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The Administration makes the case for funding Israel and Ukraine. Welcome to the fastest show in politics, as the debate over funding gets real on Capitol Hill, even as we watch both wars unfold in real time. We'll have the latest from both sides of the Atlantic and both ends of Pennsylvania. Avenue in a conversation with Michael O'Hanlon from the Brookings Institution, with analysis from our signature panel. Back together today, Rick Davis and Genie Shanzano Bloomberg Politics contributors.
I'm Joe Matthew in Washington, where the debate around funding the wars happening between Israel and Hamas, Ukraine and Russia finally gets real with lawmakers coming back into town today, and it's taking place as Israel's military engages in fierce fighting with Hamas deep in the Gaza Strip today. The headline on the terminal no hostage deal in sight as
army battles in Gaza. That is not the way. Benjamin dat Ya who sees it, of course, he talked about it in a news conference right around this time yesterday, putting the ground offensive on par with the mission to rescue hostages. Some say you can't have one without the other, including Benjamin dtnaho Are.
A common assessment of all of the not only the cabinet members, but also all the security forces in the military is that the ground action actually creates the possibility not a certain thing, but the possibility of getting our hostages out because hamas will not do it unless they're under pressure. They simply will not do it. They only do it under pressure. This creates pressure.
Now today, fast forward a few hours, members of the administration are making the case on Capitol Hill. We already told you that will likely be a vote on Thursday in the House of Representatives, specifically on is rarely funding, not Ukraine or any of the other matters that were put into this request from the White House. But lawmakers on the Senate Appropriations Committee, you're talking about how exactly
they might be able to do both if possible. There to make the case the Secretary of State Anthony Blincoln.
I also hear very much the passions expressed in this room and outside this room. All of us are committed to the protection of civilian life. All of us know the suffering that is taking place as we speak. All of us are determined to see it end.
And this is a hearing that has not been coming easily, with Heckler's repeatedly interrupting the Secretary, not in the face of an intensifying strategic competition in the Indo Positis.
Went around the world repeatedly through the hearing.
If the witness was to spend Pattie.
Murray trying to bring things to some semblance of order here, but as soon as they would put one Heckler out of the room, another would pop up.
They's fire.
Now, these are very children of.
Godda, important moments as we consider both sides of the debate here that we're going to be exploring over the course of the hour. The Secretary of Defense also in that hearing today, talking about the extent to which this money for Ukraine, sixty billion dollars worth of white House is asking would come home to the US, and we'll go to defense contractors here when we.
Send our friends munitions from our stockpiles the money to replenish our supplies strengthens our military readiness, and we invest in American industry and American workers. That also holds true for funding for Israel or you to procure a new equipment off the production line.
Lloyd Austin speaking earlier today before the Senate Appropriations Committee. As we bring in Michael O'Hanlon, delighted to say he's back with us today on Bloomberg Radio and on YouTube the Brookings Institution Senior Fellow Director of Research in Foreign Policy. Michael, it's great to have you. Have a lot of questions for you, and I have been looking forward to this for a couple of weeks here, so thanks for making
time for us today on Bloomberg. Let's begin with this idea of a ground offensive actually helping to unlock and free hostages. We saw one female soldier rescued an Israeli soldier rescued yesterday Benjamin ett Yah, who says it is the consensus in his administration and among military and intelligence officials there that this is the best chance to save hostages is by actually moving in on the ground with the military.
Do you agree, No, I'm agnostic.
I don't think that it's possible to reach that kind of a definitive conclusion. So I would disagree with anyone who has a strong opinion either way, to be honest with you, because I think it's entirely possible that Hamas would start executing hostages as Israeli troops got close, which would counter a Prime Minister net Nyahu's argument. But it
is also possible that Hamas might feel desperation. Leaders who were previously well protected or hidden might feel that their own lives were at risk, and they might start thinking about doing a deal they would not previously have contemplated. But they took hostages for a reason. They took hostages to have some kind of negotiating leverage at some point.
They may or may not have had a clear strategy for when and how to pursue that, but they could have obviously killed all those people the same way they mercilessly massacred the fourteen hundred on October seventh. So there is some kind of a negotiation somewhere in somebody's head, and I don't think we have enough evidence to be confident whether the prospect of that negotiation and that deal would be improved by you know, Israeli forces getting closer to Hamas hiding.
Places or whether it would be work. It really could go either way as I see it.
The head of Israel's National Security Council says there is no deal in sight to get more hostages freed. Does that speak to the calculation here? Do you think for the IDF to say, all right, then we're moving in.
I suppose, But I also think that the IDF was desirous of going in very quickly. After October seventh, Israeli passions were understandably so high, and the fact that they waited a couple of weeks or more before doing large scale incursions is partly a reflection of the lack of a clear military strategy for what they would do on the ground once they were there.
So I don't think it was the sort of.
Thing where they had a well rehearsed plan that could be implemented at any given moment based primarily on the hostage issue, or are there such sort of you know, specific and.
Discreet kinds of concerns.
I think it was the reflection of the need to figure out how to do what they're about to do, and frankly, what the objectives even were because, as we all know, right after October seventh, Israeli leaders were saying.
That if you're Hamas, you're a dead man walking.
In other words, they were pledging the extermination of the entirety of the Hamas organization, which is an understandable reaction, but probably no more realistic than the United States saying on September twelfth, two thousand and one, that we are going to exterminate al Qaeda.
It's a goal that you naturally.
Think about and certainly that you aspire to emotionally, but it's probably not realistic. So that just reflects the Israelis were not really in a place initially to go in with any kind of a well developed and realistic plan. So that's the main reason I believe it's taken them time to launch this.
We're are you on a potential end game and exit strategy here? If there is, when Michael, we're seeing more fighting, striking targets in Lebanon, is real going deeper into the Gaza strip. There's talk about a second or a third front, of course, and I wonder how likely do you think that is to see one break out of if it hasn't already.
Yeah, it's a great question, and I've read just in today's newspapers contending points of view on that very issue by people who know Iran and Hesbolah better than I do. Just to be transparent, I consider myself a general defense analyst by the way, with sore eyes, so my apologies for the sunglasses, rather than an expert on Hesbela or Iran.
But I could see that I would say.
The chances of Hesbelah unleashing an all out attack on Israel are still less than fifty to fifty because Hesbelah is essentially followed to live and let live with Israel for seventeen years since the Big Fight of two thousand and six. And there are reasons why Hesbelas wanted to have the ability to strike Israel but has not actually implemented that capability or employed that capability, and those reasons don't necessarily change with what Hamas decided to do down
in Gaza and your Gaza. So I think that Hesbelah's calculus is probably only moderately or modestly influenced by what's played out over the left last few weeks. But there are people who say it. Listen, Hesbela can't sit aside forever and watch it's sort of fellow you know, pro Iran anti Israel organization and Palestinian people suffer the way they have and seem powerless to do anything about it.
So if this thing continues indefinitely, the argument is that Hezbollah will then feel some greater incentive to get involved itself, for no other reason than to sort of save its own pride and its place in the pecking order as
supposedly the strongest anti Israel rejectionist group out there. But I think as to the question about an endgame, I'm sort of intrigued by the idea of a UN trusteeshe that brings in Palestinians of various stripes, you know, but not Hamas, and then ultimately transitions to a Palestinian state in Gaza and worry later about the Palestinian state in
the West Bank. Or maybe maybe that peace process begins anew as soon as this war can be brought to will close, but in other words, not go back to a situation where either Hamas or Israel would be occupying and controlling the Gaza strip. But maybe instead of trying to get this one big, perfect two state solution, which
is of course, so difficult and elusive. Maybe it's time to create a piece of that state or one state, and then see what happens later with the possibility of a second Palestinian state that may or may not ultimately merge.
This is not an idea I've heard that many Middle.
Eastern experts endorse, but I think it's worth adding into the mix because if you're going to think about a post Tamas government, you've got to think about how do you do that in a way that doesn't allow Hamas to just come back whatever's left of Hamas to regroup. And yet you don't want the United States to do this, you don't want Israel to do it. So it leaves the idea of a reasonably well armed UN trusteeship followed by, well,
what comes next? I think a Palestinian state. So there's light at the end of the tunnel for the Palestinian people in the You know, not so much that I care about himas I don't, but I think the Palestinian people need that kind of a future vision to get through this.
Spending some time with Michael O'Hanlon from the Brookings Institution and sharing ideas here on Bloomberg's sound on I wonder your thoughts about what's happening in Syria. We got a warning from the UN, Michael warning that the war is quote unquote spilling over into Syria.
How real is that? What are we going to be talking about a couple of weeks from now.
Well, of course there's an irony, you know, war spilling over into a country that's been at war itself.
For twelve years.
So true.
So I have no doubt that the UN's right at one tactical level that when you have a region like this with weak governments and a lot of extremist groups, that they're undoubtedly is movement across borders. And certainly some of that movement is from Syria into Lebanon with weapons that Iron supplies to Hesbolah, And you know, there could be other kinds of movements.
I'm sure it probably are. So in that sense, yes, the war is spilled over. It already had spilled over.
These different countries are part of a generalized conflict zone. It may be more intense in some places than others, but is really a regional kind of.
Calamity.
And so it's just an expansion of what was already underway. I have no doubt that's occurring. It's not my top concern in this situation compared to everything.
Else that's at risk.
What is your top concern?
Well, getting to your earlier questions about the possibility of Hesbela unleashing and all out second front, I think that's the main concern, not Syria being further destabilized, but Israel and Hesbela being at war.
Michael, it's great to have you back. Michael O'Hanlon a senior fellow the Brookings Institution.
He's director of Research.
And foreign policy there and sharing insights with us here on Bloomberg Radio. I'm Joe Matthew in Washington. As we assemble our panel, We've got Rick and Genie back together today. I'm glad to say and awfully curious to hear what's on their mind. Bloomberg Politics contributors Davis and Genie Shanzeno. There's a lot to pick through there. Rick, I'll start with you on the matter of Hesbolah. To what extent should Israel be reinforcing that northern border and should the US be involved?
Yeah, obviously, I think the northern border is a vulnerability for Israel and and and and the question is how much can they reinforce with the commitment of troops that they have as a move into Gaza and and and I think if there's any weakness there, the US should look at putting our own troops there on the northern border to ensure that there isn't an incursion into Israel from the north. You know, it's a sovereign country, Israel,
it's a democracy. It's a country that we should and have a security agreement to defend.
And it's great that we have.
Aircraft carrier and off the coast to intercept missiles and things like that that they've been doing. But troops on the ground on the northern border is a real deterrent to both Hesblo and Oran's interest here. And so I think it would send a strong message and we certainly have the capacity.
To do it.
How worried are you, Genie and welcome back that US boots end up on the ground in Israel?
Or is that what should happen?
You know, I think it's a concern. I don't think that it is something that the administration is inclined to do, and they certainly will try to avoid at all cost. And I think that is the right move, but it is a concern. I mean, we have seen and we have heard to your point, how this is escalating and spreading. And if the US gets enmeshed in that and we see boots on the ground, that is going to be
a whole different bawlgame. And already we are seeing the reaction from the United State's public and we are not on the ground at this point. So imagine if we get to that point what the reaction of the US public will be. And it will change the game for the twenty four elections should that happen, and.
Certainly changed the debate I suspect in Congress. We're going to go there next with Rick and Jeannie. I'm Joe Matthew.
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President Biden sends the big guns up to Capitol Hill to make the case for the money one hundred and six billion dollars. Yeah, it's a lot of money. Of course, it goes to a lot of places. The supplemental budget requests that we've talked about aimed at Israel, Ukraine, Taiwan, and our southern border. And as I mentioned, the secretaries are making the case today, Anthony Blincoln along with the Secretary of Defense Lloyd Austin. Behind them are the Senate leaders,
the Democrat and the Republican. Here's Chuck Schumer earlier today on the floor.
I'm deeply troubled that yesterday House Republicans released a partisan and woefully inadequate package with no aid to Ukraine, no humanitarian assistance for Gaza, no funding for the Indo Pacific, and in addition, poison pills that increase the deficit and help wealthy tax cheats avoid paying their fair share poison pills.
He's talking about. The offsets are going to take money out of the irs to pay for the money going to Israel. That's the plan, at least from the new Republican speaker. Mike Johnson talked about it in another interview on Fox.
My intention is to call Leader Schumer over there and have a very direct and thoughtful conversation about this. I understand their priority is to bulke up the IRS. But I think if you put this to the American people and they weigh the two needs, I think they're going to say, standing with Israel and protecting the innocent over there is in our national interest and is a more immediate need than IRS agents.
Let's reassemble the panel.
Rick Davis and Jeanie Shanzano joined Bloomberg Politics contributors Because this is the real stuff. Lawmakers are actually coming back into town well tomorrow at least for the House to get this debate started. They're already doing this though, in front of the Appropriations Committee in the Senate, and that's
what matters. Rick, Anthony Blinken, and Lloyd Austin are making the case here for what the administration sees, and even Mitch McConnell used this word intertwined national security threats.
Are they succeeding, you know, I think.
They're succeeding with those people who are already likely to be supportive of the Ukraine funding measure. That's really the test kit here. Everybody is pretty supportive of Israel and funding for them. So how do we how do we drag through this process Ukraine funding, you know, attached to the Israeli funding, and that's their pitch, and and and so I think it's working with people who are already
predisposed to want to do that. I'm not sure it's being compelling to those who are either on the fence or opposed. And a lot of it is a process conversation, right, you know, just connecting these two things, I think this administration would be well suited to make a stronger case specifically for the Ukraine funding and what it's for and how it's going to be protected, you know, and how's it going to be handled in the process, so that Republicans who are getting heat to change their mind and
be against Ukraine funding have some better standing. But that's getting lost in the you know, incredible amount of reporting around Israel, and so I think they've they've got to really focus in on this Ukraine spending and what is for and how it'll be administered.
Well, as we discussed, Joe Biden has a friend in Mitch McConnell. When it comes to making that case. You can send the Secretary of State up there all you want, but how about the Republican from Kentucky. Here he was in Louisville making that very case, Genie.
So this is not solely about helping Ukraine. It's also about getting us ready for the bigger challenges we have ahead out in Asia.
Right now.
Our efforts are making a difference both in Ukraine and here at home. But the Biden administration's hesitation along the way as really, in my view, kind of prolonged the bloodshed. This is a moment for swift and decisive action to prevent further loss of life and to impose real consequences on the tyrants who terrorize the people of Ukraine and of Israel.
He puts them together in the same sentence. So he's always got a kind of jab his old friend Joe Biden while he's at it. What he's really doing, though, Genie is selling the administration's proposal here, isn't he?
He is, and he has been doing that very vocally. Yesterday that speech, well, the introduction of the Ukrainian ambassador in Louisville, that was just another example of Mitch McConnell publicly making the case. He did something rare a few weekends ago. He went on the Sunday talk shows, and he made the same case that these should be tied together.
You know, he is the public face of the Biden administration's efforts here, but the reality is he has not been effective in selling this to his own party because you just look at what Mike Johnson has done now with this fourteen billion dollar proposal and the payoffs he
is trying to use it. It's quite a heck of an opening act that this new speaker has got himself into a bill that could been pessed with flying colors by part of and support while we wait for the next shoe to drop with the next cr he's decided to step in and say, we're going to get it pay for from the IRA in terms of the money that was designed for the IRS. And by the way, if he's interested in cost savings, you don't cut IRS agents. That is going to cost more. They are going to
score that as a higher cost. So he can't even make the case with a straight face that this is about cost saving. This is about him trying to placate the right of his party, and he's doing so at the expense of necessary funding for Israel. And oh, by the way, he left out Ukraine the border and Taiwan in the process.
What do you make of this IRS move here, Rick, we knew that the new Republican speaker was going to seek offsets, but to take the money from IRS. It's great politics, right, I'm sure this actually is playing pretty well with the Republican base, But it would do with geniesuggesting. Right, if your intent on lowering deficits, you don't cut IRS funding and limit the tax receipts coming in, do you.
Well?
The Biden administration had a hard time making the case that eighty billion dollars of additional IRS payments we're going to somehow result in big tax revenue increases. And so if the Biden administration had trouble selling that, then the Republicans aren't going to have that much trouble selling that. A small fraction of that being used for the war in Israel is probably not going to get much traction, right.
I mean, And by the way, we kind of.
Like the fact that Congress is actually looking for offsets, you know, to pay for these supplementals. I mean, supplementals have been burdening the deficit for a long time, and I think it's actually good ethic to have this conversation. If I were the Democrats, I'd say, fine, let's fund that and let's add ten billion dollars to the UK spending. I mean, like there's a better way to do it
than to somehow go out there. If I'm a Democrat and defending more IRS agents, geez, I mean, I does someone tell Schumer that it's an election year?
He calls it a poison pill?
Genie, which approach do you prefer?
You know?
The reality is is that again, if you cut the funding for the IRS agents, that'll be scored as cost inducing, not cost reducing. So anybody who is serious about cutting and who is serious about offsets would not suggest that the place to find those is cutting IRS agents. So yes, I agreed, we need to do something about spending, and these supplementals are expensive, But why don't we go back and do something else, like visit the twenty seventeen tax
cuts that we're given to those billionaires. Why don't we do something more effective to actually cutting as opposed to adding on, which is exactly what the Republicans are doing. I mean, this is confounding. If you just think about the numbers, it will cost more to take those agents away. The money that the government gets come solely from taxes. If they aren't able to collect, we don't get the money. As a people and a government, we need it collected.
We need IRS agents to do that. Defunding them in this way is not an effective way to do anything except score political points. So it's a political game that the new Speaker and the Republican Party have decided to play, but not at all effective from any sort of cost saving perspectives.
But this isn't about really reality, is it, Rick? This is about politics.
You can you can win an election on defunding the IRS, on eliminating the IRS. I think that might be part of Ronda Santis's platform.
We won't even get into how many supplementals and the billions and hundreds of billions of dollars that were passed when Crafts controlled the House of Representatives and not any effort was made to cut federal spending to pay for them. So let's just put that out there as a comparison of the new administration of Mike Johnson the Speaker. Look, I mean, it's it. The reality is this is not enough money to make a dent in anybody's wallet, and the federal government.
Uh.
And and the message to taxpayers is pretty clear by Republicans, which is we're going to find pay fors. And and there's not a there's not a voter I know who's going to look underneath the spending patterns of the I R s and figure out that it costs you a dollar ten for every dollar you cut out of the I R S.
I mean, uh, I get it.
You know, good policy, bad politics.
Yeah, there is Rick Davis knows and Genie Shanzeno. That's why there are signature panel and they're up next with more in the aftermath. If we call it that of this UAW auto workers strike historic in size, but it might just be the beginning. We'll have more on that ahead.
You're listening to the Bloomberg Sound on podcast. Catch us live weekdays at one Eastern on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcast.
Big victory lap from the UAW President Sean fain Fist bumping all three of the Big Three, or at least his own members, that massive, historic in fact strike against the Big three automakers for GM Stlantis now seemingly over. The deals have not been ratified, but as we told yesterday, tentative deals now officially struck with all three. The GM was the most recent yesterday, with the headline now on the terminal UA doub score's biggest wage hike this century
in the year of union wins. He's definitely feeling it as I read the story from Bloomberg workers getting record breaking wage hikes thanks to strategic strikes and stunning contract wins. Of course, the most recent would be Sean fains.
We'd not always secured a record contract. We have begun to turn the tide on the war on the American working class, and we truly are saving the American dream.
Saving the American dream, and as he said yesterday, rebuilding the American economy. Noting that there's a lot more where this came from. The resolution of these strikes could be just the beginning of a much greater movement that we could argue begin with UPS and the Teamsters several months ago.
The actors are still at it in Hollywood. The Culinary Workers Union in Las Vegas could be ready to tip off, and there are others here to the point where he's calling for a combined, nationwide organized labor strike on May day of twenty twenty eight, when these contracts expire. Let's reassemble our panel for their take. Rick Davis and Genie Shanzano, Bloomberg Politics Contributors was talking to Lale Brainerd's last evening
on Balance of Power. Genie in My question was whether the administration had let the genie out of the bottle here, because this, in fact, maybe the tip of the iceberg on what could be many labor actions that coincide with an economic slowdown.
What do you think?
I do think it's possible, but I don't think there is any question but that this strike, the way it looks like it is going to be resolved in these tentative agreements, is an enormous win for the workers. It's I think, a good win for the auto industry as a whole, and it's surely a really, really good win for the president. He put a lot on the line going out there and standing on that line for as the first president to do that. He has made a
lot of promises to labor. He doesn't we don't see a lot of those numbers reflected in the polls for sure, but this is one of the many successes I think we're going to see the President point to and of course I think, you know, let's give credit to on fame probably one of the most effective UAW leaders ever in the uaw's history, and one of the most notable new style labor leaders we've seen in this country for
so long. He really has made his mark. And there's no question that as we see this trickle down, say to the ev companies and others, that impact might be expanded. So a good day all around if this works out the way we think these tentative agreements will work out.
So Rick, you could argue that these deals, these wage increases specifically, would not be necessary without the increase in inflation that this administration has been trying to fight. But we just saw Joe Biden on an actual picket line and we were told that that was a history making moment and that this was victory for this administration. Could it bite back in the form of additional labor actions that could create economic interruptions in the midst of an election year.
Yeah, I don't think it's an accident that we've had had these massive labor strikes during his presidency. He likes to tout the fact that he's the most pro union president of all time. He as you point out, actually went down to a picket line, But he's intervened in previous strikes, you know, on the side of the unions. I mean, corporate in America knows exactly what they're getting with Donald Trump and and and so or with Joe Biden.
But but I was just going to say, what's interesting in the most recent Bloomberg Battleground States poll in seven states they were going to matter in November, is Donald Trump's picking up union support. He is the highest level of union support of any president or any Republican running for president in the last two decades. So whatever he's doing to support these unions isn't necessarily translating to strength
on the ballot with union households. So you know, sure there's going to be a battle royal go going on related to unionization in America courtesy of Joe Biden's presidency, and we'll see where it goes from here, But it doesn't seem to be that politically viable strategy.
What do you think of this genie to union members rank and file, those who are actually walking picket lines. The UAW vote Biden because he showed up and was on their side, or do they vote Trump because he showed up, albeit at a non union shop, and felt their pain.
You know, I think workers feel it's a win that both of the leading candidates are trying to vie for their support. I don't know where they end up in twenty four, but if I was advising Joe Biden, I would tell his team to do everything they can to get Sean Fain the UAW endorsement and to get Sean Fain working for them, because that is a guy who
has an effective message that appeals to workers. And I think this is what's so exciting when you watch what he has been able to do so far, is that he has been able to reach workers in a way that we haven't seen other UAW leaders do in the past.
Maybe it's because he's the first democratically elected It's hard to tell, but it's certainly a lesson that the Biden campaign team can take because their ability of the Biden team and Democrats as a whole, sadly, to tell the story about why their policies are in the best interests of these workers has been utterly shut out by Trump and the Republicans who have done a much better job
on that front. So kudos to them. But Democrats should take a lesson and try very hard to emulate Sean Fain's ability to make these cases, because he does it very well, and he's done it effectively six weeks this strike is taken. That's remarkable to imagine.
It is, Rick, we just have a minute left. Does he have a future in elected politics? Would you run Sean Faine as a Democrat?
Yeah, he's a dangerous guy.
I agree with Jeannie. He's got very good capability to unicate this concept of a standing strike.
I thought was brilliant.
You can't argue with his results, and I just as soon he get out of union politics and get into national politics where we have a fair shot at him, a fair shot.
How about a future labor secretary in a second Biden term.
I'd have to leave that to Genie's judgment. You know, anything that gets him out of the union organizing business would be good for me.
What do you think it was, Marty Walsh? Why not Sean Fain? Jeanie, I think.
It's a brilliant idea.
Joe Matthew I know hopefully Biden is listening. They make this move soon. It's brilliant idea, he'd be remarked.
I gottaware he's got to wear the white Camo golf shirts. Though you can't change the attire if you come to Washington, Sean Fain, I'm Joe Matthew with Rick and Jeanie morihead.
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Welcome to our two of Bloomberg Sound On. I'm Joe Matthew in Washington. Join now by Kaylee Lyons. Kayy, It's great to see you as lawmakers come back into town and the real debate begins over the very topic that we have been talking about for a couple of weeks. Now, well, we were trying to get a speaker in place, and that is the supplemental funding request from the White House, which sounds really boring. When people use jargon like that
in Washington. It's the many billions of dollars the President is asking for for Israel, for Ukraine.
And some other matters, many many billions, a lot of billions, five billions, it's a lot of money. We're talking triple digits here. And as you say, there are multiple parts to this funding for Israel, for Ukraine, for Taiwan, even border security. Trying to throw a little sweetener in there for Republicans and yet doing it all as one big package is not something the House of Representatives at the
very least seems very eager to do. We know that they're working on a separate Israel bill fourteen billion dollars in change of funding, but there's an offset, Joe, and that's stripping money from the irs.
Yeah.
So we're going through this apparently every day with Mike Johnson.
Now the Speaker has to choose slightly different language every way to say the same thing he's not bringing on all the floor. It's going to be Israel only. The one thing that remains the same with all of these interviews is they're all on Fox.
Here's the latest interview on Fox.
Humor over there and have a very direct and thoughtful conversation about this. I understand their priority is to bulke up the IRS, but I think if you put this to the American people and they weigh the two needs, I think they're going to say, standing with Israel and protecting the innocent over there is in our national interest and is a more immediate need than IRS agents IRS agent.
So this is where things get interesting.
We didn't really talk a lot about offsets yesterday, but this is what this has everyone in bunched up today in Washington, is that they want to take money from the IRS. Yes, that had been earmarked by the Biden administration, by the way, a woefully hated, if you want, but woefully underfunded agency, like the phones don't work or anything, copiers are out of ink, toner, take that money, pay for Israel, and the we zero things out on Capitol Hill.
Democrats don't like that idea at all.
Yeah, And I just wonder if the math really is zeroing out because the RS is this is how you get the revenue. So I wonder if net net it becomes a not zero sum game but actually potentially a negative someone and I feel like we should ask maybe an expert about.
That we have one. By the way, we're going to talk to Senator Rick Scott about this. I'm pretty sure I know where he's going to come down on this one. But Alex Zurden is with US Capital Peak Strategies, has spent the life doing this stuff, or at least a career.
Alex.
It's wonderful to see you. Thanks for being at the table here. I'm having trouble with the logic a little bit. Rick Davis was arguing for offsets. We get that you want to spend billions of dollars, but to take money from the money generating machine, money that's actually being counted on, I guess to Kaylle's point might be counter intuitive.
That's right, and thank you Joe and Kayley so much for having that. Absolutely there's an idea here. You have to spend money to make money, and I think that's the example with resourcing the IRS. It has been chronically underfunded for quite a while, and so what we need to do and what Congress passed and the President's sign was budget for it modernization to get out those problems
that you described. We're not on paper anymore. Unfortunately, the IRS is working in too many manual processes, they're having too many technical issues. And this was a glide path over a number of years to improve resources for the IRS, which is the largest independent bureau at the Treasury Apartment and is where the US government collects tax revenue.
Okay, So if the IRS hypothetically had, say, fourteen billion dollars less to work with, what actually happens inside the IRS at that point, or maybe maybe a better question is what won't happen.
Yeah, they're arguing that it is more efficient for a tax collection, that they are able to improve the ability for tax collection, so they're able to recoup more money and leakage in tax inefficiencies, recover more money for the government for money that people, companies, other entities owe to the government, they actually collect that money.
Well, people talk about the IRS, and you know, we went through this whole thing with armed guards or armed agents knocking down your door last year, which was of course, that did not turn out to be true or have anything to do with the eighty billion dollars that the IRS needed. Can you imagine, I mean, just as a bit of a tangent here, how awful it would be
to work there. I mean, you're dealing with what like windows ninety five machines that don't turn on, and the you're dealing with really horrible resources and you're being asked to do, you know, pretty dry work here. These aren't people knocking down doors. They're actually processing your tax reserves, which sounds like tedious.
Labor, and we need somebody to do it right.
Absolutely.
And the people I've worked with when I was at Treasury in different parts of government, there or public servants. They are civil servants, not there for the money. They're there to help improve tax collection and improve public services for everyday Americans, for all three hundred thirty million plus Americans.
And those are the people who I met.
IRS does have a small component for law enforcement IRS criminal investigations, and they do critical work, and they investigate cryptocurrency tax evasion. They go after some of the worst of the worst criminal tax evators. So it's a necessary function, but a small part of what the overall bureau does.
Okay, So to bring this conversation full circle, as you talk about criminals, we also should talk about terrorists, or at least designated terrorists by the US, because ultimately this IRS conversation is tied to the Israel and himas conversation. We actually are just getting headlines out from the White House press briefing in which Admiral Kirby is the spokesperson
for the nsc IS talking. He says no indication that Hamas has gotten any of the aid sent to Gaza, and this speaks to the difficulty in trying to get humanitarian aid in for innocent civilians while also not trying to contribute in any way to the designated terrorist organization and its activities. How hard is this kind of financing? Right now, you exactly hit the nail on the head.
This is a constant balance for imposing sanctions against foreign terrorist organizations like Hamas. Hamas has been designated since nineteen ninety seven by the State Department, two thousand and one by Treasury, and yet they've been able to assemble this horrific militia, kill thousands of civilians and murder innocence and take hostages, even with some of the most robust safeguards
in the world to combat terrorism financing. Meanwhile, the people in Gaza are suffering, and so there's a need to balance strict counter terrorism financing measures economic sanctions against Hamas. Palastan Islamic jihad while ensuring that the safe, responsible delivery of aid and aid resources get to those in need. And this is attention We've seen here in Gaza, We've seen it in Afghanistan where I've worked in the past. We see it in many conflict zones around the world.
Well, so how do they move that money? How is that money delivered?
We're sitting next to the crypto expert here and I'm going to I'm sure Kaylee has more informed questions that I'm going to ask. But to what extent do we think and I've seen several reports about this, to what extent was crypto used in funding Hamas and this attack?
So we're seeing evidence that Hamas and other terrorist groups have raised money through crypto. It's not a significant amount of money relative to the other sources of funding. But according to Sender Loomis, I've also thought about this, there's no diminimus amount for allowing terrorism financing. Any amount even one dollar, as Senator Loomis said, is unacceptable, and I
take that position as well. So these organizations have raised money though from Iran, and at least sixty to one hundred million dollars a year are the reported estimates from US Israeli sources. But Hamas controls territory in Gaza. They raise at least three to four hundred million dollars a year through taxation, through extortion, through other ways that they control physical territory. They control the ground like ISIS, like other terrorist groups. So it's really unique in that respect.
They were designated many years ago as a different type of insurgent organization rogue terrorist organization. Now they governed, they controlled territory, They oppress people in tax and extort them.
Yeah, as Joe knows, I've been talking a lot about this over the course of the last several weeks, being surrounded always by conversation in the crypto space, and there was a Wall Street Journal article that a lot of Senators latched onto that has been partially corrected. A lot of pushback from the industry on the dollar figures really at play here when it comes to crypto specifically as
a method of Hamas financing. But something else I hear from a lot of people in the crypto industry is that what's different about this is it is inherently traceable because we're talking about transactions on a blockchain, and actually that should make it easier to go after these people or prevent this kind of financing versus say things that happen in fiat currencies like the US dollar. What do you say to that.
It's a bit of a mix.
There are aspects of cryptocurrency transactions that are very transparent, that are on the open blockchain and publicly accessible. There are number of transactions that occur though within exchanges or within more opaque sources of transactional platforms, and that makes
it a lot harder to detect. Also, people are not necessarily saying they're transacting in the name of Hamas or I'm sent money to Hamas, and so you can be sending money openly in the open, but it may be obscuring the origins or destinations of those funds, which is classic money laundering and terrorism financing typologies.
So to what extent then can our treasury?
Can the government interfere with monies going to Hamas.
So Treasury has taken a number of recent actions. They designated a new network of Hamas related investments. They also designated the first crypto exchange in Gaza about two weeks ago as well. So Treasury is taking this incredibly seriously.
But it's not just the US alone. The US strategy for combating terrorism financing globally and imposing sanctions is to work with partners, and so you've seen senior Treasury officials on the road in Europe, in Middle Eastern capitals as well, to create more of an international coalition because most of this activity is not occurring in the US but rather in countries in the Middle East, and fundraising unfortunately also occurring in Europe.
It's benefiting hamas.
So if you had one recommendation, what should be done most easily or most immediately in terms of combating the financing of terrorism. I don't know if easy is a proper word to use here, because it might be very hard. But what would it be?
Yeah, never easy in this context, But I think shutting down loopholes particularly and more compliant jurisdictions in Europe and the Middle East to actually take homos terrorism financing more seriously as a legal and policy matter, those would be the first places to start, and we're seeing Treasury in the field doing that right now.
We're talking about money flows. It's kind of interesting on both sides of this. To what extent do you view this based on your experience as kind of a financial war here. I realized there's a hot war that's being fought in Gaza. But we're talking about money's billions of dollars coming from all corners of the world here to influence the outcome of this, specifically in Israel, but we could talk about the same in Ukraine.
Absolutely, So the economic picture is part of the puzzle, but it is diplomatic, is military and nature. Sanctions are most effective when they are part of a broader policy goal and policy outcome to change behavior, not just on their own. They're never going to change the conflict on their own here. There have been sanctions against Tamas for the better part of two decades and they've had some disruptive effects. But Hamas is also able to import a
large amount of military supplies from places like Iran. They're able to get diplomatic support from allies and partners of Theirs in the region, and so the economic piece is important, but I don't think it's dispositive here, especially in the midst of an active conflict.
I'm glad you come talk to us today.
Alex Surtain Capital Peak Strategies, longtime advisor for the National Economic Council, bringing his experience from Treasury here to our table at Bloomberg. Thanks for the insights today and come back and see us again. Fascinating conversation, Kaylee, as we bring things back to Capitol Hill now, so the Russell wrote, Hunda and the Senator from Florida, as we told you, standing by Senator Rick Scott. It's great to see you
and thanks for coming back to talk to us on Bloomberg. Senator, I'd like to start with the matter of funding the war effort in Israel, something that we were just talking about here, and the Republican Speaker of the House less than a week on the job, says he wants to bring this to the floor this week as a standalone measure, stripping it from funding for Ukraine, Taiwan and the border
as the White House has requested. Do you support that approach or is there going to be a standoff here now with the Senate in the House.
I completely support what the speakers doing. They're totally different issues. I think there's unbelievable support for Israel and we need to support Israel and what Hamas has done there beheading babies, burning babies, raping young girls and burning them is just despicable. So absolutely we need to do it, and we need
to do it as quickly as we can. With regard to Ukraine, I've supported Ukraine Aid, but what we have to do is let's go back and let's look at where we are, how we're going to win, how the money is going to be spent. I think there's a lot of questions on Ukraine.
So on the Israel funding and your support of what Speaker Johnson is doing here, could you get more specific? Are you supportive of the idea of splitting that funding out from a wider supplemental package or are you also supportive of the idea of offsets being necessary, of taking more than fourteen billion dollars from the IRS in order to fund that aid for Israel.
Well, number one, I support separate in it out. We ought to be doing. We should have done Israeli aid last week, So let's get that done right away. I think it's the right thing to do to start saying how are we going to pay for these things? I'll support whatever the House wants to do. There's conversations about paying with it by reducing the number of new iOS agents, which I've not found one person my state that's interested in another iOS agent. But there's other ways to do it.
But I think it's important to continue to focus on fiscal responsibility, so I'm glad the Speaker is doing that. So I completely support the Speaker. And by the way, the only way this is going to pass is that the Republicans in the House pass it. So we need just what the Speaker's trying to do. If we want to get any Israeli ai done, then separately we can have the conversation about Ukraine, the border, Taiwan, things like that.
I know you're not a big fund a big fan of the IRS, Senator, I remember talking about that request for eighty billion dollars for the agency over the last year.
Is that the right way to pay for this?
Absolutely? I haven't found one person in this country that says they want to have more IRS agents, And maybe somebody's applying for a job, they might want it, but no, we that was a complete waste of money. But there's other wastes of money too, So I think as we look at whatever aid we're doing, we ought to say, how are we going to pay for this? We have thirty three plus trading dollars for the debt. We have high inflation, high interest rates. We have to wake up
to this. We ought to wake up the week. We've got to get our fiscal house in order, and that's part of the way to do it.
You say, whatever aid we're doing, Senator, And I just wonder, considering this is an emergency funding request. We don't typically see offsets for emergency funding requests. And I just wonder, are you worried about the precedent that may be said here if one day we're talking about emergency funding not for a war that's happening abroad, but for say a humanitarian or natural disaster at home, like a hurricane in the state of Florida.
Well, first, I support Israeli A I do think the right thing to do is figure out a logical way to pay for these things and whatever it is. I mean, that's what your federal government ought to be doing. We are to prioritize, just like you do with your family. You say yourself, if I have an emergency, how am I going to pay for it? That's what we all do. Your federal government ought to be your state government's, every government ought to be doing the exact same thing.
Well, Senator, I have to ask you about what you're hearing from the leadership here, namely Mitch McConnell, who's frankly sounding a lot like Chuck Schumer. And I'm not trying to start a fight here, but when it comes to tying Israel and Ukraine funding, here's what he said yesterday in Louisville.
It's a quick remark, and we'll have you respond.
This is not just a test for Ukraine, tests for the United States and for the free world. And the path toward greater security for all of us is simple help Ukraine when the war.
I wonder if you agree with Mitch McConnell when it comes to Ukraine specifically, and might in fact vote for a standalone Ukraine funding bill, But you said you had problems with that, and I'm wondering where we might be able to find common ground if it exists. Do you want to see an audit of Ukraine funding? Do you want a different measure of accountability? What are you telling, Senator McConnell.
Well, first off, what the Biden administration is proposed has proposed, is the fact that they want to give, they want to tie Israeli aid to money for sanctuary cities. Well, we have sanctuary cities because we have an open border. So all these things are separate issues that we ought to be dealing with, and we ought to deal with them separately. Now, with regard to Ukraine, I want to know how the money has been spent. I want to look at how every dollar has been spent. That's what
my voters are telling me. I've been supportive of lethal aid all along, but I want to have I want to know what the plan is to win. It looks like the Biden administration is planning just have a long war, not to win. If we are going to help Ukraine, let's help Ukraine win.
So when you say let's help Ukraine win and you want to know, you know ultimately you have some questions that you would like answered here. Do you do you worry that in the attempt to get those answers, or that the answers cannot be that specific because this is a war we're talking about and it's inherently unpredictable in nature.
Well, at least we ought to try. We ought to try to get the information we had to know exactly where the money is gone that we've spent that's not that shouldn't be hard to do, Otherwise they've lost track of the money. We ought to know exactly what the Bide administration's plan to win is. That shouldn't be hard to do, doesn't means it might not change down the
road as the war changes. But there's information. But you know, this idea that we just going to say, oh, we're doing this, We're going to throw all this money at problems, I mean, that makes no sense to me. I mean, we need to be responsible with taxpayer money and I plan. I've said that all along. But these are all different issues.
The argument from Leader McConnell, and for that matter, I guess the Leader Schumer and President Biden for that matter, is that they are intertwined. That was the word that Mitch McConnell used yesterday, that these are national security threats that have everything to do with each other.
Are you starting to.
Doubt that case, Senator when it comes to Ukraine.
Well, first off, let's remember this. We have a Republican speaker in the House and he has said he's going to do the Israeli Aid independently. So whatever we want to do over here, all we're doing is if we try to do something that's a global solution. Is we're undermining what our Republican speaker in the House does, and we're in the majority in the House, so what we ought to be doing is listen to them, take what they give this. If we want to make that better,
us do that. But let's go support a new Republican speaker in the House to get what he wants done. And we can still do Ukraine AID. Don't say we're never going to do Ukraine A, but we've been talking about this for months and nobody wants to give us the information so we can make an informed decision.
Okay, I understand what you're saying about the Republicans. Do you have control of the House, But the fact is the Democrats do have control of the Senate. So not just on this issue, but also all of the funding battles to come. Knowing we're facing down this deadline of November seventeenth, how hard do you think it is going to be able to reconcile the two chambers here in what they want to do.
Well, hopefully we'll be able to reconcile it. It takes sixty votes to pass up in the SIDENTCE, so it takes Republican support to get something done over here, and my belief is we are to start by supporting the new Republican speaker in the House. So my goal is tot's start passing the proparation's bills. I don't know why we haven't done this before. I'm a business guy. You have a budget, you follow your budget, and you live within your means doing that. Up here, we don't even
talk about that. We didn't even start talking about the budget until sometime in September and the fiscal year in September thirty. That doesn't make any sense to me. I've been up here five years. It's every year because the leadership here wants to do these gigantic omnibus that nobody knows what's in it that we've never read.
I want to ask you about the new speaker. Senator, you were, of course a member of the House. You know what it's like in a different culture than that of the Senate. Do you know Mike Johnson and what comes from that whole exercise with Steve Scalise, Tom Emmer, Jim Jordan. I know that you've worked with all of them. That public display of chaos that some might say, although Tom Emmer said it was a great display of democracy, what did the Republican Party get for all that drama?
Oh they got a great leader. Here's what they got. It's no different, no different than what why I ran against Mitch McConnell year ago. I ran because I think we ought to work as a team. We ought to say, what's how do we as a team do the right things for the American public to our voters. And I think that's exactly what happened in the House. They picked somebody that they think will be a great team leader, but everybody's going to have a voice, and that's exactly
exactly what they wanted. I had a great working relationship with Kevin McCarthy and Steve Scalice and Tom Emmer and Jim Jordan. They're wonderful people. But what the House wanted was somebody that, you know, felt they felt more cupable, would give everybody a voice.
Senator, do you really think the Republican conference in the House is a team right now? When there were eight members who kicked out the former speaker and there's just a lot of disjointedness in general.
Well, first off, everybody ought to be representing their district, and everybody in the Centate ought to be representing their state, and we ought to find common ground. And it shouldn't be you know, there's Democrats should have the same positions I have because it's good for their state. Their Republics might not have the same position because they might think it's something's better for their state. That's how we ought
to be governing ourselves up here. But absolutely, my experience with the House is they want to work as a team. If you look at what they did earlier this year, when a lot of people in the House had never voted for a debt ceiling deal, they voted for a debt ceiling deal that was going to make some structural changes. They were frustrated when that's not what ultimately passed, but
that's what passed out of the House first. So absolutely there's a team over in the House and I look forward to working with them.
Senator, I have to ask you about what's happening on the campaign trail. Of course, your governor in Florida is running for the Republican nomination, and Ron DeSantis has been running into some issues on the campaign trail when it comes to polling.
When it comes to fundraising a.
Campaign trail dominated clearly by Donald Trump. I wonder if you think it's time for the governor to come home and focus on business in Florida.
Well, I would never suggest that they get out of a race. I remember when I got into a primary back into twenty ten, everybody in DC told me to get out of the race. So now we never do that. But if you look at the polling numbers right now, Donald Trump has a commanding lead. It's very difficult to beat in a prior president, somebody that when he left office, he can say we had a great economy, we had secure border, we weren't at war. Some of the major
issues we have now he'd actually dealt with. So I think it's hard to beat Donald Trump. But you know, if you want to run for any office, including president, do you ought to go run and see how will you do.
Yeah, that's a very good point. And of course there's a lot of other Republicans running for president at this point, though it does look like Donald Trump remains the front runner. What influence does Trump have whether or not he retakes the oval office, remaining on the Republican Party in both the Senate and the House. Do you think how influential is he in those halls?
Well, I think all of us are trying to represent what we believe in and our voters. And I know that's you know my experience with President Trump and other Republicans, that's what they're doing, and so I think we all, hopefully we all have some impact on what's going on out there. I'd do my best to try to represent the twenty two million people that live in Florida.
Senator Rick Scott, we appreciate the time as always, sir, Come back and see us again soon on Bloomberg of course, the Republican from Florida joining us live from Capitol Hill here on the radio, on the satellite, and on YouTube.
You can find us on YouTube right now.
If you've got a little fomo search Bloomberg Global News, you could have been watching the Senator in the Russell Rotunda that whole time, framed by the beautiful marble of Capitol Hill.
Kaylee, interesting conversation with the Senator.
Everyone's being very careful, and when I say everyone, I mean establishment Republicans on Capitol Hill.
Yes, but he was pretty firm on he supports Mike Johnson and what he's trying to do in the House when it comes to Israel funding, both on the idea of treating it separately but also the idea of offsetting it by pulling more than fourteen billion dollars in funding from the IRS. He seemed very sotive of the speaker in that regard.
But for sure, and maybe I should qualify that to say, careful to overstep while he's establishing himself. Nobody wants to say anything that might rattle the speaker or make things look like there was.
A problem selecting a speaker.
Tom Emmer said it the greatest ever moment to democracy.
Yeah, I'm not sure that it'll go down as such. Thanks for listening to The Sound On podcast.
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