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 welcome to the Wednesday edition of Sound On. I know it feels maybe like it should be Friday by now. We've packed a lot into this week. They actually passed a bill, it really happened in the House of Representatives late yesterday, a stopgap measure to keep the government from shutting down this week.
On this vote, the asi A three thirty six.
Then as are ninety five two thirds being in the Affirmative, the rules are suspended.
The bill is passed, and without objection the motion to reconsider, so lay it on the table.
Yes, dare to dream this will keep the government running, by the way, for well weeks in the next year. This is the lattered cr we talked about. And by the way, I'm assuming this gets passed by the Senate. That does appear to be the case. Senator Chuck Schumer just a short time ago, filing kloture on the Senate floor.
I moved to proceed Calendar two forty eight HR sixty three sixty three Clark.
Mission to proceed to HR sixty three sixty three and Act making further continuing appropriations for fiscal year twenty twenty four and for other purposes.
I send a quote your motion to the desk.
Ah, So, I guess this is really going to happen. The Senate signing off on what the House did. Remember, they had their own cr in the Senate didn't look exactly like the one in the House. But there's something called reality here in the calendar, and this is the one way to get it done in time for Friday. We talked about this late yesterday on Bloomberg TV with Senator Mark Warner, the Democrat from Virginia. Not a fan of the process, not a fan of the ladder.
Remember the ladder. You get four bills.
Expiring in January and then the other eight in February. But he says, you know, the grown ups need to do something here.
The process being crummy. Does that mean I'm going to, you know, vote to shut down the government over No. I think I got to, you know, we got to be adults. I'm unlike some of the crowd in the House. And if it comes over and it longs. It's clean and there's not any other you know, add ons, poison pills, funny business. I think the overwhelming majority of us will support.
This funny business. We'll see about that. In a conversation right now with Jonathan Tamari from Bloomberg Government Congress reporter. This is interesting, Jonathan, welcome back. It sounds to me like the lawmakers all left town and left you up there alone.
Is the Senate going to move on this today?
Yeah?
I mean you mentioned that it feels like Friday, and it certainly does feel like Friday and Congress because everybody is getting out of town and trying to wrap things up. The Senate is looking likely like they're going to try to move this today and basically wrap up their work, fund the government and every send everybody home until after Thanksgiving.
How quickly can they get this done? This talk about a vote today, Jonathan?
Is that real?
There is?
There's definitely an effort underway to get that. Senators on both parties sound pretty optimistic that they'll get there. As you know, with the Senate, everything by design moves very slowly unless you get unanimous consent, in which case things can suddenly move very fast. So my impression is that
they're working on getting that consent right now. Typically senators don't like to, you know, install each other's holiday plans, so odds are history says they'll get there eventually and get this vote and everybody can get home and out of Washington later today. It's not tomorrow, but it looks likely like today they'll.
Get it done.
Well, you mentioned the holidays. Uh, it does seem that this was just an effort to save the holidays, save Thanksgiving, Christmas, and Hanukah for the lawmakers because everyone's talking about a shutdown again in January. We simply prolonged the inevitable here, right, we.
Do prolong the inevitable, But I think it lowers the political stakes a little bit by moving it. As you point out, there's a holiday coming up next week, everybody's going to be traveling. Nobody wants to deal with a shutdown in the middle of all of that, And no matter who is blamed for a shutdown, I think everybody
would end up absorbing some negative impressions from that. Joe Biden, Republicans in the House, Democrats in the Senate could disrupt the economy at a time when people are supposedly going out shopping for the holiday season. Just nobody wanted to deal with that, and just on a human level, I don't think lawmakers want their holidays basically held hostage by this, So they push it to January and February. They're still going to have the same confrontation, but it'll at least
be without this holiday pressure. That kind of often leaves people, I think, to accept some deals that they might not under other circumstances.
Jonathan TOMORRII with us from Bloomberg Government. Is there a foregone thought then? I mean, am I projecting here that the government is likely to shut down?
Stakes?
Maybe lower here, but we're nowhere near agreement, Jonathan. A little while ago they couldn't even get a procedural vote on a spending bill on the floor of the House. Once again, do we have any reason believe that we will avoid a shut down next year?
Well, there's gonna be, yeah, as you point out, there's still a lot of work to be done. They have to Eventually, they keep passing these short term bills, Eventually they've got to pass a long term spending bill, and both chambers are struggling to get that done. In the House, you've got Republicans fighting Republicans over what those spending bills should look like from the center and from the far right.
In the Senate, you know, everything's got to be bipartisan, and so far it's been a bipartisan process, but a very slow moving process. So we'll see them both. I think after Thanksgiving, try to advance those spending bills and keee up those January negotiations. Each side will kind of lay down a marker in December, they hope, and then negotiate in January. But if they can't pass anything, they don't have anything to negotiate over. We'll see if the
politics change at that point in time. There's a lot of conservatives very angry with the new speaker over this short term spending bill, and we'll see if that means that he draws drives a harder bargain next time around.
I want to ask you lastly, Jonathan, about the work left to be done here, and it includes funding for Israel and Ukraine. I know the House pass to standalone Israel funding bill, but that apparently is not going to be taken up in the Senate, and the President's supplemental request including both plus Taiwan and border security appears to be on ice. Are we going to be talking about this next year when Ukraine tells us that it's out of money.
There's a hope among Senators at least that they'll be able to put all these things together by the end of the year. Border Security, Israel, Ukraine. You know, there's bipartisan support for Israel Ukraine. There's some skepticism from Republicans, border security, there's some skepticism from Democrats. But the idea is that there's a critical mass that if you put them all together, you can get a critical mass in
both chambers to support it. It's one where it feels like there's a pathway to get it done, and we just need to find out kind of the right balance of all the pieces. So that's something they hope to get done. Later this year. They have to pass the Defence Authorization Bill. It could possibly be attached to that, but that I think will be one of the big things to watch when they're back from Thanksgiving.
True enough, Jonathan, thank you so much for the up day. Good luck getting everybody out of here on top. Jonathan to Mario Bloomberg, government. To his point, House members are already bailing. There's a line to get to the airport. I bet that exit off three ninety five looking pretty ugly right now, can.
We get over the bridge? The Senate will be next.
We'll see if they get this done today, but even if they do, Israel and Ukraine are still left up in the air. And that's where we begin our conversation with the ambassador. He's chair of the Middle East Program at the Wilson Center, James Jeffrey, former Ambassador to Iraq and Turkey. It's great to have you back with us, sir, and I appreciate your joining us here in the throes
of debate in Washington. How important is it going to be to start with this matter of funding for the Senate to move on Israel and Ukraine before the end of this year, so this does not slip away.
It's very, very critical for both countries, and they're both part of the same fight, two democratic states being attacked by the enemies of if you will, the Global Uta. So I see them as the same package. Many in the Senate see that there are some in the House of both on the left and the right, that are doing nitpicking about this, but I'm very confident this is going to work. We should be all encouraged by what the House of Representatives has done this week, a little
bit of a return to sanity. I think this is going to carry over into these other things as well. I'm pretty upbeat.
You're upbeat just to see something move, and so this is a story of momentum.
Is that what you mean exactly, and recognition that you have to do deals and that if you're the scene as the one who's blocking the deal, it's going to hurt you on election day. And I think some of the Republicans felt that that may be the one explanation for why they didn't do as well as they had thought in the November elections.
We have a fascinating story on the Bloomberg terminal today from our Pentagon reporter Tony Capasi is going to join us a little bit later, Ambassador about the Pentagon not
waiting for a funding measure to pass. In fact, it appears the Pentagon has quite a bit to work with here when it comes specifically to Israel ramping up aid, delivering on requests that include more laser guided missiles for apache gunships as well as one hundred and fifty five millimeters shells, night vision devices, bunker buster munitions, new army vehicles, the new hum v's, even some drones, the Switchblade drones that we apparently don't even have. Is this just coming
out of our inventories. In another case, Ukraine is returning weapons that were donated to Israel. It sounds like they're getting a lot already.
Is what Israel?
It is what Israel needs, particularly the bunker busters and the drones. Some of it's coming out of inventories. Some of it is the stuff that we have in the pipeline that will be replaced. This is risk, but it is low risk at this time. The point is we are defending and Americans need to know this. We are defending these United States, We're defending Taiwan, We're defending the whole global UTA by helping the Israelis in the Ukrainians fight this fight. This is money well spent. We'll find
the weapons, we'll find the ways to fund it. If necessary. With Ukraine, we can get the Europeans to buy our stuff and give it to them. We're going to continue doing this. I'm absolutely convinced.
Spending time with former ambassador James Jeffrey here on Bloomberg sound On. You might have seen this letter, Ambassador. I want to your thoughts about this. More than thirty relief organizations sent a letter to the Secretary of Defense, Lloyd Austin, urging him not to send one of the items that I just mentioned. And it's not the high tech drones or the laser guided missiles. It's the it's the the
one hundred and fifty five millimeters shells. It's the rounds that are indiscriminate and might result in more civilian loss of life.
How do you respond to that?
In the hands of the Israelis who know how to call in artillery, it's not indiscriminate. It has a circular era probability of the more modern ones of just a handful of meters. Now the blast radius can be over
fifty meters. That's true, you get strattenal flying around, but this isn't going to inadvertently kill hundreds of people and the Israelis needed and those aid agencies obviously are doing heroic work under very difficult circumstances in Gaza, but they cannot have a veto over a military operation that is critical for our ally Israel and frankly critical for US.
It appears that the IDF Israeli military is moving into the hospital that we've been hearing so much about in Gaza. It's been suggested by some that there might in fact be Hamas militants below the hospital. How dangerous is this going to get? As israel Is urged to slow this down by the White House to show restraint, to look out for civilians when you've got potentially militants working underneath a hospital, Ambassador.
Everything is dangerous in Gaza for both It'sraeli troops, for civilians and fortunately for hamasris taking heavy losses. The Israelis know what they are doing. They will simultaneously clean out the hospital and stop moving underneath it while delivering, as we've already seen, incubators, water, other medical supplies to the hospitale. They're not going to shoot innocent people in the hospital. They haven't done that deliberately at any point in this campaign.
I have to ask you about what's happening in Ukraine, as we obviously are walking into winter here soon. As this debate floats in Washington about funding Ukraine, and you hear more Republican voices specifically in the House say not
another dollar. Does that in bolden Vladimir Putin to do something stupid, to do something, for instance, around the holidays, maybe to target civilians, maybe to start sending missiles into Kiev again, to try to wear down Americans view of Ukraine's potential to win.
No, for two reasons. First of all, he knows that if he starts doing that, he's going to create more resistance, including among Republicans in the US House. Secondly, Vladimir Putin's doing about everything he can shout of nuclear weapons, and he's not going to use those in this fight. For him, it's all out. Nonetheless, he will be encouraged psychologically by this action if we don't get the weapons and the funding, and he'll be encouraged by the presidential campaign.
Ambassador, I know you stopped a very busy day for us, and I want to thank you for coming back to see us once again. James Jeffrey with us live on Bloomberg Radio Now Share the Middle East Program at the Wilson Center. Of course, he's spent a career doing this, not only in his work as an ambassador, has worked through the States Department. He was also the Special Presidential Envoy for the Global Coalition to defeat isis.
You're listening to the Bloomberg Sound On podcast. Catch the program live weekdays at one Eastern on Bloomberg Radio, the tune in app, 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.
I'm Jill Matthew in Washington with Kaylee. And if you were on YouTube a little while ago, you already know that you never know what you're going to see on the interwebs here on sound On, and you can join us now by searching Bloomberg Global News.
I'm here.
There she is now, Kaylee. Lin's nice to see you.
Kaylee joined us every day for the second hour of this conversation. And we've got a lot to talk about. You're John Tucker talking about GM. Yeah.
Are we worried about this contract?
Yeah? Well, when we think about the deal that was signed, which of course includes the big wage increases a lot of other concessions to the union that the union wanted, it was ever a guarantee that the union was going to ratify it. It was a deal in principle, essentially a tentative deal, and we know that at least some workers at some of these specific gm plants don't seem to be as forward as maybe you would have thought.
Yeah, this is interesting.
I thought Sean Fain had a sense of the Yeah, rank and file here, but maybe this is more complicated than we thought. It's something we talked a lot about though, during the strike, and I don't want to drop this bead. As long as this is still a story, We'll keep you posted on that use here in Washington. I was joking earlier you can't get off the exit on three ninety five to National Airport because the entire House of Representatives is already in line getting out of town in
front of you. The Senate still has some work to do. It looks like the Senate will pass this bill that cleared the House late yesterday that'll fund the government into January.
Do you hear Chuck Schumer this morning? He's going for it.
This is the Senate Majority Leader filing kloture on the floor, the procedural vote that would bring us to the actual funding.
We moved to proceed to calendar two forty eight HR sixty three sixty three Clarkport.
Motion to proceed to HR sixty three sixty three and Act making further Continuing Appropriations for Fiscal Year twenty twenty four and for other purposes.
I send a quote your motion to the desk.
Send it to the desk, Kaylee lines. That means it could happen as soon as today, by the way, Yeah, well he could be like another line at the airport tonight.
Yeah.
They want to get this done asap. And something tells me the House getting to go home until November twenty eighth might fire up some senator who also would like to get on their own airplanes, trains, automobiles. However it is they're getting home for the holiday.
It's Wednesday today, Yes, a week from today, still won't even be Thanksgiving.
Yeah, well you know how this works.
Congress gets Yeah, I want.
That place extended holiday weeks. I want that would be nice if we could do that too.
But Mark Warner told us last night he's on board.
They don't want to shut down the government even though they don't like the process. So then, of course we're not sure exactly what's going to happen in terms of the vote count.
But Wall Street seems.
I guess pleased, not that they were ever freaked out to begin with. I think this is like boy who cried wolf from Washington to Wall Street.
Yeah, I mean Wall Street has lived through government shutdowns before. I think, by and large, the lesson we have learned is financial markets are more concerned about debt sealing fights and potential. That's cool on the US debt versus government shutdowns, which have a relatively limited economic impact. Though the economic impact is still there, necessarily something markets get overly concerned about.
And at the very least, the market probably is looking at what happened in the last twenty four hours and saying, Okay, we can at least breathe until January nineteenth. Maybe we'll start getting freaked out a little bit before that.
We will, because three days before that is I yeah, the Iowa. You better rest up over the holidays. I'll bet you. Libby is I told you Libby Cantrell was coming in. She's with us now, the head of US public policy at PIMCO. On the line, Libby, I saw your note to clients, and I guess we're feeling pretty good about things here. But nothing's changed, has it? Don't we just shut down in January?
Yeah? Good asking you in Joe. It basically this is Congress has done what they are very good at, which is just kicking the can down the road. As you know, there are now two deadlines. Lead it to Congress to overcomplicate something that should be more simple. Two funding deadlines January nineteenth, as you just mentioned, and that I'll so February second, which happens to be Groundhog Day. Maybe wittingly or not, they made that deadline, and it just sounds like.
From why is that real February second is did they do that on purpose?
I don't know. I mean maybe maybe it's a wink and a nod, But I think the most important thing here, and you're right, I mean markets, markets have sort of shaken this off for the most part. I think there was more focus at the end of September, I think than there was just the assumption that this would get resolved this week, which of course it looks very likely too.
You know, we would be surprised if we didn't see a big bipartisan vote in the Senate and then President Biden quickly signing this into law, but in a big butt here. We will have to revisit this come January nineteenth. And it looks like while the House Freedom Caucus, the right flank of the House Republican Conference, is giving Secer Johnson a break for now, they will not come January, they are insisting that there will there there there has to be spending cuts or else. You know, ship Roy
has indicated. Representative Ship Roy, who is part of the House Freedom CROCSSES, has has indicated this is strike one and strike two for Speaker Johnson. And so so it does seem that the stakes will be much higher as we go into January. And in terms of the markets,
I mean, again, the markets haven't really been focused on us. However, you could, you know, you could argue that some of this increase in the term premium, basically the premium that investors have to pay as sorry, that the US government has to pay investors in order to take on their debt, maybe has something to do with just questions around just
you know, functioning and governance in Washington. But it's difficult to know to sort of disentangle all the reasons for why the term premium had increased over over the last six weeks or so.
Yeah, well, if you ask Treasury Secretary Jennet Yellen, she doesn't think that has anything to do with the debt and deafest. It's just the idea that the economy is really strong and rates are going to stay higher for longer. So I guess, Libby, it depends on who you ask. To the point you were just making though about maybe the House Freedom Caucus, some of these ultra hardline conservatives aren't going to be giving Mike Johnson as much of a break come early next year. We also heard from
Congressman Bob Good of Virginia. He was speaking to reporters earlier and he said, the Speaker has said he wouldn't do another CR. We're going to hold him to that. So, Libby, with the passage of a clean CR, now, does it only intensify the idea that there will be a shutdown next year because Speaker Johnson is going to have played that card already and not going to have an option between shutdown or spending cuts that Democrats won't go for.
Yeah, I think that's exactly right, Kaylee. I think that you know the release valve that both Speaker McCarthy and now Speaker Johnson have used and it will not be available to Speaker Johnson if it sounds like if he wants to keep his speakership that it sounds like that is what is the sort of implicit you know threat here that come January nineteenth, if the funding bills for those that sort of that part of the government that that deadline applies to, if that hasn't passed, then folks,
you know, Will Will will threaten his speakership if he has to use another cr. The thing is that practically speaking, you already just saw this today in the House, and this is sort of noise, I think, to investors, but it's sort of important in Washington is that the appropriations bills have not been able to pass, even on a
partisan basis. I think this is kind of the big takeaway and sort of revealing in terms of the Republican caucuss that that there are obviously lots of different factions they've called the Five Families on the Hill within the Republican Conference, and they're not necessarily getting along very well right now, and that does not necessarily pretend well to meeting that January nineteenth deadline of passing appropriations bills, even
if it's just relying on Republicans. So I think the bottom line here is the stakes seem higher going into January. The chances seem higher of a shutdown honestly in January. But as we've just been talking about, does this really matter to the market. Probably not unless it's sustained shutdown and then there's another shutdown deadline on February second, So the flill government shutdown, then then I do think it could your markets will be taking notice.
We're talking with Libby Cantrell at Pimco on Bloomberg as the president. Today, Libby sits down with Shijimping, the president of China here in the US, for the first time in six years. They're sitting down in San Francisco for what is described as a high stakes meeting based entirely on our lack of relationship over the last nine to twelve months here. Then again, expectations are pretty low, and we keep hearing that this is a market positive.
Just the fact that they're sitting down together. Is that how you see it?
I think that's exactly how we see it.
Joe.
This is the first time that you president, she has met with a US president on US soil since twenty seventeen, and this is, you know, the first time where both leaders are coming together with I think, you know, at least their hands open a bit more than what they have during during Biden Biden's administration. So I think the meeting in itself is the deliverable. The meeting is what you know, folks on both sides were trying to deliver.
I think outside of that, we don't expect there to certainly be any kind of grand bargain on sort of the economic tool state craft, if you will, in terms of rolling back tariffs or anything announced on expert controls or what have you from the US side. I do think though, that we know one area of potential agreement and that could come out in an announcement could be the reinstatement of military to military communications, and that is
something that certainly the US administration is prioritizing. I mean, just remember that even during the Cold War, the US had principles of principal level channels of communication open with military folks and with the USSR. So during the Cold War, so the fact that we haven't had that with China since August of twenty twenty two. Of course, that's when Speaker Pelosi went over to Taiwan and then the China kind of cut us off practically for all intensive purposes.
So I do think that is that I know that the priority of the US administration, I think for good reason from a national security perspective, and so I would not be surprised if we saw an announcement around that. But outside of that, I doubt we know we see much coming out of this meeting. Again, the meeting itself is.
Deliverable, and of course Libby, the meeting with Biden isn't the only meeting that Chijin Ping is going to have. He's dining tonight with a bunch of executives of big companies. We don't know exactly who is on that invitation list for dinner, but you know, the likes of Jane Frasier, Elon Musk, Satya Nadella. They're all going to be at the CEO summit that's happening on the sidelines of APEX. So it'll be interesting to see what the business oriented
conversation is. Because we were having a conversation with Gerard de Pippo, who's one of our geoeconomics analysts here at Bloomberg Economics last night, and he basically told us, Look, whatever the messaging from the bidy of administration is about whether or not there is decoupling they're pushing for with China, Ultimately, these decisions, a lot of them come down to private actors, what businesses, and what people do, and Lippy, aren't we already kind of seeing that?
Yeah, that's an excellent point. I do think it is. It's quite a tell the President she is meeting with these US based CEOs, and I think if you look at the most recent FDI, the foreign direct Investment data in China, it is sort of dropped off a cliff in many ways, and so I think that it makes sense that President She is trying to, you know, reaffirm or reassure in many ways that China is still open for business, that it is still open to US investment.
But you make an excellent point that regardless of what the public policy is around here, you know that the sort of the political risk of investing in China has certainly increased from the US's perspective. We see that with some of our clients, you know, based in the US. And then of course there's some economic headwinds, as we all know in China. So it's dovetailing at a time where investment may not be even that attractive, you know,
going in into China. But again, I think this is is this is sort of a revealed preference, if you will, on President Sheese part where he is you know, showing that he does want to reassure us and US business that you know, China is still is still an attractive place to invest. Whether it resonates, you know, it's a.
Question, sure, what do you do? You do you have a feel for that, Libby.
I just wonder if this is the new normal here, if there's going to be some thaw or you know, a motivator to start investing in China again after so many people got burned.
Yeah, and you saw you know today that the Federal Thrift Retirement Plan is going to be moving away from some of their Chinese investments. Again, there have been lots of you know, US space pension plans, the big allocators of money that are not necessarily divesting, but they are not necessarily making new investments in in China. And I do think this is sort of the where the intersection of you know, investing and policy is very acute or
policy or political risk. You know, a lot of those folks, a lot of those allocators just think that, you know, the question about obviously the economic attractiveness of China, but then also the destination, but also again just the domestic political risk and what we've seen on the Hill that the House Select Committee on China, they very much are
scrutinizing capital flows from the US to China. We also have seen the Biden administration put out an executive order in August, you know, basically looking at capital flows into very specific sectors. They try to be very targeted and very surgical, but still so I just think in general, the kind of the threshold for investing if you're a US based investor, especially a big one with the headline risk has increased.
We're just about out of time here, Libby, but I do appreciate your taking a swing at that question.
I'm Joe Matthew and Washington.
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