Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Balance of Power podcast. Catch Just Live weekdays at noon Eastern on Applecarplay and Enrounoo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Cogress woman, when more about the democrat from Wisconsin is with us right now? Congresswoman, it's great to see you before we move on to some other issues, Welcome back to Bloomberg Hearing. Wes Moore talk prompts a number of questions about this effort. We've had some lawmakers suggest that a funding bill, or at least a commitment to fund rebuilding that bridge, could be attached to a Ukraine funding
bill that the House could act on soon. Would that be an appropriate vehicle to cover the cost of this bridge in Baltimore.
I have to just tell you that I don't know. I have not heard that proposal. I do know that getting funding to Ukraine is a heavy lift all by itself, and so perhaps the thinking is that the extent to which we're able to do that heavy lift, maybe it could just live on to that. I hadn't heard that strategy. But I do think that the Baltimore Bridge really has an impact on not only local passenger traffic, but commerce, and so I know that it should be it is a very high priority.
Well, Congresswoman, you just described Ukraine Aid as a very heavy lift. We heard yesterday from some members on the Republican side that that could be voted on next week, but we also saw yesterday a rule failing again on the House floor. How confident are you not just that this could be brought to the floor, but go anywhere at all.
Please can't do it.
Ask me for confidence, because I don't have the confidence about anything that can happen in the House of Representatives.
The margins are very very narrow.
I do know that there is a lot of support for Ukraine in both caucuses and especially among Democrats. We do have a very lively caucus I think, headed up by Marjorie Taylor Green that is against Ukraine Aid, and if it comes to the floor, it will pass. So if a Republican has told you that we could be voting on it in a few weeks, I am sure that they have assessed and evaluated the.
Democratic support that may or may not be there.
Now They may bring it up on suspension, in which case that they could bypass the Rules Committee and they won't have to rely on Democratic votes to pass their rule. Weis that came under a rule, so if it comes under suspension, they must have assessed.
That the votes were two thirds of the House would.
Vote for it for it to come under under suspension of the room.
Speaking of that rule failing, we spoke with your colleague French Hill, the Republican from Arkansas, I was a champion of renewing FIZA. He spoke with us shortly after that happened here on Bloomberg's TV and radio and expressed his extreme disappointment.
Here's what he told us. Congresswoman, we'll have you respond. Let's listen.
It's very frustrating today. This bill was important, a renewing seven zero two authority which allows us to monitor communications from our adversaries outside of the United States, not American citizens.
Not American citizens.
It is non negotiable that has to be renewed before April nineteenth.
Congresswoman, as a progressive Democrat, do you want to see FIST renewed in its current form? Should a warrant be required if an American is involved in data collection.
Well, just let me say that the bill that came to the floor that would have been come had we passed the rule, did have some reforms in it, so we are at risk of not having those reforms in it to protect American citizens. I think the Republicans listened to Donald Trump, who had a bone to pick with FISA, since you know he and you know his comrades were engaged in in conversations inappropriately with Russia were caught up
in the in the visa warrants. So I think that you know that he has personalized this and not looked at the broader the need to make sure that our country is protected by our adversaries overseas. There were reforms that that I agreed with, and perhaps we won't see those reforms if they have to come up with a near renewal.
Well, Congresswoman. As you bring up former President Donald Trump, it's worth noting that the House Speaker, Mike Johnson will be alongside him tomorrow in a news conference at mar A Lago in Florida. Especially given all of the murmurs we have heard about potentially Democrats such as yourself stepping in to save the speaker should Marjorie Taylor Green actually move on a motion to vacate the chair, does his closeness with the former president change the calculation for Democrats?
What do you think about whether you would ever cast a vote or just not vote at all to help save the speaker?
Well, I can tell you does a person who's sick and tired of the impeachments and censorships and punishments. I can say that I'm very disappointed that he's going down there to kiss the ring on so called election integrity, which is another Trump groups for I gotta be elected.
I'm gonna do January sixth all over again.
I'm very disappointed that the Speaker shows the path of going down to kiss the ring as opposed to just working with the Democrats on avoiding the Marjorie Taylor Green initiative to expel him.
She wants to expel him because.
He cooperated with Democrats to keep the government from shutting down, and now if he were to bring the Ukraine Bill to the floor, she has threatened to do that. I hate to see the Grand Old Party now becoming the Party of Putin.
Well, with that said, Mike Johnson isn't exactly the he's not exactly the normal kind of partygoer at mar A Lago. Congresswoman, what advice would you give the Speaker before he flies to Palm Beach.
Well, you know, bipartisanship is the only game in town, and he should lean into it and go down in history, you know, as a speaker that's saved the one hundred and eighty the Congress from being the worst Congress in history.
Well, and you mentioned, Congresswoman, the idea that he may be in hot water with his own party because he worked with yours to keep the government funding funded. If he were to work with Democrats in the House as well to make sure that Ukraine got funding, do you think it is likely that his speakership would remain intact due to democratic action. Have you heard anything from Hakim Jeffries about that idea.
Well, the person to hear from is Mike Johnson.
Instead of flying down to Florida, why doesn't he walk across the hall and talk to Hakim Jefferies.
I just think that it's you know, it's less.
Time consuming and less expensive, and it's more integrity saving to do that.
Congress Woman, when more with a sum Bloomberg TV and Radio. Lastly, Congresswoman, I'm struck by a new poll from the d Triple C, of course, tasked with electing Democrats to the House. A poll of more than a thousand likely voters in more than sixty competitive House battleground districts. They found two issues were deal breakers, immigration and abortion. Thirty six percent of voters say they cannot support a candidate who disagreed with them on abortion, and I think we can agree that
that's been helping Democrats. Thirty three percent as well said the same for immigration. With that in mind, do you support President Biden acting on his own through executive order to manage the flow of illegal immigrants crossing our southwestern border?
You know, I just want to point something out. There was a lot going on January twentieth, twenty twenty one. We had just two weeks earlier, had January sixth insurrection, So people don't remember that Day one of the Biden administration, he introduced immigration reform legislation. People don't remember.
Should you do more?
Just check the facts.
And then the Republicans put forth a border bill that the border protection lobby supported, and Donald Trump told Republicans not to bring it forth because he wants to run on this broken immigration system.
I want to remind people.
I mean, so, the broken borders and immigration is a gift that keeps on giving to Donald Trump, who wants to run a gift President Biden on that. But I want people to know that President Biden, from day one of his administration has tried to fix immigration.
All right, Congresswoman Gwen Moore at the Democrat from Wisconsin, thank you so much for joining us today on Balance of Power.
You're listening to the Bloomberg Balance of Power podcast kens just live weekdays at Noone's You're An on Applecarplay and then Roudoo with a Bloomberg business ad. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa play Bloomberg eleven thirty.
Live from Washington alongside Kaylee Lines. It's the fastest show in politics, with big questions about funding for Ukraine even as we see some very difficult headlines emerge from Ukraine. Kayleie, we were talking about this earlier, the missile barrage again against a Kiev that knocked out the biggest power plant in that area, and now an emergency meeting by the UN's Atomic Watchdog on what might happen to Zaparijia. You could go back a year and tell these same kinds
of stories. Yet the concern about funding is a real one. As the Speaker of the House heads to mar A Lago this weekend, and we know how Donald Trump feels about that.
Yeah, it's still a major question what action the US Congress may take, and frankly, how quickly an actual vote on providing additional military assistance Ukraine could actually transmit to Ukraine getting the assistance it needs to fend off missile attacks like the one we saw. And this is where we begin with General Mark kim At, the retired brigadier general in the US Army who was joining us here
in our Washington d C studios. So, general, as we see once again Russia arguably weaponizing energy, we hear President vladimir's Alynsky during a visit to Lithuania saying that air defense is the biggest challenge that they have. How quickly could the US, even if it decided it wanted to help Ukraine in that regard.
Well air defense capabilities, there is a significant amount in the inventory that could get over there pretty quickly. Where we are having problems is in manufacturing artillery rounds.
That's where there's a shortage.
They would draw down from existing stocks, perhaps take them from other theaters. But that's one of those systems that I think if we can get it over there. I haven't seen the list. I didn't see a large amount of air defense weapons on there in a few snippets that have been shared with me, but I think that's something that they could get over quite quickly.
This is a Pentagon spending a lot of plates right now, and if you believe reporting, there is an imminent strike that we're preparing for either by Iran or Iranian proxies against Israel following the Israeli strike against the Iranian embassy in Damascus. To what extent can we model the possibilities here? What are they talking about today behind closed doors at the Pentagon?
Yeah, I think the options for the Iranians would be a direct strike on Israel from Iranian territorial units.
I think that is significant.
That would be significant, and that could very well draw the United States in, because President Biden has told Prime Minister Netnyahu.
That he would help.
But this would sound more like an instance where the Iranians would work through their proxies.
If you go over the.
Annual report given by the State Department on State Sponsors of Terrorism, the lines drawn in there about Iran and their terrorist activities are enormous. So it would be likely that perhaps not in the Middle East, but Iran could in fact go after an Iranian go after an Israeli embassy somewhere in South America that would take their fingerprints on it, off of it if they use a group like Hezbola, and there wouldn't.
Be direct attribution.
As you remember, Iran sent an agent into Washington, d C. To try to assassinate dua ambassador, so I would expect something like that to happen.
Well, we heard the take from Senator Marco Rubi, or at least we could read it on x where he posted this morning, Iran wants to launch a large scale attack from their own territory against Israel respond instantly with an even more severe counterattack inside of Iran. What happens next is the most dangerous Middle East moment since nineteen seventy three.
You think, I think it's exactly right if that was what the Iranians were to do. I laid that out as an option, but I think it's a very low probability to that having happening, because Ron has enough problems of its own right now, internal descent, huge amount of inflation shortages that would almost be apocalyptic, if not suicidal.
So it comes through a proxy group, then most likely we've already got a carrier group in the region to deal with that. Is that how it ends, or would we have to send additional resources to manage an attack of that sort.
Well, if a proxy group goes after an Israeli embassy in South America or in Western Asia, I don't think that that carrier is going to do a lot of good.
How about if it stays in the region.
However, if it stays in the region, I think it would depend on the severity the attack, whether it was against US assets in the region. As you remember, when we targeted Costumsulamani, the response from the Iranians was in fact an attack from Iranian territorial units, but it was a fairly soft attack on a U space that created a number of soldiers getting PTSD and their bells rung essentially, but it wasn't much more than that.
Of course, against the backdrop to all of this is the ongoing war between Israel and Tamas, and a lot of questions around how the US policy in regard to that may be changing. As we hear from the Biden administration. If they don't see the changes they would like to see from Israel, US policy might change. There's been talk about conditioning aid. Can the US do anything like that?
Knowing that this threat against Israel, not just from Hamas but from other Iranian proxies or iron itself, seems so real right now.
I think there's a policy issue and there's a political issue. I won't go into the political issue because it would appear that President Biden is trying to walk the fine line between support for Israel and also support for these Lama communities here in the United States.
But on a.
Policy issue, we already have the laws. We have laws such as the Lehi Law, which prevents the Americans from giving equipment to foreign countries if they're verifiable human rights violations. So I would simply say that if the president uses the laws in the book, he has a tremendous way to hold up that support to Israel.
I don't think he will.
What will happen in Rafa if the idea I actually rolls in. We hear there's a date that's according to Benjaminttinya, who I know that the administration is trying to prevent this from happening, but surely they have plans as well.
If they're executed, what does it look like?
You know?
That's what confuses me, because it sounds like it would be what we saw in Gaza. I don't think it would be anything more than that, which was tragic in and of itself. The only difference, of course, would be somewhat of Hamas's last stand. But what I would note is if we go through with some of these programs to limit the amount of precision weapons given to Israel, well they're going to use much more, much less precise weapons and cause a whole lot more collateral damage and
death of civilians. So I think we've got to accept that Prime Minister Netanya, who's going to do what he thinks is best for his country and candidly listen to the Americans when it is convenient and ignore it when it's not convenient to him.
Well, and what we consistently hear from Netanya, who is that victory it can only be achieved if the remaining battalions are eliminated, and there's of course multiple Hamas battalions still in Rafa. But I guess I question what the idea of elimination really means if we're talking about taking out the actual Hamas fighters or their military capabilities. But can you defeat the Hamas ideology? And I just wonder if how victory can even realistically be achieved in the longer term sense.
Well in the short term sense. What he can do in his legacy that he is trying to achieve is he does not want to be another Israeli Prime minister that stops the fight short and you all of a sudden have Sinoar going up and down the streets of Dohag declaring victory. He wants to end Hamas. He will never end the ideology. That's a long term problem. What he can do is forestall another attack that Hamas has promised will happen time and time and time again. That's
why he wants to go after the infrastructure. That's why he wants to take out Hamas fighters.
General Mark Kimmitt, great to see you back with us here at the table at Bloomberg.
You're always welcome. We appreciate the insights, Kaylie.
There are huge questions about what's going to happen next and whether that attack actually takes place at all.
You're listening to the Bloomberg Balance of Power podcast. Catch Just Live weekdays at noon Eastern on Applecarplay and Enrounoo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube in.
The Nation's capital, thanks for being with us on Bloomberg Radio, on the satellite and on YouTube. With Congress in town, the President is here as well, but not a lot of news after that FISA bill was stopped in its tracks yesterday. Couldn't even get a rule passed in the House, making us wonder if anything can move in the House, including Ukraine funding, which some thought might happen in the next week.
It is feeling a lot less like it at the moment.
As Speaker Mike Johnson prepares to make a visit to mar A Lago in a couple of days, going to be holding a joint news conference apparently with Donald Trump. This could impact the agenda. We'll talk about that more ahead, because the news from Ukraine has been very concerning over the past twenty four hours. I think we can call it desperate, as a UN atomic watchdog now calls an emergency meeting in Vienna to talk about the increasing risk of a meltdown at the nuclear power plant in Zaparisia.
And that follows Russian missile attacks knocking out the biggest power plant in the Kiev region yesterday, taking advantage of pockets in the air defense. And that's where we start here with Nick Watdams, Bloomberg's, of course, National Security team leader. He drives our coverage here from Washington and a regular on this broadcast. It's great to see you Nick, as we join together again to talk about some pretty tough news.
I wonder, are we going to be hearing all of this being a cause of a lack of ammunition or would this have happened either way with Ukraine?
Well, I mean, there is no question whether or not you draw a direct causal link. There is no question that Russia has been much more aggressive in the skies over Ukraine. You had that footage a day or two ago of Russian jets essentially flying unchallenged over Ukraine, something that would not have happened several months ago. And we know very clearly that Ukraine is running out of ammunition, and the US says, listen, there is no Plan B
here if you do not get us the money. This is Ukraine has already rationing ammunition, It's running out of its air defenses. They need help, and we don't have any other options, so you got to act. It be very interesting to see what happens in mar A Lago, because you know, if Mike john Hinson does force this vote, the sort of common wisdom is that that's going to force his ouster. But we're also hearing, you know, Donald
Trump likes Mike Johnson. He doesn't want to have another Republican leadership fight, so there may be some wiggle room there. We'll see.
Very curious to hear what might emerge from that conversation. I wonder if either of them know we remember Vladimir Putin using the cold as a weapon in the winter season. He's using energy, I guess as a weapon in this case, actually targeting energy infrastructure, whether it's this plant that he knocked out in Kiev, the concerns about the nuke plant in Zaporisha.
Where does this go? What's he trying to accomplish?
Well?
It's always difficult to tell how much of this is a deliberate strategy. I mean, obviously the goal right now is to inflict as much pain on Ukraine. It's military but also the civilians there as he possibly can. And it's both inflicting pain and also exacerbating the really low morale. I think that you're seeing among Ukrainian troops in a sense that they are not getting what they need from
the West. I don't know if you'd say they feel abandoned by the US and European allies, but certainly a feeling that, you know, if Russia is allowed to do something like this unchallenged, well what does that say about the relationship. So I mean, as ever, Vladimir Putin delights in exploiting these rifts and points of tension between Ukraine and its allies. I think that's what he's doing here.
All the while, we have quite a situation brewing in Israel. It's getting more complex for this administration, it seems like by the day, as we now anticipate what we're told as an eminent strike by Iran or by its proxies in retaliation against this Israeli strike in Damascus.
Do we believe that something like this could.
Be born originated from Iranian soil, or would this be from Yemen or someone else.
You know, it's a great question because the thing that you really have not seen in this conflict so far is Israel and Iran going toe to toe against each
other directly. It's all been playing out through proxies. So I mean, yes, you had Israel targeting Iranian generals, but they were based in Syria, so it was yes, they were going after Iranian forces, but there was that half step that they were actually in serious So you know, a direct strike from Iran on Israel or vice versa, frankly that was actually publicly acknowledged would be a huge escalation.
So we're all, I mean, this is this occupying all of our time at the moment, trying to figure out what the contras of this strike would be.
But what is clear.
I mean, as President Joe Biden said yesterday, they are anticipating. They do have strong evidence that something is coming. The question is what and how escalatory it's going to be.
That we are laser focused.
On it, and we have a high ranking military official in Israel right now talking about how they respond to the response would that be coordinated with the US either way.
Yes.
I mean it's a very interesting dynamic there because the US Defense Department has played a role in advising Israel on its responses both to Hamas but also in this proxy fight. But you know, it hasn't always been the case that Israel has taken that advice, and there has been some frustration in the Pentagon that hey, we're sending you these assets and you're not listening, You're not paying
attention to us. So again you get back to that other really festering issue, which is the continued tension between US and Israel.
Something tells me we'll talk again soon. Yeah, if it'll come back to help us out.
Great to see you, Nick, as always, Nick Wadams, just doing great work as always on Bloomberg's National Security team here in Washington. They have a very important corner of our bureau, and we really do rely on them, certainly since I've been here at Bloomberg considering everything that has gone on around the world and is continuing to unfold here.
We'll stay in touch with Nick for you here at home.
The President actually talking about this today in a trilateral meeting with the Prime Minister of Japan, of course, was in town yesterday, and you're adding the President of the Philippines today all of this with an Ion China. But as we heard from the Prime Minister Kishida, the Prime Minister of Japan before a joint session of Congress earlier, they are deeply invested in this situation in Ukraine with an Ion China as well.
It's interesting how these stories overlap.
The President speaking yesterday not only about this in the Rose Garden, but also taking a question about the border. Fascinating to hear him talk on Univision about his plans to take executive action here in lieu of a legislative solution. Remember that compromise went up in smoke following Senate passagees DOA in the House. So here we are again, quote, we're examining whether or not I have that power unquote.
The President himself does not know if this will hold up in court, as he seeks to tighten the definition of asylum, and we wanted to get more into that today with somebody who has some experience in that field. Leon Fresco is with US former Deputy Assistant Attorney General at the Department of Justice, Office of Immigration litigation is now at Holland and Knight, Leon, Thank you for being with us.
Is this going to be a protracted court battle? And if so, who wins?
Well, absolutely it will be a protracted court battle because the premise of the entire reason that the Republicans have made this argument that there is an exclusion authority under what is known as INA Section two twelve F is because there's a ban and that travel ban is permitted, but the ban is on this word called entry, meaning if you're outside of the United States, you can be banned from entering the United States. So you can be banned from getting a visa, you can be banned when
you're at the airport. But here's the problem. Once you've crossed illegally, there's hundreds of years of case law that says that that is an entry, which is why you can be charged criminally with illegal entry, and so then the bar doesn't actually apply to you because you've already entered.
And at that point then the question is, well, you ban people from applying for asylum, and so the answer is yes, but that doesn't mean you can ban them from applying for something else, which is called withholding of removal, which is a statutory relief that is short of asylum, but that lets people stay. And so these bars, those are the two problems with them. Is one, will a
court actually let you get away? Well, a court actually let you get away with not calling it an entry when someone has already entered and saying yes, we can kick them out because they haven't actually entered, that's one thing. And then could you actually ban them from applying for any sort of relief? And in both of those those are things tried by President Trump, and President Trump was unsuccessful on both of those grounds.
In the pipes my god.
Well, for those of us who are more confused than when we started, leon, let me ask you about the definition of asylum, because they tried to get to this in the Senate compromise. These are people who are fleeing obviously economic conditions as well as violent conditions, and the idea was to tighten this definition to include only those who were in physical harm. How do you think it should read? What would stand up in court?
Well, the definition of asylum is what it is, which is that you fear persecution on the basis of your race, religion, national origin, social group, or political opinion. So basically on an inutable factor of you specifically, not on the basis
of something that's happened happening economically in your country. The problem has been with the burden of proof you have to show to make your initial case that allows you to stay for many years, and people have thought that that initial burden, which is called credible fear, which is one where you basically have to show the best is a significant possibility that you could win, was too low, and so administrations have tried to rent that up administratively.
But the problem is they can't change that because that standard is in the statutory law. So all they can do is basically issue memos that say, hey, remember what the standard is, which triggers sort of a subliminal readout to the agent, Hey, maybe you want to deny more cases.
But when that happens, then lawsuits happened because people say, hey, what you're trying to do is actually change the standard from what it actually is, which is why the president was asking for a congressional change, so that that initial threshold standard could be raised to something more definitive, or you had to already present something more concrete than just articulating some magic words Hey, I'm against the government in my country, and so that's why I'm trying to come in,
and that that would be more You know that you would need more than that. You would already need some documents or something to show that you actually could justify what you're saying in order for you to stay and make the second part of your case.
Spending time with immigration attorney Leon Fresco at Holland and Night getting back to this idea of qualifying entry. Leon under section two twelve f of the Immigration and Nationality Act, which Donald Trump tried to leverage repeatedly, it says that the president has brought leeway to block entry of certain immigrants if it would be detrimental to US national interests.
What qualifies as detrimental.
So there in the Trump versus Hawaii case, the court actually gave President Trump. The Supreme Court and that was when they remember, we had the travel ban, which first started with during the election, the allegation that he would ban all quote unquote Muslims, and then it kind of shrunk it to a seven He kind of shrunk into a seven country ban, and it was more security oriented than Muslim orient that there was about whether those countries
had specific security thresholds in place. But in any case, the Supreme Court gave broad authority to presidents to be able to say that that was not reviewable that issue. They only had to say that there was this there was this reason, and as long as a reason was articulated, then it wasn't reviewable. So the reason itself was not relevant as long as it was articulated. And so there that's a huge standard. But again, the problem isn't bad.
The problem is that the people coming across illegally are already entering, which is what makes them liable for illegal entry. So then you can't ban their entry because they've already entered. The entries that can be banned are people who are outside, or who are at the board of Entries, or who are at the airport, but not the people who crossed illegally.
Leon, you're reminding me why I'm not a lawyer President Biden's, he says, we're examining whether or not I have that power. What's his legal team telling him? What should they be telling him today?
Well, I think he's getting two kinds of advice. One kind of advice is, look, just do it. Have the court say it's illegal, and say, you see, I did everything I could. You Republicans told me everything, told me I had this power. I clearly didn't. Let's get back to the drawing board and let's negotiate something. And then the other lawyers are telling him you can't do it, and you shouldn't do it because we don't pass laws here that are going to get enjoined by the court.
We swore an ope not to do that. And he's just got to decide which advice he wants to take in that situation.
Do you think he's got an angel on one shoulder and a devil on the other?
Correct?
And this is always the fifty to fifty burden of any president in this situation is do you do it now? You're always gonna have to have a credible argument because you don't want the lawyers going to court to get in trouble or get this barred that they've made a ridiculous argument. So you're gonna have to do something that's at least credible enough to pass the threshold of the
lawyers being sanctioned. But the point is, if you think you're gonna win, then that's really what you should move forward. But he might do it not thinking he's gonna win, just so he can prove everybody that they were wrong. I hear, because he'd ever had that power in the first place.
Hey, Leon, thanks for coming to talk to us today, Leon Fresco, Hollanden Knight, as we try to figure out President Biden's next move on this one or what the courts might say. Much more ahead on Balance of Power. This is Bloomberg.
You're listening to the Bloomberg Balance of Power podcast. Can just live weekdays at noon Eastern on Apple CarPlay and then Ronoo 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.
Certainly after yesterday's route and as we try to rebuild things at least to some extent today, we want to make sure you know what's happening in the markets. With one day PPI, the next here we are do they cancel each other out?
Remember how upset.
Everyone was around this time yesterday We had the end of the world situation. We're never cutting rates again as long as we're alive. And then twenty four hours later, PPI and everyone starts turning in the other direction. Almost a little bit of relief here on a very different reading when it comes to wholesale inflation and the Fed's preferred reading here, of course, the core Personal consumption Expenditures Price Index, which I woke up thinking about this morning.
I'm Joe, Matthew and Washington, joined at the table by Lindsay Owens of the Groundwork Collaborative.
She's with us at the table today.
Great to see you in studio here at Bloomberg. Thanks for joining us. We last spoke around jobs Day. As you reminded me, We've had two big data points since then. Yesterday, as I said, people thought, okay, this is a problem three months as a trend. Then you see something that many people consider a leading indicator with the PPI data this morning, and we feel a little bit better about things.
Where are you?
Yeah?
I mean, look, Job's Day was great. Last week.
We saw continued strength in the labor market. That's building on continued strength in the economy overall. Right, we've had great GDP numbers. I think folks sort of fell back down to earth this week with the inflation numbers coming in hotter than expected. Yesterday worrying that maybe inflation is a bit stickier than we'd hoped, the sort of disinflation story of twenty twenty three, you know, maybe eroding a bit. But then you know, today's PPI numbers, I think give
us a little bit of hope. You know, they tell us that the Fed's preferred gauge PCE is maybe softening a touch, and you know, perhaps we'll still get those rate cuts that we're hoping for from the Fed later this year. I think for me, the question is, you know, why would the Fed continue this high interst rate environment for longer given what we saw under the hood yesterday in those CPI numbers. Well, housing is really what's continuing to drive CPI. And as you know, we don't get
relief in the housing market with higher interest rates. We get higher mortgage rates putting pressure on rental prices. Right, Folks aren't moving out of houses, and folks aren't leaving the rental market to jump in and start buying. So you know, the Fed's interest rate tool is not very well matched for housing inflation. If anything, it may be exacerbating housing inflation. And so that's the real sort of paradox and predicament I think we're in here, is how do we get out of this?
Sure without a building boom, Sure you're trying to take another lever, But if you're Jay Powell, you're saying, look, i mean we're not anywhere near two percent right now, and the last thing I want to do is start cutting.
And have to start racing again. And I'm sure you empathize with that. Yeah, I mean, he has history shows the danger there.
He has one tool in his toolbox, right, he has interest rates, and so that's what he's looking at. Is he going to stay the course? Is he going to be higher for longer? Is he going to sort of continue with his promise to begin cutting this year? I mean, my guess is the language that we'll see from the FED won't change very much. It'll still talk about an outlook of cuts beginning this year. But I think this does maybe call into question how quickly they move to the first cut, maybe puts June.
A little bit in the rear view mirror.
But I'm still I'm still optimistic that you know, that really could see movements sooner this year in June, maybe not June, but you know, still optimistic.
Because the worry is, oh, now there was a sudden we're in political season. He's not going to want to do anything in the fall. Does that apply at this point? Whenevery other norm has been thrown out the window? Does history matter? If j Palell thinks he needs to cut rates in September, he's going to.
Do it, right, Yeah, I mean, look, federal reserved tres have cut rates during election years before. There is no law or rule that says you can't cut an interest rate during an election year.
You know what people would say though, that it's political. Well, he's auditioning for the job again. He's trying to of course political that's that's that would be the refrain, and that's what he's trying to avoid.
Yeah, he's trying to avoid politics.
Look, I think you know, in that case, I would argue actually that you know, cutting rates earlier with more gap between now and November is less political than sort of moving to recuts in the fall.
Right on the eve of the election.
Did the President help Yesterday? He actually went there. We can't get anybody to talk about the fedting. God knows, we've tried.
I don't know.
Heather Bouchet, who's going to join us later today, Jared Bernstein. They're trained to say we're not going there. As opposed to the last administration. The president was tweeting at j Powell every day. But yesterday Joe Biden, in front of a rose garden full of reporters, says, there's going to be a ray cut this year. You might have to wait a month, he said, talking almost like somebody who would come on Bloomberg. Did he cross the line or did it at least change an unspoken policy.
At this White House?
Yeah? I mean, look, just like there's no rule against the Federal Reserve chair cutting interest rates the election year, there's a rule against the president talking about the Federal Reserve.
I think this kind of.
But they reinforced that independence when they came into office.
They do.
I mean, but it's really custom, it's not law. These are norms, you know, not hard and fast rules. And I actually think it's a disservice. And so ways, the American people should be hearing from the President about his plans to bring down inflation, and they should be hearing from the President whether or not he thinks interest rates
are helping or hurting. And I think in this case, again, you know where we see housing driving a huge percentage of continued inflation, and the interest rate environment is not our front here.
I suspect he's going to lean into this more as we get closer to the election. We'll see what happens to the economy. You wonder how much his political fortunes lie in a soft landing, if we can call I don't know if we're even beyond calling it that at this point. Some people think we're already in one.
Yeah.
Look, I think obviously the economy is going to be a huge part of the story in November, and I don't think a high interest rate environment helps President Biden. I mean, punishingly high borrowing costs for families. They notice those, and they're frustrated by those, and they'd like to see those go down. So the President is surely aware of that. Obviously,
continued high prices are a problem too. I think he's done a great, great job, and you know, he did this yesterday as well, at pointing out that there's a place where we could see inflation come down considerably, where we could get a lot of pricing back.
And that's in the markup channel.
You know, continued high actually, you know right before the you know, the easter break, we saw corporate profits come in at their all time record high, not a post pandemic record high, a true all time record high.
And markups are up as well.
And you know, the President has said repeatedly that he thinks markups are a place where we could see softening and prices, And you know, just yesterday he mentioned that he'd like to see those sort of record high grocery margins he passed back to consumers in terms of, you know, in the form of lower food prices.
Well, why did you mention that, because actually one of the positive refrains from the CPI was food wasn't as bad as its How worried are you about grocery prices? There's a real political side to this because just like gas prices, people see it every day.
Yeah.
Look, I mean here's the here's the rub for the consumer. Disinflation doesn't mean lower prices, right. The fact that prices stop accelerating doesn't mean that you go to a grocery store and you know the price of eggs doesn't take your breath away, right, So the sticker shock, I don't think, you know, really gets alleviated by today's numbers. But of course, you know it's a positive sign that we don't have continued to inflation in food.
Uh huh.
The other is energy, and we're looking at gas prices rising. Of course, there's a seasonal pattern here, and the last thing the president wants to hear about is four dollars a gallon.
But that could happen. That is in some forecasts.
Absolutely.
I mean, we've got a seasonal pattern on gas prices and energy prices.
We've also got geopolitical.
Factors now and looming that are going to affect energy prices. And again I would just point out this is yet another area where the feed is not going to be much helped, and so we are really in a little bit of a predicament here where the primary tool we're using to bring down prices is probably not going to give us a lot of relief.
Well, so when you sit down at the ground, we're collaborative and consisted, consider where we're going to be in six months.
What's your vision here?
Is it a no landing, is it a hot landing like I heard this morning on Bloomberg Surveil.
What does it feel like in the fall?
Yeah, Look, we're really optimistic about the continued likelihood of a soft landing.
You know, we've been saying for years that it.
Is possible to have both a strong labor market and low prices, that we didn't have to choose between those that, you know, the path forward for bringing down prices wasn't eviscerating the labor market making us all too poor to
buy stuff, yeah, and bringing down prices that way. And I do think, you know, overall, you know, this couple of months hasn't been great on the inflation front, but overall, what we've seen now is twenty six full months of unemployment below four percent and inflation coming down off its peak for you know, a year and a half now, and so obviously, you know, we're not getting that straight line on inflation that we'd like to see. But I think overall the pattern is a strong labor market and
continued disinflation. And that's the story of a soft landing, and that's the story of a strong economy that we're hoping to see.
So you're actually projecting that that will happen. We're hoping for it that's not already happened.
Absolutely.
Yeah, it's great to see you. Thanks for coming in to talk to us in studio. As always, Lindsay Owens groundwork, collaborative and a really interesting take on the economy that we wanted to bring to you. Lindsay spent time as an economic advisor to Senator Elizabeth Warren, to Congresswoman at Primela Jaia Paul, and part of the equation here in Washington. When we think about the interest rate cycle the impact that it's having politically on this administration, Lindsay is.
A voice that we turn to. 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.