1 00:00:00,120 --> 00:00:02,920 Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in 2 00:00:03,000 --> 00:00:07,840 Speaker 1: local communities, economies and a sustainable future. That's a power 3 00:00:08,080 --> 00:00:12,360 Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 4 00:00:12,760 --> 00:00:26,400 Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,440 --> 00:00:29,920 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:29,960 --> 00:00:34,800 Speaker 1: insight from the best of economics, finance, investment, and international relations. 7 00:00:35,240 --> 00:00:40,760 Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 8 00:00:40,800 --> 00:00:47,559 Speaker 1: and of course on the Bloomberg. Joining us now in 9 00:00:47,600 --> 00:00:50,279 Speaker 1: our Bloomberg eleven three studios in New York is Bill Lee, 10 00:00:50,560 --> 00:00:53,000 Speaker 1: now chief Economist at the Milk and Institute, as I mentioned, 11 00:00:53,040 --> 00:00:55,840 Speaker 1: formerly head of North America Economics at City and before 12 00:00:55,880 --> 00:00:57,880 Speaker 1: that with the I M F in Washington. Great to 13 00:00:57,920 --> 00:00:59,959 Speaker 1: have you here with us. Congrats on the new gear 14 00:01:00,680 --> 00:01:03,080 Speaker 1: as well. And let's let's start with the tax reform 15 00:01:03,120 --> 00:01:05,680 Speaker 1: package that we got yesterday from the White House, said 16 00:01:05,680 --> 00:01:08,319 Speaker 1: before the press briefing began at one third Wall Street time, 17 00:01:08,920 --> 00:01:11,680 Speaker 1: UH Gary Cohen and the Treasury Secretary Stephen Minution passed 18 00:01:11,680 --> 00:01:14,160 Speaker 1: out a one pager, as they called it, just about 19 00:01:14,160 --> 00:01:16,360 Speaker 1: two hundred words on one piece of paper outlining what 20 00:01:16,400 --> 00:01:18,840 Speaker 1: they would like to see in the tax reform proposal. 21 00:01:19,040 --> 00:01:20,840 Speaker 1: What did you see there yesterday? What was different here? 22 00:01:20,840 --> 00:01:22,839 Speaker 1: How does it compared to what the president was talking 23 00:01:22,840 --> 00:01:25,640 Speaker 1: about when he was a candidate on the campaign trail. Well, David, 24 00:01:25,680 --> 00:01:27,800 Speaker 1: what's great about it was that they reaffirmed that they're 25 00:01:27,800 --> 00:01:31,000 Speaker 1: really committed to doing tax reform and reducing corporate tax rates. 26 00:01:31,080 --> 00:01:33,399 Speaker 1: I mean, we were starting the question that, especially the 27 00:01:33,440 --> 00:01:35,320 Speaker 1: given that he didn't seem to have the political capital 28 00:01:35,480 --> 00:01:38,480 Speaker 1: to get the medical stuff through so so and getting 29 00:01:38,520 --> 00:01:40,039 Speaker 1: rid of a bombacare. Of course I gives him a 30 00:01:40,040 --> 00:01:43,119 Speaker 1: lousy basedline because he now has a higher expenditure level, right. 31 00:01:43,200 --> 00:01:45,160 Speaker 1: But but one of the things that I took away 32 00:01:45,160 --> 00:01:47,760 Speaker 1: from that also was that the the adults have to 33 00:01:47,800 --> 00:01:50,160 Speaker 1: come back into the room and guide policy. We had 34 00:01:50,200 --> 00:01:54,080 Speaker 1: to tell the policymakers in Washington, namely the Senate, right 35 00:01:54,280 --> 00:01:57,080 Speaker 1: and and the House, that we have tools to raise 36 00:01:57,120 --> 00:01:59,520 Speaker 1: revenues and we have to use these tools now. Board 37 00:01:59,520 --> 00:02:01,400 Speaker 1: of Taxes, something that everyone is telling me is dead 38 00:02:01,400 --> 00:02:03,720 Speaker 1: and done. Um, but where are they going to find 39 00:02:03,760 --> 00:02:06,000 Speaker 1: a trillion dollars to fill the gap? So so it 40 00:02:06,280 --> 00:02:08,600 Speaker 1: can't be totally dead and done. And so the stuff 41 00:02:08,600 --> 00:02:10,639 Speaker 1: that I've written and talked about here before is that 42 00:02:10,919 --> 00:02:12,800 Speaker 1: we have to have a realistic analysis of what this 43 00:02:12,880 --> 00:02:15,079 Speaker 1: bordetize can do. And what it can do is give 44 00:02:15,120 --> 00:02:18,080 Speaker 1: you that revenue because you won't get that exchange rate 45 00:02:18,120 --> 00:02:21,320 Speaker 1: offset instantaneously. And that's where I think our profession has 46 00:02:21,360 --> 00:02:25,280 Speaker 1: done a poor job and explaining to the policymakers exactly 47 00:02:25,320 --> 00:02:28,520 Speaker 1: what the prospects are. I think historically we've seen that 48 00:02:28,600 --> 00:02:31,280 Speaker 1: the exchange rate doesn't move in response to these export 49 00:02:31,320 --> 00:02:34,880 Speaker 1: import taxes and current accouse shocks for several years. So 50 00:02:34,960 --> 00:02:37,519 Speaker 1: that means during that time we're gonna get boosted and 51 00:02:37,960 --> 00:02:40,880 Speaker 1: boost to exports and holding back imports. Now it's gonna 52 00:02:40,919 --> 00:02:44,880 Speaker 1: be costly. And that's what everyone, the politicians say, My god, Walmart, 53 00:02:45,000 --> 00:02:47,520 Speaker 1: you've got all these imports that are gonna be up 54 00:02:47,520 --> 00:02:51,120 Speaker 1: at arms. Well, what do we learn international trade? Everyone 55 00:02:51,200 --> 00:02:53,280 Speaker 1: is better off with trade if you do what if 56 00:02:53,320 --> 00:02:56,280 Speaker 1: you tax the gainers and subsidize the losers, because we 57 00:02:56,360 --> 00:02:59,360 Speaker 1: come up with a package that makes everybody better off. 58 00:02:59,600 --> 00:03:01,799 Speaker 1: So that means that we have to during this transition 59 00:03:01,880 --> 00:03:05,880 Speaker 1: period as exchange it starts to appreciate tax the winners. 60 00:03:05,919 --> 00:03:08,320 Speaker 1: That is the bonings of the world, the exporters of 61 00:03:08,320 --> 00:03:10,280 Speaker 1: the world who are exempt, who all of their revenues 62 00:03:10,320 --> 00:03:13,160 Speaker 1: are exempt from taxation, and and help pay for some 63 00:03:13,200 --> 00:03:15,640 Speaker 1: of the costs that the importers are facing. And I 64 00:03:15,680 --> 00:03:18,359 Speaker 1: think that would alleviate a lot of the problems. Now, 65 00:03:18,480 --> 00:03:22,120 Speaker 1: you can't doing this transfer program doesn't mean another bureaucracy setup. 66 00:03:22,280 --> 00:03:23,960 Speaker 1: So what you do is you put some exemptions and 67 00:03:23,960 --> 00:03:26,600 Speaker 1: PHAs ines for the border tax, but it lets you 68 00:03:26,639 --> 00:03:29,160 Speaker 1: start to raise revenues and lets you put in place 69 00:03:29,400 --> 00:03:31,880 Speaker 1: the lower tax rates, and that's really key, lower tax 70 00:03:32,000 --> 00:03:34,840 Speaker 1: rates at broadening the base. There's something elliptical here, isn't 71 00:03:34,840 --> 00:03:37,119 Speaker 1: there That the White House is saying, don't worry about 72 00:03:37,160 --> 00:03:40,400 Speaker 1: the deficit. If we impose this this performance to tax policy, 73 00:03:40,560 --> 00:03:43,000 Speaker 1: we're gonna see growth. If I'm a first term or 74 00:03:43,080 --> 00:03:46,680 Speaker 1: second term congressman in Washington talking to constituents and saying, look, 75 00:03:46,720 --> 00:03:48,320 Speaker 1: I have to have some blind faith here that's going 76 00:03:48,360 --> 00:03:50,280 Speaker 1: to happen, I might be worried. They'd be a little 77 00:03:50,280 --> 00:03:52,160 Speaker 1: skeptical of that of that taking place. How much blind 78 00:03:52,160 --> 00:03:54,480 Speaker 1: faith is required here to get that three percent growth 79 00:03:54,520 --> 00:03:56,920 Speaker 1: that Steve manution talks about time and time again. That's 80 00:03:56,920 --> 00:03:59,120 Speaker 1: the hope in prayer. There really is a lot of faith. Yes, 81 00:03:59,160 --> 00:04:00,680 Speaker 1: you're gonna get a couple of orders where you might 82 00:04:00,680 --> 00:04:03,840 Speaker 1: get three growth, but sustained growth of above two and 83 00:04:03,880 --> 00:04:07,440 Speaker 1: a half percent requires technology to kick in. And technology 84 00:04:07,520 --> 00:04:10,240 Speaker 1: is something that isn't kicking into increased productivity for some 85 00:04:10,320 --> 00:04:13,040 Speaker 1: mysterious reason. The part of the mysterious reason, actually, I 86 00:04:13,040 --> 00:04:15,720 Speaker 1: think is because of regulatory environment. We don't have the 87 00:04:15,840 --> 00:04:19,840 Speaker 1: we have a regular environment that doesn't inspire the use 88 00:04:19,880 --> 00:04:24,560 Speaker 1: of capital to to to create investments that boost productivity. Instead, 89 00:04:24,760 --> 00:04:27,799 Speaker 1: people are looking for ways of pushing dividends and stock 90 00:04:27,839 --> 00:04:31,039 Speaker 1: buybacks instead of investing. And that's really the key. Did 91 00:04:31,040 --> 00:04:33,840 Speaker 1: you like blind faith? You know, the cream was so 92 00:04:33,960 --> 00:04:38,920 Speaker 1: deep good, I mean, Cree was outstanding, and they went 93 00:04:38,920 --> 00:04:45,120 Speaker 1: off and they did this blind staith that did you well? 94 00:04:45,240 --> 00:04:47,599 Speaker 1: Blind faith, hope and prayers. I mean that's the that's 95 00:04:47,640 --> 00:04:50,080 Speaker 1: the stuff of which new administrations are built. But you 96 00:04:50,120 --> 00:04:52,240 Speaker 1: have to come out with some real plans, right and 97 00:04:52,360 --> 00:04:57,400 Speaker 1: real plans. And Richard Nixon had real tangible political plans 98 00:04:57,720 --> 00:05:01,080 Speaker 1: with the House and the set in it back in 99 00:05:01,120 --> 00:05:04,440 Speaker 1: the nine and it started And how did lb J 100 00:05:04,680 --> 00:05:07,520 Speaker 1: get his stuff through? Because he knew where the skeletons beared, 101 00:05:07,560 --> 00:05:09,000 Speaker 1: because he buried some of them. And you make the 102 00:05:09,120 --> 00:05:12,440 Speaker 1: statement that that Donald Trump is no l lb J. 103 00:05:13,839 --> 00:05:17,159 Speaker 1: Is that too strong of a statement. Well, I think 104 00:05:17,480 --> 00:05:20,279 Speaker 1: McConnell is no LBJ uh and and so he can't 105 00:05:20,279 --> 00:05:23,480 Speaker 1: get this number of skeletons out. He convinced the Democrats, 106 00:05:23,640 --> 00:05:26,440 Speaker 1: especially Schumer, right to come along and be part of 107 00:05:26,480 --> 00:05:29,040 Speaker 1: the plan. And I think that's where the opposition is, 108 00:05:29,040 --> 00:05:30,640 Speaker 1: and that's why the Republicans have to resort to the 109 00:05:30,640 --> 00:05:35,480 Speaker 1: so called reconciliation right, a non partisan or a one partisan, 110 00:05:35,640 --> 00:05:39,159 Speaker 1: one party approach to put to passing on tax reform. 111 00:05:39,240 --> 00:05:41,120 Speaker 1: William Lee with this of the Milk and Institute, their 112 00:05:41,160 --> 00:05:44,400 Speaker 1: chief economist. Good morning everyone, Black. I just I interrupted 113 00:05:44,400 --> 00:05:49,920 Speaker 1: their David's excuse me, I never cream was just so 114 00:05:50,000 --> 00:05:53,520 Speaker 1: damn but I never forgave him for that this morning, David, 115 00:05:53,560 --> 00:05:56,720 Speaker 1: why don't you consider continue I look back at my 116 00:05:56,920 --> 00:05:59,599 Speaker 1: record catalog here. But you've you've written so much bill 117 00:05:59,640 --> 00:06:01,800 Speaker 1: about the border adjusted tax and we heard from the 118 00:06:01,839 --> 00:06:04,200 Speaker 1: House Speaker yesterday saying when you look at his plan 119 00:06:04,360 --> 00:06:07,440 Speaker 1: versus the White Houses planing, there's agreement. Do you think 120 00:06:07,480 --> 00:06:10,320 Speaker 1: that the border justed taxes in that remaining do you 121 00:06:10,360 --> 00:06:11,839 Speaker 1: really think that this thing is dead at this point 122 00:06:11,920 --> 00:06:13,200 Speaker 1: or do you think it's something that the White House 123 00:06:13,240 --> 00:06:15,520 Speaker 1: could come around too. I think it's dead until somebody 124 00:06:15,720 --> 00:06:18,000 Speaker 1: explains to the White House how it can work, and 125 00:06:18,000 --> 00:06:19,760 Speaker 1: and and right now there's no one who has really 126 00:06:19,800 --> 00:06:22,000 Speaker 1: cut the vested interest to explain it. And I might 127 00:06:22,000 --> 00:06:23,640 Speaker 1: be the only loan voice out there that says, you know, 128 00:06:23,720 --> 00:06:25,360 Speaker 1: it's a reasonable thing, but you know, there are some 129 00:06:25,400 --> 00:06:27,000 Speaker 1: bad things that come with this border at tax right, 130 00:06:27,040 --> 00:06:29,600 Speaker 1: which which if the current analysis is right, which means, 131 00:06:29,640 --> 00:06:32,119 Speaker 1: you know, if the exchange right appreciates very rapidly, what's 132 00:06:32,120 --> 00:06:34,520 Speaker 1: the one thing we're guaranteed to see termoil than the 133 00:06:34,520 --> 00:06:38,040 Speaker 1: financial markets? Why because the holders of dollar assets are 134 00:06:38,080 --> 00:06:40,640 Speaker 1: gonna be cheering and saying, wow, we were making this 135 00:06:40,720 --> 00:06:43,120 Speaker 1: windfall game. Well, who the hell are those people? They're 136 00:06:43,160 --> 00:06:46,000 Speaker 1: the Chinese, right, so and and and who is it 137 00:06:46,040 --> 00:06:47,800 Speaker 1: that's gonna say, my god, I just lost a ton 138 00:06:47,839 --> 00:06:50,440 Speaker 1: of money. It's the Americans that are holding foreign assets. 139 00:06:50,480 --> 00:06:53,479 Speaker 1: So so, do we really want a rapid exchange right appreciation? 140 00:06:53,480 --> 00:06:58,240 Speaker 1: Absolutely not, because that means a huge uh wealth transfer 141 00:06:58,279 --> 00:07:01,360 Speaker 1: abroad and everyone's gonna selling like crazy and that means 142 00:07:01,400 --> 00:07:04,240 Speaker 1: financial market turmoil. So if the adults holds a can 143 00:07:04,279 --> 00:07:06,920 Speaker 1: all back analysis is right, they should be bringing the 144 00:07:07,040 --> 00:07:11,320 Speaker 1: doorbells and saying sell, because you're like Mark is gonna 145 00:07:11,360 --> 00:07:13,840 Speaker 1: go crazy. And I think that's why they're wrong, because 146 00:07:13,960 --> 00:07:17,800 Speaker 1: the currency dynamic. But our heads are spinning. Mean, just 147 00:07:17,840 --> 00:07:23,640 Speaker 1: the nafta thing last night, doctor holds aken, I did 148 00:07:23,640 --> 00:07:26,400 Speaker 1: not know that. Thank you. I know I'm the lasting 149 00:07:26,520 --> 00:07:29,680 Speaker 1: or anything around here. Wonderful the day. Douglas Holtzkin will 150 00:07:29,720 --> 00:07:32,400 Speaker 1: be with us tomorrow. And as he said, this is 151 00:07:32,480 --> 00:07:37,120 Speaker 1: a fairy tale that they're dealing with tax reform. Do 152 00:07:37,280 --> 00:07:41,880 Speaker 1: you see any credible tax policy out of this one 153 00:07:41,960 --> 00:07:45,160 Speaker 1: page proposal? Yeah, if you don't have a way of 154 00:07:45,240 --> 00:07:47,480 Speaker 1: raising a trillion dollars of revenues, that means you don't 155 00:07:47,520 --> 00:07:50,480 Speaker 1: have any prayer of Do you see proof in your 156 00:07:50,560 --> 00:07:53,720 Speaker 1: research you're wonderful academics, your work at the I m F, 157 00:07:53,960 --> 00:07:57,960 Speaker 1: your work with Professor Powder at the FED, whatever, excuse me, 158 00:07:58,240 --> 00:08:01,560 Speaker 1: but did you see any proof that you can guarantee 159 00:08:01,600 --> 00:08:05,680 Speaker 1: growth off of tax dynamics? No one has ever shown that. 160 00:08:05,840 --> 00:08:08,559 Speaker 1: No one has ever shown that period, right, but tax 161 00:08:08,640 --> 00:08:12,080 Speaker 1: dynamics is a key ingredient to increasing productivity because it 162 00:08:12,120 --> 00:08:15,000 Speaker 1: incentivizes people to the right thing. But you need the 163 00:08:15,000 --> 00:08:17,520 Speaker 1: regulatory environment to go along with it. And right now 164 00:08:17,640 --> 00:08:19,960 Speaker 1: with all the Dodd Frank and SEEKR requirements, we're not 165 00:08:20,000 --> 00:08:23,600 Speaker 1: getting that. So we need coordinated tax and regulator environments. 166 00:08:23,760 --> 00:08:25,920 Speaker 1: Did you, David, did you have to have a kill smoothie? 167 00:08:26,000 --> 00:08:29,200 Speaker 1: Last time over the NAFTA back and forth? My head 168 00:08:29,280 --> 00:08:31,800 Speaker 1: was spinning. But you know, why are we so obsessed 169 00:08:31,840 --> 00:08:34,040 Speaker 1: with NAFTA when trade, Let's face it, trade is a 170 00:08:34,120 --> 00:08:36,920 Speaker 1: very important thing, but it's only the US economy, right 171 00:08:37,000 --> 00:08:40,760 Speaker 1: exposts imposts to the share of GDP. You know, whatever 172 00:08:40,800 --> 00:08:43,920 Speaker 1: anybody's belief here, the president is fixated a NAFTA because 173 00:08:43,960 --> 00:08:47,760 Speaker 1: his core CONSTITUENTSY, oh absolutely, but they're interested in job creation. 174 00:08:47,760 --> 00:08:50,160 Speaker 1: They want good jobs. They don't want they don't want 175 00:08:50,520 --> 00:08:53,319 Speaker 1: a retail healthcare and hospitality be the main source of 176 00:08:53,400 --> 00:08:55,599 Speaker 1: job creation, and they think manufacturing is going to be 177 00:08:55,640 --> 00:08:58,520 Speaker 1: the way. By kidding getting a new NAFTA. What we 178 00:08:58,640 --> 00:09:00,720 Speaker 1: need is a tax environment that said we have to 179 00:09:00,760 --> 00:09:04,000 Speaker 1: have magnufacturing in the US. That's not just trade related. 180 00:09:04,360 --> 00:09:06,199 Speaker 1: Bill leever with us will continue with the milk in 181 00:09:06,240 --> 00:09:08,880 Speaker 1: the Institute this morning and David, we have a guest 182 00:09:08,920 --> 00:09:12,280 Speaker 1: from Washington. The President of the United States, tweeting out 183 00:09:12,720 --> 00:09:17,040 Speaker 1: seven minutes ago quote, I received calls from the President 184 00:09:17,080 --> 00:09:20,120 Speaker 1: of Mexico and the Prime Minister of Canada asking to 185 00:09:20,200 --> 00:09:26,199 Speaker 1: renegotiate an AFTA rather than terminate. I agreed, Yeah, amending 186 00:09:26,360 --> 00:09:28,839 Speaker 1: an official White House statement last night which we quoted 187 00:09:28,840 --> 00:09:30,360 Speaker 1: from at the top of the show, in which he 188 00:09:30,760 --> 00:09:33,840 Speaker 1: commented on the phone calls but didn't indicate who called 189 00:09:33,920 --> 00:09:38,120 Speaker 1: him and and they want to determinate. I don't think 190 00:09:38,160 --> 00:09:40,640 Speaker 1: that's quite that was not in the initial statement from 191 00:09:40,640 --> 00:09:42,800 Speaker 1: the White House. We're lucky to have an expert on this, 192 00:09:42,920 --> 00:09:44,880 Speaker 1: of course, with his great work at City Group on 193 00:09:44,960 --> 00:09:48,000 Speaker 1: Border Texas. We talked about this before and we reviewed it. 194 00:09:48,040 --> 00:09:53,000 Speaker 1: But with the president's uh timely economic tweet, if he's listening, 195 00:09:53,000 --> 00:09:55,960 Speaker 1: you know, it's as if he's chiming in. I'm sorry. 196 00:09:56,040 --> 00:10:00,440 Speaker 1: I go back to Jacob Winer Chicago, zero sum, Murky Tile. 197 00:10:01,000 --> 00:10:03,679 Speaker 1: That's what that tweet looks like to me. Are we 198 00:10:04,000 --> 00:10:09,120 Speaker 1: nudging away from the Washington consensus of Uruguay of gat 199 00:10:09,760 --> 00:10:13,480 Speaker 1: towards a mercantile world? I hope to god we're going 200 00:10:13,520 --> 00:10:15,760 Speaker 1: away from the Washington Sensus because the world has moved 201 00:10:15,760 --> 00:10:18,080 Speaker 1: away from it. The world is no longer a trade 202 00:10:18,160 --> 00:10:20,439 Speaker 1: between nations the way Adam Smith described it is a 203 00:10:20,480 --> 00:10:24,120 Speaker 1: trade between companies. And companies have this huge supply chains 204 00:10:24,280 --> 00:10:26,280 Speaker 1: that associated with it, and so it's very hard to 205 00:10:26,280 --> 00:10:30,800 Speaker 1: see what countries importing what because we're importing and re exporting. God. 206 00:10:30,960 --> 00:10:32,960 Speaker 1: So if that's the case, that means that we need 207 00:10:33,320 --> 00:10:36,760 Speaker 1: a NAPTI type treaty that deals with sector by sector, 208 00:10:36,800 --> 00:10:40,200 Speaker 1: almost company by company type trade relations. And that means 209 00:10:40,200 --> 00:10:42,439 Speaker 1: that we need to have bilateral and and and and 210 00:10:42,520 --> 00:10:46,040 Speaker 1: micro trade agreements and and the kind of multilateral trade 211 00:10:46,040 --> 00:10:47,760 Speaker 1: deals that we had in the past where a ton 212 00:10:47,800 --> 00:10:50,680 Speaker 1: of countries got together and they were cluging stuff together 213 00:10:50,760 --> 00:10:53,360 Speaker 1: just to fit some stupid farm subsidy in some tiny 214 00:10:53,360 --> 00:10:58,000 Speaker 1: little country. That's not appropriate to a multilateral agreement with Caterpillar. 215 00:10:59,040 --> 00:11:02,800 Speaker 1: Caterpillar had to be uh, telling us, you know, these 216 00:11:02,840 --> 00:11:06,240 Speaker 1: are key trade relations, this is who we important export to. 217 00:11:06,640 --> 00:11:08,520 Speaker 1: We we have to have a way of adding that 218 00:11:08,559 --> 00:11:11,240 Speaker 1: together and saying what are the US interests and those 219 00:11:11,280 --> 00:11:14,880 Speaker 1: are the bilateral kind of sets of of of deals 220 00:11:14,880 --> 00:11:17,680 Speaker 1: we made. But David, I'm sorry, this is a unipolar 221 00:11:17,920 --> 00:11:22,800 Speaker 1: or by binomial tweet. I've never said that a binomial tweet. 222 00:11:23,480 --> 00:11:28,679 Speaker 1: It's not it's a Yan would call it a t 223 00:11:28,920 --> 00:11:31,760 Speaker 1: decision because we don't have the vocabulary in place to 224 00:11:31,840 --> 00:11:35,800 Speaker 1: let him say, Hey, we need a more refined NAFTA, right, 225 00:11:35,880 --> 00:11:38,600 Speaker 1: we need a NAFTA that allows us to deal with 226 00:11:38,840 --> 00:11:40,880 Speaker 1: the companies the way we should and the sectors the 227 00:11:40,920 --> 00:11:43,400 Speaker 1: way we should. What what his objective is is to 228 00:11:43,440 --> 00:11:46,160 Speaker 1: maximize job growth in the United States, and not just 229 00:11:46,200 --> 00:11:50,240 Speaker 1: any job growth. You don't want healthcare, hospitality, and retail 230 00:11:50,440 --> 00:11:53,400 Speaker 1: to be spurring all of the production of jobs because 231 00:11:53,400 --> 00:11:55,400 Speaker 1: those are low wage jobs. What you want are the 232 00:11:55,480 --> 00:11:58,280 Speaker 1: highway jobs that we come from a company that is 233 00:11:58,320 --> 00:12:00,720 Speaker 1: able to have intrant industry trade and even jump in here. 234 00:12:00,720 --> 00:12:06,800 Speaker 1: But it's part due. Yes, I agree, subject to the 235 00:12:06,840 --> 00:12:08,760 Speaker 1: fact that if we do not reach a fair deal 236 00:12:08,840 --> 00:12:13,120 Speaker 1: for all, we will then terminated. After relationships are are 237 00:12:13,200 --> 00:12:16,600 Speaker 1: good deal very possible. Billy, help me with the time 238 00:12:16,640 --> 00:12:18,720 Speaker 1: factor here when it comes to tax reform, when it 239 00:12:18,720 --> 00:12:20,680 Speaker 1: comes to trade, you mention all of these micro deals 240 00:12:20,679 --> 00:12:23,040 Speaker 1: that the potential here from more bilateral deals. All this 241 00:12:23,080 --> 00:12:24,959 Speaker 1: stuff takes so long, and I think a lot of 242 00:12:24,960 --> 00:12:27,280 Speaker 1: dissatisfaction with what we saw yesterday was Look, we're close 243 00:12:27,320 --> 00:12:29,960 Speaker 1: to a hundred days in administration, Steve and Nushan said, 244 00:12:30,200 --> 00:12:32,240 Speaker 1: a hundred people in the Treasury Department, we're working on 245 00:12:32,280 --> 00:12:34,000 Speaker 1: tax reform. And this is what they produced at the 246 00:12:34,040 --> 00:12:37,600 Speaker 1: end of one page document with two hundred words on it. Uh, 247 00:12:37,640 --> 00:12:39,040 Speaker 1: And there's still a long way to go before we 248 00:12:39,040 --> 00:12:41,440 Speaker 1: get anything close to legislation because it tells you how 249 00:12:41,480 --> 00:12:43,800 Speaker 1: far apart the sides are. Right, and they can only 250 00:12:43,840 --> 00:12:45,959 Speaker 1: come out with this one page plan because anything else 251 00:12:46,000 --> 00:12:47,880 Speaker 1: will be destroyed. Look at what they did to the 252 00:12:47,880 --> 00:12:50,719 Speaker 1: border tacks, right, you have Walmart and Boeing at war 253 00:12:50,800 --> 00:12:52,320 Speaker 1: with each other. So one of the things that we 254 00:12:52,400 --> 00:12:54,560 Speaker 1: have to do is settle and come down to the 255 00:12:54,640 --> 00:12:57,000 Speaker 1: to the staff level and say, hey, let's find a 256 00:12:57,040 --> 00:12:59,320 Speaker 1: way of getting this stuff together. And you know, I 257 00:12:59,360 --> 00:13:01,160 Speaker 1: hate to keep lean the milk and approach, but the 258 00:13:01,200 --> 00:13:03,560 Speaker 1: reason I joined that that this outfit is because their 259 00:13:03,600 --> 00:13:06,800 Speaker 1: way of doing things is to put in place collaborative solutions. 260 00:13:06,920 --> 00:13:08,640 Speaker 1: That means you gotta talk to one another and you 261 00:13:08,679 --> 00:13:10,800 Speaker 1: have to have a platform that says here's what we 262 00:13:10,840 --> 00:13:13,120 Speaker 1: agree on and here's what we disagree on. So far 263 00:13:13,200 --> 00:13:14,800 Speaker 1: we haven't been able to see that come out of 264 00:13:14,800 --> 00:13:17,480 Speaker 1: the administration, and I hope that at least we can 265 00:13:17,520 --> 00:13:20,320 Speaker 1: do that. Thirty seconds, does the price of Corona beer 266 00:13:20,360 --> 00:13:24,080 Speaker 1: go up because of the import tax, sense of compulsion 267 00:13:24,120 --> 00:13:26,240 Speaker 1: to drink? It will give you incentive to produce that 268 00:13:26,280 --> 00:13:28,719 Speaker 1: beer here in the U. S wanten. But Corona beer 269 00:13:28,800 --> 00:13:30,960 Speaker 1: is not Corona beer if it's made nailed to. So 270 00:13:31,520 --> 00:13:33,320 Speaker 1: you know, if they can take over the old rolling 271 00:13:33,400 --> 00:13:36,800 Speaker 1: rock factory, it doesn't work better. Living through chemistry, alright, 272 00:13:37,240 --> 00:13:39,760 Speaker 1: living through chemistry. I like that, Bill Lee, thank you 273 00:13:39,840 --> 00:13:44,120 Speaker 1: so much. With the milk and it's optimistic ons in Washington, 274 00:13:44,120 --> 00:13:46,280 Speaker 1: I appreciate it. This is very good. I'm still distressed 275 00:13:46,320 --> 00:13:49,560 Speaker 1: about blind faith. I mean, you know we have blind faith. 276 00:13:50,720 --> 00:13:54,559 Speaker 1: And oh, Mr Winwood, thank you, Ken Felly, this will 277 00:13:54,600 --> 00:13:56,920 Speaker 1: be wonderful a little blind faith to get us to 278 00:13:57,000 --> 00:14:20,880 Speaker 1: break Billy, thank you. It is wonderful. On tax reform 279 00:14:20,960 --> 00:14:24,040 Speaker 1: to bring in Diana first, got Wroth, um of the 280 00:14:24,080 --> 00:14:29,120 Speaker 1: Manhattan Institute, who has written consistently and been a strong 281 00:14:29,560 --> 00:14:35,480 Speaker 1: voice for fiscal responsibility. Um, Diana first, got Roth. What 282 00:14:35,720 --> 00:14:38,600 Speaker 1: is the next step for President Trump? At Diana? I 283 00:14:38,640 --> 00:14:41,560 Speaker 1: guess we got a one page document. What what would 284 00:14:41,560 --> 00:14:45,360 Speaker 1: you presume will be next? Well, the important thing is 285 00:14:45,400 --> 00:14:49,960 Speaker 1: for Congress to come forward with its own tax plan, 286 00:14:50,040 --> 00:14:54,000 Speaker 1: and Paul Ryan has put out his plan. The Senate 287 00:14:54,040 --> 00:14:56,240 Speaker 1: thinks slightly differently. They are not in favor of the 288 00:14:56,280 --> 00:15:01,960 Speaker 1: border adjustment aspect of the House plan. So a tax 289 00:15:02,000 --> 00:15:04,400 Speaker 1: plan has to start in the House ways and means 290 00:15:04,400 --> 00:15:07,120 Speaker 1: committee be voted out, go to the Senate uh and 291 00:15:07,160 --> 00:15:09,400 Speaker 1: then be conferenced in and sent to the present for 292 00:15:09,520 --> 00:15:14,120 Speaker 1: his signature. So the President can encourage, he can lead, 293 00:15:14,480 --> 00:15:16,800 Speaker 1: but he cannot get that bill out of the House 294 00:15:16,960 --> 00:15:19,080 Speaker 1: or out of the Senate. So the ball is really 295 00:15:19,120 --> 00:15:22,160 Speaker 1: in Congress is court. President Trump has shown he is 296 00:15:22,200 --> 00:15:25,480 Speaker 1: serious about tax reform, and it's up to Congress now 297 00:15:25,520 --> 00:15:27,600 Speaker 1: to send him a bill that he can sign. Where's 298 00:15:27,640 --> 00:15:30,880 Speaker 1: the demonstrable seriousness to this? Again, it's it's such a 299 00:15:31,040 --> 00:15:33,920 Speaker 1: short outline that we got yesterday. The rhetoric from the 300 00:15:33,920 --> 00:15:36,320 Speaker 1: Treasury Secretary and the director of the National Economic Council 301 00:15:36,960 --> 00:15:38,280 Speaker 1: is there that they want to do this and that 302 00:15:38,400 --> 00:15:40,760 Speaker 1: they're they're reiterating that the president's goal here is from 303 00:15:40,760 --> 00:15:44,000 Speaker 1: more economic growth. Does the action match the rhetoric, I 304 00:15:44,040 --> 00:15:48,359 Speaker 1: suppose is what I'm asking this is very much about signaling. 305 00:15:48,440 --> 00:15:51,040 Speaker 1: Everybody knows that it is Congress that has to craft 306 00:15:51,080 --> 00:15:54,360 Speaker 1: the tax bill. What President Trump is indicating with this 307 00:15:54,760 --> 00:15:57,680 Speaker 1: is that he is firmly behind this effort. He is 308 00:15:57,720 --> 00:16:01,160 Speaker 1: exerting a leadership role. He's holed out this bill. But 309 00:16:01,280 --> 00:16:05,320 Speaker 1: of course the details are always left to Congress. The 310 00:16:05,400 --> 00:16:08,320 Speaker 1: House and the Senate have to decide, especially about this 311 00:16:08,400 --> 00:16:12,920 Speaker 1: border adjustability provision, which Paul Ryan indicated he might moderate. 312 00:16:13,640 --> 00:16:17,840 Speaker 1: Uh and uh so, right now, the President's role is 313 00:16:17,880 --> 00:16:20,800 Speaker 1: not so much negotiating the fine details, but saying he 314 00:16:20,960 --> 00:16:23,160 Speaker 1: is there, he is encouraging it. It was a massive 315 00:16:23,200 --> 00:16:26,760 Speaker 1: publicity roll out yesterday, was very much in accord with 316 00:16:26,880 --> 00:16:30,040 Speaker 1: what President Trump said he wanted to do during the campaign, 317 00:16:30,360 --> 00:16:33,120 Speaker 1: and he is reiterating that there will be these three 318 00:16:33,160 --> 00:16:35,000 Speaker 1: brackets if the President were to get his way, ten, 319 00:16:35,040 --> 00:16:37,280 Speaker 1: twenty five and thirty five percent. There was a question 320 00:16:37,280 --> 00:16:40,240 Speaker 1: from a reporter yesterday does the White House have guidance 321 00:16:40,240 --> 00:16:43,040 Speaker 1: when it comes to income brackets? Gary Cohen, the director 322 00:16:43,040 --> 00:16:44,920 Speaker 1: of the National Economic Council, said, in fact, the White 323 00:16:44,920 --> 00:16:47,960 Speaker 1: House does not at this point. Um, does that strike 324 00:16:48,000 --> 00:16:50,120 Speaker 1: you as as problematical? Do you think that they have 325 00:16:50,160 --> 00:16:54,120 Speaker 1: those guidelines, they're just not sharing them publicly right now. Look, 326 00:16:54,240 --> 00:16:56,320 Speaker 1: this is not something that's up to the White House 327 00:16:56,360 --> 00:16:58,840 Speaker 1: to do. Plus, the whole scoring is up to the 328 00:16:58,920 --> 00:17:02,600 Speaker 1: Joint Tax Committee the Congressional Budget Office. So even if 329 00:17:02,680 --> 00:17:04,560 Speaker 1: they were to roll out, even if the White House 330 00:17:04,560 --> 00:17:07,639 Speaker 1: were to roll out specific tax brackets, these would be 331 00:17:07,680 --> 00:17:11,200 Speaker 1: liable to be changed during the crafting of the bill. 332 00:17:12,000 --> 00:17:14,120 Speaker 1: I think it's also very important to note that the 333 00:17:14,200 --> 00:17:17,720 Speaker 1: tax on pass throughs on small businesses would go down 334 00:17:17,760 --> 00:17:21,480 Speaker 1: to the same as the corporate rate. It's very important 335 00:17:21,520 --> 00:17:24,520 Speaker 1: that those two rates are the same. Otherwise small businesses 336 00:17:24,520 --> 00:17:28,280 Speaker 1: would just be incorporating to take advantage of that lower 337 00:17:28,320 --> 00:17:32,320 Speaker 1: corporate rate, the same way that the reverse happen. As 338 00:17:32,359 --> 00:17:36,760 Speaker 1: you know, if fighting the left right wars that everybody 339 00:17:36,800 --> 00:17:41,639 Speaker 1: lines up about whether reduced taxes spurs growth. I know 340 00:17:41,720 --> 00:17:46,040 Speaker 1: you're gonna tell me reduce taxes spurs growth. Take the 341 00:17:46,080 --> 00:17:50,880 Speaker 1: other side, Diana, help me with the people that say 342 00:17:51,000 --> 00:17:56,800 Speaker 1: it's unproven. Where is it proven that reduced taxes directly 343 00:17:56,840 --> 00:18:02,119 Speaker 1: gets you to GDP growth? In the nine eighties, after 344 00:18:02,280 --> 00:18:06,600 Speaker 1: taxes went down, we had growth of around three or 345 00:18:06,680 --> 00:18:10,199 Speaker 1: four percent after the Reagan tax cuts, After the Bush 346 00:18:10,320 --> 00:18:14,200 Speaker 1: tax cuts were fully implemented in two thousand and three. Again, 347 00:18:14,800 --> 00:18:17,359 Speaker 1: we had a lot of growth, and it makes sense 348 00:18:17,760 --> 00:18:20,399 Speaker 1: that if there's a lower tax rate, people can invest 349 00:18:20,480 --> 00:18:23,399 Speaker 1: in projects that have a slightly lower rate of return 350 00:18:23,440 --> 00:18:26,920 Speaker 1: than they would have otherwise, So more projects and more 351 00:18:27,000 --> 00:18:31,560 Speaker 1: investment would occur. Throughout the world, corporate tax rates have 352 00:18:31,640 --> 00:18:34,399 Speaker 1: been going down steadily. The United States is at an 353 00:18:34,400 --> 00:18:39,640 Speaker 1: exceptionally high level, the highest among industrialized nations attent including 354 00:18:39,680 --> 00:18:44,240 Speaker 1: federal and state taxes. Our companies are inverting, in other words, 355 00:18:44,280 --> 00:18:47,720 Speaker 1: they're becoming owned by foreign companies in order to have 356 00:18:47,840 --> 00:18:51,080 Speaker 1: advantage of those countries tax rates. It's absurd. We need 357 00:18:51,119 --> 00:18:53,399 Speaker 1: to do something about it. We cannot be left behind. 358 00:18:53,560 --> 00:18:58,080 Speaker 1: Do you, as a pro parse and separate corporate tax 359 00:18:58,160 --> 00:19:02,439 Speaker 1: analysis from individ usual tax analysis, or do you bundle 360 00:19:02,520 --> 00:19:06,040 Speaker 1: them together. Well, we are going to get the biggest 361 00:19:06,080 --> 00:19:09,640 Speaker 1: bang from the buck from lowering corporate taxes because that's 362 00:19:09,640 --> 00:19:12,600 Speaker 1: where we are the biggest outlier. So that's where we're 363 00:19:12,600 --> 00:19:16,000 Speaker 1: going to get growth. Coming back in terms of individual 364 00:19:16,040 --> 00:19:19,159 Speaker 1: tax rates, it's beneficial to have a tax cut, but 365 00:19:19,240 --> 00:19:22,520 Speaker 1: we're not that much in out of line with other countries. 366 00:19:22,640 --> 00:19:25,520 Speaker 1: In fact, our individual tax rates are probably slightly lowered 367 00:19:25,560 --> 00:19:27,679 Speaker 1: in other countries, But where we're going to get the 368 00:19:27,720 --> 00:19:31,120 Speaker 1: biggest growth banks from the buck is lowering our corporate 369 00:19:31,119 --> 00:19:34,160 Speaker 1: tax rates not just to lower levels, but also taxing 370 00:19:34,160 --> 00:19:38,560 Speaker 1: companies on a territorial basis around the worldwide basis. Only 371 00:19:38,640 --> 00:19:42,399 Speaker 1: seven countries tax companies on a worldwide basis on their 372 00:19:42,440 --> 00:19:45,280 Speaker 1: worldwide income, because that makes it harder for our companies 373 00:19:45,440 --> 00:19:47,919 Speaker 1: to repatriate their earnings and kind the first cut right, 374 00:19:48,040 --> 00:19:51,080 Speaker 1: let me ask you about the repatriation tax holiday repatriation 375 00:19:51,160 --> 00:19:55,320 Speaker 1: tax proposal that was unveiled yesterday. UM acknowledge that there's 376 00:19:55,320 --> 00:19:57,760 Speaker 1: two points six trillion dollars worth of earnings US companies 377 00:19:57,800 --> 00:20:00,520 Speaker 1: have overseas, no indication here that all of that would 378 00:20:00,520 --> 00:20:02,879 Speaker 1: be repatriated if this were to come to pass. How 379 00:20:02,920 --> 00:20:06,199 Speaker 1: do you make repatriation most efficacious? How do you how 380 00:20:06,240 --> 00:20:09,800 Speaker 1: do you incentivize or make sure that companies who bring 381 00:20:09,840 --> 00:20:12,359 Speaker 1: back those profits are then going to spend some of it, 382 00:20:12,400 --> 00:20:16,679 Speaker 1: at least on on capital expenditures. Well, first of all, 383 00:20:16,720 --> 00:20:18,760 Speaker 1: we don't really have to worry what they're going to 384 00:20:18,800 --> 00:20:20,359 Speaker 1: spend it on. We just want them to bring it 385 00:20:20,359 --> 00:20:22,600 Speaker 1: back and then we let them decide what to spend 386 00:20:22,640 --> 00:20:25,480 Speaker 1: it on. And even if half of it were brought back, 387 00:20:25,560 --> 00:20:28,359 Speaker 1: that's one point three trillion. Even if a quarter of 388 00:20:28,400 --> 00:20:31,119 Speaker 1: it were brought back, that would be a certain amount 389 00:20:31,160 --> 00:20:34,600 Speaker 1: of stimulus. We certainly don't want to micromanage what companies do, 390 00:20:34,800 --> 00:20:37,760 Speaker 1: and the way to make it most efficacious is to 391 00:20:37,920 --> 00:20:40,959 Speaker 1: make the changes permanent, so that there's not just a 392 00:20:41,000 --> 00:20:45,439 Speaker 1: one time jump, but it continues into the future. We 393 00:20:45,480 --> 00:20:49,959 Speaker 1: don't need to have a Texas garbage disposal company merging 394 00:20:49,960 --> 00:20:52,480 Speaker 1: with a Canadian one, as happened a couple of years ago. 395 00:20:53,119 --> 00:20:55,840 Speaker 1: We don't need our pharmaceutical companies to become owned by 396 00:20:55,920 --> 00:20:59,360 Speaker 1: Irish companies. This is not beneficial for the United States. 397 00:20:59,680 --> 00:21:03,359 Speaker 1: And we continue with Diana Fritchard throw with the Manhattan Institute. 398 00:21:03,680 --> 00:21:06,680 Speaker 1: She is in support of a large part of the 399 00:21:06,760 --> 00:21:12,840 Speaker 1: Trump agenda on Texas. Diana, the idea of individual taxes 400 00:21:13,000 --> 00:21:17,600 Speaker 1: and doing away with this tax Bolton, that text Bolton, 401 00:21:18,080 --> 00:21:23,080 Speaker 1: how will that be received on the Hill? Uh? Well, 402 00:21:23,280 --> 00:21:25,639 Speaker 1: the Hill, it depends if you're looking at the House 403 00:21:25,760 --> 00:21:27,879 Speaker 1: or the Senate. The House is very much going to 404 00:21:28,000 --> 00:21:30,280 Speaker 1: welcome this because it is in line with the House's 405 00:21:30,359 --> 00:21:34,320 Speaker 1: own bill. The Senate is probably going to be less enthusiastic, 406 00:21:35,040 --> 00:21:37,960 Speaker 1: and people keep talking about the House, but they need 407 00:21:38,000 --> 00:21:41,760 Speaker 1: to remember that Majority Leader Mitch McConnell has certain views 408 00:21:41,760 --> 00:21:44,679 Speaker 1: of his own. So I think that the ceiling in 409 00:21:44,800 --> 00:21:47,439 Speaker 1: Congress is definitely mixed. Not only do you have the 410 00:21:47,480 --> 00:21:49,560 Speaker 1: Democrats and Republicans, but we also have the House. In 411 00:21:49,600 --> 00:21:53,040 Speaker 1: the Senate. We'll take, just as one the Obamacare overlay, 412 00:21:53,080 --> 00:21:56,840 Speaker 1: the Affordable Care Act overlay three point x per cent 413 00:21:58,119 --> 00:22:00,919 Speaker 1: on every I believe, on every dollar as you go 414 00:22:01,040 --> 00:22:02,879 Speaker 1: up the food chain, and they want to get rid 415 00:22:02,920 --> 00:22:05,480 Speaker 1: of that. I get that, but what what will be 416 00:22:05,520 --> 00:22:10,600 Speaker 1: the reception of that single idea on the hill? I 417 00:22:10,680 --> 00:22:13,919 Speaker 1: think that in general the Republicans are going to be 418 00:22:13,960 --> 00:22:16,240 Speaker 1: happy and the Democrats are going to be left. We 419 00:22:16,359 --> 00:22:19,920 Speaker 1: know that. But can you get past Uh well yeah, 420 00:22:19,920 --> 00:22:21,320 Speaker 1: I mean it's going to have to be part of 421 00:22:21,320 --> 00:22:24,159 Speaker 1: a larger package. But I definitely think that that can 422 00:22:24,240 --> 00:22:28,560 Speaker 1: get past. And I think what's really important is to 423 00:22:28,640 --> 00:22:32,080 Speaker 1: move these corporate tax rates down and to take away 424 00:22:32,680 --> 00:22:36,880 Speaker 1: the worldwide taxation, because if you think about it, say 425 00:22:36,920 --> 00:22:39,439 Speaker 1: you're Burger King and you want to bring back a 426 00:22:39,520 --> 00:22:43,159 Speaker 1: hundred million to invest from abroad in new Burger King restaurants. 427 00:22:43,840 --> 00:22:47,600 Speaker 1: Thirty nine percent of that hundred million, minus whatever taxes 428 00:22:47,640 --> 00:22:49,600 Speaker 1: you've paid, is going to go to the U. S. Treasury. 429 00:22:49,840 --> 00:22:52,120 Speaker 1: But then, say you're Tim Horton's Donuts and you want 430 00:22:52,119 --> 00:22:53,960 Speaker 1: to set up a chain of doughnuts stores, and you 431 00:22:54,000 --> 00:22:56,119 Speaker 1: want to bring back a hundred million, and you're a 432 00:22:56,119 --> 00:22:59,040 Speaker 1: Canadian company, every penny of that a hundred million can 433 00:22:59,040 --> 00:23:03,040 Speaker 1: be used. The quickest way for a company to maximize 434 00:23:03,080 --> 00:23:04,840 Speaker 1: the money that it wants to bring back to the 435 00:23:04,920 --> 00:23:08,159 Speaker 1: United States and make sure every dollar is used is 436 00:23:08,200 --> 00:23:11,600 Speaker 1: to invert and become a foreign company. And it should 437 00:23:11,680 --> 00:23:13,920 Speaker 1: not be like that. We should not be so much 438 00:23:13,960 --> 00:23:17,960 Speaker 1: out of line with the other countries. Let me ask 439 00:23:17,960 --> 00:23:20,560 Speaker 1: you about the role that healthcare reform place in all 440 00:23:20,560 --> 00:23:23,080 Speaker 1: of this. There was news yesterday the conservative caucus in 441 00:23:23,119 --> 00:23:25,280 Speaker 1: the Republican Party on Capitol Hill might be willing to 442 00:23:25,320 --> 00:23:29,639 Speaker 1: support a piece of legislation there reforming or repealing the 443 00:23:29,840 --> 00:23:32,879 Speaker 1: Affordable Care Act. How important is that for tax reform? 444 00:23:32,920 --> 00:23:35,600 Speaker 1: Early on, during the first debate over over healthcare reform 445 00:23:35,640 --> 00:23:38,520 Speaker 1: during this administration, there is a sense that had to 446 00:23:38,520 --> 00:23:41,439 Speaker 1: happen first before tax reform could happen. Do you believe 447 00:23:41,480 --> 00:23:43,840 Speaker 1: that how much easier. Would that make tax reform to 448 00:23:43,880 --> 00:23:46,880 Speaker 1: have reformed to the Affordable Care Act in place? First, Well, 449 00:23:46,920 --> 00:23:51,119 Speaker 1: it's important for two reasons. First of all, repealing Obamacare, 450 00:23:51,240 --> 00:23:54,719 Speaker 1: as the Congressional Budget Office has shown, gives Congress a 451 00:23:54,720 --> 00:23:57,200 Speaker 1: certain amount of money that it can use to put 452 00:23:57,240 --> 00:24:01,399 Speaker 1: towards reducing taxes because it's saves money to repeal the 453 00:24:01,440 --> 00:24:05,160 Speaker 1: Affordable Care Act according to the Congressional Budget Office scoring rules, 454 00:24:05,160 --> 00:24:07,399 Speaker 1: which are very important. That's number one. It gives the 455 00:24:07,440 --> 00:24:09,800 Speaker 1: money to play with, so tax reform does not have 456 00:24:09,880 --> 00:24:12,800 Speaker 1: to be deficit neutral. Second, it shows that Congress can 457 00:24:12,840 --> 00:24:16,560 Speaker 1: get something done. That's an equally important message. Congress does 458 00:24:16,640 --> 00:24:19,320 Speaker 1: not look very good right now having promised to repeal 459 00:24:19,560 --> 00:24:22,040 Speaker 1: Defordable Care Act and not having managed to do that. 460 00:24:22,680 --> 00:24:26,560 Speaker 1: Two reasons very important. In your wonderful book, Disinherited and Folks, 461 00:24:26,560 --> 00:24:29,639 Speaker 1: this is an emotional book. It really goes to the 462 00:24:29,720 --> 00:24:35,000 Speaker 1: generational challenges of all this financial blatherer. You have a 463 00:24:35,040 --> 00:24:40,600 Speaker 1: painful first chapter called unfunded Promises. Everyone listening right, left center. 464 00:24:41,080 --> 00:24:45,159 Speaker 1: That's the number one worry is unfunded promises. What is 465 00:24:45,200 --> 00:24:49,400 Speaker 1: the risk of tax reform by a minority majority Republican 466 00:24:49,840 --> 00:24:53,600 Speaker 1: Capitol Hill? What is the risk of that furthering our 467 00:24:53,760 --> 00:24:58,760 Speaker 1: unfunded promises. If we don't have tax reform, we're going 468 00:24:58,800 --> 00:25:02,399 Speaker 1: to have less business investment and lower tax revenues. So 469 00:25:02,760 --> 00:25:06,080 Speaker 1: in order to propel economic growth and reduce the deficit 470 00:25:06,400 --> 00:25:08,879 Speaker 1: and also reduce the deficit as a share of g 471 00:25:09,000 --> 00:25:12,760 Speaker 1: d P, we absolutely need tax reform to get us 472 00:25:12,800 --> 00:25:15,600 Speaker 1: to a three percent or even in some quarters of 473 00:25:15,680 --> 00:25:19,720 Speaker 1: four percent growth level. Tax reforms absolutely essential, and at 474 00:25:19,720 --> 00:25:22,600 Speaker 1: the same time, we need to be trimming entitlements. In 475 00:25:22,600 --> 00:25:27,320 Speaker 1: today's Wall Street Journal, UH, the hybrid economist Martin Falstein 476 00:25:27,400 --> 00:25:31,680 Speaker 1: proposed gradually raising the security social Security retirement age to 477 00:25:31,920 --> 00:25:35,720 Speaker 1: seventy along with people's life expectancies for people who are 478 00:25:35,800 --> 00:25:40,800 Speaker 1: younger than fifty five. I very much support that proposal, 479 00:25:40,920 --> 00:25:42,920 Speaker 1: and we also need to be looking at cutting other 480 00:25:43,080 --> 00:25:46,520 Speaker 1: entitlements also, Dana, thank you so much. Dana first got 481 00:25:46,520 --> 00:25:51,160 Speaker 1: Throws the Manhattan Institute. Her book is disinherited. I really 482 00:25:51,200 --> 00:25:55,880 Speaker 1: can't say enough about it. How Washingtons be Training America's 483 00:25:56,000 --> 00:26:05,959 Speaker 1: youth brought you by Bank of America Mary Lynch, dedicated 484 00:26:06,280 --> 00:26:09,720 Speaker 1: to bringing our clients insights and solutions to meet the 485 00:26:09,800 --> 00:26:14,240 Speaker 1: challenges of a transforming world. That's the power of global connections. 486 00:26:14,600 --> 00:26:19,119 Speaker 1: Mary Lynch, Pierce Feeder and Smith Incorporated Member s I 487 00:26:19,280 --> 00:26:27,960 Speaker 1: p C. There's something new from Bloomberg. It's called Lens. 488 00:26:27,960 --> 00:26:30,960 Speaker 1: Starting right now, you can use the Bloomberg Io s 489 00:26:31,040 --> 00:26:35,159 Speaker 1: app off your iPhone or iPad or our new Google 490 00:26:35,240 --> 00:26:39,119 Speaker 1: Chrome extension to read any news story on any website, 491 00:26:39,640 --> 00:26:43,240 Speaker 1: scan it, and then instantly see the news stories relevant 492 00:26:43,240 --> 00:26:47,639 Speaker 1: market data from Bloomberg. In addition, see all the bios 493 00:26:47,720 --> 00:26:51,439 Speaker 1: of the key people mentioned in the story. It's called Lens, 494 00:26:51,760 --> 00:26:54,320 Speaker 1: and it is just that, a lens into the people 495 00:26:54,720 --> 00:26:58,560 Speaker 1: and the data of any story you may be reading. Again. 496 00:26:58,840 --> 00:27:02,000 Speaker 1: Lens brings you the power of Bloomberg's news and data. 497 00:27:02,359 --> 00:27:05,560 Speaker 1: Download or io s app or search for the Bloomberg 498 00:27:05,560 --> 00:27:09,480 Speaker 1: extension at the Chrome store to try Lens out. Learn 499 00:27:09,480 --> 00:27:17,119 Speaker 1: more at Bloomberg dot com slash Lens. David Garrett and 500 00:27:17,119 --> 00:27:19,320 Speaker 1: Tom Keane in New York, This is Bloomberg Surveillance on 501 00:27:19,359 --> 00:27:22,520 Speaker 1: Bloomberg Radio. Were talking about trade a little bit throughout 502 00:27:22,520 --> 00:27:24,960 Speaker 1: the morning. Here. Obviously, what's happening with NAFTA or isn't 503 00:27:25,000 --> 00:27:27,359 Speaker 1: happening with NAFTA. I want to get some perspective on 504 00:27:27,440 --> 00:27:30,000 Speaker 1: what that means for corporations doing business both in Canada 505 00:27:30,040 --> 00:27:31,600 Speaker 1: and the US. And who better to give us that 506 00:27:31,640 --> 00:27:35,359 Speaker 1: than Brian Belski, the chief investment strategy to BEMO Capital Markets, 507 00:27:35,400 --> 00:27:39,440 Speaker 1: of course, a Canada based institution. Brian, this news came 508 00:27:39,440 --> 00:27:41,320 Speaker 1: out a couple of days back, and we saw some 509 00:27:41,400 --> 00:27:44,400 Speaker 1: movement in home builders. First of all, I guess said, 510 00:27:44,400 --> 00:27:46,800 Speaker 1: there are mattress manufacturers who rely on wood from Canada 511 00:27:47,240 --> 00:27:49,080 Speaker 1: as well. How big an impact is this going to have, 512 00:27:49,119 --> 00:27:51,880 Speaker 1: this new trade policy, at least preliminary trade policy from 513 00:27:51,880 --> 00:27:54,840 Speaker 1: the Commerce Department? Well, good morning. You know, duties back 514 00:27:54,880 --> 00:28:00,399 Speaker 1: and forth between Canady United States are mostly annual duties, 515 00:28:00,440 --> 00:28:03,560 Speaker 1: and this was just a really elapse of the prior 516 00:28:03,640 --> 00:28:07,240 Speaker 1: duty and then you know news and noise with respect 517 00:28:07,280 --> 00:28:10,480 Speaker 1: to a pendential even higher duty. I think the stocks, 518 00:28:10,760 --> 00:28:14,520 Speaker 1: with respect especially the paper and forestry stocks in Canada 519 00:28:15,000 --> 00:28:17,440 Speaker 1: had little or no response to what happened with the 520 00:28:17,520 --> 00:28:20,280 Speaker 1: duty because I think there was again fears and rhetoric 521 00:28:20,359 --> 00:28:24,719 Speaker 1: and noise that the duties would be even even more so. 522 00:28:24,720 --> 00:28:27,040 Speaker 1: So you know, the market so far got it right. 523 00:28:27,080 --> 00:28:28,919 Speaker 1: You've had a couple of stocks, or at least one 524 00:28:28,960 --> 00:28:33,560 Speaker 1: come out yesterday that had um that missed their earnings, 525 00:28:33,640 --> 00:28:35,600 Speaker 1: but had really nothing to do with duties. It had 526 00:28:35,600 --> 00:28:38,800 Speaker 1: more to do with what was happening with the underlying 527 00:28:38,800 --> 00:28:40,840 Speaker 1: fundamental So at the end of the day, you know, 528 00:28:41,200 --> 00:28:44,520 Speaker 1: I think that fundamentals should be the ones that UM 529 00:28:44,760 --> 00:28:49,320 Speaker 1: investors should follow. And this noise of NAFTA being revoked, 530 00:28:49,440 --> 00:28:52,840 Speaker 1: or Trump not getting along with Canada, or fears with 531 00:28:52,880 --> 00:28:56,960 Speaker 1: respect of the softwood um in soft lumber a chord 532 00:28:57,080 --> 00:29:01,320 Speaker 1: in terms of Canada is really is really been more 533 00:29:01,400 --> 00:29:04,560 Speaker 1: of a again non event from with respect to the 534 00:29:04,560 --> 00:29:07,360 Speaker 1: stocks versus what everyone's talking about. What does that noise 535 00:29:07,400 --> 00:29:09,160 Speaker 1: get so loud that you have to take notice? I 536 00:29:09,320 --> 00:29:11,040 Speaker 1: was talking with the Secretary of Commerce and he said, 537 00:29:11,080 --> 00:29:12,800 Speaker 1: you should take this as an example of what this 538 00:29:12,840 --> 00:29:15,680 Speaker 1: administration intends to do going forward. It's very keen on 539 00:29:16,480 --> 00:29:20,320 Speaker 1: more enforcement than it's than its predecessors. Uh. Does does 540 00:29:20,320 --> 00:29:22,680 Speaker 1: it become problematic if we see more and more cases, 541 00:29:22,680 --> 00:29:25,720 Speaker 1: more and more countervailing duties like these? Well, I mean, 542 00:29:25,920 --> 00:29:28,080 Speaker 1: if you take a look at the importance of the 543 00:29:28,080 --> 00:29:32,200 Speaker 1: paper industry that the or the lumber industry within North 544 00:29:32,240 --> 00:29:35,360 Speaker 1: America at you know, pales in comparison to let's say, 545 00:29:35,680 --> 00:29:39,520 Speaker 1: the overall consumer side our economy. Is based on the consumer. 546 00:29:39,600 --> 00:29:41,600 Speaker 1: And you mentioned about mattress is being made of some 547 00:29:41,640 --> 00:29:43,520 Speaker 1: wood and things like that. But think about this. You know, 548 00:29:43,880 --> 00:29:49,080 Speaker 1: housing starts have been at the housing start numbers have 549 00:29:49,200 --> 00:29:52,120 Speaker 1: that been great since the since the credit crisis. We're 550 00:29:52,120 --> 00:29:54,280 Speaker 1: starting to see a bit of a recovery, but nowhere 551 00:29:54,440 --> 00:29:57,880 Speaker 1: near the type of supply that really is needed to 552 00:29:58,160 --> 00:30:01,280 Speaker 1: facilitate kind of the growth overall and what we're seeing. 553 00:30:01,320 --> 00:30:03,600 Speaker 1: And number two, you know, Americans are gonna pay to 554 00:30:03,680 --> 00:30:06,000 Speaker 1: pay that price for wood to get to get the 555 00:30:06,080 --> 00:30:09,680 Speaker 1: job done. I think that's the difference again, what happens 556 00:30:09,680 --> 00:30:13,520 Speaker 1: with technology companies, what happens with you know, the ge 557 00:30:13,560 --> 00:30:15,040 Speaker 1: and some of these other things that are going to 558 00:30:15,080 --> 00:30:18,200 Speaker 1: happen at the end of the day. This is more 559 00:30:18,280 --> 00:30:20,560 Speaker 1: tough talk with respect to you know, trying to get 560 00:30:21,200 --> 00:30:24,600 Speaker 1: companies to come back to America, and and that has 561 00:30:24,640 --> 00:30:26,600 Speaker 1: more to do with what's gonna end up happening with 562 00:30:26,600 --> 00:30:30,040 Speaker 1: the repatriation bill and of course moving through some of 563 00:30:30,040 --> 00:30:33,440 Speaker 1: this new tax plan information well with your Beamo Capital 564 00:30:33,480 --> 00:30:35,360 Speaker 1: Markets of Bank in Montreal, as I was going to 565 00:30:35,400 --> 00:30:39,520 Speaker 1: ask you about mostly golden beer, and we won't go 566 00:30:39,560 --> 00:30:42,520 Speaker 1: there right now. Let's take a bigger broader view Brian Belski. 567 00:30:42,560 --> 00:30:44,320 Speaker 1: In the time that we've got with you before the 568 00:30:44,400 --> 00:30:48,680 Speaker 1: drug press conference, we see all of this back and forth, 569 00:30:48,720 --> 00:30:51,640 Speaker 1: the political swirl of the last forty eight hours, the 570 00:30:51,720 --> 00:30:55,280 Speaker 1: Central bank swirl, the surprise of Sweden blinks and they 571 00:30:55,320 --> 00:30:58,600 Speaker 1: stay accommodate of little things here and there. We gotta 572 00:30:58,640 --> 00:31:03,280 Speaker 1: focus down any company's income statement, what do you observe 573 00:31:04,080 --> 00:31:08,680 Speaker 1: in revenue growth? And critically down the income statement from 574 00:31:08,720 --> 00:31:11,920 Speaker 1: the first earning reports we've seen this quarter. The great 575 00:31:11,960 --> 00:31:13,800 Speaker 1: question of the love of the amount of cash that's 576 00:31:13,840 --> 00:31:16,640 Speaker 1: coming coming off the earnings is actually pretty good, tim 577 00:31:16,800 --> 00:31:19,360 Speaker 1: And you know, at the at the end of the day, 578 00:31:19,480 --> 00:31:23,720 Speaker 1: this is about um companies in the overall economy recovering. 579 00:31:23,760 --> 00:31:26,040 Speaker 1: You know, I F I m F data with respect 580 00:31:26,040 --> 00:31:29,920 Speaker 1: the global growth has been solidifying. You know, I'm I'm 581 00:31:29,920 --> 00:31:32,360 Speaker 1: going through kind of the one page tax plan now 582 00:31:32,400 --> 00:31:33,920 Speaker 1: to try to put out a note today to kind 583 00:31:33,920 --> 00:31:35,840 Speaker 1: of give our view on it. You know, at the 584 00:31:35,880 --> 00:31:38,280 Speaker 1: end of the day that let the negotiations begin. You 585 00:31:38,400 --> 00:31:41,800 Speaker 1: put out a one page tax piece of paper, you're 586 00:31:41,800 --> 00:31:44,120 Speaker 1: building a template to build off of. You not this 587 00:31:44,200 --> 00:31:45,880 Speaker 1: is the isn't the end all be all? And I 588 00:31:45,920 --> 00:31:47,840 Speaker 1: think the investors that are looking for an end all 589 00:31:47,880 --> 00:31:50,840 Speaker 1: be all are sadly mistaken because this is an administration 590 00:31:50,840 --> 00:31:53,120 Speaker 1: and president that's running the country like a business. So 591 00:31:53,560 --> 00:31:55,480 Speaker 1: he's gonna have to sell this to the American people 592 00:31:55,480 --> 00:31:58,440 Speaker 1: in Congress and hasn't even begun yet. So at the 593 00:31:58,520 --> 00:31:59,920 Speaker 1: end of the day, there's a lot more work to do. 594 00:32:00,040 --> 00:32:02,440 Speaker 1: And so I think there's a big fear that the 595 00:32:02,560 --> 00:32:05,400 Speaker 1: potential for tax reform has already been priced into the market. 596 00:32:05,400 --> 00:32:07,560 Speaker 1: I don't think so, especially given that we think that 597 00:32:07,640 --> 00:32:10,720 Speaker 1: stocks have risen because of fundamental reasons. If we start 598 00:32:10,760 --> 00:32:13,640 Speaker 1: to actually see the implementation of lower taxes, that's when 599 00:32:13,680 --> 00:32:15,720 Speaker 1: you really see the kicker on the income statement. For 600 00:32:15,840 --> 00:32:18,840 Speaker 1: your question, uh in comments, So we need to really 601 00:32:18,840 --> 00:32:22,160 Speaker 1: need to see to get earnings going again and from 602 00:32:22,240 --> 00:32:25,600 Speaker 1: our from our lands and doing the actual work. Earnings 603 00:32:25,640 --> 00:32:29,440 Speaker 1: haven't really even started to reflect what the actualities of 604 00:32:29,520 --> 00:32:33,640 Speaker 1: any kind of new fiscal reform from the United States government. 605 00:32:34,040 --> 00:32:35,640 Speaker 1: Bounds great to speak with you is always thanks for 606 00:32:35,640 --> 00:32:38,520 Speaker 1: that perspective from Montreal there on the Countervalian duties that 607 00:32:38,520 --> 00:32:42,080 Speaker 1: we're announced earlier this week. Brian Belski, the chief investment 608 00:32:42,080 --> 00:32:58,160 Speaker 1: strategy that BEMO Capital markets. We could literally spend three 609 00:32:58,200 --> 00:33:02,720 Speaker 1: hours today speaking with David Rosenberg of Gluskin Chef. He 610 00:33:02,720 --> 00:33:05,239 Speaker 1: has been such a supporter of my work here at 611 00:33:05,240 --> 00:33:07,880 Speaker 1: Bloomberg over the years. Has been way too long since 612 00:33:07,880 --> 00:33:11,200 Speaker 1: we've had Mr Rosenberg join us, and I think, David, 613 00:33:11,240 --> 00:33:13,080 Speaker 1: we've got to rip up the script and not talk 614 00:33:13,120 --> 00:33:16,880 Speaker 1: about your and my beloved Montreal Canadians, what a disaster 615 00:33:17,000 --> 00:33:21,240 Speaker 1: that was, but rather talk about this renewed trade tiff 616 00:33:21,920 --> 00:33:26,240 Speaker 1: between Canada in the US. Christoph Friedland, the Foreign Affairs Minister, 617 00:33:26,360 --> 00:33:29,600 Speaker 1: made clear there was lumber one, Lumber two, Lumber three, 618 00:33:29,640 --> 00:33:33,480 Speaker 1: Lumber four, and as she stated, every time Canada wins. 619 00:33:34,200 --> 00:33:38,400 Speaker 1: How will this change the debate in the trade and 620 00:33:38,640 --> 00:33:43,200 Speaker 1: finance tone of these two nations. Well, you know, so 621 00:33:43,240 --> 00:33:47,080 Speaker 1: far we've got two hot issues here. One is obviously 622 00:33:47,320 --> 00:33:52,520 Speaker 1: UH the dairy situation TOM and UH unfiltered milk and 623 00:33:52,560 --> 00:33:55,880 Speaker 1: so on and so forth, and supply management techniques in 624 00:33:55,920 --> 00:33:58,720 Speaker 1: Canada have long been that source of debate even internally. 625 00:33:59,480 --> 00:34:02,720 Speaker 1: UH and software Lumber has been an ongoing dispute for 626 00:34:02,760 --> 00:34:05,120 Speaker 1: the past two decades. You know, um, you know, when 627 00:34:05,160 --> 00:34:08,240 Speaker 1: we talk about how Canada's won, it's usually when these 628 00:34:08,280 --> 00:34:10,840 Speaker 1: disputes on the lumber side end up going to w 629 00:34:11,000 --> 00:34:14,719 Speaker 1: t O and after rules uh, and we'll see, you 630 00:34:14,719 --> 00:34:16,799 Speaker 1: know what ends up happening down the pike. But here's 631 00:34:16,800 --> 00:34:19,680 Speaker 1: the reality. You know, these trade issues make the front 632 00:34:19,680 --> 00:34:22,640 Speaker 1: page news, and yet when you take a look and 633 00:34:22,680 --> 00:34:24,839 Speaker 1: you see what these tariff increases are going to mean 634 00:34:24,840 --> 00:34:28,200 Speaker 1: for the Canadian economy, it comes to less than zero 635 00:34:28,280 --> 00:34:31,360 Speaker 1: point one percent of a downward impact. But a symbol, 636 00:34:31,560 --> 00:34:35,600 Speaker 1: isn't it a symbol of of attention that can dampen 637 00:34:35,960 --> 00:34:40,920 Speaker 1: the spirit of doing business? Well? Uh, you know, I 638 00:34:40,920 --> 00:34:44,719 Speaker 1: think sometimes you have to separate, um, the rhetoric and 639 00:34:44,800 --> 00:34:49,040 Speaker 1: the action. I think that um, it's always been a 640 00:34:49,239 --> 00:34:53,480 Speaker 1: big dispute in the US about how uh the you know, 641 00:34:53,520 --> 00:34:56,560 Speaker 1: how what the producers in Canada on the software lumber 642 00:34:56,600 --> 00:35:01,319 Speaker 1: side get charged because their trees from crown land as 643 00:35:01,320 --> 00:35:03,840 Speaker 1: opposed to private land in the US. Uh. Look, the 644 00:35:03,840 --> 00:35:06,799 Speaker 1: reality is at this is very sector specific. We've seen 645 00:35:06,840 --> 00:35:09,120 Speaker 1: the US in the past with a whole range of countries, 646 00:35:09,120 --> 00:35:12,600 Speaker 1: whether it's steel in Asia or electronic products in Japan. 647 00:35:13,080 --> 00:35:15,680 Speaker 1: We've seen these targeted tariffs before, and not just by 648 00:35:15,760 --> 00:35:18,719 Speaker 1: this president, by by other presidents as well. But no 649 00:35:18,800 --> 00:35:22,560 Speaker 1: I don't think it's gonna trigger a wider trade war, David. 650 00:35:22,920 --> 00:35:25,560 Speaker 1: He did Mr Drogg moving the markets. We've got a 651 00:35:25,600 --> 00:35:30,360 Speaker 1: weaker Euro, and German yields have moved substantially off of 652 00:35:30,440 --> 00:35:32,560 Speaker 1: his comments. We have a lower German two year in 653 00:35:32,680 --> 00:35:36,640 Speaker 1: tenure at negative German to your yield down negative point 654 00:35:36,760 --> 00:35:39,640 Speaker 1: seven one nine. That's not near record lows, but there's 655 00:35:39,640 --> 00:35:43,480 Speaker 1: been a real reversal in tone there towards lower yields 656 00:35:43,480 --> 00:35:45,600 Speaker 1: and higher note prices. And I'd encourage you, if you 657 00:35:45,640 --> 00:35:48,000 Speaker 1: have a Bloomberg to follow along on the top Live blog. 658 00:35:48,000 --> 00:35:49,960 Speaker 1: I'm doing that here, looking at headlines as they crossed. 659 00:35:50,000 --> 00:35:53,000 Speaker 1: It seems like he's getting peppered with questions about the 660 00:35:53,000 --> 00:35:55,680 Speaker 1: French elections, about Mario drags trip to Washington, d C. 661 00:35:55,840 --> 00:35:57,840 Speaker 1: For the I m F and World Bank Spring meetings, 662 00:35:57,840 --> 00:36:00,239 Speaker 1: and he just said we discussed policies, not politics. So 663 00:36:00,239 --> 00:36:02,880 Speaker 1: he seems to speak growing weary of having to respond 664 00:36:02,880 --> 00:36:05,399 Speaker 1: to questions about political events. David, let me ask you 665 00:36:05,760 --> 00:36:08,480 Speaker 1: about you. What the events of this week indicate to 666 00:36:08,480 --> 00:36:12,080 Speaker 1: you about a broader trade policy from this this administration. Yes, 667 00:36:12,080 --> 00:36:15,279 Speaker 1: it's sector specific, but does it indicate to you um 668 00:36:15,440 --> 00:36:18,120 Speaker 1: directionally where this administration here in the US is headed 669 00:36:18,160 --> 00:36:20,919 Speaker 1: when it comes to trade policy. Well, look, I once 670 00:36:20,960 --> 00:36:24,120 Speaker 1: again lots of rhetoric and uh what we're in the 671 00:36:24,160 --> 00:36:26,440 Speaker 1: ninety nine day, So I think we have to keep 672 00:36:26,480 --> 00:36:30,320 Speaker 1: an open mind. Uh look my senses at President Trump 673 00:36:30,400 --> 00:36:34,200 Speaker 1: ran on this American first. Uh um, you know mantra, 674 00:36:34,440 --> 00:36:36,080 Speaker 1: and I guess that means everybody else in the world 675 00:36:36,200 --> 00:36:38,520 Speaker 1: is tied for second. Um. But you know, do I 676 00:36:38,600 --> 00:36:40,839 Speaker 1: think this is going to spark a wider trade war, 677 00:36:40,920 --> 00:36:43,560 Speaker 1: I mean trade frictions globally or I've been simmering for 678 00:36:43,640 --> 00:36:45,719 Speaker 1: some time. I'm not in the camp that things is 679 00:36:45,719 --> 00:36:48,320 Speaker 1: going to spark a global trade war. The reality is 680 00:36:48,320 --> 00:36:50,160 Speaker 1: that the rest of the world still needs, you know, 681 00:36:50,200 --> 00:36:53,760 Speaker 1: the US consumer to drive a lot of their economic growth. 682 00:36:53,840 --> 00:36:56,000 Speaker 1: So you know, it really doesn't talk my worrial list. 683 00:36:56,040 --> 00:36:59,160 Speaker 1: These are just very sector specific trade actions we mum 684 00:36:59,200 --> 00:37:01,120 Speaker 1: to draw, you know, I know leans on Glasco and 685 00:37:01,239 --> 00:37:06,080 Speaker 1: chef literature parts inflation right now, low goods inflation, higher 686 00:37:06,200 --> 00:37:09,759 Speaker 1: service sector inflation. Nobody does it like you. What is 687 00:37:09,760 --> 00:37:13,719 Speaker 1: the observation the distinction in the inflation data in the 688 00:37:13,840 --> 00:37:17,440 Speaker 1: US right now, Well, I think that we have whatever 689 00:37:17,440 --> 00:37:21,759 Speaker 1: cyclical inflation we had that back has been broken time. Firstly, uh, 690 00:37:21,800 --> 00:37:25,440 Speaker 1: you know, core goods pricing has been falling now for 691 00:37:25,480 --> 00:37:27,800 Speaker 1: on a year of your basis, for thirteen consecutive months, 692 00:37:27,800 --> 00:37:29,960 Speaker 1: forty two of the past forty three. The inflation that 693 00:37:30,000 --> 00:37:32,120 Speaker 1: we had in the US that had all the bond 694 00:37:32,160 --> 00:37:35,440 Speaker 1: bears in a tizzy with service sector inflation different principally 695 00:37:35,520 --> 00:37:38,279 Speaker 1: by rents. And now that we've had really a a 696 00:37:38,360 --> 00:37:41,680 Speaker 1: bullmarket in apartment construction this cycle, the vacancy rate is 697 00:37:41,719 --> 00:37:44,359 Speaker 1: starting to go up, rental rate to starting to come down. 698 00:37:44,400 --> 00:37:46,200 Speaker 1: I think the big news in the past couple of 699 00:37:46,200 --> 00:37:48,120 Speaker 1: months has been the break in the and the rental 700 00:37:48,120 --> 00:37:51,400 Speaker 1: component of the cp I. My sense is that you know, 701 00:37:51,440 --> 00:37:53,600 Speaker 1: in the next six to twelve months, inflation is going 702 00:37:53,640 --> 00:37:55,279 Speaker 1: to be very close to one percent. I'm not so 703 00:37:55,280 --> 00:37:57,359 Speaker 1: sure that's full factory and I want to bring this 704 00:37:57,400 --> 00:38:00,360 Speaker 1: is a really important research note from Chris Rupki at 705 00:38:00,400 --> 00:38:03,960 Speaker 1: Bank of Tokyo, Mr Bisi agreeing with Mr Rosenberg. Rupky 706 00:38:04,080 --> 00:38:07,359 Speaker 1: is a real optimist. David Gurdn, he really makes note 707 00:38:07,400 --> 00:38:10,839 Speaker 1: of recent soft economic data. Just quickly here about about 708 00:38:10,840 --> 00:38:12,520 Speaker 1: the housing market in Canada right now when you look 709 00:38:12,520 --> 00:38:15,280 Speaker 1: at it it regionally is it confined to certain provinces 710 00:38:15,280 --> 00:38:18,160 Speaker 1: in specific the weakness in the housing marketing in Canada, Well, 711 00:38:18,200 --> 00:38:20,680 Speaker 1: you know, Vancouver was in a super duper bubble, you know, 712 00:38:20,719 --> 00:38:23,560 Speaker 1: till about a year ago. Uh, it's it's cooled off somewhat, 713 00:38:23,760 --> 00:38:27,480 Speaker 1: still quite strong. But south central Ontario, I mean not 714 00:38:27,560 --> 00:38:29,920 Speaker 1: just Toronto, but the Greater Toronto area which is now 715 00:38:29,920 --> 00:38:31,920 Speaker 1: six seven million people. I mean it's the fourth largest 716 00:38:31,960 --> 00:38:34,600 Speaker 1: metropolis in North America. There is a bubble in the 717 00:38:34,600 --> 00:38:37,200 Speaker 1: housing market in the in in south central Ontario of 718 00:38:37,239 --> 00:38:39,319 Speaker 1: epic proportions. There's no doubt about it. When you're talking 719 00:38:39,360 --> 00:38:42,000 Speaker 1: about you know, three standardviation events. When you look at 720 00:38:42,000 --> 00:38:45,080 Speaker 1: home prices against rans InCom nominal GDP growth. Uh, I 721 00:38:45,080 --> 00:38:46,920 Speaker 1: mean this this makes the late nineteen eighties lo like 722 00:38:46,920 --> 00:38:49,319 Speaker 1: a looks like I walked to the park. Okay, we're 723 00:38:49,320 --> 00:38:52,880 Speaker 1: gonna go geometric here with David Rosenberg right now. My 724 00:38:53,000 --> 00:38:55,360 Speaker 1: basic take on the laugh for curve, and I've interviewed 725 00:38:55,440 --> 00:38:59,839 Speaker 1: Mr laugh for three or four times. Mr Rosenberg, is 726 00:39:00,480 --> 00:39:05,960 Speaker 1: that it depends where you are within tax regime on 727 00:39:06,040 --> 00:39:10,600 Speaker 1: how effective or uh the efficacy of the Laugher theory, 728 00:39:11,160 --> 00:39:13,520 Speaker 1: and if you've done a lot of tax reform over 729 00:39:13,520 --> 00:39:16,759 Speaker 1: the years, it's less effective. It has to do with 730 00:39:16,840 --> 00:39:19,160 Speaker 1: the first derivative of a parabola. I don't want to 731 00:39:19,200 --> 00:39:21,120 Speaker 1: get into it. I don't have the math in front 732 00:39:21,120 --> 00:39:24,600 Speaker 1: of me. Can the laugh For curve be effective where 733 00:39:24,640 --> 00:39:29,840 Speaker 1: we are in a complex modern economic system. The short 734 00:39:29,880 --> 00:39:32,680 Speaker 1: answer is no. And I think the proof of the 735 00:39:32,680 --> 00:39:34,359 Speaker 1: pudding is in the eating. I don't even know why 736 00:39:34,360 --> 00:39:37,800 Speaker 1: we're still talking about the Laugher curve or how dynamic 737 00:39:37,880 --> 00:39:41,560 Speaker 1: scoring is going to pay fully uh for these proposed 738 00:39:41,560 --> 00:39:45,160 Speaker 1: tax cuts. Just take the Ronald Reagan era, um, you know, 739 00:39:45,320 --> 00:39:47,240 Speaker 1: tip our hat to the gemper. But here's the reality. 740 00:39:47,280 --> 00:39:50,080 Speaker 1: We all heard about the Laugher curve of the nineteen eighties. 741 00:39:50,719 --> 00:39:54,600 Speaker 1: When Ronald Reagan took over in nineteen eighty, the deficit 742 00:39:54,719 --> 00:39:57,680 Speaker 1: was one percentage GDP. He finishes eight years later and 743 00:39:57,760 --> 00:40:00,120 Speaker 1: the deficit is over three percent of g d P. 744 00:40:00,640 --> 00:40:03,239 Speaker 1: Ronald Reagan starts in office and the net federal debt 745 00:40:03,280 --> 00:40:07,000 Speaker 1: GDP ratio is twenty five percent of GDP. Eight years 746 00:40:07,040 --> 00:40:09,640 Speaker 1: later it's forty percent GDP. I mean, of course that 747 00:40:09,680 --> 00:40:12,359 Speaker 1: number today is close to But how did the lab 748 00:40:12,440 --> 00:40:14,560 Speaker 1: for curve ever work? In the nine time we had 749 00:40:14,600 --> 00:40:18,719 Speaker 1: monumental tax cuts. Even with eight percent nominal growth annually, 750 00:40:19,840 --> 00:40:22,680 Speaker 1: those tax cuts did not pay for themselves. We finished 751 00:40:22,680 --> 00:40:25,919 Speaker 1: with a federal debt GDP ratio under the Reagan era 752 00:40:26,400 --> 00:40:29,200 Speaker 1: fifteen percentage points higher. So somebody has to explain to 753 00:40:29,239 --> 00:40:32,160 Speaker 1: me how the lab for curve even work back then, 754 00:40:32,560 --> 00:40:35,480 Speaker 1: and what makes anybody think it's gonna work today and 755 00:40:35,600 --> 00:40:40,280 Speaker 1: even higher levels of the debt GDP ratio and heading 756 00:40:40,320 --> 00:40:42,799 Speaker 1: into the tail end of the expansion, it probably would 757 00:40:42,800 --> 00:40:44,839 Speaker 1: work better if we had a lot of excess capacity, 758 00:40:45,160 --> 00:40:47,160 Speaker 1: and this was year one of the expansion coming out 759 00:40:47,200 --> 00:40:50,120 Speaker 1: of recession. But how exactly this is gonna work at 760 00:40:50,120 --> 00:40:53,120 Speaker 1: four and a half percent unemployment? How does fiscal policy 761 00:40:53,239 --> 00:40:55,840 Speaker 1: work at the tail end of an expansion when the 762 00:40:55,920 --> 00:40:58,200 Speaker 1: labor market as tight as it is today? How does 763 00:40:58,320 --> 00:41:04,000 Speaker 1: fiscal policy work given the great fixed income distortion of 764 00:41:04,080 --> 00:41:08,439 Speaker 1: the moment? Can you apply those models given where real 765 00:41:08,520 --> 00:41:12,800 Speaker 1: and nominal rates are in this era? Well, look, I 766 00:41:12,920 --> 00:41:16,120 Speaker 1: look at it more as to um what the actual 767 00:41:16,320 --> 00:41:19,719 Speaker 1: level of the debt GDP ratio is, because the efficacy 768 00:41:19,719 --> 00:41:22,440 Speaker 1: of fiscal policy at ever higher levels of the debt 769 00:41:22,560 --> 00:41:26,640 Speaker 1: ratio dissipates quite rapidly. Just let's just go back and 770 00:41:26,719 --> 00:41:30,200 Speaker 1: dust off the rogue off Reinhardt textbook on the matter. 771 00:41:30,640 --> 00:41:34,440 Speaker 1: You reach a critical threshold, call it roughly where already 772 00:41:36,200 --> 00:41:39,040 Speaker 1: gross federal debt GDP ratio. The people that said that 773 00:41:39,120 --> 00:41:43,320 Speaker 1: Monterrey policy loses its its efficacy at the zero bound, 774 00:41:43,360 --> 00:41:46,320 Speaker 1: we're right. Every central banker knows that. But the people 775 00:41:46,320 --> 00:41:48,279 Speaker 1: that thought that we were suddenly going to with this 776 00:41:48,280 --> 00:41:52,160 Speaker 1: new administration passed the baton from monetary policy to fiscal 777 00:41:52,200 --> 00:41:56,879 Speaker 1: policy somehow dismiss that fiscal policy at large is as 778 00:41:56,920 --> 00:42:01,319 Speaker 1: tapped out at these debt ratios as Monterrey policy is. Yeah, 779 00:42:01,320 --> 00:42:03,000 Speaker 1: it's almost a zero bound, and we don't know where 780 00:42:03,040 --> 00:42:04,800 Speaker 1: that is, David Gurrow, But you know we've shown that 781 00:42:04,880 --> 00:42:08,080 Speaker 1: chart a million times, moving from thirty three to g 782 00:42:08,239 --> 00:42:11,720 Speaker 1: d P up to a hundred and five percent GDP. 783 00:42:11,880 --> 00:42:15,959 Speaker 1: Are you drawn first derivative parabolic? Their dad with chalk 784 00:42:16,000 --> 00:42:19,680 Speaker 1: on Your father's exactly looking at looking at the looney 785 00:42:19,760 --> 00:42:22,480 Speaker 1: right now. One five. This is something that we've caught 786 00:42:22,480 --> 00:42:23,960 Speaker 1: both of us by surprise. Tom and I have talked 787 00:42:23,960 --> 00:42:25,920 Speaker 1: about this over the last couple of weeks. What's your 788 00:42:25,920 --> 00:42:28,600 Speaker 1: outlook for the Canadian dollar at this point? Well, you know, 789 00:42:28,640 --> 00:42:31,160 Speaker 1: what's interesting is that it was just about oil prices. 790 00:42:31,200 --> 00:42:34,319 Speaker 1: The Canadian dollar would be closer to say, uh, you know, 791 00:42:34,400 --> 00:42:39,160 Speaker 1: one seven than thirty six, But it's not there. And 792 00:42:39,160 --> 00:42:42,120 Speaker 1: that's because the Bank Canada has deliberately been keeping Canadian 793 00:42:42,120 --> 00:42:44,920 Speaker 1: interst rates below US levels. And of course, look we 794 00:42:44,960 --> 00:42:48,359 Speaker 1: came off the detonation to the energy patch Alberta. That's 795 00:42:48,440 --> 00:42:51,399 Speaker 1: yesterday's story. The Bank Canada cut interest rates twice, has 796 00:42:51,440 --> 00:42:54,040 Speaker 1: the Fed raised rates. So I think the big surprise 797 00:42:54,160 --> 00:42:57,480 Speaker 1: is going to be, especially with the housing mania in 798 00:42:57,480 --> 00:43:00,319 Speaker 1: in many urban areas and Canada, especially Ontario. A fact 799 00:43:00,320 --> 00:43:03,000 Speaker 1: look at very quietly. The Canadian economy right now is 800 00:43:03,000 --> 00:43:05,640 Speaker 1: advancing over the past four quarters at a three percent pace. 801 00:43:05,760 --> 00:43:08,840 Speaker 1: The US is barely more than two uh. The emergency 802 00:43:08,920 --> 00:43:10,960 Speaker 1: is over. It's time for the Bank Canada take back 803 00:43:11,000 --> 00:43:14,799 Speaker 1: those two emergency UH rate cuts that would basically then 804 00:43:14,880 --> 00:43:17,480 Speaker 1: help close the interstrate gap between in the United States, 805 00:43:17,760 --> 00:43:20,680 Speaker 1: allow the Canadian dollar to more fully reflect the terms 806 00:43:20,680 --> 00:43:23,720 Speaker 1: of trade fundamentals. And I think that takes you back below. 807 00:43:24,760 --> 00:43:27,040 Speaker 1: So to be clear, here, you lost so much money 808 00:43:27,080 --> 00:43:30,000 Speaker 1: betting on the Montreal Canadians in the Stanley Cup that 809 00:43:30,080 --> 00:43:32,319 Speaker 1: you're making it up. You know, don't tell your family 810 00:43:32,360 --> 00:43:37,160 Speaker 1: if you're making up Canada. Is this what? Or can 811 00:43:37,200 --> 00:43:39,680 Speaker 1: you go further to one? Two? I think I think 812 00:43:39,719 --> 00:43:42,279 Speaker 1: that um, I think you can go back to under 813 00:43:42,280 --> 00:43:45,160 Speaker 1: the prevs. So that uh, and this is actually my 814 00:43:45,320 --> 00:43:47,719 Speaker 1: call that oil prices on the second half of the 815 00:43:47,760 --> 00:43:50,480 Speaker 1: year gravitate to the high end of the fifty to 816 00:43:50,600 --> 00:43:52,640 Speaker 1: sixty dollar range of the post where we are right now. 817 00:43:53,280 --> 00:43:55,319 Speaker 1: This is an administration here in the US that is 818 00:43:55,360 --> 00:43:59,840 Speaker 1: so single mindedly focused on trade deficits. What's your message 819 00:43:59,840 --> 00:44:02,680 Speaker 1: to one Wilbur Ross a Secretary of Commerce Peter Navarre, 820 00:44:02,719 --> 00:44:04,840 Speaker 1: who heads up the White House Trade Council about trade 821 00:44:04,840 --> 00:44:08,759 Speaker 1: deficits at this point, Yeah, you know, it's a it's 822 00:44:08,840 --> 00:44:14,080 Speaker 1: it's almost laughable to talk about these trade deficits. A 823 00:44:14,160 --> 00:44:17,160 Speaker 1: policy to eliminate trade deficits. Why why don't they come 824 00:44:17,239 --> 00:44:19,400 Speaker 1: up and say, hey, our policy is to eliminate the 825 00:44:19,440 --> 00:44:23,040 Speaker 1: capital count surplus, the trade deficit. It's just an accounting identity. 826 00:44:23,280 --> 00:44:27,000 Speaker 1: The US has a current account deficit, therefore has a 827 00:44:27,000 --> 00:44:29,640 Speaker 1: capital count surplus. A capital count surplus, by the way, 828 00:44:29,920 --> 00:44:31,880 Speaker 1: is money that flows into the U s from abroad 829 00:44:32,160 --> 00:44:34,919 Speaker 1: that helps keeps our cost A capital low that goes 830 00:44:34,920 --> 00:44:37,640 Speaker 1: into real estate, goes into plant equipment, that goes into 831 00:44:37,640 --> 00:44:39,960 Speaker 1: bonds and stocks. So I would say, hey, why don't 832 00:44:40,000 --> 00:44:42,960 Speaker 1: we just talk about we're going to eliminate the capital 833 00:44:42,960 --> 00:44:46,520 Speaker 1: the capital count surplus, and let's see how that plays. David, 834 00:44:47,120 --> 00:44:50,719 Speaker 1: as we sum up here, can you be comfortable in equities? 835 00:44:50,760 --> 00:44:55,000 Speaker 1: You've done with gluscin chef his ability to meld economics 836 00:44:55,040 --> 00:44:59,320 Speaker 1: into equity markets. Can you own a portfolio of equities? 837 00:44:59,360 --> 00:45:02,120 Speaker 1: Given all the going on? You can certainly own a 838 00:45:02,120 --> 00:45:07,000 Speaker 1: portfolio of equities, but the menu is getting um more limited, 839 00:45:07,120 --> 00:45:10,560 Speaker 1: especially in North America, So I would say that yes, 840 00:45:10,600 --> 00:45:12,319 Speaker 1: you can. I think that in the United States it's 841 00:45:12,320 --> 00:45:14,640 Speaker 1: hard to come up with a real hardcore theme right now. 842 00:45:14,680 --> 00:45:16,160 Speaker 1: I think it's a matter of if you're in the 843 00:45:16,239 --> 00:45:19,680 Speaker 1: US right now, have special situations value plays. I think 844 00:45:19,680 --> 00:45:22,239 Speaker 1: that there's greater opportunities right now abroad, I would say, 845 00:45:22,239 --> 00:45:25,880 Speaker 1: specifically Japan, parts of Southeast Asia, and if this political 846 00:45:25,920 --> 00:45:28,320 Speaker 1: discount starts to dissipate, which I think it will in Europe, 847 00:45:28,320 --> 00:45:29,680 Speaker 1: that could be a very interesting place to be in 848 00:45:29,680 --> 00:45:32,040 Speaker 1: the coming year. Okay, David Rosenberg, thank you so much. 849 00:45:32,040 --> 00:45:34,760 Speaker 1: With glask and Cheff don't be a stranger. This is great. 850 00:45:34,840 --> 00:45:37,040 Speaker 1: We were We only booked him so he and I 851 00:45:37,080 --> 00:45:42,279 Speaker 1: could do a postmortem David and David Canadian disappointment and 852 00:45:42,360 --> 00:45:45,560 Speaker 1: where my black band? So you know, I mean we 853 00:45:45,560 --> 00:45:48,040 Speaker 1: we try to get Tobias Lefkovitch on over at City 854 00:45:48,040 --> 00:45:51,440 Speaker 1: Group and he's on medication. Corbett said he couldn't come on. 855 00:45:52,200 --> 00:45:55,360 Speaker 1: He just in no way. Tobias is just distraught. A 856 00:45:55,440 --> 00:45:58,319 Speaker 1: Northern way to put it. Michael Barr's looking at me like, 857 00:45:58,480 --> 00:46:01,319 Speaker 1: what is this? The Detroit Tigers want it? What did 858 00:46:01,400 --> 00:46:05,360 Speaker 1: you know what a couple of days ago, nineteen to whatever? Yeah, whatever, 859 00:46:05,800 --> 00:46:18,000 Speaker 1: Nobody When you're put nineteen across, nobody counts the other side. 860 00:46:18,800 --> 00:46:22,960 Speaker 1: Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and 861 00:46:23,040 --> 00:46:28,360 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 862 00:46:28,480 --> 00:46:32,000 Speaker 1: platform you prefer. I'm on Twitter at Tom Keene. David 863 00:46:32,040 --> 00:46:36,200 Speaker 1: Gura is at David Gura. Before the podcast, you can 864 00:46:36,280 --> 00:46:50,759 Speaker 1: always catch us worldwide. I'm Bloomberg Radio, brought you by 865 00:46:51,000 --> 00:46:54,720 Speaker 1: Bank of America Mary Lynch, dedicated to bringing our clients 866 00:46:54,800 --> 00:46:58,960 Speaker 1: insights and solutions to meet the challenges of a transforming world. 867 00:46:59,440 --> 00:47:02,760 Speaker 1: That's the Power were of global Connections. Mary Lynch, Pierce, 868 00:47:02,880 --> 00:47:06,719 Speaker 1: Fenner and Smith Incorporated member s I p C