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We're just as busy as New York is today with this double dip of big economic events, a FED decision coming up in just over half an hour. Joe after cooler inflation data this morning on the headline monthly CPI figure, we get a zero point zero.
Of our set. Yeah, kind of amazing. Markets love it. White House likes it, but treading carefully. As we see in the statement here, prices are still too high, writes the statement from the White House. But today's report shows welcome progress on lowering inflation. Let's go to the source and a great opportunity just moments before our special coverage begins here on today's FED meeting, to speak with Heather Bouchet,
a member of President Biden's Council of Economic Advisors. She's with us from a beautiful north lawn today, and Heather, it's great to have you back. As I read the statement from the White House, which is clear as I read at the outset, prices are still too high. I also wonder if you're thinking inside about how far we've come.
Oh, we have come so far in so many different ways, you know. I think about the economy that the President inherited and so many challenges. How we got unemployment down, how we got people back to work. And yes, prices went up, but we have seen prices come down by about sixty percent, and certainly good news today with the zero you know, the flat increase in prices overall. So
this has certainly been giving. As the President likes to say, family is a little bit more breathing room and is good news for American families, and of course good news for American workers today as we saw yet another month of wages outpacing inflation. That marks fifteen months for the eighty percent of the workforce that are production and non supervisory employees where their wages have been outpacing inflation. So that's great news for workers and their families.
Well, Heather, even as we talk about a flat figure on the headline, there still is a bit more happening beneath the surface that shows some stickiness in certain areas, including shelter prices up four tenths of one percent owners equivalent rent similar How can that realistically be addressed at this point when there are arguments being made, including by members of the Democratic Party like Senator Elizabeth Warren, that this is something that high interest rates are actually exacerbating
because it costs more to borrow to buy a house. How can you be confident, as long as rates remain high, that the shelter price pressures are going to come down.
Well, let me give you two answers to that question, first a technical one and then a policy one. So first, you know, CA, the Council of Economic Advisors, we've been tracking this for quite some time. The way that shelter is accounted for. You know, you build in rents from leases that were signed while ago, so you have a good sense when you look at real time data how
this might shift over time. You know, we have been estimating that these these numbers will come down as the prices of new leases come down, and certainly that's what we've been seeing in general. Now, granted we certainly want to come those to come down more, but that's taking up a larger share of the monthly increase in price changes. On the second point though, in terms of policy, and the President has been acutely aware of the challenges in housing.
You know, he has put together a comprehensive housing supply plan and that would do a number of things. One thing that I just would like to point out is that that plan includes giving new home buyers a tax credit to make it just that much more affordable, which can help account help ease the burden of those higher interest rates during these times, so that people can get into those new homes.
Heather, at what point to higher interest rates in themselves become inflationary or are we already there?
Well, listen, you know, we have been in this situation for quite a while now, and the expectations of where interest rates are have been baked into you know, forecasts and where people are thinking about the economy. And certainly this is challenging for folks making those big purchases or
things like that. But we remain optimistic that because of the success in the economy, and you know, critically we've made so much progress, and that very quick progress in the beginning, but we have seen you know, things like the gains and jobs and output that we're starting to see those get down to that kind of pace that is sustainable, and so that's what we're looking for. And you know, here today, we're here to talk about the fact that you know, we have these numbers on inflation
that beat expectations on the low side. That certainly is its ongoing good news and means that we're going to get that extra bit of breathing room in the economy to continue.
Well, as we think about the strength of the economy that you're characterizing and say the labor market specifically, we have seen a lot more analysis of the way in which migrants have contributed to that the idea that they are actually playing a very key role in the strong job growth we continue to see every single month. But President Biden just signed an executive order essentially cracking down on those seeking asylum. Heather, how quickly do you expect
that might actually show up in the data? What economic impact could it have?
So the President does not expect this to have negative implications on the economy. Certainly, we have seen that, you know, immigrants are an important part of our labor market. They add to the economy, they go out there and get those jobs, and you know in all the different ways
than add to the economy as they're buying things. But we also know that the economy is very strong right now in terms of the labor market, and we've seen an unemplomerate add or below four percent, for you know, over two and a half years now, and so that certainly is an indication of the strength that there are a sufficient number of jobs out there for anybody who you know, wants to go out and try to find something that continues to be a strong labor market even
though we've had this immigration We're spending.
Time with Heather Bouchet live from the White House as we prepare for our spend. She'll fed coverage here on Bloomberg TV and radio. There's a big debate about to begin, Heather. We were discussing it before you joined us, about potentially making the Trump era tax cuts permanent. There's a big drive among Republicans to make that happen. And as we consider the potential impacts of greater deficits on inflation, I wonder what you would see happening to our economy if
that took place. These are set to expire next year. What would happen if they were made permanent.
Well, listen, here's the thing. We know that the kinds of policies that the prior administration put forward, we're supposed to lead to a ramp up and investment and productivity and particularly in manufacturing jobs across the country, and that's
not what we saw. In fact, the President Biden's agenda has led to that kind of sharp uptick in investment, and not doing it through the massive tax cuts that were not good for the economy, but actually doing it through smart targeted policy that has led to real economic out comes and communities all across the place. So, as we're looking at this conversation about what should and should
not expire, the President's been very clear. He continues to believe that no one making under four hun one thousand dollars a year should see their taxes go up. But he also knows that we should not be just having giveaways for American businesses that are not tied to investment in growth and the kinds of things that really matter
to our economy. So that, I think is where the important real contrast is between that Tex Cuts and Jobs Act that only starved a government of the resources that it needed and the President's proposals that have been put forward in a way that is helped to lower the deficit but is also making those of the top pay their fair share.
All right.
Heather Bouchet, member of the White House Council of Economic Advisors, joining us from the north lawn of the White House today.
Thank you.
You're listening to the Bloomberg Balance of Power podcast kens just Live weekdays at noon Eastern on Applecarplay and then roud Oro with the Bloomberg Business at You can also listen live on Amazon Alexa from our flagship New York station, Jo Say Alexa play Bloomberg eleven thirty.
Often we talk about here in Washington the political implications of that, but there also is a fiscal question around the very high level of borrowing costs and an incredibly high level of debt. And as we get ready to see former President Donald Trump meeting with congressional Republicans tomorrow, addressing the debt, also addressing just the ledger, how much money's coming in versus how much money is going out, definitely going to be on the AGECTA.
Yeah, that's right. And of course there's going to be a big drive for Donald Trump supporters to reinstate or make permanent is a better way to put it. The twenty seventeen Trump tax cuts. They are set to expire next year, Kayley, and this is a big push in Washington. We're already hearing a lot about this, and it's at a time that frequently the concept of debt and deficits can be forgotten in a campaign season. But it's obviously an issue that Washington needs to get its.
Arms around pret quick, especially when you consider the potential impact that that could have. I actually spoke about this last month with Philip Swegel, who's the director of the Congressional Budget Office, and he talked about how much it would cost realistically to keep those tax cuts intact in twenty twenty five.
That's right, that important parts of the twenty seventeen tax Act expire at the end of next year, at the end of twenty twenty five. Those are not in our physical projections in the sense of the taxes referred to the pre December twenty seventeen law and is more revenue. So extending the parts of the tax Act that expire would cost upwards of three trillion dollars over ten years, and really closer to four trillion dollars, including the interrat service.
Three to four trillion dollars. We're talking big money here, and it's going to prompt a conversation about spending as well as taxation while we're at it, Kayley, and that's where Kevin Brady comes in with us at the table today. You know him as Congressman. We call him former Congressman, now former chairman of the House Ways and Means Committee. Kevin Brady is now spokesman for the Alliance for Competitive Taxation and we're lucky to have him just in time
for the annual Congressional baseball Game. It's great to see you. Welcome back to Blueberg. Thanks for having What a treat to have you at the table here. This is going to be part of your cause. So what do you have as a response when you hear about debt and deficits as an answer to making these tax cuts?
Yeah, so when you have to ask a question, what's happens if they don't extend? So, you know, putting a three to four trillion dollar tax hikes on families, main street businesses, on American competitiveness has real consequences for lower paychecks, much lower growth in the economy US less competitive at a timetime is super aggressive, you.
Know what I mean.
They want to dominate our industries and technologies, and so I think it's going to be crucial for both parties to find a way forward to extend those tax cuts, especially for those families, mainStreet businesses, and our competitiveness. You may remember. The reason we did it is that for a decade before twenty seventeen, the economy was slow growth less than two percent. For a decade, paychecks have been flat, and every other month we saw another US company move overseas.
So we had to.
Modernize the code in a big way lower rates. But we didn't in such a way. We created code built for growth of jobs and the economy and paycheck. We wanted to make sure we were the desirable location for new plants, innovation.
We did that.
We wanted one of the most competitive economies on the planet. We did that, and as a result, paychecks the thing I think I'm proud oft of. In the first three years after tax reform, paychecks inflation adjusted went up nine percent, the highest level since we began keeping records. So people were getting ahead in a big way. That's really the legacy of those cuts and why Congress has to find a way to extend those or make them permanent.
But people were getting ahead at the same time the deficit was growing. So if you, as you say, businesses and consumers actually need these to stay in place, how do you make it fiscally responsible?
Yeah, So the good news is there's ways and here's why. You know, people remember the tax cuts is costing one and a half trillion dollars, even though we've seen record revenue, Like corporate rate revenue today is higher at twenty one percent than it was at thirty five percent because of the growth, so we've seen good growth. But bottom line is the actual cuts for five and a half trillion dollars.
We paid for four trillion dollars of it reforms to lower the rates, to modernize the code, and to grow the economy in a big way. So lawmakers, as they extend the tax cuts, will also extend the reforms that help pay for that won't cover all of it. It's a good solid step. So depending on the party, depending on in an era where deathsit and debths really matter, you know, both parties are going to have to decide, so do we pay for all of it? We pay for most of it. You know, what does that good
policy look there? And so they're going to have to be looking at similar type reforms as we did in twenty seventeen going forward for that very reason, to make sure we're not adding, you know, significant amounts to the debt.
But you're sitting down there in Texas looking up at this crowd. Now, we can hardly figure out a budget to pay for the government, never mind deal with the debt ceiling that's going to be looming. You do you trust the people who currently serve in Congress to do what you just said, extend the tax cuts and find a way to pay for it.
You know, I do? And here's why. I think there's a middle class in Congress people you don't see or hear about often. They are very solid, trying to do the right thing, serious lawmakers, and they're going to be the ones to be putting these.
Packages together on both sides of the office.
So I believe there's I believe there is, and I think that they can because sort of like twenty twelve when we saw the Bush tax cuts expire, both parties had a lot at stake, you know what I mean in that and they do again in twenty twenty five. The thing is, my point is, don't just extend or permanent keep improving the tax code. We can be more pro growth. It can be simpler, especially on small businesses. There are things have changed, you know, because of China's
so super competitive. AI has changed things innovation should be, especially for our US companies, the country the winds the innovation race, wins the future and acts as top priorities are keep America competitive, make us the most desirable place for those new plants innovation, keep incentivizing innovation in the US. And I think those are policies both parties, I think can embrace.
Well, it's going to be one party or at least the majority of the parties in both chambers meeting with Donald Trump when he's here at Washington tomorrow. To what extent is he already influential on this conversation, knowing that there was a bipartisan tax bill that passed the House with massive bipartisan majority that ended up going nowhere in the Senate, and some people were telling us it's because it's an election year and if you expand the child
tax credit, potentially Biden gets credit for it. Comes political I wonder what you think of that narrative.
Yeah, so I think one president presidenthp's very influential, certainly among the republic Party and party. These drove his economic agenda that is so popular with the American people, so he's got a big stake extending that in the corporate rate cut, for example, that drove so much the paycheck wage growth was his signature achievement, So he's going to play a big role. I think some of the dynamics of this year's tax bill will still be front and
center in twenty twenty five. You know, you're gonna have businesses, you know, Republicans that want the middle class cuts, the small business cuts remaining place, and want America to be super competitive. Democrats are going to want a child tax credit that looks like the COVID era credit. They're going to want to defend the Green Energy Subsidies Inflation Reduction Act. So you can already see sort of the battle lines
being drawn. But twenty twenty five, with the prospect of three or four trillion dollars of tax hikes, it's gonna to focus leaders in both those parties, tax writers who are already beginning their work.
We're still waiting for the task COO to fit on a postcard. Wasn't that going to happen?
You know, I'll tell you what in the house we did exactly that. Our version was thirteen lines on a postcard that ninety percent of Americans would use to file I still dream about that because others. Can you imagine you and I looking at a postcard and saying, this is how I'm taxed, and more importantly, that's how my
neighbor is taxed. There's real power to simplicity. So I'm you know, if you asked me things I'd dream about, I wish we could have actually achieved, you know, the postcard and that fairness from that is certainly.
One of them.
On the subject of what could be dream and what could be achievable, we had Donald Trump over this past weekend in Nevada floating no taxes on tipped income.
Yeah.
Do you think that is actually something workable knowing he would need congressional approval to actually do that in a second administration? Or do you think that was just kind of an idea that was thrown out there given the audience.
No, I think it doesn't surprise me. Here's why because during tax reform especially, you couldn't be at the White House that he wasn't asking what are we doing for the little guys? What are we doing for the blue collar workers? I mean, that is part of who he is. I don't know tons about the tip thing, but here's so full disclosure. I'm one of those people. I want fewer tax provisions for some lower rates for everyone. I
think that's the fairness here. But I think there's two impacts. One, if you tax less is something to get more of it, So I think there'll be more wages sort of redesigned on the tip model. Secondly, those are industries that really have trouble hiring people and keeping them, you know, I mean those service industries, So you may see more young people.
I was a waiter and a bartender. I've lived that tip life as well, and so you see may see more people drawn to some of those service industries that traditionally, you know, it's been hard to cover those tables.
That's for sure.
Yeah.
All right, well sir, great to have you here in our studio. Thank you so much for joining us. Kevin great indeed, beautiful night here in Washington. Former Chair of the House Ways and Means Committee now spokesman for the Alliance for Competitive Taxation. We appreciate you joining us. We want to turn now to our political panel as we look ahead to the perhaps non tax related discussions that will be happening on Capitol Hill tomorrow between former President
Trump and Congressional Republicans. Rick Davis and Jeanie Shanze. Know our signature political panel contributors here at Bloomberg are joining us now. So, Rick, do you think that there's actual items on the agenda for these meetings or is most of this about optics in the show.
Yeah?
Well, first of all, you can't get away from the optics in the show.
Right.
We're right in the middle of.
A presidential contest, and I think that part of what Donald Trump's message is going to be is, Hey, our boat floats with me at the top of the ticket. Anybody who thinks that they can do better is crazy. Everybody needs a rally around my annidacy. It's going to be all about how the top of the ticket's going to drive the outcome of the election.
And that's the political message.
I think that when you get into substance, I think that Donald Trump's gonna make sure, nobody goes out there with a with an agenda that somehow puts either his campaign in a bad light or the Biden administration in a good light.
You know, I certainly I'm the untold message.
You won't say this specifically, I would assume, but you never know what Donald Trump is that don't do anything it's going to cause me any problems between now and November. That is probably the most important thing, because there are various elements of the House and the Senate who have agenda items that could cross pressure his campaign, and he doesn't want any of that stuff happening. So it's almost like, play along with my campaign. Do what I tell you
to do. We're all unified around me, and don't do anything between now and November that's going to cause a problem from my campaign.
Genie, you just heard the pitch from none other than Kevin Brady, who used to share the House Ways and Means Committee, with a strong argument on making the Trump era tax cuts, as we call them, permanent. This is going to be a big debate that makes its way onto the campaign trail. What's Joe Biden's answer, Well, first of all, I.
Love the thirteen lines. I remember a good postcard, and I love that, so I wish Kevin Brady would come back and fulfill that. I think what is going to happen, or what should happen in a serious discussion, is to look back and look at the reality of Donald Trump's record.
You know, he.
Promised cuts, and he delivered those cuts for billionaires, for the very wealthy, and for big corporations. He reduces the corporate income tax to twenty one percent. He's the first president it's Herbert Hoover to leave with less jobs than when he came in. And of course he had the pandemic to deal with, so I will cut him some slack on that. And the budget deficit a sword under both him and Joe Biden, and we're now over three trillions.
So you know, I think he likes to hype his record, but I think real serious questions have to be asked about both his record in the past and what he wants to do now. If he wants to grow our military, for instance, how is he going to do that? If he is cutting revenue. You know, in a way, this isn't complicated. You if you're going to spend more, you
got to tell us what you're going to cut. I don't suspect we hear any of that tomorrow, by the way, but I think those are the serious discussions that have to be had. And I think on Joe Biden's part, he's got to say, we haven't reached where we should. We still have very high costs in this country, but
we are moving in the right direction. And I am going to take on all of those corporate billionaires and the corporations that Donald Trump has been delivering for and continues to promise to deliver for if they give a billion dollars to his campaign.
Well, Rick, to Jeanie's point on a few are going to reduce revenue. You also need to reduce spending. We all know how big the slice of the pie is that you can actually reduce. Because the mandatory part of the ledger is just so much larger than everything else, there's very little discretionary that you can actually cut. The problem is when all of that, or a big chunk of that is entitlements. Neither Joe Biden nor Donald Trump can touch that politically, right, that's.
Well, certainly they're not going to touch it between now and election day. They've both been very clear about their
lack of interest in reforming entitlements. The real question is both of these guys, regardless of who wins, this will be the last job of their political career, and so they have an opportunity to then sit back and say, you know, in order to reform some of our fiscal house, we have got to start to get these entitlements under control, because as you point out, Kaylee, I mean, there is no such thing as cutting a budget without touching the entitlements.
The rest of it is just optics.
And so that's the question is do they have the political wisdom and courage in the last four years of their political career to try and put the country on the right track when it comes to the successive entitlement spending that's going to bankrupt the country at some point if it's continued to go unchecked.
Our great panel, Rick Davis and Jeanie Shanzano or signature panel on Balance of Power, and many thanks to both of you for helping us distill all of this. We're going to be talking a lot more about it, of course, tomorrow when Donald Trump makes his visit here to Washington, d C. Meeting with lawmakers on the House and the Senate sides.
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon Eastern on Applecarplay and Enrounoto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Go to YouTube search Bloomberg Global News. Our live stream is flying and we would love to have you join us always. However you find us here on Bloomberg, we make it pretty easy, and we'll be inviting our global television audience in the next hour as we gear up for the decision on interest rates and of course the news conference that's going to follow. What Lindsey Owens would ask if she were in that news conference today with the chair Jay Powell, or maybe what she would say,
I told you so. She's not like that though. Groundwork Collaborative executive director, former Senior economic policy advisor to Senator Elizabeth Warren. Didn't that cross your mind? Great to see, lindsay, at eight thirty this morning, you said I told you so. You should have started cutting by now.
Oh no, not quite, not quite that spacier vindictive. I mean, I just think for me, when I saw the numbers this morning, breathed, breathed a huge sigh of relief. You know, zero percent, zero year over year inflation. You know, it's hard to get much better than that. And you know, the second thought that came into my mind was be better cut in September. I mean, there is no reason to be looking past September to November.
Now, Okay, I got you. Are we going to hear that today or are you concerned that higher for longer remains the message this summer?
Yeah?
I mean I am really concerned that this may slip to November. I think, you know, Powell has been pretty hawkish on this front, but I think the data really supports a September cut for a couple of reasons. But the primary one is we are now if you exclude owners equivalent of rent, we are now actually on the year below the FEDS two percent target. So the last mile here is housing. This is a housing story. We've
talked about this before and again. The interest rate environment does not do you any favors on the housing front, and if anything, could be exacerbating some of the housing price issues that we're seeing lingering in the inflation numbers. So the rest of the data suggests that we have got to see cuts and the housing story doesn't get better with this punitively high interest rate environment.
Whether we're talking housing or just broadly, lindsay, at what point do high interest rates become inflationary on their own?
I mean, I think we're pretty much they are right.
We've got folks locked out of the mortgage market because the cost of borrowing is prohibitively high. We're starting to see an increase in credit card delinquencies for some borrowers. That's not a great situation to be in. Economically, we're starting to see a little bit of signs of a slowing labor market. I mean, we're still, obviously just in an incredibly strong labor market.
We've had now more.
Than two full years of unemployment at or below four percent. We're seeing folks who've been on the sidelines in the labor market who've wanted to get pulled into the labor market able to get jobs. Americans with disabilities are able to get jobs at higher rates than in decades past. So you know, we've got a really strong economy here.
But I do think the Fed has got to stick to its promised to follow the data, and the data is saying, look, we're we're below the FEDS two percent target when you pull out.
Owners equivalent of rent.
The other thing we're seeing on the housing front here is, you know, new leases are are coming in low, so this is really kind of a hangover of older leases. And that's not a problem you solve with with high interest rates, right. You know, people have just got to you know, flow through those older leases. They you know, they come back online and you get those at lower price points. So I'm definitely ready for interest rate cuts,
I'll tell you. I find it quite concerning that you hear over and over again in Washington that the Federal Reserve chair will be uncomfortable cutting interest rates in September because it's so close.
To the election.
And you know, I actually view that that position.
I understand that folks think he's trying to sort of not to be political by not cutting interest rates before the election.
I view that as dangerously political ground. If the data.
Supports a cut in September, there should be a cut in September, right. He shouldn't sort of be playing timing games with the election here. Manage the economy like you said you would, adhering to the data and go for the cut in September.
It's really something to when you read the President's statement on this today, it begins by saying, not, you know, hey, look everyone, this is great news. It begins by saying prices are still too high, and he has to keep saying that. I suspect publicly. We're going to talk to Wendy Benjaminson about that in just a second, Lindsay. The fact is he's got to be thinking, look how far we've come, right.
I mean absolutely, you know, we're now almost two years of inflation falling off. It's June twenty twenty two peak, right, so we've come a huge way here. But Americans are upset about high prices, and they're also upset about how pricing works. And the administration has been taking this on aggressively. The junk fees that Americans are paying, the drip pricing, the personalized pricing, You paying more than your neighbor for the same sweater because of the user interface dark pattern
you got pushed into through your Instagram app. I think you know, it's not just the high prices Americans are upset about.
It's how pricing works.
And I think you know what he said into his statement is he's also taking that on. He's taking on the drug companies who are jacking up the price of insulin. He's taking on the hotels who are adding all manner of you know, fees and other sort of deceptive add ons to your total bill at the end of your stay. And I think that stuff is really resonating with the public because they're sick of that crap. And so that's also what he said in his statement today, is that he's doubling.
Down on those efforts.
So you have it from Lindsay Owens. It's good to have you back on a FED day, no less groundwork collaborative executive director. Thank you, Lindsey for the insights as we bring in the aforementioned Wendy Benjaminson, who had her eyes on this statement as well when the White House decided to speak up this morning. She is Bloomberg's Washington senior editor. Nice to see you, Nice to see it.
I don't care if you're running our poll or if we're talking about Joe Biden's message of the day, which frequently veers into different things, including the border, including the reproductive rights. But this is the stuff that he needs to be talking about every day. I'm just curious your thoughts on the reaction here, because he could take a victory lap right, look at the markets and maybe do what Donald Trump I do for months. But prices are still too high. He has to say that.
He has to say that, But I think this is the first time he's done that. I mean, I was been watching. Maybe I missed a month or so, but I've been watching his statements over the whole period of this where he does nothing but spike the football. And while he has good reason to spike the football, has the rate of inflation has slowly been coming down. Prices in the grocery store, prices at the gas pump have
not significantly changed, and voters are feeling that. So you tell an average voter that the rate of inflation has slowed, but prices are still three percent higher than they were yesterday and last year, and you got a one and a half percent raise. That's not going to do it so in November. So the fact that this month they decided to start with that simple sentence prices are still too high is an acknowledgement of the pain that voters are still feeling when they go to buy things.
Do they believe him when he says that, you know, he's going after big pharma. Republicans allow the special interest from big oil. They're fighting for billionaires on Park Avenue. I'm fighting for families. Is that resonating after three years of this?
Maybe the polls are not really showing that.
I mean, He's people are remembering Donald Trump's economy.
Is a lot better than that now, of course, whether that's real or not, right, that was before a global pandemic, and that was before a huge infusion of federal spending. But the economy, there's no argument that the economy is getting better. And it is and Biden should politically take
credit for that. Voters still aren't feeling it. And he's talking though about how I presume he means in a second term he will actually get some of these things done that he's been talking about, Yes for three years, working with farm upbringing taxes down, things like that.
Well, we're going to have a grand debate about extending the Donald Trump tax cuts next year.
Yes, Well, if Trump wins, we are ye. Oh well yeah, rue.
Although they are starting the full court press with his visit this week. We're going to talk to Kevin Brady about that a little bit later on. You wonder to the extent that deficits are going to matter in an election year. It's funny how people get amnesia over deficits. Is Donald Trump running the agenda here in Washington for Republicans with or without this election, because it's feeling like it with this meeting tomorrow.
Absolutely, there's no question that Donald Trump is the head of the Republican Party, is the driver of Republican Party policies. And this meeting on Capitol Hill, to which Evan Mitch McConnell, who has never had a lot of love lost for Donald Trump, is attending, He is meeting with the House Republicans and Senate Republicans to set the policy for the rest of this year and then if they win after that. I think even if he loses, he's still and Biden
as president. Republicans in Congress will still be pushed and pulled by Donald Trump in terms of the policy that they're going to talk about tomorrow, right before he goes and meets with the most powerful CEOs in the country down on the wharf tomorrow afternoon.
Speaker would love to deliver a contempt vote for the Attorney General Merrick Arland to give for the President when he comes to town. Are they going to make that happen today?
I think they're going to try. The odds are not firmly in their favor that they're going to succeed. There are some centrist House Republicans, some House Republicans who used to work for the Justice Department or the FBI, who feel that this is not right to do. And right after the conviction of the President's son on gun charge, is what are we I mean, there's all over the.
Release of audio recordings of the president.
By the way, is funny about the weaponization of the justice they're feeling that that's what's.
Well and the and the Attorney General doesn't think that due to privacy issues and many other things. But the precedent that would be set you get the transcript, not the recording. Is it funny that we still call them tapes after people listening never had a tape, but we still but they know what we mean by audio tapes. I just think it's funny there are no tapes. They're
like MP three's or something. That's going to be a big story tomorrow, Yes, and it's going to set us off in a conversation, whether there's a content vote or not about Donald Trump's e can policies. And I hope that you'll be back with us to do it again soon. I know you're Are you in the field right now for our next pole?
Now?
You love to say that after the debates Inside Information, Yeah, Wendy benjamins In Bloomberg Washington, Senior Editor. Always great to have Wendy's insights with us.
You're listening to the Bloomberg Balance of Power podcast. Can just live weekdays at noon Eastern on Applecarplay and Enrounoo with 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.
Walking us through the markets on a very important day here. Double risk is what I was reading about this morning, and we just checked one of those two boxes waiting for I guess single risk with the FED meeting, and that's coming. We have special coverage planned for you. But the news at eight thirty. My goodness, everyone's happy. US inflation broadly cools, an encouraging sign for Fed officials. I read on the terminal White House seems pretty happy about it.
Markets seem pretty happy about it. See how Molly Smith feels about it. She was up early if you want to get on the terminal. By the way, Molly Smith is the gatekeeper if you cover economics here. She is Bloomberg's economics editor. And you know CPI day is one thing with a FED day on top of it. We're lucky that you made time for is Molly Smith? Welcome back? Do you drive a car? I know you live in New York? Right, do you mind?
Well?
I like god you could, but gosh, be just about anywhere? Are you coming in from the suburbs? You live in New York? You don't have a car? Is that right?
I don't drive, and I live very close to HQ, so I'm right here for the action.
You're really smart, as I know. Spend an hour to get to work every morning. Although I don't live above the store, they can't call me at night the way they do you or first thing in the morning. And I'm asking you about this because of these crazy prices, not only for automobiles that we've been talking about, but all insurance up twenty percent. Is this the number that distorts the CPI today? How is that even possible.
So, actually, we've been looking at it more from the monthly change in car insurance. What you were citing, correctly is the annual pace that car insurance is up twenty percent year every year. It has been one of the bigger drivers of services and pleas.
Did it come down from last month?
What's that?
Did it come down from last month? Is that why you make the difference?
Correct?
Yes, so this was the first month in gosh, I think it was over two years.
Maybe it'd have.
To check me on that that our insurance fell in the monthly rate. That is so look obviously on actual prices still definitely high, not discounting that whatsoever. But when you're looking at directionally, if this is maybe a sign that this is going to start easing more going forward and not contributing to more outsized readings, that could be very significant.
So if you're looking at the more broad picture here and you're, say, Joe Biden hoping for an interest rate cut, we're going to talk more about that coming up in a minute as well. What has you encouraged about this reading? I mean we're talking we're celebrating over a tenth of a percent essentially, here right.
Well, it's a lot of things, you know, It's not just car insurance. This was a really broadly positive report no matter if you're at the FED, if you're Joe Biden American consumers. It really had a lot of good news for a lot of people. That where we have seen so much of the inflation pressure in the last couple of years has been from services, and that's where
we finally got to see services prices coming down. Car insurances was a big one that that has been, like we said, going up for so many months, and we also saw airfares come down that was significant some other travel related expenses as well.
Well.
The next one that we're really all waiting for and that economists are getting more conviction is going to show up. And next month's report is that long awaited slowdown in how inflation that has still really yet to materialize. So we're hoping that the June CPI is going to be the first real look at that.
So core CPI up two tenths from April market expected three tenths. Is that right? But that I mean, this is the sliver we're talking about here right right, And.
If you want to get even to even more to a narrower sliver than that and get really walky with it, as our readers like to. Then you're going to look at it out to two decimal places. So this was actually a point one six percent, so that rounds up to zero two versus let's say if it was point twenty four.
And rounded down.
And that's really significant because let's try to annualize that rate. Point one six multiplied out over twelve months is a one point nine to two pace of inflation. That's under two percent. That's the magic number that we're looking for.
That's why I would have copied off of Molly's homework in high school.
Couldn't do that one?
In your head?
I didn't either, I think.
Before I came here, Well, you've got a terminal, by God, connect the dots for beyond this fed meeting of Molly. They're not making decisions today, I'm sure based on this alone. But in the grand scheme when we talk about the dot plot, how does this factor into it?
Right?
Yeah?
I mean this was already we were wondering about how the dots were going to shift from the March quarterly projections to now, and after we had seen all of those really hefty inflation prints at the start of the year, and that's when the FED was thinking there would be three rate cuts in twenty twenty four. Everybody's thinking, Okay,
that's now got to be down to two. This report really helps solidify that, like there are probably two rate cuts that could happen this year, and investors in the market reaction today even more bullish that those could start to come sooner. So right now, the first fully priced FED hike would be in November, which is consequently two days after the election.
Consequently, and we're told they don't play those games right if it's too close to the election. That might be part of the fact in although the FED wouldn't acknowledge that, I'm sure.
Correct, But that's I'm sure that would come up in Jay's press conference today and we will all be very much listening.
Michael mckey's in there crafting a question that the I'm sure the chairman will have to stop down and think about. And Molly is great to have you. We appreciate your joining us. Molly Smith, Bloomberg Economics editor, spends more time on Bloomberg Radio than I do. She's that good. This is a very important day in Washington tomorrow that you might not have heard about, maybe if you're not inside the beltway. Here an important thing called Seersucker Thursday. It's
happening on June thirteenth this year. And I bring this up because if you're with us right now on YouTube, you can close your eyes. If you're listening on Bloomberg Radio or in satellite radio, the Great Lester Munson is prepared for Seersucker Thursday. You're a day early, and it's nice to see you in the studio here.
Thanks Joe on k Street. We like to do it a little bit. We like to be ahead of the curve Senate. It's going to be on Thursday out there today.
I have so much to learn from you. Still is the co head of the international practice at BGR Group and spent some time on the Senate Foreign Relations Committee as as an important staff director. Another thing starts tomorrow,
that's the G seven. Funny how that coincides Joe Biden's on Air Force one right now, heading over there with your acumen in foreign policy, I want to get your take on this because we have two hot wars going that this president is trying to balance, and he has the opportunity to sit down with our most important allies the next couple of days to try to move the ball on both of them. Does it help will pick through those Ukraine and Israel first? How about that? Does
it help with the potential for a ceasefire? For him to be in the same room with his G seven allies?
Well?
I think it can and can he use Is he nimble enough to use this as an opportunity to drive a message and show strength in the international community. It's it's there's a higher degree of difficulty today than a few days ago. The European Parliament elections were just a few days ago, the right wing did really well. That's going to be the mood with the Europeans at the G seven. Prime Minister Maloney, who is hosting it's kind of the spokesperson for that, so she's going to have
a prominent position. There's a mood of change afoot. Can Joe Biden kind of turn that to his advantage? It's hard as the incumbent, he's got some real challenges, but this could be a real good opportunity for him to show some foreign policy chops.
He got a bit of a running start in Normandy last week he was in the same room with a lot of the same people who'll be talking to now, including Emmanuel mcron to your point, bruised up a little bit in the elections over the weekend, but also President Zelenski. He's going to be holding a bilateral news conference. I suspected a land right in the middle of the show tomorrow. As a matter of fact, we'll bring it to you
as it happens from overseas. Ukraine is something, of course that's in the air, but we've cleared funding here in the US. What's the next hurdle for Joe Biden and Ukraine.
Crane has been using some of our new aid and some of the new kind of longer leash from Biden to start striking at supply lines inside Russia. That's a big deal. And now we see as kind of a tit for tat Russian ships coming into Cuba in our backyard. Yeah, a little bit of a violation of the Monroe doctrine if you want to go way back, So can can Biden double down with Zelenski. Let's punch the bully in
the nose. Let's go after the Russians. Let's show them that we're undeterred here by what they're doing in the Caribbean and that we're going to We're going to bring the fight to them in Ukraine where it really matters. So again, big opportunity for President Biden.
Seizing a Russian assets I suspect is on the agenda. Remember we President signed the REPO Act into law same time he passed the funding for Ukraine. But the bulk of that money, we're told as in Europe. So this sounds like an important conversation this week.
It can be, it can be. I think they should keep expectations low. There's gonna be a lot of legal, real impediments to fring up that money to use it right away. It's probably going to be a few years before we really see it being used.
So that's the rebuilding of Ukraine, that's the war.
That's right, that's right.
So the problem, why is it so hard to do this when everyone seems to be on that side.
There's just it. It's harder than it looks.
Right.
The people are going to lawyer up these assets have that are very valuable. President can't just go grab them, or we are nations of laws here in the West, yes, which is our wonderful asset and occasionally it's a bit of a problem. In this case, it might be a bit of a problem.
You mentioned offensive weapons. That is the big development, I guess most recently, but it's isolated around Kharki for the most part, where it appears that Ukraine has been on the ropes. There have been interesting comments We've heard from the likes of Emmanuel Macron and others say, hey, maybe you want to use European weapons, and in some cases
Ukraine has been taking them up on that. Are we on the same page with our European allies and are we going to see a widening of that offensive posture.
It's a great question, Joe. The Biden administration has been letting Europeans kind of push the envelope in terms of what weapons systems are being used. Was Europeans and the British who were pushing for more tanks, for more jet aircraft, longer range weapons, and the Biden administration made it appear like they were kind of going along reluctantly with that. I think that's intentional to make to give the Europeans some agency here, which can be a very good thing.
But so I'm hoping that's what this is. And there isn't a real delta between the US and Western Europe here.
Well, it's interesting when you step back then and look at this G seven. How much of this is photo opportunity versus policy.
Sometimes the photo opportunity is the policy. The appearances matter here. Can the President show some vigor and some nimbleness and get these the Europeans to show their supportive of him. Can they hold off the specter of, if you will, of kind of an ascendant right wing in both Europe and the United States. They're going to have to look like they've got energy and they can solve problems. Can they win in Ukraine? Can they get to a negotiated
settlement in Gaza? Can they show results for their efforts? If not, people are going to vote for change.
So this is an important summit and the optics behind it for this president. He's probably getting a good nap on the plane right now. Right this is exhausting for a young man, This would be exhausting. They're putting him down the short stairs now to eliminate the chance.
Of a stumble.
This is part of the calculation for this White House. No matter where he's.
Going low expectations. If he can walk off the stage in the right way, in a straight.
Line, that's all I am going to my own self to be perfectly on it. So I mentioned your time on the Senate Foreign Relations Committee, there's discord over the ICC. Getting back to where we started with Israel. Here, this is the International Criminal Court arrest warrants.
Right.
We heard for Benjaminett Yahoo along with the leaders of Hamas, and there was a move to have a resolution essentially condemning the ICC. And it's not a layup. Why is this controversial within the Senate Foreign Relations Committee? And will it die there?
So I think Senator Rish, who's the ranking Republican there, who's kind of the instigator of the is in the is actually in the right place. He's taking a bipartisan bill from the House. He wants the Senate to move it. Senator Carden, who's the chair of the committee, has said, well, I don't think it's bipartisan enough. I don't like the methodology, but I'll continue talking to you. And and Senator Rish is kind of holding his feet to the fire saying all right, I'm going to slow down some of these
other things until we get this thing resolved. This is the hot item, this is what both parties care about, and and poor Sendor Cardon has to kind of defend this little bit schizophrenic policy of the White House, partisan the past House with a lot of Democrats, there are some there's several Democrats in the Senate who want to move this thing. I think it will at the end of the day in some form, whether it's it goes through the committee on some sort of compromise where they
attach it to something else. There's just there's just a lot of energy and Congress that's playing out in other committees on other legislation. Congress wants to support Israel. They see Israel as very much the victim of Hamas and Hamah and the positions of Hamas as utterly untenable. They're going to pushing until this thing is over.
Which has got a minute with Lester Munson. But I have to ask you, with that said about Benjamin ett Ya, who paying a visit. That's going to be quite a day in Washington with some very sensitive feelings on both sides of the Aisle. He will be addressing a joint session. It seems what's the potential boycott list's going to look.
Well, let's remember he was invited by the Speaker, Yes, Speaker Johnson and the Minority leader in the House, and Schumer and McConnell. So this is a bipartisan, bicameral effort. Yes, it'll be a little bit controversial, I think, particularly for progressives, there may be some on the far.
Right or ceasefire by then that's that.
Really is the big question, Joe, like, can can the Biden administration get to a place where this where whatever is going to happen, happens before the address that will make it much more successful. And if that doesn't happen, then I think we are looking at a real hot topic that we'll.
Be curious to see if there's a White House visit and if there's gloating when he goes home, because that's a big score for Benjamin Att yahow to do.
There should be a White House list the lay up here.
Yeah, we'll talk more about it then. Great to see you, Seersucker Thursday. He's at Day Ahead. That's how they play it on K Street. Lester Munson at BGR Group. Of course, our good friend here often a panelist and great to have a long form conversation with Lester. Thanks for listening
to the Balance of Power podcast. Make sure to subscribe if you haven't already, at Apple, Spotify, or wherever you get your podcasts, and you can find us live every weekday from Washington, DC at noontime Eastern at Bloomberg dot com.