceasefire, neither of
Speaker 4: those things will happen.
Speaker 2: And if Putin's goal is to reconstitute the Soviet Union,
Speaker 2: were just spending a lot of time talking for nothing here, Yeah,
Speaker 2: spending time with Michael Allen on balance of power. I
Speaker 2: want to move to Israel and what might take place tomorrow.
Speaker 2: We've seen a lot of cross currents here between Hamas
Speaker 2: and Israel when it comes to hostages in Gaza approaching
Speaker 2: a potential phase two under the ceasefire, Donald Trump this
Speaker 2: week decides to say if they're not all out by
Speaker 2: noontime Saturday, hell breaks out. That threat seemed to work
Speaker 2: pretty well last time. Will it tomorrow?
Speaker 4: I think so. A few hours ago, Hamas, through an
Speaker 4: intermediary said here are the three hostages that we planned
Speaker 4: to release. So I think things are still on track.
Speaker 4: It's never great to feel super about until it actually happens.
Speaker 4: There's definitely a lot of stress in the relationship. I
Speaker 4: think the President constantly talking about Gaza and maybe the
Speaker 4: Palestinians not being able to come back might be sort
Speaker 4: of just stabilizing for this in the future. I think
Speaker 4: they need to try and get Israel's commitments to roll
Speaker 4: back their troops out of populated areas. That needs to
Speaker 4: continue to happen so that the conditions that for us
Speaker 4: to proceed down into phase two will obtain.
Speaker 2: Boy, he said a lot the other day and indicated
Speaker 2: that he needed to see more than three hostages. Did
Speaker 2: you read his words to suggest the scheduled release much
Speaker 2: must go forward, or that every hostage must be released tomorrow.
Speaker 4: The latter I saw him say very clearly that I
Speaker 4: want them all back now.
Speaker 2: I don't know that.
Speaker 4: I don't know that if he attached though all hell
Speaker 4: break loose to all of them coming back on Saturday,
Speaker 4: he definitely said I want them all back. I'm tired
Speaker 4: of this process. But it may be enough that they're
Speaker 4: back in train and that maybe that'll satisfy Trump.
Speaker 2: This is what happens when you're trying to parse the
Speaker 2: words here. I want to remind everybody that you were
Speaker 2: the first person on this broadcast. I think it was
Speaker 2: about two weeks ago, around the time Donald Trump met
Speaker 2: with Benjamin dett Yahoo to say that they were in
Speaker 2: fact talking about a lot more than Gaza. They were
Speaker 2: talking about a preemptive strike against Iran and that this
Speaker 2: is in fact something that is in the works. Reporting
Speaker 2: in the days following our inner suggested that this is
Speaker 2: in fact underway. Are we going to see and Israeli
Speaker 2: strike against Iran?
Speaker 4: I think it's honestly, it's getting more and more likely
Speaker 4: because the conditions for Israel to be able to do
Speaker 4: this are in good shape. It's because there is no
Speaker 4: real air defense system radars in Syria. Even in Tehran,
Speaker 4: there is a sense that because there's no Hezbola, they
Speaker 4: have a freer shot in order to go hit Iran
Speaker 4: inside Iran proper. I think what people are digesting now
Speaker 4: is that will it be a complete destruction of their
Speaker 4: nuclear program or just degrading. And it's going to be
Speaker 4: just degrading. It's too spread out, It's been going on
Speaker 4: for too long. I think what they're really down to
Speaker 4: is do they have the precise weaponry to be able
Speaker 4: to penetrate into the mountain complex that houses the main
Speaker 4: centrifuge hub called ford Ou. That's I think what they're
Speaker 4: looking for. They're rumors that the Israelis are getting the
Speaker 4: right weaponry from US, but I don't know that I've
Speaker 4: seen nick confirmed yet.
Speaker 2: So they use American made bunker busting bombs. Exactly does
Speaker 2: America help execute the operation by intelligence or any other meal?
Speaker 4: I think by intelligence certainly. I don't know that. However,
Speaker 4: Trump will allow one of our cargo planes or a
Speaker 4: B two in order to do it. I mean, the Israelis,
Speaker 4: I think, could do it through their own cargo plane.
Speaker 4: But there are a lot of people trying to study
Speaker 4: this right now.
Speaker 2: What does Saudi Arabia think of this idea.
Speaker 4: I think they're not excited about it. When you think
Speaker 4: about Mohammed ben Salman, what he wants and what he's
Speaker 4: been talking about forever is Vision twenty thirty. He wants
Speaker 4: to be able to develop his economy diversified away from oil.
Speaker 4: And I don't think even though he doesn't like the Iranians,
Speaker 4: I don't think he really wants to see a war
Speaker 4: breakout between the two. I think he, over time wants
Speaker 4: to see some sort of progress with the Palestinians so
Speaker 4: that he can normalize with Israel, because ultimately that's what's
Speaker 4: good for his economy. That's like the Silicon Valley in
Speaker 4: the Middle East, and he needs to have good relations there.
Speaker 2: Fascinating. I'm guessing that King Abdullah of Jordan is not
Speaker 2: sleeping well at night. He met with Donald Trump here
Speaker 2: earlier in the week. Pretty awkward meeting. I mean, he's
Speaker 2: being asked to essentially do the impossible in housing one
Speaker 2: thousands more of Palestinians, which he's clearly not prepared to do.
Speaker 2: But he needs the United States to exist, doesn't he.
Speaker 4: We have supported them lockstock and barrel for many generations
Speaker 4: and I don't see us stopping this anytime soon. I
Speaker 4: hope that Trump was satisfied with the King of Jordan
Speaker 4: saying I'll take two thousand sick and injured children. Maybe
Speaker 4: he can do humanitarian things to assuage President Trump. But
Speaker 4: I think the pressure goes back onto Egypt now they
Speaker 4: canceled their trip over here. I think you'll hear Trump
Speaker 4: will comment on that at some point in particular. And
Speaker 4: don't forget about the UAE in Saudi. It seems like
Speaker 4: the vice presidents I'm sorry, Rubio is going to go
Speaker 4: over there soon. Mike Waltz might go over there soon.
Speaker 4: So there's a lot of activity in the works.
Speaker 2: Well, you know, the long game was normalized relations between
Speaker 2: Israel and Saudi Arabia. We talk about this a lot,
Speaker 2: that this cease fire might help to unlock negotiations. Again,
Speaker 2: you start bombing Iran, we're walking away from that, right.
Speaker 4: It could be yeah, because sometimes Iran says, well, you
Speaker 4: know what, I'm going to hit your regional allies America.
Speaker 4: If this happens here, I don't know that they would
Speaker 4: do it. We would be over there in some sort
Speaker 4: of presence to try and shoot down the missiles that
Speaker 4: we're headed towards our allies.
Speaker 2: But it would be an.
Speaker 4: Iffy proposition and I don't think they're ready for it.
Speaker 2: Benjamin NETANYAHUO does not want to see a phase two,
Speaker 2: is the conventional wisdom.
Speaker 3: Yeah.
Speaker 2: Will he find a way to reignite this fight in Gaza.
Speaker 2: He's promising intense fighting if hostages are not released tomorrow.
Speaker 4: I think that he's under real pressure from President Trump.
Speaker 4: It's so early in the Trump term. I know Rondhmer
Speaker 4: and people that are close to him are saying, you
Speaker 4: just can't defy the president right now when he's saying
Speaker 4: he wants all the hostages done and he wants that
Speaker 4: distraction over with. That's the real new factor that Netanyahu
Speaker 4: has to deal with. It's no longer just Biden anymore
Speaker 4: pushing for things. It's Trump. He's going to be here
Speaker 4: for a long time, and Trump loves to use the
Speaker 4: leverage and he doesn't want that relationship to go in
Speaker 4: the ditch.
Speaker 2: How long is the window for Iran by the time
Speaker 2: they build up their defenses once again to make that impossible.
Speaker 4: It's hard to say. It's probably a matter of six
Speaker 4: months or more. They need new stuff back from Russia,
Speaker 4: which obviously has a lot of other designs on their
Speaker 4: own equipment, but it's not going to be there forever.
Speaker 4: I mean, has Bela and Iran are already trying to rebuild,
Speaker 4: so they need to think about doing it sooner rather
Speaker 4: than later, and they need to figure out how many
Speaker 4: sites they can hit.
Speaker 2: Someday We're going to have a lighthearted conversation. I just
Speaker 2: know it. Michael Allen, beaking Global Strategies. Thank you for
Speaker 2: bringing your experience and expertise to the table as always
Speaker 2: here on Balance of Power, I'm Joe, Matthew and Washington.
Speaker 2: Glad you're with us. We'll assemble our panel next. Rick
Speaker 2: Davis and Gdi Shanzano on the way in here on
Speaker 2: Balance of Power. On Bloomberg TV and Radio.
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Speaker 1: flagship New York station. Just Say Alexa played Bloomberg eleven thirty.
Speaker 2: They're been fired by email? How about voicemail? This does
Speaker 2: happen from time to time and our little business, maybe yours,
Speaker 2: and if you work for the federal government, it's part
Speaker 2: of your new reality. As the purge begins, thousands of
Speaker 2: workers laid off in messages delivered through pre recorded videos
Speaker 2: that's cute, and on group calls. Some ordered to leave
Speaker 2: the building within thirty minutes, not even enough time to
Speaker 2: pack up the desk. Washington Post says the purge begins
Speaker 2: now as the Trump administration moves swiftly to fire thousands,
Speaker 2: directing to begin with agency heads to terminate trial and
Speaker 2: probationary staff. If you've just gotten the bill, don't get comfortable.
Speaker 2: That'll affect as many as two hundred thousand employees. Reaction
Speaker 2: from the American Federation of Government Employees, the biggest union
Speaker 2: representing federal workers. Employees were given no notice, no due process,
Speaker 2: no opportunity to defend themselves in a playton violation of
Speaker 2: the principles of fairness and merit that are supposed to
Speaker 2: govern federal employment. But this is just the beginning, right
Speaker 2: Not that many took out the buyout offer, and so
Speaker 2: they are now being fired, not just here in Washington,
Speaker 2: but all over the country, where most of the federal
Speaker 2: workforce lives and works. This is of course, all going
Speaker 2: back to the DOGE and the efforts of Elon Musk
Speaker 2: and his team digging through various agencies trying to find
Speaker 2: the cuts. If you ask Elon Musk, and to the
Speaker 2: extent that he spoke to the World Government's summit in Dubai,
Speaker 2: you just lop off the whole agency with nothing left.
Speaker 2: Here's what he said, We.
Speaker 5: Have to really delete entire agencies, many of them. And
Speaker 5: that's not to say there won't be an increase over
Speaker 5: time of bureaucracy in some new administration, but it will.
Speaker 5: It'll be from a much lower baseline. So it's a
Speaker 5: step in the right direction.
Speaker 6: I think.
Speaker 5: Well, the overwatching goal here is like, it's to lay
Speaker 5: the foundation for prosperity that will last many decades, you know,
Speaker 5: maybe centuries.
Speaker 2: See what the panel thinks. We're joined now by Rick Davis,
Speaker 2: partner at Stone Core Capital, republican strategist Genie Shanzino, democratic analyst,
Speaker 2: political science professor at Iona University. They are both our
Speaker 2: Bloomberg Politics contributors. What do you think about this idea
Speaker 2: genie of deleting entire agencies. Elon Musk went on to say,
Speaker 2: quote it's kind of like a weed. If we don't
Speaker 2: remove the roots of the weed, then it's easy for
Speaker 2: the weed to grow back. Is he right?
Speaker 7: That is quite an analogy to describe people in our government.
Speaker 8: You know.
Speaker 7: The reality is we fought a revolutionary war to fight
Speaker 7: back against a tyrant in the form of the King
Speaker 7: of Great Britain, and we have clung to that importantly
Speaker 7: throughout our almost two hundred and fifty year history, that
Speaker 7: no one person should accumulate power in that way. And
Speaker 7: now here we have an unelected person who is responsible
Speaker 7: to no one, is not transparent in what he is
Speaker 7: doing up there talking about making these kinds of cuts.
Speaker 7: That is deeply concerning, and of course that's why we're
Speaker 7: seeing all these lawsuits come out against this kind of
Speaker 7: exercise of power. And already public opinion shows, public opinion
Speaker 7: polls rather show how unpopular this is. Elon Musk's approval
Speaker 7: rating is underwater. Yes, we can trim cut, we can
Speaker 7: be more efficient, but that's not what they are doing,
Speaker 7: and not what they are interested in, and not a
Speaker 7: process that they are following that is legal or that
Speaker 7: is something that we've ever seen in the United States.
Speaker 7: And so all of those things are deeply concerning.
Speaker 2: Rick. You've worked with your share of bureaucrats in your
Speaker 2: time here in Washington, in the Senate and in the
Speaker 2: White House. Elon Musk says, I think we do need
Speaker 2: to delete entire agencies as opposed to leave a lot
Speaker 2: of them behind. Will he accomplish it, Yeah, I think
Speaker 2: he will be able to do that.
Speaker 9: Look, there's nothing in the Constitution that specifies which agencies
Speaker 9: a government should be existing, and many of these are
Speaker 9: relatively modern affectations of expansion of the government role. You know,
Speaker 9: Department of Education is a classic example. Since Ronald Reagan,
Speaker 9: it's been orthodoxy in the Republican Party to say that
Speaker 9: we're going to get rid of the Department of Education.
Speaker 9: Lenna McMahon is just in a process of getting confirmed.
Speaker 9: Maybe you know, she can just stay at home and
Speaker 9: not have to worry about coming into the office. But
Speaker 9: you know, this is a state function, not a federal function.
Speaker 9: There's there's a lot of argument to be made that
Speaker 9: those closest to the education and we have a you know,
Speaker 9: quilt of different rules and regulations that govern education as well.
Speaker 9: It should be the last thing we want is federal
Speaker 9: intervention in the teaching of our children. And so you know,
Speaker 9: nobody's making that argument, but that's been the argument for
Speaker 9: fifty years. In the Republican Party Commerce department. Howard Lutnik
Speaker 9: put him out of a job. You know, we have
Speaker 9: duplicate trade roles, and and you know, you scratch your
Speaker 9: head and you wonder, what do we really need a
Speaker 9: commerce department for? If we have if we believe in
Speaker 9: market economies and the free trade system. So at the
Speaker 9: end of the day, I think, you know, we have
Speaker 9: to understand there is only two elected officials in the
Speaker 9: executive branch. Never has been more than that. President and
Speaker 9: Vice president. They tell their staff and a cabinet secretary
Speaker 9: is a staff member what to do every day. And
Speaker 9: that's all that Elon Musk is doing. He's just a
Speaker 9: little bit better at it than most have been in
Speaker 9: the past. And so I'm not condoning all his tactics.
Speaker 9: But at the end of the day, much like in
Speaker 9: his first term, Donald Trump said, hey, you know, every
Speaker 9: Republican president says they want to make Jerusalem the you know,
Speaker 9: the location for our embassy, and he's the only one
Speaker 9: who's done it. So and look at that's worked out
Speaker 9: just fine, So at the end of the day, I
Speaker 9: think we got to give them a little bit of
Speaker 9: space here. And and Genie's right, you know, there is
Speaker 9: a recourse go to the courts and and and let
Speaker 9: them decide, you know, what is legal within our system.
Speaker 2: How about that, Genie, your thoughts on the way Rick
Speaker 2: just framed that having just heard Elon Musk say that
Speaker 2: we're talking about laying the foundation for prosperity that may
Speaker 2: last many decades, maybe centuries. So is the temporary pain
Speaker 2: worth it?
Speaker 7: You know? I don't think anybody said that the bureaucracy
Speaker 7: is in the constitution. But when we reference the Constitution,
Speaker 7: it is the fact that we live in a democratic
Speaker 7: state and that the president not directly elected but indirectly elected,
Speaker 7: and you do have members of the cabinet. They are
Speaker 7: responsible and responsive to the Senate. Elon Musk is not
Speaker 7: in that trect. Sure, presidents appoint all kinds of people,
Speaker 7: including family members, but they do not wield this kind
Speaker 7: of power, nor are they on the dole for the
Speaker 7: federal government. Let's not forget Elon Musk and his companies
Speaker 7: get huge amounts of money from the federal government and
Speaker 7: we're not seeing any cuts there. So there is absolutely
Speaker 7: a case to be made that what is being done
Speaker 7: here is improper.
Speaker 6: And we will see.
Speaker 7: The courts have upheld certain things like the retirements the
Speaker 7: buyouts at least at this point, but most of the
Speaker 7: other things that this unelected efficient person has talked about,
Speaker 7: they have not upheld at least so far, and they
Speaker 7: have said, we have to take time to look at it.
Speaker 6: And let's not forget.
Speaker 7: This is all being done against a backdrop of a
Speaker 7: Republican Congress that is talking about four point five billion
Speaker 7: dollars trillion rather dollars in cuts so that they can
Speaker 7: extend tax cuts for the wealthy. So this is the
Speaker 7: environment in which this is being had, and so this
Speaker 7: is the impropriety that people are feeling, and this is
Speaker 7: the frustration that they are feeling, and people are starting
Speaker 7: to voice concern about that. Yes, you can cut the
Speaker 7: federal bureaucracy, but don't forget when they tried to do it,
Speaker 7: what did George Bush end up coming in to do
Speaker 7: in two thousand to take back education to the federal
Speaker 7: level because it was that unpopular with the American public.
Speaker 7: And we are still the sovereign people in the United States,
Speaker 7: not people who are appointed by the president and beholden
Speaker 7: to no one, especially not the wealthiest person in the world.
Speaker 7: So there is so much wrong with how that was
Speaker 7: just laid out.
Speaker 2: Well, I'm glad you mentioned the budget resolution that was
Speaker 2: passed out of committee last night. This followed twelve hours
Speaker 2: of debate, the defeat of dozens of Democratic amendments. As
Speaker 2: I said, we had a lot of noise in Washington yesterday,
Speaker 2: a lot of talk about Donald Trump, no fewer than
Speaker 2: four encounters in the last forty eight hours with the media,
Speaker 2: a lot of threatening of tariffs. Nothing was actually implemented.
Speaker 2: We did set the timeline on some to be the
Speaker 2: real news yesterday, Rick. Was this a budget resolution approved
Speaker 2: by the House Budget Committee, as Genie mentioned, four and
Speaker 2: a half trillion dollars in tax cuts, at least one
Speaker 2: and a half trillion in spending cuts. Is this something
Speaker 2: the Freedom Caucus can endorse that could actually be passed
Speaker 2: on the floor.
Speaker 9: Well, I think you know, we heard from the chairman
Speaker 9: of the Freedom Caucus that he got a deal cut.
Speaker 9: His deal was that they would the Freedom Caucus would
Speaker 9: be for this bill as long as you know, they
Speaker 9: would be able to explore another five hundred billion in
Speaker 9: cuts to get it to two trillion, you know, by
Speaker 9: the time the tax cuts are approved. So so they
Speaker 9: got bought in, and I see no opposition to this
Speaker 9: bill at this stage, so you know, conceptually they could
Speaker 9: win by one vote on the floor of the House
Speaker 9: of Representatives and have one big, beautiful bill. So that'll
Speaker 9: put actually a little pressure on the Senate now to
Speaker 9: finalize their budget resolution that does not include the tax cuts.
Speaker 9: What I'm hoping is that we get a step back,
Speaker 9: and has been discussed on this program today, not just
Speaker 9: look at taxes, but tax reform, because there's a lot
Speaker 9: in the tax code that can save Americans a lot
Speaker 9: of money that generates revenue without stifling our growth, and
Speaker 9: be a better tax code gone in the days of
Speaker 9: the debates about flat tax and things like that. But
Speaker 9: the idea that we are going to spend this amount
Speaker 9: of political capital in re upping these tax cuts and
Speaker 9: not actually revised the tax code just seems to be
Speaker 9: a missed opportunity to me.
Speaker 2: Gene the democrat on that panel, ranking Democrat Brendan Boyle
Speaker 2: Pennsylvania called the proposal cruel, heartless, and toxic, harmful to
Speaker 2: low income families by slashing medicaid. We've only got about
Speaker 2: thirty seconds, is he right?
Speaker 7: Well, it's not only Brendan Boyle, He's absolutely right. It's
Speaker 7: also Steve Bannon, who warned everybody last night that a
Speaker 7: lot of MAGA supporters in Red States really, really like
Speaker 7: medicaid and are on it, and these cuts are draconian.
Speaker 7: The President has said privately he agrees this is the
Speaker 7: challenge they have with eight hundred billion cuts Medicaid.
Speaker 2: Great conversation with our signature panel, GENI thank you and
Speaker 2: Rick as well, Genie Shanzano and Rick Davis, Bloomberg Politics contributors.
Speaker 2: I'm Joe Matthew in Washington on the fastest show in politics.
Speaker 2: We're going to turn our attention back to Ukraine talks
Speaker 2: under way today in Munich. Blenda Herring from the Atlantic
Speaker 2: councils up next on Bloomberg.
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch
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Speaker 2: President Trump is set to sign more executive actions. There
Speaker 2: has been some reporting that it will be directed at
Speaker 2: the Department of Education, but we have not seen the
Speaker 2: president yet. He's going to be soon making tracks for
Speaker 2: mar Alago, where he'll be spending the weekend.
Speaker 3: Here.
Speaker 2: Jd Vance, the Vice President, carrying the message of the
Speaker 2: administration today at the Munich Secure Conference, where Ukraine is
Speaker 2: story and issue number one. In fact, it's not just
Speaker 2: jd Vance he was meeting a short time ago. They
Speaker 2: could still be underway with Voladimir Zelenski, the President of
Speaker 2: Ukraine there as well. Following a speech by jd Vance
Speaker 2: that really raised a lot of eyebrows directed towards Europe,
Speaker 2: but also in an interview with Politico suggesting the troops
Speaker 2: are very much on the table, suggesting as well that
Speaker 2: sanctions against Russia may also be employed if no deal
Speaker 2: can be reached. The gears are starting to turn. We
Speaker 2: did hear from Vladimirer Zelensky in Munich earlier today.
Speaker 3: Here he is I will meet with Russians with only
Speaker 3: one Russian guy, with Putin only after we will have
Speaker 3: common plan with Trump Europe and we will sit it
Speaker 3: with Putin and stop the war. Only in this case
Speaker 3: I'm ready to meet, not in other compromus platorms.
Speaker 2: That's where we start our conversation with the true expert.
Speaker 2: We wanted to reach out to Melinda Harring because she's
Speaker 2: been with us every step of the way since Russia's
Speaker 2: invasion of Ukraine, and as we seek peace, we want
Speaker 2: to talk with the senior fellow at the Atlantic count
Speaker 2: Council's Eurasia Center. She's senior advisor rasm for Ukraine. Melinda,
Speaker 2: great to have you back here on Bloomberg TV in radio.
Speaker 2: How seriously are you taking the opening salvo in these negotiations?
Speaker 2: It was an interview with the Wall Street Journal in fact,
Speaker 2: where Jade Vance said, everything is on the table. How
Speaker 2: is the Trump administration posturing itself ahead of talks?
Speaker 6: Hey, Joe, thanks for having me back. So it's been
Speaker 6: a big week for the war in Ukraine and we
Speaker 6: saw the actual opening salvo was Donald Trump's tweet this week,
Speaker 6: and he said a lot of things, but it opened
Speaker 6: the question of territory, It opened the question of NATO,
Speaker 6: It opened the question of long term security guarantees, and
Speaker 6: also the question of American boots on the ground. And
Speaker 6: we've seen the administration pull back and where they are
Speaker 6: today and the way that it looks could obviously change tomorrow.
Speaker 6: But the administration is currently saying that the nineteen ninety
Speaker 6: one borders, so a much larger Ukraine than what we
Speaker 6: see right now is possible, NATO membership is possible. They
Speaker 6: ruled out American boots on the ground, so that was
Speaker 6: one no go.
Speaker 3: But in the.
Speaker 6: Original statement, it doesn't mean that American troops couldn't be
Speaker 6: in Poland or in nearby NATO territory. But really the
Speaker 6: issue is about long term security guarantees, and jd Vance
Speaker 6: said today that we're going to put a plan together
Speaker 6: that gives Ukraine real security guarantees and we're all waiting
Speaker 6: for what those details are. Joe.
Speaker 2: This follows what we heard from the Defense Secretary yesterday, Melinda,
Speaker 2: and I'm sure you were listening when Pete Hegseth ruled
Speaker 2: out US troops for Ukraine, suggested that a return to
Speaker 2: Ukraine's pre twenty fourteen borders was an un realistic objective
Speaker 2: and suggested that the country would never be able to
Speaker 2: join NATO, which do you believe?
Speaker 6: So I believe today's version. So you have to remember
Speaker 6: that the Defense Secretary has waffled, his positions have been
Speaker 6: all over the place. He's not the decider, as George W.
Speaker 6: Bush would like to say, So I'm going to go
Speaker 6: with today's version, and if I have to go with
Speaker 6: yesterday'st version, Joe, I want to parse it a little bit.
Speaker 6: The headlines were not as bad as they were made
Speaker 6: out to be. So even if it even if Pete
Speaker 6: Heegsath's version wins, the US is not recognizing the twenty
Speaker 6: percent of Ukraine that Russia currently occupies as Russian. So
Speaker 6: that's one they're not Washington is not saying NATO membership
Speaker 6: is never going to happen. They're saying it won't happen now.
Speaker 6: And there's a possibility of putting US troops in NATO
Speaker 6: territory to back up European troops. So even if the
Speaker 6: worst case scenario, what heg Seth said is true that
Speaker 6: if that turns out to be policy, it's not terrible.
Speaker 6: It's not great, but it's not terrible and we can
Speaker 6: work with it.
Speaker 2: Okay, Well, that's good perspective when it comes to pre
Speaker 2: twenty fourteen borders, though, Melinda, how realistic is it? In
Speaker 2: any conversation to have Crimea return to Ukraine.
Speaker 6: So joe Crimea is the tricky question. You'll remember that
Speaker 6: the Russians illegally annexed Crimea. This is the boot of
Speaker 6: Ukraine the peninsula in twenty fourteen in a sham referendum,
Speaker 6: and the status of Crimea is still disputed. The Russians
Speaker 6: occupy it and they have a military operation there, but
Speaker 6: Ukraine says it's ours. And the best historical example that
Speaker 6: the international community looks to are the Baltic States. So
Speaker 6: even when the Soviets occupy the Baltic States, they refuse
Speaker 6: to recognize them as Soviet and the international community has
Speaker 6: done the same thing for Crimea. So in these negotiations,
Speaker 6: I don't expect to see Crimea formally change hands. I
Speaker 6: don't think that Ukraine is going to be able to
Speaker 6: get it back legally right now. But the international community
Speaker 6: and Ukraine will continue to recognize that it was illegally
Speaker 6: taken and they have the hope and aspiration that Crimea
Speaker 6: will be returned to Ukraine someday.
Speaker 2: Yeah. We talked a little earlier with Michael Allen this hour, Melinda,
Speaker 2: and he was very skeptical of Vladimir Putin's objectives here.
Speaker 2: Some see a Russian president seeking an off ramp. Michael
Speaker 2: Allen said he's only looking for a short term ceasefire
Speaker 2: so he can regroup in Ukraine. What do you think.
Speaker 6: I think that's right. I think Michael Allen has put
Speaker 6: his finger on it. I don't see a lot of
Speaker 6: momentum on Putin's part or desire on his part to
Speaker 6: seek a ceasefire. He thinks he's winning. He's still taking territory.
Speaker 6: It's slow going, but he has momentum, particularly in the
Speaker 6: Dawn Boss, and there's no reason for him to jump ship.
Speaker 6: He wants to destroy Ukraine, Joe. That's his goal, and
Speaker 6: he's doing it slowly but surely. And he's betting that
Speaker 6: he cares more about Ukraine than the United States or
Speaker 6: Europe does. And that's still That was the decision and
Speaker 6: the calculate he made in twenty two and that's his calculus.
Speaker 9: Now.
Speaker 2: Well, surely Donald Trump knows this right. How can you
Speaker 2: negotiate with an actor who does not have a motivation
Speaker 2: to seek peace?
Speaker 6: So that's a really good question. It's unclear what Donald
Speaker 6: Trump thinks about Putin and his motivations. I think are
Speaker 6: opaque to be generous. So I think Donald Trump wants
Speaker 6: to be a peacemaker, which is a great impulse. You know,
Speaker 6: the New Testament says, blessed are the peacemakers, for they
Speaker 6: should be children of God. We all want to be peacemakers.
Speaker 6: But the conflict in Russia and Ukraine, the war in
Speaker 6: Russia and Ukraine is very difficult, and I think Donald
Speaker 6: Trump is learning the hard way that the devil is
Speaker 6: in the details, and it's going to be difficult for
Speaker 6: him to broker a real, lasting and just peace in Ukraine.
Speaker 6: So I think we're going to have to wait and see.
Speaker 2: The headlines from Ukraine today are not terribly incouraging. As
Speaker 2: Zelenski continues his trip to Munich, Ukraine says a Russian
Speaker 2: drone hit Chernobyl. The nuclear plan actually targeted Chernobyl on purpose, Melinda,
Speaker 2: causing significant damage to the containment shelter that surrounds the reactor.
Speaker 2: Russia says Ukraine staged the attack, which is straight out
Speaker 2: of the playbook that we've seen over the past couple
Speaker 2: of years. Are we about to see a fit of
Speaker 2: additional violence in Ukraine ahead of any kind of a deal?
Speaker 6: Joe, we don't know exactly what we're gonna see, but
Speaker 6: the drone attack on Chernobyl is part of a larger
Speaker 6: pattern every day. I just got back from Ukraine. I
Speaker 6: was in Denipro, in Harky ven Kiev for ten days,
Speaker 6: and every day is uncertain. You don't know if you're
Speaker 6: going to wake up the next day. You don't know
Speaker 6: if you'll if you'll hear drones in the morning. You
Speaker 6: don't know if your apartment building will be hit with
Speaker 6: a ballistic missile. You don't know if your train will
Speaker 6: be struck. This is the uncertainty that people live with
Speaker 6: every day. But I expect Putin to continue what he's doing.
Speaker 6: He's trying to destroy Ukraine as a sovereign, independent country. Joe,
Speaker 6: I went out to one of the old villages, one
Speaker 6: of the small villages in Harkiv Oblast, near Izoom, and
Speaker 6: this is a city that you'll remember that the Russians occupied.
Speaker 6: Went out to a village and in the gymnasium there
Speaker 6: were books tied up, and I said, what are these books?
Speaker 6: And there were books that the Russians had taken in
Speaker 6: this Ukrainian school. They tied them up in rope and
Speaker 6: they were planning to burn the books because they want
Speaker 6: to destroy Ukraine's educational system. The books were in Russian
Speaker 6: and Ukrainian. That's Russia's vision for Ukraine. They want to
Speaker 6: destroy the educational system and they don't want the country
Speaker 6: to exist.
Speaker 3: Wow.
Speaker 2: These are the first hand stories that Melinda brings us
Speaker 2: that you won't hear anywhere else. I want to bring
Speaker 2: you back to that speech from jd Vance Melinda, the
Speaker 2: Vice President, speaking earlier today in Munich, with a focus
Speaker 2: directly on our European allies. Here's what he said.
Speaker 10: The threat that I worry the most about visa e
Speaker 10: Europe is not Russia, it's not China, it's not any
Speaker 10: other external actor. And what I worry about is the
Speaker 10: threat from within, the retreat of Europe from some of
Speaker 10: its most fundamental values, values shared with the United States
Speaker 10: of America.
Speaker 2: Not of a lot of applause in the room, there,
Speaker 2: not a shocker, Melinda. I'm not sure what you thought
Speaker 2: he was referring to there. But is he strengthening America's hands?
Speaker 2: Is he strengthening Ukraine's hand by turning criticism on Europe
Speaker 2: right now?
Speaker 6: So, Joe, I want to take the most generous assessment
Speaker 6: of JD Vance's speech, and I think the most generous
Speaker 6: assessment I can give you is that he is trying
Speaker 6: to provoke the Europeans into action, and he's right to
Speaker 6: do it. The Europeans have been lazy and they have
Speaker 6: talked a big game. And here I'm pointing my finger
Speaker 6: at Germany in France in particular. You know, there's a
Speaker 6: lot of good countries like Poland and the Lithuanians and
Speaker 6: also the Nordic countries that have done a huge amount
Speaker 6: for Ukraine, but Germany and France in particular, they like
Speaker 6: to talk and they don't do. So I think he's
Speaker 6: right to point out that Ukraine is in Europe's backyard
Speaker 6: and it's time to actually do to make good on
Speaker 6: all the promises and and secure Europe.
Speaker 2: What promises are we talking beyond paying dues to NATO
Speaker 2: and beyond investing in each country's own military? Is that
Speaker 2: what we're talking about? Is there more than that?
Speaker 6: No, there's more than that. So if you go to
Speaker 6: the Keel Institute's website, it's a great think tank in Germany.
Speaker 6: It looks at the commitments that country donor governments have
Speaker 6: made and then the actual amount of military kit that
Speaker 6: they've delivered, and in many of these cases there's a
Speaker 6: huge gap between the promise and the delivery. So I'm
Speaker 6: saying Germany and France in particular need to make good
Speaker 6: on the promises that they've made and deliver.
Speaker 2: We've rarely heard your commentary hit Europe so hard, Melinda.
Speaker 2: What's the big picture here? If talks are starting now,
Speaker 2: Donald Trump Vladimir Putin apparently are going to get together.
Speaker 2: At one point floated to get together in Saudi Arabia.
Speaker 2: Apparently that's not going to happen. What's the window for negotiations?
Speaker 2: When does this war end?
Speaker 6: So this war ends when Vladimir Putin decides that it ends.
Speaker 6: That's the hard truth. If Donald Trump pulls out and
Speaker 6: sends no more military assistance, Ukraine will keep fighting and
Speaker 6: the Ukrainians have six to eight months more where they
Speaker 6: can continue at about the same pace. So even if
Speaker 6: the United States says no more, it's over, that doesn't
Speaker 6: mean it's over. And you hear you heard Vladimir Zelensky
Speaker 6: saying any negotiations have to involve Ukraine. So don't try
Speaker 6: this y Alta like format where you exclude Ukraine. We're
Speaker 6: not going to agree to it. So I think we
Speaker 6: are getting closer and closer. We see Trump wants, he
Speaker 6: wants peace, he wants the rumor is Joe that he
Speaker 6: wants the Nobel Prize and he thinks that bringing peace
Speaker 6: to Ukraine might give him that. And let's hope, you know,
Speaker 6: if he can do it sutely. But it's really a
Speaker 6: question of when Putin has decided that the costs exceed
Speaker 6: the benefits, and they don't at this point. For Moscow, does.
Speaker 2: A peace plan need to be permanent to win the
Speaker 2: Nobel Prize?
Speaker 6: You'd have to ask the committee that one. I would
Speaker 6: urge them though, to only issue a peace plan that
Speaker 6: involves a just and lasting piece. And that's going to
Speaker 6: mean some kind of security arrangement with permanent presence of
Speaker 6: troops in Ukraine, and it means Article five guarantees. And
Speaker 6: unfortunately NATO membership is not on the cards right now.
Speaker 6: As Pete haig Seth mentioned yesterday.
Speaker 2: Wellind I'm really glad you could join us today. Welnda Herring,
Speaker 2: Senior Fellow for the Atlantic Council's Eurasia Center, Senior Advisor
Speaker 2: RASM for Ukraine and just back from Kiev, as Melinda mentioned,
Speaker 2: thank you for the insights. As always, Melinda, fascinating conversation
Speaker 2: as we try to track the ball here on negotiations
Speaker 2: surrounding Europe. We've got another day in Munich tomorrow as
Speaker 2: talks will continue.
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch
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Speaker 2: Yeah, you made it to the end of the week,
Speaker 2: and boy, I haven't even mentioned Valentine's Day. Happy Valentine's Day.
Speaker 2: It's not just the Friday edition, it's the Cupid edition.
Speaker 2: And the White House knows this too. If you check
Speaker 2: out the Twitter page at the White House, Producer James
Speaker 2: pointed me to this. Roses are red, violets are blue.
Speaker 2: It says, come here illegally and we'll deport you. Donald Trump,
Speaker 2: the last of the Romantics. It's a big day at
Speaker 2: sixteen hundred Pennsylvania Avenue, so we have to talk about
Speaker 2: some hard decisions. An important thing happened last night. By
Speaker 2: the way, we talk about all the noise that comes
Speaker 2: out of the West Wing every day, and there are
Speaker 2: going to be more executive orders, we're told being signed
Speaker 2: around one pm Eastern time. Sometimes you forget what to
Speaker 2: pay attention to, and I got into that a little
Speaker 2: bit yesterday. We're going to be the flashlight in the
Speaker 2: dark for you where there's actual news, because well, Donald
Speaker 2: Trump was threatening reciprocal tariffs all day long, none of
Speaker 2: them implemented. Maybe they will be someday, maybe they won't.
Speaker 2: Something actually happened last night. A budget got out of
Speaker 2: committee in the House. This is a big deal. If
Speaker 2: you listen to this broadcast. We had Ralph Norman on
Speaker 2: yesterday talking about some of the tough decisions that they
Speaker 2: need to make here when it comes to spending cuts
Speaker 2: to make the freedom COCKUS happy, tax cuts to make
Speaker 2: Donald Trump happy. There are a lot of moving parts here,
Speaker 2: so they get it out of committee even as the
Speaker 2: Senate is marking up its own bill. The big questions, though, remain,
Speaker 2: beginning with how you pay for it, And this is
Speaker 2: where things got complicated. When you add salt, no tax
Speaker 2: on tips, no tax on overtime, no tax on anything.
Speaker 2: I guess anymore, and so decisions are going to have
Speaker 2: to be made. I dared you to stay with us
Speaker 2: for this conversation. You hear about the sausage being made.
Speaker 2: We're going to do this right now and figure this
Speaker 2: out a little bit together and try on some ideas.
Speaker 2: Because a group called Arnold Ventures just produced a report
Speaker 2: on wasteful spending and proposed ways to cut and save.
Speaker 2: The face of that study is George Callis, who served
Speaker 2: for fifteen years on Capitol Hill, a senior tax council
Speaker 2: in the US House of Representatives, was on ways and means.
Speaker 2: Former Speaker Paul Ryan also served as counsel for the
Speaker 2: House Budget Committee. So we have the perfect voice for
Speaker 2: this right now. The report offers twenty reforms, okay, ten
Speaker 2: spending cuts, ten tax loopholes to close. You will not
Speaker 2: agree with them all, but according to this research, if
Speaker 2: they all ended up in the legislation, Trump tax cuts
Speaker 2: are paid for. What a concept. George Callis is with
Speaker 2: us right now in the studio. It's great to see you,
Speaker 2: Thanks for coming in. I hope I framed that close
Speaker 2: to being what we have here. You've got cuts, you've
Speaker 2: got loopholes. I want to walk through some of these
Speaker 2: specifically year. But as you sit in front of me
Speaker 2: right now, having been through this process before, do you
Speaker 2: actually believe that all of these proposals that Donald Trump
Speaker 2: rolled out during the campaign, on top of the twenty
Speaker 2: seventeen tax cuts, we'll end up in a final piece
Speaker 2: of legislation.
Speaker 8: Well, first of all, Joe, it's great to be here.
Speaker 8: Appreciate you having me on. It is hard for me
Speaker 8: to prognosticate. You know, you watch Congress just like I do,
Speaker 8: and it's hard to know what's going to happen in
Speaker 8: twenty four hours, much less as we get to the endgame.
Speaker 8: I think yesterday's markup at the House Budget Committee was
Speaker 8: the first step in a long and winding road to
Speaker 8: quote a Beatles song, and there'll be a lot of
Speaker 8: twists and turns before this thing, you know, gets to
Speaker 8: an endgame. I think I don't know about the President's
Speaker 8: proposals my senses. Some of them are maybe higher priorities
Speaker 8: than others. They certainly add a lot to the four
Speaker 8: point five trillion dollar cost of simply making permanent the
Speaker 8: expiring tax provisions from twenty seventeen, and digs are whole
Speaker 8: even deeper you know, we put out this report and
Speaker 8: it wasn't it wasn't just me, it was you know,
Speaker 8: at Arnold Ventures, we have experts. I'm a tax expert,
Speaker 8: we have healthcare experts, higher education experts, and this was
Speaker 8: a collaborative effort to come up with what was what
Speaker 8: we thought of as a balanced proposal. You know, twenty
Speaker 8: spending cuts or sorry, ten spending cuts, ten tax loophole
Speaker 8: closers that we that are we think are politically viable,
Speaker 8: and therefore we really want to put them on the
Speaker 8: table and have Congress take a close look at them.
Speaker 8: You know, our view is that Congress can do both
Speaker 8: and should do both. And what I mean by that
Speaker 8: is both make permanent and extend pro growth tax policy,
Speaker 8: tax policies that simplify tax filing for American families, make
Speaker 8: the tax code fairer, but also do it without increasing
Speaker 8: are already unsustained able dead burden.
Speaker 2: Well, that would be a feat based on what we've
Speaker 2: been hearing. So just to be clear before I start
Speaker 2: getting specific, you're looking at TCJA without all of the
Speaker 2: other additives, without tips, without overtime, without moving salt. Is
Speaker 2: that fair to say? We're looking at this in the
Speaker 2: twenty seventeen structure.
Speaker 11: That that's how this project started. I mean that was
Speaker 11: the yes, that was the basis.
Speaker 2: Just to set the baseline here. So number one, let's
Speaker 2: start with spending cuts. You find up to a trillion
Speaker 2: dollars by modifying risk adjustment payments to Medicare advantage insurers.
Speaker 2: This is heady stuff, it's complicated, but as you write,
Speaker 2: insurers receive higher payments for enrollees with higher risk scores.
Speaker 2: You make the argument that creates strong financial incentives for
Speaker 2: insurers to make their patients appear sicker than they actually are.
Speaker 2: So what do you do with it?
Speaker 11: Right?
Speaker 8: And so this you know, this is a policy that
Speaker 8: can save up to one trillion dollars. There's a lot
Speaker 8: of money there's you can, as we say in kind
Speaker 8: of DC parlance, you can dial you can do less
Speaker 8: than the whole. It's not everything or nothing kind of policy,
Speaker 8: but it's a good representation of the kinds of policies
Speaker 8: that we proposed in that we think, not only can
Speaker 8: Congress save trillions of dollars, but they can save trillions
Speaker 8: of dollars before they have to go straight to things
Speaker 8: like cutting benefits or raising.
Speaker 11: People's tax right, This would not cut benefit, that's right.
Speaker 8: This is about ringing inefficiencies and waste out of the system.
Speaker 2: Yep, got it. Simplifying student loan repayment, you find over
Speaker 2: two hundred billion dollars there by simply streamlining seven plans
Speaker 2: into two. How easy would that be?
Speaker 11: That's right?
Speaker 8: Well, I think from a technical perspective it's pretty easy.
Speaker 8: In fact, legislation to that effect has already been introduced.
Speaker 8: So there was clearly congressional Republican support on the Hill
Speaker 8: for it. You know, politically, of course, as we know,
Speaker 8: one or two votes in the House on a partisan
Speaker 8: bill can stop anything, so but there is clearly interest
Speaker 8: in doing the We think the policy case is strong.
Speaker 8: You know, a lot of this money is going to
Speaker 8: law students and medical students who earn a lot of money.
Speaker 11: A lot of it goes to professional students.
Speaker 8: Who just get degree after degree after degree that may
Speaker 8: not be worth a whole lot and then get their
Speaker 8: loans forgiven. So there's a lot of you know, poorly
Speaker 8: targeted money there that could be targeted better at the
Speaker 8: students who are really using it appropriately.
Speaker 2: You call for repealing the IRA expansion of the EV
Speaker 2: tax credit, Electric vehicles. That is, the savings of one
Speaker 2: hundred you find another one hundred billion dollars there alone.
Speaker 2: Elon Muskin to let you do that.
Speaker 11: We'll have to see.
Speaker 8: I don't think he's from what I've seen, he hasn't
Speaker 8: been to shown much concern about reducing the EV subsidies.
Speaker 8: I think there's a view that of the IRA Green
Speaker 8: Energy Package of the Democrats enacted in twenty twenty two,
Speaker 8: the EV subsidies have, like the Lead East bang for
Speaker 8: the buck. They cost the most relative to the climate
Speaker 8: impact they have. And so if there's any low hanging
Speaker 8: fruit in the green energy space, I think it's the
Speaker 8: electric vehicle area.
Speaker 2: All right, So we're flying along pretty smooth flights so far,
Speaker 2: we're about to hit massive turbulence. Ready, apply the salt
Speaker 2: cap to businesses. Brace yourself. Eight hundred and twenty three
Speaker 2: billion dollars. I thought we were going to raise the
Speaker 2: cap on salt for individuals. I'm assuming you don't want
Speaker 2: to see that happen, and you want to add it
Speaker 2: to business.
Speaker 3: Is that right? Well?
Speaker 11: Right, right?
Speaker 8: So there's a currently a ten thousand dollars PA on
Speaker 8: the salt deduction.
Speaker 11: If you if you simply extend everything. It stays there.
Speaker 8: You know, I think from a policy perspective, the ideal
Speaker 8: salt cap is zero dollars.
Speaker 2: Someone's screaming right now in New York. I could hear it.
Speaker 11: Well, I like, I like to say I would double
Speaker 11: that amount for married couples, double the zero.
Speaker 2: Mike Lawler's calling.
Speaker 8: He wants to I suspect, yes, I suspect they'll have
Speaker 8: a note from his office when I get back later
Speaker 8: this afternoon. But you know, the policy rationale is that
Speaker 8: if somebody's in the thirty seven percent federal tax bracket
Speaker 8: and their state raises their taxes by one hundred dollars,
Speaker 8: if there's an unlimited salt deduction, it only cost them
Speaker 8: sixty seven dollars or sixty three dollars. They just right,
Speaker 8: and the other thirty seven dollars is basically paid for
Speaker 8: by the rest of the country. And so you know,
Speaker 8: that rationale applies to both individual taxes and to business taxes. Now,
Speaker 8: I would say the revenue from extending it to business
Speaker 8: taxes is pretty substantial, and there are a lot of
Speaker 8: good pro growth business and corporate tax relief provisions on
Speaker 8: the table as well, provisions that I think we would
Speaker 8: say are good policy, and so maybe the corporate salt
Speaker 8: deduction revenues should be allocated mostly to those provisions. Whether
Speaker 8: it's Trump wants to reduce the corporate rate further, sure depreciation,
Speaker 8: R and D, things like that.
Speaker 2: My terminal is exploding right now on this. All right,
Speaker 2: if I had time to mention one more this loophole,
Speaker 2: this is right down the middle for the Bloomberg audience,
Speaker 2: reduce tax preference for stock buybacks over dividends. A lot
Speaker 2: of people watching and listening right now are going to
Speaker 2: bristle at this idea. Why would it work?
Speaker 8: So that's a good example of another principle we had
Speaker 8: with a lot of these proposals, which is we're not
Speaker 8: trying to punish people. We're trying to find areas where
Speaker 8: there's non neutrality, where there's economic distortions, and move closer
Speaker 8: to economic neutrality because in the long run that leads
Speaker 8: to more economic efficiency, more economic growth, a stronger economy.
Speaker 8: There is a tax distortion that from a tax perspective,
Speaker 8: Using stock buybacks to return cash to shareholders is favored
Speaker 8: from a tax perspective compared to just paying out dividends.
Speaker 2: Why they just keep buying stock.
Speaker 11: That's why they keep buying.
Speaker 8: Right, right, And like we're not against stock buybacks, but
Speaker 8: there shouldn't be a tax subsidy for stock buybacks, right.
Speaker 11: Penwharton budget Model did an estimate.
Speaker 8: There's currently a one percent tax on stock buybacks. Penwharton
Speaker 8: Budget Model did an estimate that said the economically neutral
Speaker 8: tax would be about four point six percent. That would
Speaker 8: that would eliminate the tax advantage and make them money.
Speaker 11: Equal with dividends.
Speaker 8: So we've proposed, you know, not going over four point
Speaker 8: six if anything, undershooting to reduce that distortion.
Speaker 11: Let's set the market decide.
Speaker 8: Have you sent this research to the dough We've we
Speaker 8: have distributed it widely to yes, the policymakers in both
Speaker 8: the executive and legislative reaction. Again, I haven't heard from
Speaker 8: Elon yet, Okay, but we've gotten a lot of interest.
Speaker 8: We've got a lot of interest from Capitol Hill.
Speaker 2: I'm sure each office finds a different component that they
Speaker 2: like here.
Speaker 11: They right, So then they.
Speaker 2: All go on the room, they bang their heads against
Speaker 2: the wall and try to come up with something. When
Speaker 2: you add politics to this document, how realistic is any
Speaker 2: of this?
Speaker 11: That's a that's a great question.
Speaker 8: So again, if you're assuming that this is a part
Speaker 8: is an exercise, and yes, every Democrat is going to
Speaker 8: vote no, you know better. We know that everything is
Speaker 8: difficult in the House because they have a one or
Speaker 8: two vote margin. Senate has a little more of a cushion,
Speaker 8: so everything is politically difficult.
Speaker 11: It's sort of a baseline matter. Now.
Speaker 8: We did apply kind of a political viability test to
Speaker 8: identify our top twenty, and we think there's enough interest
Speaker 8: in these proposals to make them.
Speaker 2: Viable achieving fiscally responsible tax reform. I've got the hard
Speaker 2: copy here, you can find it online. It's pretty remarkable,
Speaker 2: arnold ventures you want to agree with it all, but
Speaker 2: at least somebody has taken a crack at this great
Speaker 2: conversation and many thanks for being with us, George Kallis,
Speaker 2: pleasure to have you with us here on Bloomberg. Thanks
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