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We've got a lot to talk about, of course, all the issues we're discussing here when it comes to fiscal policy, monetary policy, funding the government in Washington all plays in to what Charlie's talking about in the markets, what the Fed is going to be dealing with today. The Speaker is sounding more optimistic this morning. We're eleven days out now to a possible government shutdown, and Kevin McCarthy telling reporters we are going to solve this problem. That's the
line this morning. We're making some progress, he says, not sounding terribly upbeat last evening when an attempt to get a vote on the floor, a procedural vote just to move forward with the stopgap budget, was pulled off the floor because he didn't have the votes, sounding frustrated as he headed back to the Speaker's chambers.
What they're voting, they're voting against even bringing the bill up to have a discussion about it, to vote on if you're post to build vote against the bill. At the end, you've got more than one hundred and seventy amendments you could change if you don't mind it. But the idea that you vote against the rule to you to bring it up that makes sense for.
War makes no sense, he says.
But waking up this morning having spoken to some people, presumably feeling better about things, but we still have no real path forward. There's no plan B here that we're looking at the problem Solver's caucus again apparently cooking up something that they might present in the waning hours of this debate. But we're waiting for something concrete, and that's why we want to talk to Douglas holtz Eken. It's been a while the president of the American Action Forum.
He spent time, as I mentioned, on both sides of this issue, as the chief economist Council of Economic Advisors and the director of the Congressional Budget Office. So, Douglas, what's your thought here? Because a lot of Washington seems to think that a shutdown is inevitable at this point, it's good to have you back.
What's your thought?
Well, I understand why they think it's an there doesn't appear to be anything that can pass the House with strictly Republican votes and then pass the Senate where they're going to need sixty and so they need bipartisan support. And in the absence of that, the government closes. Because Democrats in the House have no incentive to participate and let their problems off the hook. They'll they'll let them
take the blame for shutting the government. Then they'll come back and pass something in a bipartisan fashion in both houses and this will be behind us. But we first have to go through the ritual of shutting the government and hopefully that is very short lived and has a very small impact on the American people.
Bloomberg Intelligence is putting, i believe, seventy percent odds on a shutdown that would last roughly a week. We've heard from some Republican members say, get ready for a ten days shutdown. At what point, Douglas, does the duration matter?
Well, the duration matters because you know, while lots of essential government activities will continue, there are things that people think are essential in their lives that will not happen. So if for example, you want to close on a home and you need flood insurance. If they close on September thirtieth, we're not going to have a national flood insurance program. New policies can't be issued. People can't close on their homes. Is that a big macro event?
No?
Is it a nuisance in an American person's life? Yes? Absolutely? And passports don't get renewed, and all sorts of the routine functions of government can interrupted. People don't like it, and every day that it goes on, congressmen hear about it, and pretty soon it's over.
So let's say they blow it.
Your view, as the former director of the CBO, at what point will the calculation be made?
Then?
If this, say, goes beyond a week or beyond the weekend on what we pay for, how will those decisions be made? Is that the Office of Budget Management or is this CBO overseeing this?
Where does it come together? So there are.
Some shutdown rules that have been drafted, guidance that will come from the Opfice of Management Budget and they'll send it out to all the agencies, and they will identify essential employees who want to show up for work, whether they're paid or not, and the others will be furloughed and then the Treasury will have the responsibility of using its cash as available to pay bills as possible, and the responsibility will lie there.
Kevin McCarthy says he's asked the White House to work with Congress and not just send requests for supplemental What role should the President be playing.
In this, Well, I mean, I think you think about the endgame. The endgame is there's a large omnibus appropriations bill that gets drafted in the Senate and thus can get bipartisan support. By definition, has to have the support of the White House. There's no point in vtailing such a vehicle. It will have in it whatever necessary funds for the Disaster Relief Fund, which is a real pressing issue.
FEMA is running out of money and any additional funding for Ukraine supplementals, and it will come over from the Senate to the House. It will pass with both the support of Democrats who the White House will be getting lined up and Republicans who choose to support it, and that's where we'll end up. So if I'm the White House, I'm shaping what does that look like right now, because you want to have that ready to go as soon as possible.
So The first matter to deal with here is potential continuing resolution. There are a number of Republican members of the House who say, hell no, we've heard about a triggering emotion to vacate if that happens, But that's number one. I just want to get your take on these, because the CR buys some time, maybe a month.
Do you think, first of all, that that will pass.
I don't, and I don't have any special insight. I'm listening to Bloomberg and reading the papers like everyone else. But if you start counting on your fingers, you get to five Republicans who have said they will not support a CR. Well, they can't lose five votes, so that doesn't appear to have a path forward at the moment. They might be able to add onto a CR some additional supplements like the disaster relief to make it more enticing. That'll get it out of the House, but the Senate
won't pass that. The Senate will insist on Ukraine funding and that won't pass the House. So this is where I see the logjam. It's the initial bill that won't make it through because House Democrats have non centerve to participate in House, Republicans can't muster the votes. That's the real problem.
Well, that's fascinating because a lot of people are looking at the end of the year, maybe walking up the holidays. You think it just happens now the fiscal year, we go into a shutdown in October.
I think it happens quickly, you know, bluntly. I think there's some members of the House who want to shut the government and they have the power to do it. I mean, if you can get four of your friends, it's over. So that'll happen because they want it to happen and they have the ability to make it happen. And then we start figuring out the realistic future where the Congress and United States funds the federal government, which
has to happen and will happen. And the question is how long is the disruption that we have to suffer before we get to that business.
It's looking like the Ukraine funding will not be part of a continuing resolution.
That appears to be a deal breaker.
But to your point, you're not passing a budget without some increase in funding here to get it through the Senate. A lot of this might hinge on this meeting tomorrow when President Zelenski comes to Washington. Kevin McCarthy was asked again today about the questions that he and other potentially skeptical members of his conference will have for Zelensky when they meet. A little bit less downbeat than we heard from him twenty four hours ago.
Here he is, these are hard working taxpayer dollars. I want to make sure there's accountability where the resources are going. I want to see a plan of what we're looking for for victory, and I think members will sit and have their questions as well.
I won't ask you to be a military analyst for us, Douglas, but when it comes to this issue of accountability, what would that look like? How could that actually work in a way short of a full audit of everything that's already been spent.
Maybe that's part of this.
How would you sell that to members who say, not necessarily no more money for Ukraine, but new accountability for Ukraine.
Well, I think the number one thing would be to have a convincing demonstration presentation on their efforts to root out corruption and fraud in Ukraine. This has been an ongoing issue. People have lost their jobs over so it's not a secret, and some members are nervous about sending more money to a government that has an ongoing corruption problem, and the money may not be going to fight military.
War.
So you know that, I think is the key. What evidence he can bring about his efforts to clean up the operation of his government. I'm not sure, but I think that's the key issue.
So a shutdown in October, when do we actually get a budget for next fiscal here, Douglas roe Am, I just asking too much right now?
Well, there isn't going to be a budget for next for a few years. So, as it turns out, while we're having this conversation, the House Budget Committee has finally marked up a budget resolution, something it should have done in March, and the Senate Budget Commute has no intention of doing one, and neither chamber is going to vote on a budget. So we have flunked the let's budget and figure out how to govern steps that they're gone.
All we're going to do is pass a very large spending bill that has enough money in different places to get sixty votes in the Senate and two eighteen in the House. And that's going to be a reactionary way to find the government, not a plan, not a budget. There's nothing to be proud of in this, but we will get through it.
So much for regular order. Douglas Holtzecon, don't be a stranger. It's great to have you back meebe. We'll talk again on the other side of this thing, because we've got a lot to learn still. He's the president the American Action Forum. I'm Jill Matthew in Washington with an eye on both ends of Pennsylvania Avenue.
Let's assemble our panel.
We're going to be hearing in a few moments from Gary Gensler at the SEC who talked to her own Kyley Lines earlier today. But Rick Davis and Jeanie Shanzano jump in now as Bloomberg Politics contributors, our signature panel. As we spent some time with Douglas holtz Ichan, I'd love to hear from both of you. With an eye on this conversation over at Ukraine. You heard Kevin McCarthy
talking about Ukraine. Rick, have you heard Ran Paul. Because this is in the Senate, of course, where there's supposed to be more galvanized support, and I think we can credibly say that there is for the war in Ukraine. But the Senator for Kentucky is apparently done. Here's what he said on the House floor.
It's not just that this is not helping our national security. The very threat to our national security is our debt. The more we send money overseas, the more we deplete our munitions, the worst things get. No matter how sympathetic we are to the Ukrainian people, we must put the American people first. And to that end, I encourage my colleagues to pose any effort to hold the federal government hostage for Ukraine funding.
So Rick Davis ran Paul apparently the one to crystallize the argument against Ukraine funding.
Will others join him in the Senate?
Very few? I mean, there are some that have expressed reservations about the use of the funds for Ukraine. And ran Paul, though, is in a distinctly minority position. I mean, you probably have eighty five to ninety Senate votes both parties, the support increasing and funding and support for Ukraine. And I don't know what he thinks about, like holding on to all those munitions. Is he waiting for Russia to invade Florida and then he'll go ahead and use him or what's his plan?
Right?
I mean, I don't understand the idea that we don't want to use the weapons we make to create peace around Europe, especially, So it's a frustrating thing to hear him talk. But you know, not many people are listening, certainly not other senators. And so he's making news, but he's not making history.
What does this tell those negotiating a budget plan? Though, Genie, it's not getting any easier here in the House. And now you've got a senator crystallizing an argument that others might be able to lift others on the House side who are pushing back on Kevin McCarthy.
Yeah. I mean, you know, it's interesting because I have talked to several people in the last couple of days who privately have expressed concern, as much as they support Ukraine in the effort against Russia, expressed concern about making the case that this is in the interest of the United States to keep spending this money. And so I do think that this argument, I agree, it probably doesn't
have many legs in the Senate. It's going to give some oxygen to some of these Republicans in the House, but I do think there is a necessity for the administration and for Vladimir Zelensky when he comes to make the case, and he's making it forcefully right now in the UN that this is in the interest of the United States of democracies around the world, and that we have an obligation here because this is something you do
hear Americans scratching their head about. So as frustrating as rand Paul is, I think he's raising something that does need to be addressed straight on to make this case. And I think the President tried yes yesterday, but more needs to be done on this score. So we move public opinion on this issue. It's critical.
Well, the democracy argument is clearly not enough for everybody. Rick when it comes to accountability, what kind of a system could be put in place that would give skeptics the ability to track the money?
Well, first of all, I mean there's not a penny that's spent that we don't have, you know, federal government employees tracking where it goes and what it does. And the vast majority of this Remember, these are checks that are going to the US defense industrial complex. They're not going to Ukraine. Where do you think the munitions are coming from? You know, we have American jobs building you know, this kind of weaponry and shipping it off to the Ukraine.
So there's only a fraction, especially the economic aid that's actually being spent by Ukrainians. And I'm actually encouraged by the steps that President Zelensky has made recently in cleaning house in defense ministry of his own country to keep people who might see some profiteering being made to kick him out. I mean, that's really tough in the middle of a war effort to clean house like that, And kudos to him for keeping frankly common cause with the
American taxpayer. I think we can be encouraged by.
That fascinating conversation as always with Rick and Janie, and we add another voice to our conversation today and that's the Chair of the SEC. Bloomberg's Kaylee Liones, was on Capitol Hill this morning spent some time with the Chair as he was up there for a hearing talking about a range of issues, including this matter of a shutdown. We're trying to hear from as many policy makers as
we can in Washington for their view on this. Of course, his agency would be subject to some changes in a government shutdown, and that's where Kayley began the conversation with the impact on financial regulation here he.
Is I would say first the market regulators, Security IS and Exchange Commission. I'll leave Chair Benham to speak about the other great market regulator, the CFGC. But we're appropriated agencies and so public should understand we will largely be a skeletal staff under the laws, and so the normal oversight we have in markets will not be possible, just
simply not for how many days that happens. Companies that want to go public may not find that their filings could even be reviewed by the SEC and the like during pendency of a shutdown. Those are the most immediate functions. But also we won't be able to oversee the markets if there's significant events or in the like.
But you don't anticipate significant events could emanate from the government shutting down potentially for a prolonged period of time that would be disruptive to the apsual activity.
We have the deepest, most liquid capital markets, but the base, the absolute base of that capital markets, is our US treasury market. It's about a quarter of the market, it's twenty five trillion dollars, but it's the base, and the trust in that market is in part just that we function well that we are able to resolve our differences in our democratic ways. But importantly, the treasury markets will
still function, They'll be trading in the stock markets. You just want to have the oversight of the market regulators.
Gary Gensler, a chair of the SEC, talking with our own Kayley Lines earlier today on Capitol Hill as we bring back Rick Davis and Jeanie Shanzano. It's just a reminder, Genie, he doesn't sound terribly worried about things, but yet another element of a shutdown that we don't always think about. That's the watchdog, I guess would be what in the doghouse?
Yeah, that's right, And I think these conversations are critically important because we keep hearing from Republicans. You know, we heard from Andy Biggs in the last forty eight hours. My constituents are okay with a shutdown. It's a pause, as he describes it, and the impact is going to be minimal. But as that conversation just suggested and showed us in so many ways, the impact is real, and so I think we need to and also to go back to your conversation earlier.
You know, the.
Reality is is that you cannot run and function a government this way. This is no way to run anything, let alone a government. And so there is an impact, as much as we're told there's not. If people want to get religion on spending, God bless them, we should, but this is not the way to do it. There is damage on the other side when we proceed down this path.
Where's your head on this at this point?
Rick, Obviously a government shutdown isn't going to shake the world here. We avoided a default earlier this year. There are some Republicans like Mick Mulvaney who sat right in this room and said, hey, calm down here, we're not shutting down the government. It's you know, it's a partial shutdown, and we can direct money to places that we need to go for a pretty good chunk of time. Where does duration become a problem for you?
Yeah?
Well, look, I mean duration matters on those things that you know, checks need to be delivered. I think you know, Cheermyer makes a good point, right, is that on the regulatory agency side, Well, your paperwork just sits in a bin until we get back to work.
Tough luck.
You should call your congressman. But in things that we need to cut checks for military pay things like that, especially if it goes beyond just a limited shutdown. Uh, those really have a pinch, and those can affect us. But the latter part that he makes and Genie picked up on, is, you know, we we need to quit operating like a third world country. You know, we're we're supposed to be the standard of democracies around the world.
We have to actually start acting like it if we want others to participate in this great democratic experiment, and we have to show them way to do it that looks a lot better than what we're currently doing.
You're listening to The Bloomberg Sound on pun Cast. Catch the program live weekdays at one Eastern on Bloomberg Radio, the tune in alf Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Rand Paul, who we heard from earlier, was urging his colleagues to vote against increased Ukraine funding. He said, this isn't a democracy anyway over there in Ukraine. They canceled their presidential election. Of course, things are a little bit
difficult there at the time. But we heard from Voladimir Zelenski himself in an interview with CNN this following his address at the UN yesterday, and he was asked about Donald Trump's claims, as we hear frequently, to be able to negotiate an end of this war in twenty four hours in his first day in office. He says, not only is it possible, it'll be easy. He's speaking in English here, but I think you'll get the point in his response.
The question is to Trump, or maybe it's not his idea, somebody, what what the United States really ready to give to put him from your territories? What you are ready to give but for the possibility, possibility not to risk after his public wars about nuclear weapon.
So after he's invoked, after Putin has invoked the possible use of a nuclear weapon, how can you negotiate with him about anything?
What would you be willing to give him?
As what he's saying, Genie, how does that argument resonate tomorrow in Washington?
I think it's gonna resonate incredibly strongly. And he makes an really important point, And you know, these are the exact points that the American public needs to hear over and over again. You know, Rick was saying earlier something
I wish the administration would say about this money. These are exactly the arguments that need to be had, because what we're hearing, or what people are hearing out there, is that we are giving billions of dollars away to a corrupt regime while we have trouble at home that is got to be countered. And so Zelensky does a very good job making the case and asking Donald Trump and anybody else who has this idea, what are you
planning to give up? And likewise we have to ask, we have to explain to people where this money is coming from and what it's for and why it's critical. Those arguments have to be had over and over again so people feel assured and rightly so, that their money and their time and their energy is being well spent. And the fight that we are in, as distance that we are from it, is one that we should be in as it pertains to Russia and Ukraine.
How does President Zelenski need to compose himself tomorrow? Rick, He was criticized, for instance, for not wearing a suit when he addressed a joint session of Congress. He's going to be going with his hand out to Speaker McCarthy and other members who might, according to McCarthy, have some difficult questions for him.
How does he approach this?
Yeah, I mean obviously his brand is military warfare outfits, right, and I guess that's that's part of it. But look, I think he has to be appreciative of what the United States has already done. We've done a lot, We've done more than anybody else. And I think he needs to those stress this urgency. These aren't you know, these arguments that people are making against this aren't moral equivalents.
You know, if Vladimir Putin is able to threaten Western countries with nuclear weapons, to leave him alone and let him take land in the Ukraine. What's the stop from saying, hey, Germany, you got to get rid of those US bases there, or I'm going to New you know, one of your city, or Poland you know, how about those missile defense systems that you just bought for the United States? Take them down, or I'm going to New I mean, like, this is not the kind of behavior you want to start rewarding.
And so unless you take a strong stand against this one dictator, you're going to have a European turmoil, which affects all of our security and economic prosperity.
We're going to be throwing to our special FED coverage in just a couple of moments. I want to get both of you on this matter of a dress code. Since we're talking about this, I guess President Selenski won't need to worry about what he's wearing if he enters the Senate chamber. We told you about this in response to Senator John Fetterman's preference wearing shorts and hoodies, and that will keep him on the floor without having to give a thumbs up from the door like he's been doing.
But I just saw him presiding over the Senate when Ran Paul made his comments on Ukraine, John Fetterman was presiding. Where's short sleeve shirt? And we've got a bit of an update on this. A group of forty six Senate Republicans that's almost all of them, sending a letter to Chuck Schumer asking that he reversed his decision here to relax the Senate dress code. I believe it was Susan Collins Rick who said that maybe she should start wearing a bikini in the Senate. I don't know where either
of your heads are on this, Ricket. Is this going to turn around? Or do we wait for a potential different leader? What's the future dressing?
I just think, you know, I think it's a mistake. I think Chuck Schumer is lessening the value of the chamber. The Senate is the greatest deliberate body in the world, and it should look like it, and looking like it is not a weekend at Bernie's where everyone's wearing shades
and shorts. And I certainly think that Susan Collins made the right point, although just the concept is just so bothersome to me that you should wake up, Chuck Schumer and rescind and go back to a policy that you know, really I think maintains the level of the Senate Away it should be.
The response from John Fetterman Genie talking to the Hill newspaper, quote, America, it's about freedom and choice. It's like a burger king you rule kind of thing.
Unquote.
Is this working for you or does this go right back when Republicans potentially take control of the Senate someday or both?
All right with you?
The burger king thing that goes over my head completely. You know, I do think it's a bit of a bridge too far for Susan Collins to be talking about wearing bathing suits on the floor. That's not what the
senator with the majority leader is talking about. I think we should have faith that our leaders can make a dignified choice for clothing, and that the rule that they have to stand in their Jim Shortz on the you know, with one foot in the cloakroom and one foot on the floor to vote is a little fashion at this point. And let them have their way. And good for Zelenski. He's in a war. He should wear his military dress.
All right. So where to go with the That was my follow up?
There go with the the olive thing and where the suit? Thanks for listening to the Sound on podcast. Make sure to subscribe if you haven't already, at Apple, Spotify, and anywhere else you get your podcasts, And you can find us live every weekday from Washington, DC at one pm Eastern Time at Bloomberg dot com.