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Speaker 1: Runt You by Bank of America Mary Lynch. With virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world

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Speaker 1: be of a, mL dot Com, slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best of economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg David Gurrwy Tom Keen

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Speaker 1: and an increasingly crowded Bloomberg eleventh three O. This is wonderful.

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Speaker 1: In the same studio or two of the great experts

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Speaker 1: on American housing, Robert Schullervial Universe City gets his dose

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Speaker 1: of hate. Peter Wallison does as well. Formerly with President Reagan,

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Speaker 1: A lot of people criticize him for the book Hidden

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Speaker 1: in Plain Sight, which speaks about lousy government policy getting

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Speaker 1: the housing. The key insight is lb J, we all

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Speaker 1: owned a certain amount of houses, then we had a

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Speaker 1: policy prescription of forty or forty five years that blew

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Speaker 1: up And am I right? We're back to the time

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Speaker 1: of l b J, we are back to where we

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Speaker 1: were before the nineteen nineties with about sixty homeownership rate

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Speaker 1: in the United States. Are renters bad people? Of course?

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Speaker 1: Not sent and makes a lot of sense to be

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Speaker 1: a renter very often. How how is that? What's your

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Speaker 1: sense of what this administration's housing policy is? We had

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Speaker 1: Dr Ben Carson, Secretary Ben Carson in here who I

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Speaker 1: last went out, was wonderful. He was very candid, very

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Speaker 1: gracious about the comedy in Washington, very and very candid

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Speaker 1: about what what he intends to do. But I will

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Speaker 1: say I don't think we got a fully formed vision

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Speaker 1: for what he has of the of of HUD. Do

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Speaker 1: you have a sense of what housing policy is going

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Speaker 1: to be likely to this now? I think they're still

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Speaker 1: in the process of developing this policy. UM there are

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Speaker 1: lots of opportunities for them. There's some their Senate groups

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Speaker 1: that are trying to get together. The House has a

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Speaker 1: very clear policy, and that is to get the government

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Speaker 1: out of the housing finance system. UM. I and some

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Speaker 1: colleagues have been talking to people in the administration about

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Speaker 1: other ways that this thing can be approached. But really

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Speaker 1: the answer is and there's only one answer, and that is,

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Speaker 1: if we want to have a stable housing system with

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Speaker 1: affordable housing, we have to get the government out of

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Speaker 1: the business of the of controlling this housing market. And

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Speaker 1: Bob Shiller squirming over there, I mean wallaceon wants to

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Speaker 1: get everybody in the government out. I'm sorry, housing policy

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Speaker 1: is made in a long quarter of the Willard Hotel. Bob,

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Speaker 1: if we can't get to Wallace's nirvana, what's the proper

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Speaker 1: mix of government and private enterprise that makes the case

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Speaker 1: Shiller index go well? I think that the government regulations

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Speaker 1: often serve a purpose. So UH, the Dodd Frank Act

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Speaker 1: put in responsibility for qualified mortgages of the lender to

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Speaker 1: appreciate to uh look at the affordability for the homeowners

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Speaker 1: in terms of mortgage payments. Also, they created the Consumer

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Speaker 1: Financial Protection Bureau, which is UH doing something I don't

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Speaker 1: think Peter would always disagree with that. They're they're they're looking,

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Speaker 1: they're looking at bad business practices. They've they've they've feeled

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Speaker 1: complaints from people who feel they were tricked or misleaded. UH.

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Speaker 1: And and so we have some the unregulated market has

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Speaker 1: some strengths, and it also has weaknesses. And the United

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Speaker 1: States in our history have always had some regulations, or

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Speaker 1: we had. You could sue UH and complain about how

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Speaker 1: you were treated. That goes back right to the beginning.

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Speaker 1: But it's better to have some kind of umbudsman like

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Speaker 1: or some people who are really looking at the practices

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Speaker 1: and UH sometimes lay down the law. Paint a picture

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Speaker 1: for the listeners who've got about six ft between Peter

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Speaker 1: Wallison and Robert Shiller and a bunch of monitor monitors

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Speaker 1: between them. But Peter, what what is what is your

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Speaker 1: impression of the CFPBS role here? There's been so much

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Speaker 1: complaining about it and its structure and all of that

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Speaker 1: to agree with Professor Schiller that it does serve an

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Speaker 1: important purpose. Look, there ought to be certainly some regulation

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Speaker 1: of how mortgages are made and to be sure that

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Speaker 1: the people who buy homes are able to afford them.

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Speaker 1: Things like that the CFPBS rules are terrible, UH. For example,

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Speaker 1: they suggest that there's a limit of forty on the

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Speaker 1: debt to income ratio for a person who has a mortgage.

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Speaker 1: That means you can borrow up to forty of your income.

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Speaker 1: But if you sell the home to Fannie Mae and

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Speaker 1: Freddie mac or to f h A. It's unlimited, you

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Speaker 1: can go over. And so we are creating a whole

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Speaker 1: lot of people in the United States who are buying

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Speaker 1: homes with huge mortgages, way over what they can afford.

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Speaker 1: And eventually, when we reached the top of the bubble

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Speaker 1: and the bubble falls, these people will all default. Um.

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Speaker 1: So we've got to stop getting the government involved in this.

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Speaker 1: If the private sector were making these loans, they would

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Speaker 1: be stable prime loans and we'd have a stable market.

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Speaker 1: I want to come back and broaden this out to

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Speaker 1: what Bob Schill has written about, which is our financial

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Speaker 1: system and also the the idea of a good society.

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Speaker 1: Peter Wallison with US I just got an email from

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Speaker 1: Barry in Connecticut. Barry's got a backyard. You know, it's

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Speaker 1: like the state of Delaware. The backyard is so big

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Speaker 1: and Connecticut, Barry sends in an email. We'll talk to

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Speaker 1: a broader discussion about the banking system A I G

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Speaker 1: as well and Robert Schiller with US of Yale University.

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Speaker 1: UH will continue this discussion perfectly time for the two

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Speaker 1: anniversary of our financial crisis. All of that coming up

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Speaker 1: and about eight weeks with Peter Wallison with Robert Schuller.

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Speaker 1: This is Bloomberg. Peter. Let me go to you first.

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Speaker 1: Over the last couple of weeks, we've seen some movement

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Speaker 1: on the issue of regulation in Washington. Of course, the

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Speaker 1: House of Representatives past the Financial Choice Act, a bill

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Speaker 1: that was drafted by and championed by A. Jeb Hensling,

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Speaker 1: the chairman of the House Financial Services Committee. The expectation

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Speaker 1: is it's not going to go very far. In the Senate,

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Speaker 1: we got the first iteration of a Treasury Department report

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Speaker 1: on regulation from the Treasury Secretary, this one focusing on banks,

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Speaker 1: but some seven pages in length. It's a serious, thick

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Speaker 1: report on what this administration could do when it comes

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Speaker 1: to regulation. Where is change going to happen from? Where

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Speaker 1: is it going to come from? If indeed we do

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Speaker 1: see change to regulation in Wathington, how much faith are

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Speaker 1: you putting in the legislature at this point to do anything.

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Speaker 1: I think at this point, unfortunately, we have to assume

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Speaker 1: that there's not going to be very much important legislation.

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Speaker 1: The Democrats and the Senate, as we all know, are

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Speaker 1: voting against everything that my change Dodd Frank in any

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Speaker 1: way that might change any kind of policy that the

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Speaker 1: Trump administration is for. So we have to realize and

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Speaker 1: as long as we have a filibuster rule in the Senate,

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Speaker 1: the Democrats are going to be able to prevent anything

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Speaker 1: from happening. So the changes in regulation are going to

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Speaker 1: come from the personnel that the Trump administration appoints to

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Speaker 1: various offices in the in the government. And I believe

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Speaker 1: that most of the most of the optimism now that

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Speaker 1: we are seeing in the business community comes from the

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Speaker 1: fact that they believe that there will be an end

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Speaker 1: to the reign of regulation that they had under Obama,

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Speaker 1: and that that's very important. But unfortunately it is not

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Speaker 1: a long term solution. The people in office now during

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Speaker 1: the Trump administration may be less interested in regulation, but

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Speaker 1: there will be a different president in four or eight years,

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Speaker 1: a different administration, and they may return to the regular

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Speaker 1: Tory process. So we really should get rid of all

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Speaker 1: of this terrible regulation if we can. And up to now,

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Speaker 1: it doesn't look as though the Choice Act, which was

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Speaker 1: the House's version of the repeal of most of the

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Speaker 1: major uh seriously troubling provisions in the Dodd Frank Act um,

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Speaker 1: it doesn't look as though that's going to go very

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Speaker 1: far in the Senate right now, Robert Truler, how do

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Speaker 1: you begin to assess the efficacy of of the Dodd

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Speaker 1: Frank Act, of all the regulation that was put into

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Speaker 1: place after the financial crisis. Now, with hindsight, we can

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Speaker 1: sort of look at at what's worked and what what hasn't. Well,

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Speaker 1: how do you go about that process? Actually, you we

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Speaker 1: don't have hindsight yet because we haven't had a financial

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Speaker 1: crisis again, so there's a lot of things that were

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Speaker 1: created in Dodd Frank to deal with the next crisis,

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Speaker 1: and we haven't seen it yet. Things have been kind

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Speaker 1: of frozen. So, as Peter was saying, we still have

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Speaker 1: Fannie and Freddie government agencies supporting much of the housing market.

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Speaker 1: That doesn't look like a stable I agree with Peter,

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Speaker 1: that's not a stable, long run thing, but we're kind

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Speaker 1: of slow to change now. Donald Trump has the problem

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Speaker 1: that during the election he made some rather striking extreme proposals,

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Speaker 1: uh like end Obamacare or delete Dodd Frank. But when

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Speaker 1: you actually look at doing that in its entirety, it's

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Speaker 1: not going to be politically popular and so it's not

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Speaker 1: not going to happen. And we've got that this morning

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Speaker 1: with the healthcare bill from Mr McConnell that we may

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Speaker 1: see Peter Royalison Berry from Connecticut emails in I know

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Speaker 1: Barry's got a backyard bigger than the size of Delaware.

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Speaker 1: He's a typical homeowner, and he says the criticism of

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Speaker 1: Wallason's is just about housing. Do you link in other

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Speaker 1: financial events? In financial events leverage such as the A

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Speaker 1: I G blow up or the SEC allowing the banks

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Speaker 1: to leverage up, They've got to be part of this

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Speaker 1: tobacco too. Yeah, I don't think that there is um

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Speaker 1: a reason to solely look at housing here, but you

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Speaker 1: have to understand, I think anyone has to understand that

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Speaker 1: the market was developed the way it did with a

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Speaker 1: huge housing bubble because of the credit availability that only

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Speaker 1: the government would supply a private set. Fannie mayor Freddie

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Speaker 1: mac hadn't done that. City Group and JP Morgan of

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Speaker 1: course enough why would they? No one would want to

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Speaker 1: make investments because it could have hedged off the risk

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Speaker 1: to the derivatives crew saying you don't think of the

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Speaker 1: big short and derivatives and all that to pick a beast.

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Speaker 1: JP Morgan or Wells Fargo could have done the Fanny

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Speaker 1: May equivalent and hedged off the risk. I don't know

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Speaker 1: how many people would want to take on that risk,

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Speaker 1: but if they did, they would have to pay for it.

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Speaker 1: The government does not have to pay for it in

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Speaker 1: the same way, at least we don't recognize that the

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Speaker 1: government is paying for it. And as a result, these

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Speaker 1: very risky mortgages would be acquired by the government. And

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Speaker 1: as long as that would was going to happen, JP

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Speaker 1: Morgan and Wells Fargo and others make those mortgages, and

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Speaker 1: we're gonna come back with Peter Wallis and Bob Shiller.

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Speaker 1: Got one more question here four hundred ten on the

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Speaker 1: dowll You have been a very cautious bull to be

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Speaker 1: polite about it. How exuberance is our exuberance this morning.

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Speaker 1: I've said things recently that we're quoted as bullish. I

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Speaker 1: was just trying to be reasonable and balanced. Uh. The

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Speaker 1: US has about the highest price stock market in the world,

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Speaker 1: and that is a reason for alarm. Maybe not alarm

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Speaker 1: for concern, but I still think that having some US

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Speaker 1: stocks in one's portfolio makes sense. Interest rates are very low. Uh,

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Speaker 1: you know, there's a there's a risk to the long

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Speaker 1: term bond market as well if interest rates started. If

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Speaker 1: we have we in the time we've got left quickly.

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Speaker 1: Here have we forgotten what a bear market is? How

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Speaker 1: long does it take for us to forget what a

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Speaker 1: bear well? I think, uh yeah, Forgetting is an important

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Speaker 1: human process. It takes place. Um I would say over

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Speaker 1: you know, we're starting to forget the financial crisis. We've

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Speaker 1: remember it pretty well. I think that narratives of old

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Speaker 1: crisis stay with us, and unless they're reinforth, we live

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Speaker 1: stronger and as great depression narrative. Did you see David

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Speaker 1: he got narratives in six times. He was working on

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Speaker 1: it right now. Bob Shiller, Vale University, runt you by

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Speaker 1: Bank of America, Mary Lynch. With virtual reality, virtually everything

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Speaker 1: will change. Discover opportunities in a transforming world, be of

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Speaker 1: a mL dot Com, slash VR, Mary Lynch, Pierced Fenner

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Speaker 1: and Smith Incorporated. David, I want you to bring in

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Speaker 1: our asked because I tear up. He's with the n

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Speaker 1: y U Stern School of Business, which is one of

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Speaker 1: my two charter everytime they believed in Tom Keane when

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Speaker 1: people still don't, it was it was a long time ago,

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Speaker 1: and I'm gonna pass you the box of tissues here

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Speaker 1: or something in the way he is, as you said,

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Speaker 1: Global professor of Management and Strategy at the Stern School

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Speaker 1: at n YU. Author a great piece in the newest

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Speaker 1: issue of the Harvard Business Review. That's the Globalization in

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Speaker 1: the Age of Trump, he joins us on our phone lines.

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Speaker 1: As I said, it's it's a great piece in the

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Speaker 1: Harvard Business Review. A line stood out to me. Executives

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Speaker 1: believe the world is a lot more globalized than it

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Speaker 1: actually is. You dug into this in great detail. We've

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Speaker 1: been told for such a long time that the world

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Speaker 1: is in fact flat right, and that's still according to

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Speaker 1: the results of the six country several thousand managers survey

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Speaker 1: I did, still overwhelmingly the preponderant view. But on the

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Speaker 1: other hand, you just kind of have to look around

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Speaker 1: to realize that the notion of a world in which

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Speaker 1: borders or distances don't matter is well, we shall we

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Speaker 1: say it's slightly optimistic in terms of where we are

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Speaker 1: right now. Package how have we seen a company's adjust

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Speaker 1: to the election of President Trump, the new rhetoric that

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Speaker 1: we've heard that could be characterized as more protectionist, to

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Speaker 1: worry about what's going to happen to globalization. If it's

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Speaker 1: going to disappear or change, how have companies adjusted? Well,

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Speaker 1: I think obviously Trump selection was a signal event, But

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Speaker 1: that said, companies were starting to sense a more protectionist

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Speaker 1: climate well before Trump selection or even Brexit. So I

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Speaker 1: remember Jeff Amelt coming to n y U Stern to

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Speaker 1: do the NBA commencement address in May, and his whole

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Speaker 1: point was the world is turned turned more protect sionistic,

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Speaker 1: and therefore g E is going to localize. So that's

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Speaker 1: a fairly early but very influential example of how some

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Speaker 1: companies are trying to change their strategies. Your article is spectacular,

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Speaker 1: including painful paragraphs a Nazi Germany and a nascent globalization

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Speaker 1: before World War Two? Is the globalization now different from

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Speaker 1: what we studied even six years ago? Is the is

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Speaker 1: the globalization now, professor? Different from Stiglets? There's a small

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Speaker 1: school in northern Manhattan called Columbia. Is the globalization different

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Speaker 1: than stiglets discontent? Well, I mean, I think you know,

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Speaker 1: Joe certainly had his uh finger on the pulse in

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Speaker 1: some sense when he wrote that book. I think the

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Speaker 1: title actually came from a marthis sin but be that

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Speaker 1: as it may, I think that what we're seeing right now,

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Speaker 1: for whatever reason, and as the kind of anger that

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Speaker 1: some of us had frankly been expecting a while ago

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Speaker 1: around distributional outcomes, etcetera. And globalization is certainly in a

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Speaker 1: way more fragile place than when Joe Stiglerts wrote his

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Speaker 1: book in terms of are not being certain about which

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Speaker 1: way it's going to head? Did you see David Gurah

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Speaker 1: how he got that Harvard Indian skewer in there. He

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Speaker 1: was very subtle about that. You know, it's very cool

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Speaker 1: how the professor got that any great titles are worth

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Speaker 1: a lot world of flat book suggests. And uh, based

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Speaker 1: on what I've heard about it, A Marthea has been

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Speaker 1: not skeptical about globalization, but let's just say, has uh

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Speaker 1: longstanding impressions of its limitations. We say good morning to

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Speaker 1: professor Professor Stiglet's David about fucus. Let me ask you

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Speaker 1: about g E in particular. Of course, ge has been

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Speaker 1: in the news as we heard of Jeff Emil's exit

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Speaker 1: here over these last couple of weeks. That's going to

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Speaker 1: happen fairly soon. He'll remain on the board for for

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Speaker 1: a little while. Longer. But in your piece you profile

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Speaker 1: GE in particular, what what how has that Jeff Emil

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Speaker 1: reacted to the globalization? Why is it such an interesting

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Speaker 1: case study for you? Well, I think a couple of reasons.

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Speaker 1: One is that Jeff was very prescient when he came

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Speaker 1: to stern At sensing before Brexit, because I think a

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Speaker 1: lot of business leaders were oblivious to what the downside

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Speaker 1: risks were in terms of where the world economy might head.

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Speaker 1: So you know, now it's kind of a commonplace that

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Speaker 1: you know, globalization is dead or an't life support or

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Speaker 1: some other similar exaggeration. But Jeff sense this and the

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Speaker 1: part of it. So on that. On that account, I

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Speaker 1: thought he was very perceptive as to the notion of

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Speaker 1: GE dealing with the whole change in the environment by localizing.

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Speaker 1: That's the one that I expressed some reservations about, just

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Speaker 1: in terms of how well suited that kind of pure

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Speaker 1: approach is to a company like GE. What does globaloney

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Speaker 1: It's like maloney? Is it edible? Yeah? It is, unfortunately,

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Speaker 1: and the more of more of it you eat, uh,

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Speaker 1: you know, the greater the health hazards. Uh. Some of

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Speaker 1: our surveys documents so globaloney, which is great phrase due

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Speaker 1: to Claire Booth, loose is basically the idea that there's

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Speaker 1: a persistent tendency and one can go into a bunch

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Speaker 1: of reasons to overstate how palize the world actually is.

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Speaker 1: And so when I recently ran a survey of managers

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Speaker 1: in six countries asking them questions like, you know, what

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Speaker 1: percentage of GDP is accounted for by trade? What percentage

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Speaker 1: of calling minutes are international? Things like that, Uh, basically

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Speaker 1: the overstated by about a factor of five, and that's

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Speaker 1: a rather large gap. That are rather large overshoot. It

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Speaker 1: certainly doesn't fit with some of you know, the folk

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Speaker 1: wisdom about the wisdom of crowds, etcetera, and suggests that

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Speaker 1: there's some systematic biases in terms of how we perceive

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Speaker 1: levels of globalization that, particularly at a time of anger

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Speaker 1: about globalization, are not very helpful at easing some of

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Speaker 1: the tensions and apprehensions. Are we done with GAD? Are

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Speaker 1: we done with Reguay? Are we done with World Trade

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Speaker 1: Organization as a multilateral world? Is that global only going forward? Well? Um, no,

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Speaker 1: I mean I think that, or I certainly hope that

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Speaker 1: we're not entirely done with the multilateral trading apparatus, because

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Speaker 1: I think, and more importantly, uh many other more knowledgeable

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Speaker 1: people think that that's been the driver of some of

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Speaker 1: the extraordinary gains in trade that we've seen since the

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Speaker 1: Kennedy round back in nineteen three. So by global only,

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Speaker 1: I simply mean a tendency to overstate how globalized we are.

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Speaker 1: And in the context of international organizations, I would suggest

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Speaker 1: something more like the following scenario. Lots of people worried

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Speaker 1: about world government, et cetera. You know the black you

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Speaker 1: know the black helicopters, and so forth. Useful to remind

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Speaker 1: ourselves the total amount of employees of international governmental organizations

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Speaker 1: is point one percent of the total employment of governments

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Speaker 1: around the World's let's come back. This is too, This

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Speaker 1: is very, very valuable. Panjab with us with New York's

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Speaker 1: University's String School of Business, with an incredible, incredible effort

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Speaker 1: in a Harvard Business Review it takes to cover the

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Speaker 1: truth about globalization. It's really if if you're engaged in

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Speaker 1: the world economy. It is truly a must read from

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Speaker 1: Harvard Business Review, The Truth about Globalization. And we will

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Speaker 1: continue this discussion. I know David Gurrl has got a

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Speaker 1: whole bunch of tangents he wants to take as well. Okay,

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Speaker 1: why did you bring in this great article that we're

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Speaker 1: using as a foundation to talk about people's huge fears

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Speaker 1: about globalization? Why don't you bring in and I'll put

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Speaker 1: that link out on Twitter as well. Globalization in the

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Speaker 1: Age of Trump. That's in the Harvard Business Reviews July

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Speaker 1: and August issue package. Gym watching this now. He's a

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Speaker 1: global professor of management and strategy at the Stern School

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Speaker 1: of Business. Let me ask you how much globalization is

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Speaker 1: determined by the United States. I've been struck by the

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Speaker 1: rhetoric since the NATO summit in Brussels, since the United

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Speaker 1: States elected to pull out of the Paris Climate Agree.

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Speaker 1: I mean, there's a sense among policymakers in Washington that

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Speaker 1: the US will always have a seat at the table

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Speaker 1: because it is the US. I think we've heard that

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Speaker 1: from from members the administration in those exact words. How

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Speaker 1: much does globalization depend on the US? Well, the US

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Speaker 1: is certainly central to globalization in the sense that if

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Speaker 1: you look at anything other than merchandise trade, where China

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Speaker 1: has become the leading exporter in the world, other types

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Speaker 1: of international interactions, the US typically leads, usually by large margins.

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Speaker 1: And then, of course, outside the standard economic indicators, is

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Speaker 1: has something to do with US military expenditures and military power,

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Speaker 1: which obviously still matters a great deal, but there is

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Speaker 1: something about not just latent structural power, but as Joe

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Speaker 1: and I pointed out a long time ago, about soft

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Speaker 1: power in terms of how people actually react to one

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Speaker 1: and one of the concerns is that what's being sacrificed

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Speaker 1: right now is a lot of US soft power around

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Speaker 1: the world, as in terms of how how reliable traditional

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Speaker 1: allies think of the US as being, how much people

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Speaker 1: even want to emulate some of the kinds of sentiments

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Speaker 1: that seem to have risen to the floor in the

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Speaker 1: US political process, etcetera. You know, I look at what's

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Speaker 1: happening with trade and this this three headed beast heading

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Speaker 1: our trade policy. We've got the Wilbur Ross, Robert Leitheiser,

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Speaker 1: and we've got Peter Navarro as well. How much how

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Speaker 1: much potential does that have to change the globalized landscape

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Speaker 1: of what they're proposing doing what we've seen them do

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Speaker 1: here on a on a sort of bilateral basis, the

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Speaker 1: countervailing duties, their approach to trade. How how substantial difference

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Speaker 1: could that make? Well, I mean, I think the approach

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Speaker 1: to trade, as your note is very different. So there's

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Speaker 1: a clearer sense. Certainly, people have talked about Peter Navarro's

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Speaker 1: philosophical leanings in this regard towards seeing trade as a

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Speaker 1: zero sum game, and that simply doesn't have any real

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Speaker 1: kind of support anywhere in economics as a way of

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Speaker 1: thinking about the thing. So it's definitely radical some of

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Speaker 1: the things that they're proposing. I mean, the original discussion

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Speaker 1: of the import tax on China. Uh, let's just say that,

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Speaker 1: you know, it's a little bit easier to beat up

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Speaker 1: on Mexico given that of their merchandise exports are directed

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Speaker 1: to the US and there are neighbor to the south.

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Speaker 1: But China supplied a clear warning that in the event

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Speaker 1: of such attacks, uh, it would go after companies like

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Speaker 1: Apple and Boeing, etcetera. Uh, they've at least been somewhat

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Speaker 1: more cautious than the kinds of things that Navarro has

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Speaker 1: written in the past about China. Would have you necessarily

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Speaker 1: led me to expect, And that's probably a good thing. Well,

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Speaker 1: this has been wonderful from Spain. Pancosh Jamahmat with New

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Speaker 1: York University STI in School of Business. Really look forward

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Speaker 1: to speaking in when he wanders back to the island

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Speaker 1: of Manhattan again. The truth about globalization. It is in

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Speaker 1: Harvard Business Review, and it is a triumph of clear

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Speaker 1: writing and clear charts. And I love Globe blooney. Yes,

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Speaker 1: that's like Survey Bolony, Survey blooney. We do that to

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Speaker 1: keep that cold here. Often of it as pimiento and

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Speaker 1: olives in it as well. Yeah, has inflicted in my childhood.

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Speaker 1: We have had huge response this morning to a number

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Speaker 1: of our guests. One of them, Michael Cannon at the

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Speaker 1: Cato Institute Liberals Progresses said, how can this guy be

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Speaker 1: on air, ETCETERA Conservative say, Kato doesn't know what they're

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Speaker 1: talking about. Kato says, nobody knows what they're talking about.

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Speaker 1: To clear the air further, Michael Cannon of Cato Institute,

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Speaker 1: as we await McConnell care, Michael, let me start with

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Speaker 1: a nuance, and I think everybody needs clarified. What is

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Speaker 1: the difference between Cato healthcare and the criticisms of Senator

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Speaker 1: Paul of Kentucky. How are the conservatives of the GOP

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Speaker 1: different from the libertarians of Kato. Well, Rand Paul is

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Speaker 1: probably closest to Kato. He calls himself a libertarian conservative,

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Speaker 1: and he would repeal Obamacare in full, which is what

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Speaker 1: libertarians wants. And he would replace Obamacare with changes that

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Speaker 1: would actually drive down the cost of healthcare, that would

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Speaker 1: make access to care more secure for the sick, that

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Speaker 1: would let you get a health insurance plan that's portable,

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Speaker 1: that disappear when your job. Why does he have next

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Speaker 1: to no support, Well, it turns out that a lot

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Speaker 1: of Republicans have been saying for seven years that they

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Speaker 1: want to repeal Obamacare. Didn't mean it because as soon

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Speaker 1: as they got the chance a students voters put them

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Speaker 1: in place to do that, they abandoned that cause. And

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Speaker 1: now the Senator Mitch McConnell is pushing a bill that

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Speaker 1: would not only not repeal Obamacare, it would expand Obamacare

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Speaker 1: in significant respects. Let me ask you just about what

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Speaker 1: you're expecting to to see today. I've I've noted in

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Speaker 1: Bloomberg's coverage of the goings on on Capitol Hill from

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Speaker 1: our colleagues Stephen Dennis, from say Jokapoor and others, how

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Speaker 1: often they stop a Republican lawmaker, Republican senator to ask

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Speaker 1: him or her what's going to be in this bill,

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Speaker 1: and how few of them seem to know. I mean,

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Speaker 1: this has been held very close to the vest I

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Speaker 1: wonder what you make of of that, indeed, what you

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Speaker 1: think you're gonna see today. Well, the reason for that

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00:27:43,720 --> 00:27:48,520
Speaker 1: is pretty clear. The Senate has uh fifty two Republicans.

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Speaker 1: They are sharply divided over Obamacare. You've got some moderates

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Speaker 1: or even left leaning Republicans who want to keep Obamacare

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00:27:58,080 --> 00:28:01,080
Speaker 1: or even expand it, and you've got some Republicans who

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00:28:01,119 --> 00:28:02,960
Speaker 1: definitely want to repeal it. And they've got a very

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00:28:03,040 --> 00:28:05,439
Speaker 1: narrow margin. They can only afford to lose two votes

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Speaker 1: because of this arcane procedure they're using to pass something

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Speaker 1: with just a bare majority in the Senate. Uh and

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Speaker 1: then even then they'll need the Vice president to break

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Speaker 1: a tie. And so when you've got a divided caucus

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Speaker 1: and a narrow margin, they don't want to leave it

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Speaker 1: to chance by putting it through the committee process and

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Speaker 1: having it get uh pulled too far either to the

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Speaker 1: left or to the right. So Mitch McConnell's really trying

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Speaker 1: to control this this process, and that's why they're doing

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Speaker 1: everything they accused the Democrats of doing back in two

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Speaker 1: thousand nine, which is drafting the bill behind closed doors,

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Speaker 1: not sharing what they're doing with the American people, letting

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Speaker 1: lobbyists know about what's in the bill before they let

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Speaker 1: anyone else know. So, Uh, I think that's the reason.

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Speaker 1: What does that portend to you? To you, Michael, I

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Speaker 1: mean I listened to what you're saying there about the

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Speaker 1: worry that the caucus is so fractured. They would be

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Speaker 1: able to hammer it down if if everybody was was involved.

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Speaker 1: But this seems like a pretty short term measurement where

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Speaker 1: they're gonna come out of this committee, this small committee,

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Speaker 1: with a piece of legislation. How do they then get

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Speaker 1: everybody to rally around it? Well, with a lot of

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00:29:09,000 --> 00:29:12,880
Speaker 1: threats and cajole. Really mean, President is going to plead

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Speaker 1: with them that we need to win and if you

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00:29:15,160 --> 00:29:18,240
Speaker 1: want me to support anything on your agenda, you're gonna

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00:29:18,280 --> 00:29:20,600
Speaker 1: have to vote for this bill. Ms McConnell will do

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00:29:20,600 --> 00:29:23,800
Speaker 1: the same. They'll threaten to primary Uh folks who don't

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00:29:23,880 --> 00:29:27,840
Speaker 1: vote for the bill. Uh. But uh, look, you know

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Speaker 1: the problem with writing a bill like this behind closed doors.

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Speaker 1: We saw on the House side, you have a bunch

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Speaker 1: of really nonexperts or at least something maybe some experts,

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00:29:38,560 --> 00:29:40,640
Speaker 1: but who still have limited knowledge, who are putting together

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Speaker 1: a bill when they don't even understand all the consequences.

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Speaker 1: That's why you have committee hearings and and and write

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Speaker 1: these things in an open process, so you can find

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00:29:48,040 --> 00:29:50,560
Speaker 1: out what's gonna work and what isn't. The emotion I

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00:29:50,760 --> 00:29:53,680
Speaker 1: see in conversation and the emails and letters I get

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00:29:53,720 --> 00:29:57,320
Speaker 1: from listeners comes down to how much a given person

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Speaker 1: pays in a deductible where the you to pay twenty

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00:30:01,400 --> 00:30:04,000
Speaker 1: bucks or two hundred bucks whatever, and now they're paying

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Speaker 1: eight hundred dollars dollars. That seems to be a third

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Speaker 1: rail for a lot of people. What does Cato Care

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Speaker 1: or Rand Paul Care or Obama lightcare due to this

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Speaker 1: hugely emotional issue of cash out if I get sick, Well,

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Speaker 1: what really motivates people is the quality of covers that

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Speaker 1: they're going to receive. I mean that that that turns

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Speaker 1: Democrats against Obamacare's pre existing conditioned provisions when they learn

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Speaker 1: about the impact that those provisions have on What about

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Speaker 1: the money out the door? Right but so many people

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Speaker 1: right in to me about the problem with Obamacare and

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Speaker 1: the Republican Obamacare light plan. And something that Rand Paul

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00:30:47,160 --> 00:30:51,240
Speaker 1: gets right is, Uh, those Obamacare and Obamacare Light they

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00:30:51,280 --> 00:30:53,680
Speaker 1: don't reduce the cost of care. They just throw more

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Speaker 1: government money at unaffordable care. Rand Paul's proposal and proposals

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00:30:58,600 --> 00:31:01,520
Speaker 1: that I put forward, and and and some others would

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Speaker 1: actually reduce the cost of care so that uh, fewer

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00:31:05,520 --> 00:31:08,120
Speaker 1: people would even need to hit those deductibles because the

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00:31:08,200 --> 00:31:09,680
Speaker 1: care they need is going to cost so much less

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00:31:09,680 --> 00:31:12,560
Speaker 1: than their deductibles, and their health insurance premiums would be lower,

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00:31:12,600 --> 00:31:14,840
Speaker 1: so they'd be able to afford lower deductibles if that's

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00:31:14,840 --> 00:31:18,959
Speaker 1: what they what they want. But Ms McConnell is not

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Speaker 1: reducing the cost of care. Ms McConnell is just throwing

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Speaker 1: more government money at unaffordable care. Uh. I'm going back

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00:31:27,160 --> 00:31:28,840
Speaker 1: to what might or might not be in this bill.

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Speaker 1: We saw the House pass its own piece of legislation.

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00:31:30,920 --> 00:31:33,680
Speaker 1: The Senate refused to pick up that piece of legislation

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Speaker 1: work off of it. From the reporting that I'm reading

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Speaker 1: this morning again from our our colleagues, it sounds like

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Speaker 1: this bill is going to look uh not totally like

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00:31:40,920 --> 00:31:43,680
Speaker 1: that bill coming out of the House, but similar to it.

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00:31:44,960 --> 00:31:47,160
Speaker 1: Are you optimistic that that there is going to be

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Speaker 1: some agreement between these two houses of Congress, that there

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00:31:50,040 --> 00:31:51,680
Speaker 1: is a path forward for them to hammer out some

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Speaker 1: of their disagreements and come come out with something that

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Speaker 1: both houses could support. I think if they hammered out

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Speaker 1: a compromise between these two bills, I'd be very pessimistic

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Speaker 1: um about the future of healthcare. So I because I

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Speaker 1: think that either the House bill or what we've heard

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00:32:05,400 --> 00:32:07,880
Speaker 1: of the Senate bill so far would not be a

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00:32:07,880 --> 00:32:09,600
Speaker 1: step in the right direction, or it would be worse

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Speaker 1: than doing nothing. So I do I think they could

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Speaker 1: work out a compromise, perhaps, but I think that the

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Speaker 1: future of healthcare would be more secure if if if

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Speaker 1: these efforts failed, people got to feel the costs of

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Speaker 1: Obamacare for a little longer, and that focus people's attention

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00:32:31,320 --> 00:32:34,520
Speaker 1: on the real problem that the Republicans hardly touched much

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00:32:34,600 --> 00:32:37,800
Speaker 1: less repeal, which is the community rating price controls that

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00:32:37,840 --> 00:32:40,800
Speaker 1: are driving up premiums and driving quality of coverage. I

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Speaker 1: want to come back and continue this discussion, Michael Cannon.

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Speaker 1: We get a huge response for pro and con when

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00:32:46,160 --> 00:32:49,360
Speaker 1: Mr Cannon joins us, we greatly appreciate his attendance on

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00:32:49,440 --> 00:32:51,920
Speaker 1: this important day for all of our health care coverage

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Speaker 1: with the Senate bill. David, what's it like? Sort of

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Speaker 1: sort of like this morning, it's a morphic from Senator

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Speaker 1: McConnell that it's gonna come out today. I don't think

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Speaker 1: we've gotten much more clarity on the record from him

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Speaker 1: about that. We heard from John Corny, another senator, yesterday

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Speaker 1: saying it could be Friday. I understand that's kind of

548
00:33:08,520 --> 00:33:11,200
Speaker 1: an outlier call, but I think the expectation broad lines

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Speaker 1: will get a draft of this thing today to look at.

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00:33:21,520 --> 00:33:25,640
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and

551
00:33:25,720 --> 00:33:31,040
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

552
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Speaker 1: platform you prefer. I'm on Twitter at Tom Keene. David

553
00:33:34,720 --> 00:33:38,880
Speaker 1: Gura is at David Gura. Before the podcast, you can

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00:33:38,960 --> 00:33:53,560
Speaker 1: always catch us worldwide. I'm Bloomberg Radio. Runch you by

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