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Welcome to the Friday edition of Bloomberg Sound On. I'm Joe Matthew in Washington. We've got a lot to talk about, of course. The biggest story of the hour here is an attempt to keep the government from shutting down this weekend as the House prepares to vote on a continuing resolution. I'm not going to get too far on the weeds because it'll probably be different a couple of hours from now.
But the headline at Bloomberg Government says it all. Our chief Budget reporter, Jack Fitzpatrick, the headline, stopgap work drags on as shut down deadline nears. That's kind of all you need to know, as Jack wrights, lawmakers expect to shut the government down after tomorrow night's deadline. The House and Senate continue to work on separate stopgap funding measures and have not even started by Cameron negotiations. So midnight Saturday Night Live, apparently this is all going to happen.
Although that's what we've been hearing for weeks, and still the slow motion train wreck happens before our eyes. I'm glad to say that joining us from the Capitol right now is Congresswoman Haley Stevens, Democrat from Michigan's eleventh district, who we're going to talk about a couple of things with, including the latest from the UAW Congresswoman, it's great to see you, and thank you for joining us on what
I know is a very busy day. I'm told that you might have to leave actually in a few moments to go vote on a continuing resolution. Is that going to happen today?
We might get the hook mid interview and the bell might sound, I might have to go and vote. And you are correct that in the dark of the night, a continuing resolution dropped from House Republicans. It passed through the Rules Committee earlier this morning. It's moving through the House floor, and it's really, frankly, quite astonishing because it hasn't been negotiated in good faith with the other chamber
of this institute. I serve in with the Senate, and we also know what needs to be signed by the President. So it appears that Republicans are acting in a very isolated way, trying to pass through unbelievable cuts, gutting a heating assistant program, gutting health services, gutting our food safety systems. And I've had a chance to digest as much of this bill as I can, and I don't plan to support it.
Well, we're told as well it would be doa in the Senate. So clearly we're spinning our wheels here, Congresswoman, And it looks like there will be a shutdown tomorrow night. Can you tell us what the plan is? Will you stay through the weekend, assuming that that's the case, do lawmakers keep working until this is done?
That right now appears to be the case. We are getting guidance that we will be voting through the weekend. And let me just be clear, this is entirely manufactured and in fact, it's been quite befuddling to me, and that when I started Congress, I was sworn in twenty nineteen during a partial government shutdown, that this is where we're going back to, and it's coming from the other party.
This just isn't a way to govern this country. We know we're not always going to agree, but it just appears that a few in the Republican Party are holding everyone hostage. We're going to shut down this government, cost us money with the attempt to what They're not sure what they're going to get as a result of this, and it's really quite unfortunate and frankly frustrating.
I hate to be repetitive to our listeners, Congresswoman, but I can be a stickler. I guess sometimes I'm just still struck by the fact that last August there was an agonizing debate, a week's long debate that prevented a default to make a deal that would avoid all of this drama, the debt limit deal that set top line numbers and created a structure. I guess I should say for this budget negotiating process that of course fell through. The Senate wanted more, members of the House wanted less.
I just wonder your view, though. If Speaker McCarthy brought that back to the floor, it passed comfortably in bipartisan fashion. Would it pass again today?
Well, I would say that it did pass at the time. It might not pass now. But in this business, we are in a place where your word is everything, and so we weren't supposed to be in this place we agreed to top line numbers we pass annual budgets in this country. I mean, I'm starting to look to Q one of next year thinking about where we're going to be in March when we're working on the twenty twenty five budget. Will we have a budget for this year?
Are we going to put the American people through repeated shutdowns? Looking in the crystal ball. I was just on the floor of the House talking with colleagues, and we're I've almost never seen anything like this. We're all looking at each other with blank open eyes, wondering what's going to happen, wondering when the Republicans are going to come to the table. So, yes, you're right, we passed a deal in August. Would it
pass today? It seems that the extreme few who have now taken the Republican Party and therefore the country and our Congress and somewhat our country hostage by their demands. I don't know if they'd pass something like that again, And that's certainly why they're heading towards the government shutdown right now.
So the earth is shifting under our feet. Obviously, I want to ask you about the UIW congresswoman, but I'm curious about two things. What you make of this motion to vacate. We keep hearing about if there is a vote on a cr apparently Matt Gates will try to fire Kevin McCarthy. And are you hearing from moderate Republicans are you guys whispering in the halls about how you're going to save this Well.
I'm going into a meeting with the problem Solver's Caucus later this afternoon. I'm not sure if that is going to be on the dock at Our meetings are private, but that is a bipartisan group. And frankly, what I've been hearing around motion of akate right now are rumors. I was in the middle of working last night when a Washington Post story broke about potentially replacing Speaker McCarthy with Tom Emmer. That hasn't necessarily been verified. Mister Emmer
rejected those concerns. I think these rabble rousers are just trying to do anything to rest control, and maybe those holding the line see that as not necessarily the best path forward because they'll just be right back where they started. But one thing is clear. Trust has been broken. Trust has been broken with mister McCarthy and the Democratic Caucus and apparently the White House, and now it seems like within his own conference, which is why we are in
this place. The American people are sick of manufactured crisis. I'm sick and tired of this as well. We don't need to be in this place. We were passing a Chips bill last year, we were doing infrastructure at the beginning of the term. We were lowering the costs of prescription drugs. You know, the American people need a government that's going to work for them. And yes, we need to tackle long term realities around our debt and our deficit,
but this is not the way to do it. We've been doing this for ten years and it just doesn't cut it.
We're talking with Congressman French Hill. A bit later on the Republican from Arkansas reportedly had some choice words. I believe it was an F word for the aforementioned Matt Gates congresswoman. Does that kind of symbolize the state of the Republican conference in the House?
Well, I wasn't in that meeting, but I will say I have the utmost respect for mister Hill. We actually both serve as co chairs of the Task Force on American hostages and Americans wrongfully detained abroad. I've worked with him very closely on my constituent, Paul Wheeland, the longest detained American in Russia. And I think when someone like french Hill is reportedly losing their temper, you know something's not going right in the Republican Conference. And we're hoping
coolier heads prevail. We're hoping that these extremists, we don't really know what's motivating their concerns. Right now, we'll put the country first, put good governance first, put stability first.
We didn't.
We just had a COVID nineteen disruption just a few short years ago that we just made our way out of. We've got a lot of good things going right now. Let's not manufacture this type of scenario.
Well, I'll tell you what. We'll relay what you said to Congressman Friendshil when he joins us on Balance of Power on Bloomberg TV at five o'clock later today. Congresswoman, we've got big news from Detroit. This would be our lead story on any other day without the government shutting down. It looks like Ford is back on the naughty lists.
The UAW is stepping up strikes against GM and FORD not stillantis this time, But now that we've crossed another deadline, are we in any better place than we were a week ago.
I continue to be hopeful that these negotiations will play out as the workers are intending them to for their stronger wages, for some of the paybacks from the concessions that they made fourteen years ago. And I'm not in the deal making room. I know that this is painful.
It's tough for the workers who are striking. We really can't forget that, and hearing the stories on the picket line, I'll tell you when I was last home in Michigan, a thirty eight year UAW employee, he told me, he said, I wish I could afford the GM silverado that just drove by our picket line. And that's just not their reality.
And it's interesting. I had the Detroit Regional Chamber in my office today and they expressed, similarly to almost everyone who's talking around this strike right now locally in Detroit, the workers deserve a race. The workers deserve a race. It's obviously not that simple as just waving a magic wand there's a lot of back and forth. It does seem, according to some of the Detroit headlines right now, that we're not in that immediate place to sign the deal.
We know these strikes are continuing. These ones that have been announced today are quite large, and frankly, I wish I was home in Detroit to be with the workers, to be talking with the suppliers and negotiating that deal as best as I can as a lawmaker.
Well, I see, congress women that you've reintroduced a bill to protect union workers in federal vehicle contracts. The UA DOUBD Job Protection Acts would require federal contract bidders to disclose all plant locations, interestingly where vehicles will be made, along with some other details. To what extent are the Big Three exposed to federal contracts.
They are somewhat. This law came or this bill, I wish it was law. Yet this bill came about because of the contract awarded to Oshkosh Defense Industries around the Postal Service truck vehicles. They were supposed to be made
with union labor. Contract gets awarded. Midway through they decide, well, we don't have the capacity here, so we're going to move this to a non union and we certainly could see something like this pertain to the Big Three, and that would actually be a great date because they're unionized shops. I'm really proud of this piece of legislation. I've got a lot of co sponsors. It's something we should get done.
And frankly, it's very frustrating as a lawmaker when we pass these laws and then they go to be implemented. Around infrastructure, around the Inflation Reduction Act, We've got union provisions, prevailing wage provisions in there, and then somehow they get cut out as the deals go forward. And I do oversight, but we've got to take it a step further, which is why I've introduced this legislation.
I have to ask you while you're with US Congresswoman, I didn't think we'd be speaking this long with I know you're looming votes, but we've lost Dianne Feinstein. We learned this morning that the Senator has passed at ninety the longest serving female US senator, who of course inspired many women and men for that matter, to enter politics. And I wonder if you have any reflections on this news today.
Yeah, well, thank you for the chance to reflect on the line of the Senate. Diane Feinstein. She was such a champion for gun safety. She led the assault weapons ban, and she blazed the path for so many women and her family, her legacy, it's in my thoughts. We were just on the floor of the House. Speaker McCarthy was in the chair. Nancy Pelosi, our Speaker emeritus, was behind the podium, and we had a moment of silence for
Senator Feinstein. Obviously a tough time for her family and a real loss for the Senate at this time.
Yeah, I appreciate your weighing in on that. Congresswoman, thanks for joining. It sounds like you're a no vote on the CR Did I get that right before you leave us?
I don't plan to vote for this bill that would get critical funding for so many Americans and programs that we rely on, and frankly, something our president wouldn't sign and wouldn't make it through the Senate. We need a real let's be mature, let's get that done.
I know it's a busy day on the ROWTNA, thanks for joining Congresswoman Haley Stevens, the Democrat from Michigan here on Bloomberg Sound On. I'm Joe Matthew in Washington. Where it's going to be a working weekend. Hey maybe I'll talk to you Sunday night. Don't make plans for that. As we bring our panel in now, Genie Shanzano joins Democratic analyst and Bloomberg Politics contributor, and Lisa Camusa Miller is here as well. What a perfect panel to have today,
partner at RESET Public Affairs, former RNC communications director. We're going to try to get to both sides of this, and we've got a lot to talk about here. Jeanie. I can't imagine what's going through your mind right now, because we've talked about this something like every day for the last month. We could have avoided this if serious people were at the table, couldn't we.
That's right, And your conversation with Representative Stevens, I mean, she is just so clear and she is absolutely one thousand percent right. This is a max manufactured, man made crisis. It doesn't have to be this way, and it is being manufactured by a small number of Republicans to the detriment of all of us. So it is not surprising from one perspective. We knew it was coming, but it is shocking that they would push us to this degree.
And also shocking that Kevin McCarthy doesn't call their bluff and say fire me. I'm going to do the work of the American people, all right, you want to do He hasn't done that yet. That's shocking.
All right.
We'll add the voice of Lisa Camuso Miller coming up as well, because you know, look, if they vote on this cr that Haley Stevens is about to vote no on, he gets fired. Right, That's what Matt Gates said. Let's see if we call any bluffs today. Our panels up next, Genie and Lisa. I'm Joe, Matthew and Washington. This is Bloomberg.
You're listening to the Bloomberg Sound on podcast. Catch the program live weekdays at one Eastern on Bloomberg, 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.
As we reassemble our panel with regular order in mind here, Jeanie Shanzano is with us along with Lisa Camussa Miller, who was at one time the communications director for the RNC. She's now partner at Reset Public Affairs spend time in a Republican Speaker's office and knows exactly the conversation that's taking place. Are you chuckling right now, Lisa, over this victory lap on three spending bills or are you too depressed?
Well, you know, Joe, this is hard to it's hard to laugh about because it really is the livelihood of so many American people. I mean, we think about government shutdown, it doesn't just affect the government workers. I mean it expands out to so many other people. But look, I think I think Speaker McCarthy is the right man for the job. He is absolutely trying to balance all of these different agendas, all of these different personalities, and he's
making strides. He continues to punch above his weight. He continues to surprise people. And all of these other I mean, to Representative Stephen's point, all of these other mischief makers this small corner of the House Republican Conference, they are as powerful today as they will ever be because they continue to threaten the Speaker. But the truth of it is that there is no candidate that they could get
across the line. There is no speaker that they could put in place, and there is no one else that could do the job better than Kevin McCarthy. So no, I don't think that this is our best demonstration of American politics, it's at all. But I do think that that a lot of the hyperbolean nonsense that's going on in the fringes about the speaker himself is really super unfair.
You know, he was asked about this directly in that same conversation with reporters about the motion to vacate. I'm curious, though, and I'll play you what he said, Lisa. How many people are we talking about here? I mean, the we're general headlines all over the world. Is it Matt Gates? Is it we know it's Mack Gates? Is it two other people? Is it four people? I mean, what you could count on a hand, correct, the number of lawmakers holding this up?
Yes, that's correct. I mean, on one hand, I think and I think that there's probably contours of a variety of folks in the Freedom Caucus that are agitating in one direction or another. But the truth of it is is that the mastermind behind all of this mischief is mac Gates, and it's because he has a personal vendetta against the speaker from everything I see, so this alone, it's petty, it's childish, it's honestly, it's just it's it's bad government and it really needs to stop.
Well, it came up as I mentioned today, Genie, I don't know if you think of Matt Gates as a mastermind. I know Lisa didn't mean it that way. But here's Kevin McCarthy's answer to you know, you're reaching out to members to try to see if you can survive emotion to vacate. I've never asked anybody that question on I don't intend to any other. Best thing to do is just leave you here, just lead, Jeanie. I suspect there's some wisdom there. But is it going to work?
Well, you know, God willing for all of us, it works.
But we are now, you know, just several hours away from a really dramatic shutdown.
We will have two million people in the.
Armed forces and law enforcement who will work and not get paid. But you know who will get paid, Kevin McCarthy, Matt Gates, every member of Congress, the President, right, because they get paid under the constitution. So we do need leadership. But this is not the kind and the reality is this is a result of a deal Kevin McCarthy made
to have his job. We still don't know what was in most of that deal because it's apparently not written down, and when reporters go on the hell and ask him, he won't say.
So.
We don't know a lot of what's in that deal. But he made the deal to get this job. So I don't think this is about Matt Gates, and I don't see Matt Gates as a mastermind or any of those other folks. This is about Kevin McCarthy. He does he's right have to lead, But you cannot lead if you start your job with your hand tied behind your back promising that you will be beholden to the far right or far left, or any single member of the caucus. That's not the way leadership work. He did show leadership
when it came to default. He walked away from that deal to save his job. He has to stand up and say, fire me, I'm going to lead for the American people.
Fire me, Matt.
Let Matt Gates move ahead with the motion and see where the chips fall.
But he's not doing that.
He's doing everything he can to save his job and that's why we are all in this position, so he can save his job.
Well, I know that you see this a little bit differently here, Lisa. If the motion to vacate, actually, if Matt Gates goes there, what happens next. Kevin McCarthy's got to be talking to the rank and file about this now, and Democrats too.
I think that that's probably Matt Gates's last best move. I mean, I think that's the last time that he has any power at all in the conference. You know, the motion to vacate only takes you know, it takes a small uh, it takes one vote, right, But then we watched how the speaker's race went. We saw fifteen votes right, and that was for Kevin McCarthy, who had a large swath of support in the conference already. So to me, this seems like another It seems it's Groundhog
Day over and over again. This just happens to be the one that is the most public and most recent. But I remember a time with Louis Gohmert and other members in the House were yelling and screaming about the possibility of challenging whoever the front runner was, and they could never get the votes, Joe, And so this is just noise, its distraction, and look to the Congressman's point earlier, it's childish and it's unnecessary.
Okay, So you don't think it would succeed. The Washington Post is out with a screamer this morning saying Tom Emmers being teed up as as the next speaker of the House that members want to can tingency plan in case Kevin McCarthy gets fired. Lisa clearly doesn't buy it. How about Eugenie.
You know, I don't see any sign that Tom Emmer wants this job. Who on earth with any sense would want this job at this point, As the representative said, and you have talked about many times, Joe, this is not just Kevin McCarthy. It is a Republican caucus that is ungovernable. Just ask Ryan, just ask Bayner. If he falls, Kevin McCarthy will be the third Republican speaker in the last several years to fall because of a caucus that is ungovernable. So I don't think Tom Emmer would want
this job. But if he took it, is he some kind of magician who would make this all work? I don't see how that could happen. And if Kevin McCarthy does work with Democrats to keep the government open or to keep his job, he's going to have a heck of a time trying to do anything else while he remained Speaker. It is a huge conundrum for him and anybody else who tries to lead this caucus at this point.
Lisa Cavusa, you worked in the Speaker's office, in Dennis Hastert's office. What's going on behind closed doors right now?
That's the longest days of their lives, Joe. These people are working NonStop, working constantly to find ways to get members to come across the line to support various negotiations as they're coming through it is. It's cutthroat, it's emotional, they're exhausted, and it's honestly, I'm tired of just thinking about how much work is going on right now, between the staff, the leadership, the policy teams, the whip team. There's so many people involved in this process, and no one is sleeping.
It is.
They're working their butts off, for one and they're doing everything they can to try to get this over the line. That's apparent to me, and that's a parent from the disposition the speaker has had with every time he comes to the sticks talks to reporters, is that they are working as hard as they get to get this right. But I just I think that it's not We're not there and we're not going to get there by twelve midnight on Saturday night and Sunday morning.
Wow, she's having flashbacks live on the air here. I'm feeling for you, Lisa. I mean to pull you back into all of that. But yeah, the cots are coming out right, the takeout food, the wine bottles are coming in. This is This is a working weekend in Washington, and we'll keep you posted on all of this as we get closer to the deadline. But it looks like this is done. Lisa Camuso, Miller and Genie Shanzano back with more of our panel. Next.
You're listening to the Bloomberg Sound on podcast. Catch us live weekdays at one Eastern on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App. We're listening on demand wherever you get your podcast.
So Ford is back on the naughty list. The UAW has been hearing on Bloomberg is expanding its historic strike against all three of the Big three, this time targeting GM and Ford. Remember a week ago at this time, they held off on Ford because progress was being made. This week it's Stillantis. They're holding back on Stalantis. And we heard about this from Seawn Faine a bit earlier. Of course, the head of the United Auto Workers.
What we went at the bargaining table depends on the power we build on the job. It's time to use that power. That's why I'm calling on an additional seven thousand members across Ford and GM to go on strike starting at noon Eastern today.
Newly targeted facility as a FORD factory in Chicago produces the Explorer and a GM plant in Lansing, Michigan, manufactures the Chevy Traverse. According to Sean Fain, they had planned to strike at Stilantis, but something obviously happened here. They've been making some progress. Let's bring our panel in for more on this. Genie Shanze No, Lisa Camuso Miller. It's just one of the stories they're developing. I'm trying to keep up with the news here to get both of
your takes on them. Jeanie, how's this hit you now? It doesn't sound like much of anything has changed in the last week. Does this just keep escalating?
You know, I think for the time we were seeing some light at the end of the tunnel. That seems to maybe have subsided a bit, unfortunately. But I do think it was good news that the union was talking about a thirty as opposed to forty percent pay increase.
That's the right direction for them to go.
And you know, we all knew this was going to be a long strike, and I think we are set up for that at this point. And let's not forget you know, we've talked about the fact that the writers out in Hollywood they have reached an agreement apparently, but we are looking at a healthcare strike now in the next few days, next week potentially. So the strikes and the labor uprising across the country continues, and it can
be really detrimental to the economy. But is just an indication as the strike summer now becomes strike fall, and that doesn't seem to be subsiding at all.
Boy, that's for sure, Lisa. We saw both Joe Biden and Donald Trump speaking to union workers, I guess, both in their own ways this week. Joe Biden, though, was on the picket line. At what point does this become a liability politically for him or is it already?
I think it's already, Joe. I mean, this is a president who has been a friend of unions for a long time, for as long as he's been in public office, and he is proud of that, and that's why he went That's why he went to the picket line. That's why he went to do what he could to be helpful. Unfortunately, though, if you're in the White House, you are going to bear the burden of any of these bad economic news.
And Jeanie's point is right on. This is going to have far reaching impacts and it's happening all across the labor market, and you know what, and good for them that they're speaking up and speaking out and getting noticed and getting the workers what they deserve. But also too, the impact as we talk about government shut down, this is, all of this is going to have a tremendous impact on the economy, and unfortunately for the president, he's going to bear the burden of that.
We are watching the House floor. I want to mention as we stand by for a final vote here on a continuing resolution, it appears enough Republicans have already voted no to sink this. It's not going to happen. That basically guarantees here. Although you knew that when you woke up at the government, we'll shut down tomorrow at midnight. Geenie Shanzeno and Lisa Camuso Miller are with us as we reflect on another top story today. We can just
keep on going here. Dianne Feinstein has died, of course, the longest serving female Senator, now passing it ninety and there are a lot of questions about what happens next. But I'd love to hear from both of you on her legacy. Nancy Pelosi spoke from the House floor a very emotional address as she asked for unanimous consent and gathered the entire California delegation in the well of the chamber. A taste of what she had to say.
Thank you, mister Speaker, for the purpose of speaking with great sadness and emotion about the loss of our great senator, our senior senator from California, Senator Dianne Feinstein. I do so as I say personally as a friend, neighbor, and fellow San Franciscan.
She won her seat, of course, in the Year of the Woman nineteen ninety two, as it produced four new female Senators, tripling the number of women in the Upper Chamber to six. This is a tough day for a lot of Democrats, obviously, Nancy Pelosi emotional Genie, what's going through your mind?
Yeah, I mean, and I would say she had an awful lot of friends across the aisle as well, and so it is a very tough day. I think the word you hear most often attached to her as a trail blazer. Rightly, so she really was. As you mentioned, teen ninety four, four women elected to the Senate, and we called it the Year of the Woman. You know, the first time we saw two women representing our largest state of California, and she did so for so long.
I think the thing I'll remember most about Diane Feinstein is her ability to reach across the aisle. She was a trail blazer, to use that word again, as it pertained to issues that still haunt us today, like gun control. She also was willing to speak truth to power, even when it was not in the interest of her own party. We never forget that. After nine to eleven, she releases the report about the treatment of detainees, much to the dismay of many Democrats.
So she's a real, real sort.
Of example for us today at this really partisan time of somebody who governed herself and reached across the aisle and worked with.
People from the other party. And of course she.
Will be sorely miss, as Representative Haley told you Stevens Rather and as we just heard from Nancy Pelosi.
Yeah, Lisa Genie's right. She was known for her tussles with the intelligence community, with gun makers. How should we remember Diane.
Feinstein unapologetically American and just loyal and patriotic, and she was a leader and a hero for so many. So set aside all politics. What I loved about the Senator is that she really did speak to power. I mean, she really did stand up to those regardless of politics, regardless of party, and did the right thing. And that's the way she will be remembered. She'll be remembered for.
All of the.
All of the historic marks that she hit, you know, from being the first female mayor of San Francisco to being you know, the elected in the year of the Woman ninety two. I mean just yeah, a big loss for the Senate, a big loss for the Senate and a big loss for the country.
Veteran in the Senate as well as we consider the next generation here. I appreciate the comments from both Lisa and Jeannie.
You're listening to the Bloomberg Sound on podcast. Catch us live weekdays at one Eastern on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
We're joined now by the Vice President, Director of Economic Studies Program at Brooking's former chief economist Treasury Department. He was also a former Assistant Treasury Secretary in the Biden deministration, and he's all ours at the moment. Bennett's great to see you as we try to understand what's actually going on inside the Treasury right now. When it becomes clear that a shutdown is happening, what are the next steps.
Well, the Treasury Department, like every other federal agency, has put out contingency plans understanding that this might actually happen. Much of Treasury operations will continue as normal, so at least for the short term, so social curity recipients will continue to receive their checks. Payments will generally continue to be processed within Treasury. The big disruption in operations will
come from the IRS. So, for example, the IRS has said that it may have to stop processing some tax transcripts. So think about when you apply for a mortgage and you get this tax transcript that might be interrupted. And so roughly half of IRS employees will not report to work. As my understanding and reading the contingency plan, on day one of the shutdown.
We got a warning from Moody's. I'm sure you saw that Ben just a couple of days ago, threatening to join Fitch and S and P in removing our top credit ratings. How likely is that to happen knowing that we'll continue paying our debt.
Well, Fitch obviously felt comfortable doing it, and Fitch, if you read the justification for the shutdown, what was feature centrally in that was the inability for the US government to continue doing its job. And so this just feels like this massive unforced error. I mean, we have known about the start of the fiscal year for literally years. We've had a framework for this, going back to May when you saw that bipartisan compromise coming out setting discretionary
spending levels. So this is not a surprise to appropriators. It's not a surprise in Matt Gates. It's not a surprise to the extremists in the House who are trying to blow all of this up. So, you know, I think that what we can expect moving forward is a lot of displeasure, not just from American people, but also from legislators who felt like they had a deal in place.
Yeah.
Well, I mean, look, if the downgrade is going to be based on chaos and deficit spending, how about we just rip off the band aid because neither we'll be changing anytime soon, right.
Yeah, I mean, I think we need to focus on the crisis which is directly in front of us, and this is a government shutdown. One point I want to make is that not all government shutdowns are created equally. So you go back to nineteen ninety five, we had that twenty one day shutdown, but that only impacted about a quarter of discretionary spending and military was not included.
You go back to the shutdown that happened under the Trump administration that lasted for thirty five days, only about thirty three percent of government spending was impacted, and the military was not included. We're talking about the whole suite of appropriations bills here. One hundred percent of discretionary spending is potentially on the table. So this shutdown can even be worse than ones we've seen in the past.
I saw you in the Deal Book this morning, Ben, and you were talking about the impact that this might have UNFED officials' ability to manage inflation, to forecast, to model around the economy, and you wrote, quote, it's like a pilot trying to land a plane without knowing what the runway looks like. That's where we are now, That's where we are now.
And you know, the FED is another example of an entity in the US economy that relies on the government for either information or for processing or for providing services. And so the FED is obviously in the middle of a very difficult period when it comes to making decisions around FOMC. And we may ask members of the FED to make a decision about monetary policy without knowing what
the unemployment rate is, and that is just crazy. And I'm just I'm not sure that these really extremist members of the House are considering this as part of their calculus when they're pulling all these stunts.
Well, I suppose not, but we should remind our viewers and our listeners here Ben that we will not get economic data until this is solved. That could be weeks. The impact on the markets alone being in the darklight, that could be significant.
Exactly, we have no idea how long this is going to last for, and a lot of the economic disruption intensifies over time. So you've probably heard that TSA screeners, air traffic controllers will report to work.
On day one. That's true.
But look, these people all have bills to pay, and if they're not being paid, they have to go make the money somewhere else. And so when we've seen really long government shutdowns in the past, is that you start to see these increased rates of these workers calling in sick. Look, our nation's domestic travel system is pretty central to the
US economy. And if it means you can't go through security, if it means you can't safely travel on an airplane because an air traffic controller isn't reporting to work, that's a pretty steep economic cost. And I could give you a dozen different examples about how this impacts the US economy, But the point is is that the magnitude of the shock, the intensity of the disruption increases over time.
Well, isn't that right? Is it possible? Maybe you can bring us inside the Treasury Department here for a moment. Well, they have their own estimates on economic data. Would commerce, for instance, have its own Does the White House have data that just simply won't be released publicly or those numbers will not be available period.
Those numbers will not be available period. Now you've seen some Fed officials say, look, we can go we can turn to other sources of data. They can turn to private sources of data to try to get a sense of what's going on. But if I'm making if I'm on the FOMC, or if I'm staffing someone on the FOMC, I really want the best data possible so that person can can make the best informed decision. There's nothing that substitutes for a federal inflation report. There's nothing that substitutes
for the employment report. There's just that's too comprehensive, too well established, and there's there's really no substitute for those data sources.
Are we making phone calls to foreign debt holders? Is their business? Are their transactions with overseas governments that are impacted by this.
Not that I'm aware of. You know, I think that the debt payments will continue to be made. This isn't quite as severe or really anywhere near as severe as the debt ceiling impass that we were dealing with back in May of this year. That doesn't mean it's not costly. So Goldman has an estimate that this will subtract about zero point two percent off of growth. About three fourths of that impact comes from federal employees not getting paid
and the rest comes from the private sector. But I think that, you know, most of the payments will continue to be made. What doesn't happen is that things like small business loan applications, those won't get processed. But as far as the payment system for the federal government, in most circumstances, that will continue as normal.
We're spending time with Ben Harris's former chief economists the Treasury Department. He's now head of the Economic Studies program at Brookings. Interesting headlines today from Janet Yellen. Ben, I'm not sure if you saw this, but I'd love your take if you did. She was talking about recent prices, showing that the price cap on Russian oil may not actually be effective, that it may not be working. And we know that Russia has brought in billions of dollars
in dark oil exports. What do you make of this news?
So my take on the price cap was that the price cap was enormously effective over the first half a year or so after it was put in place. Russia has undertaken countermeasures which I think probably surprised no one, and has shifted a larger sere of that trade outside of the price cap coalition. This doesn't mean that the price cap isn't effective or wasn't effective in the past.
It was.
What it means is the coalition needs to adapt and evolve and put in place remedies that push back against those countermeasures that Russia has undertaken.
So what should the next step look like? Should this remain in place?
Oh, it should definitely remain in place. I think the next step is increased enforcement on behalf of the coalition, so not just within the United States, but in Europe and in other coalition countries. I think it could take steps such as potentially banning the sale of tankers to Russia. I would have liked to see that measure be put in place, but it's really a focus, I think on
enforcement rather than adjusting the price cap levels. We need to keep a fairly substantial share of Russian oil trade under the price cap for it to remain effective, and that's really what's up to the coalition to take on next.
We look glad you could join us today. Ben Harris, vice President, Director of Economic Studies at Brookings, formerly with the Treasury Department of the Biden administration, and a very recent memory with reflections here of what's happening at the Treasury now with our government set to shut down tomorrow at midnight, we'll continue to bring you voices from inside the Beltway to better understand what's happening in this time of chaos. Us here on sound On. I'm Joe Matthew.
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