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Eyes on Munich today, there are a couple of important stories that we're following. You've you've got negotiations, of course, that are getting underway in Munich with regard to Ukraine. You've also got an important deadline tomorrow in Gaza that we're going to be talking to Michael Allen about. Here, a high noon deadline put forth by Donald Trump said all hell will break out if hostages are not released, and hamas had been dragging its feet on the idea
of a continued release. Here it appears it will be on schedule. Very unclear how many hostages and what condition they will be in. Michael Allen is Managing director of Beaking Global Strategies and spent time as special assistant to President George W. Bush as part of his national security team. It's great to see you, Welcome back. Good to see Jeff. So we want to talk about a couple of things here,
and we'll start in Munich. I know you're no stranger to the Munich Security Conference, and it is now apparently the staging ground for at least the opening salvo in talks over Ukraine. Jd Vance is talking about a lot of things today, including the idea of American troops being on the table in Ukraine. Do you buy that?
Wow?
I was shocked by the inclusion of that in jd Vance's remarks. Of course, he means I believe a tripwire force part of some sort of peacekeeping operation, but just two days after Hegseth dismissed that there would be US soldiers involved in such an arrangement. It was definitely a surprise to see Vice President Vance come in and say, well, not only US troops, but sanctions as well are on the table.
So he's trying to talk tough against Russia. They're trying to compel I guess Vladimir Putin to the table. But Donald Trump was on the phone with him for an hour and a half the other day. What they talk.
About, well, well, they talked about Ukraine. Certainly, it sounds like the President also talked about wanting to get rid of nuclear weapons. And they even talked about artificial intelligence, but I think Ukraine was the most thing they talked about. And I think he's trying to induce Putin to the table. Maybe they meet in the Middle East in the coming weeks. But I think it's Trump starting to set the conditions under which he can get into a real negotiation.
He says, Vladimir Putin wants to get out Russia wants to get out of this thing. Do you believe that? Is he looking for an off ramp? How come he couldn't find one with Joe Biden.
I believe it most that Putin's looking for is a brief cease fire in order to re you know, Tavik have his arms back.
With doubt his motivations entirely.
Well, because I don't think the underlying problems with why there is a war going to be addressed, and which is that Ukraine. He doesn't want them to exist. He sees them as a security threat. He doesn't like NATO approaching his orders. So Putin's been suffering. He needs more arms, He needs time for his economy to recover. It's starting to go down and down, And so I think at most he would want to cease fire a peace agreement.
I doubt it. The idea of going back to pre twenty fourteen boundaries Crimea included. Yeah, Secretary of Defense says unrealistic. He had to walk back some of those remarks. Is he right?
I think it's unrealistic to expect them to vacate Crimea or really almost any territory.
That they already lost goes to Russia.
I'm afraid that at least half the don boss might go to Russia, and maybe they put it in some special status and try to say that there'll be a vote sometime in the future, just to surrounds familiar Yeah, to preserve some sort of face saving arrangement for Zelenski. But yeah, it's hard to imagine. Can you see Russian troops rolling back from any of the territory that they've already gotten, Maybe only if they're trading Kursk and that's the Russian territory that the Ukrainians have set.
Up camp testing. That was a pretty smart move Ileski. Just big picture, then this does not sound like Michael Allen, who expects this war to end. Well, certainly not on day one, but in the initial stages of this new presidence.
I can't see it ending for a long period of time. I mean this could come back again. I mean we had twenty fourteen and then we had twenty twenty two, and I think Vladimir Putin's got very serious designs on this particular piece of territory. I'm hopeful that we won't have a third war. If you will, if we have a real European peacekeeping force, a real trip wire there, we have to do actual security guarantees. If not NATO, then they need to have some assurances that the West
will be there for them. Because what Zelensky needs is he needs to have his country back. He needs to feel safe enough, and companies need to feel safe enough to go there and invest and attract his refugees back. And if it feels like a cheap ceasefire, neither of those things will happen.
And if Putin's goal is to reconstitute the Soviet Union, were just spending a lot of time talking for nothing here, Yeah, spending time with Michael Allen on balance of power. I want to move to Israel and what might take place tomorrow. We've seen a lot of cross currents here between Hamas and Israel when it comes to hostages in Gaza approaching a potential phase two under the ceasefire, Donald Trump this week decides to say if they're not all out by
noontime Saturday, hell breaks out. That threat seemed to work pretty well last time. Will it tomorrow?
I think so. A few hours ago, Hamas, through an intermediary said here are the three hostages that we planned to release. So I think things are still on track. It's never great to feel super about until it actually happens. There's definitely a lot of stress in the relationship. I think the President constantly talking about Gaza and maybe the Palestinians not being able to come back might be sort
of just stabilizing for this in the future. I think they need to try and get Israel's commitments to roll back their troops out of populated areas. That needs to continue to happen so that the conditions that for us to proceed down into phase two will obtain.
Boy, he said a lot the other day and indicated that he needed to see more than three hostages. Did you read his words to suggest the scheduled release much must go forward, or that every hostage must be released tomorrow.
The latter I saw him say very clearly that I want them all back now.
I don't know that.
I don't know that if he attached though all hell break loose to all of them coming back on Saturday, he definitely said I want them all back. I'm tired of this process. But it may be enough that they're back in train and that maybe that'll satisfy Trump.
This is what happens when you're trying to parse the words here. I want to remind everybody that you were the first person on this broadcast. I think it was about two weeks ago, around the time Donald Trump met with Benjamin dett Yahoo to say that they were in fact talking about a lot more than Gaza. They were talking about a preemptive strike against Iran and that this is in fact something that is in the works. Reporting in the days following our inner suggested that this is
in fact underway. Are we going to see and Israeli strike against Iran?
I think it's honestly, it's getting more and more likely because the conditions for Israel to be able to do this are in good shape. It's because there is no real air defense system radars in Syria. Even in Tehran, there is a sense that because there's no Hezbola, they have a freer shot in order to go hit Iran inside Iran proper. I think what people are digesting now is that will it be a complete destruction of their nuclear program or just degrading. And it's going to be
just degrading. It's too spread out, It's been going on for too long. I think what they're really down to is do they have the precise weaponry to be able to penetrate into the mountain complex that houses the main centrifuge hub called ford Ou. That's I think what they're looking for. They're rumors that the Israelis are getting the right weaponry from US, but I don't know that I've seen nick confirmed yet.
So they use American made bunker busting bombs. Exactly does America help execute the operation by intelligence or any other meal?
I think by intelligence certainly. I don't know that. However, Trump will allow one of our cargo planes or a B two in order to do it. I mean, the Israelis, I think, could do it through their own cargo plane. But there are a lot of people trying to study this right now.
What does Saudi Arabia think of this idea.
I think they're not excited about it. When you think about Mohammed ben Salman, what he wants and what he's been talking about forever is Vision twenty thirty. He wants to be able to develop his economy diversified away from oil. And I don't think even though he doesn't like the Iranians, I don't think he really wants to see a war
breakout between the two. I think he, over time wants to see some sort of progress with the Palestinians so that he can normalize with Israel, because ultimately that's what's good for his economy. That's like the Silicon Valley in the Middle East, and he needs to have good relations there.
Fascinating. I'm guessing that King Abdullah of Jordan is not sleeping well at night. He met with Donald Trump here earlier in the week. Pretty awkward meeting. I mean, he's being asked to essentially do the impossible in housing one thousands more of Palestinians, which he's clearly not prepared to do. But he needs the United States to exist, doesn't he.
We have supported them lockstock and barrel for many generations and I don't see us stopping this anytime soon. I hope that Trump was satisfied with the King of Jordan saying I'll take two thousand sick and injured children. Maybe he can do humanitarian things to assuage President Trump. But I think the pressure goes back onto Egypt now they canceled their trip over here. I think you'll hear Trump will comment on that at some point in particular. And
don't forget about the UAE in Saudi. It seems like the vice presidents I'm sorry, Rubio is going to go over there soon. Mike Waltz might go over there soon. So there's a lot of activity in the works.
Well, you know, the long game was normalized relations between Israel and Saudi Arabia. We talk about this a lot, that this cease fire might help to unlock negotiations. Again, you start bombing Iran, we're walking away from that, right.
It could be yeah, because sometimes Iran says, well, you know what, I'm going to hit your regional allies America. If this happens here, I don't know that they would do it. We would be over there in some sort of presence to try and shoot down the missiles that we're headed towards our allies.
But it would be an.
Iffy proposition and I don't think they're ready for it.
Benjamin NETANYAHUO does not want to see a phase two, is the conventional wisdom.
Yeah.
Will he find a way to reignite this fight in Gaza. He's promising intense fighting if hostages are not released tomorrow.
I think that he's under real pressure from President Trump. It's so early in the Trump term. I know Rondhmer and people that are close to him are saying, you just can't defy the president right now when he's saying he wants all the hostages done and he wants that distraction over with. That's the real new factor that Netanyahu has to deal with. It's no longer just Biden anymore
pushing for things. It's Trump. He's going to be here for a long time, and Trump loves to use the leverage and he doesn't want that relationship to go in the ditch.
How long is the window for Iran by the time they build up their defenses once again to make that impossible.
It's hard to say. It's probably a matter of six months or more. They need new stuff back from Russia, which obviously has a lot of other designs on their own equipment, but it's not going to be there forever. I mean, has Bela and Iran are already trying to rebuild, so they need to think about doing it sooner rather than later, and they need to figure out how many sites they can hit.
Someday We're going to have a lighthearted conversation. I just know it. Michael Allen, beaking Global Strategies. Thank you for bringing your experience and expertise to the table as always here on Balance of Power, I'm Joe, Matthew and Washington. Glad you're with us. We'll assemble our panel next. Rick Davis and Gdi Shanzano on the way in here on Balance of Power. On Bloomberg TV and Radio.
You're listening to the Bloomberg Balance of Power Podcast. Catch us live weekdays at noon and five pm. E's durn on Apple, Cocklay and Android Auto with the Blueberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just Say Alexa played Bloomberg eleven thirty.
They're been fired by email? How about voicemail? This does happen from time to time and our little business, maybe yours, and if you work for the federal government, it's part of your new reality. As the purge begins, thousands of workers laid off in messages delivered through pre recorded videos that's cute, and on group calls. Some ordered to leave the building within thirty minutes, not even enough time to
pack up the desk. Washington Post says the purge begins now as the Trump administration moves swiftly to fire thousands, directing to begin with agency heads to terminate trial and probationary staff. If you've just gotten the bill, don't get comfortable. That'll affect as many as two hundred thousand employees. Reaction from the American Federation of Government Employees, the biggest union
representing federal workers. Employees were given no notice, no due process, no opportunity to defend themselves in a playton violation of the principles of fairness and merit that are supposed to govern federal employment. But this is just the beginning, right Not that many took out the buyout offer, and so they are now being fired, not just here in Washington, but all over the country, where most of the federal
workforce lives and works. This is of course, all going back to the DOGE and the efforts of Elon Musk and his team digging through various agencies trying to find the cuts. If you ask Elon Musk, and to the extent that he spoke to the World Government's summit in Dubai, you just lop off the whole agency with nothing left. Here's what he said, We.
Have to really delete entire agencies, many of them. And that's not to say there won't be an increase over time of bureaucracy in some new administration, but it will. It'll be from a much lower baseline. So it's a step in the right direction.
I think.
Well, the overwatching goal here is like, it's to lay the foundation for prosperity that will last many decades, you know, maybe centuries.
See what the panel thinks. We're joined now by Rick Davis, partner at Stone Core Capital, republican strategist Genie Shanzino, democratic analyst, political science professor at Iona University. They are both our Bloomberg Politics contributors. What do you think about this idea genie of deleting entire agencies. Elon Musk went on to say, quote it's kind of like a weed. If we don't remove the roots of the weed, then it's easy for the weed to grow back. Is he right?
That is quite an analogy to describe people in our government.
You know.
The reality is we fought a revolutionary war to fight back against a tyrant in the form of the King of Great Britain, and we have clung to that importantly throughout our almost two hundred and fifty year history, that no one person should accumulate power in that way. And now here we have an unelected person who is responsible to no one, is not transparent in what he is doing up there talking about making these kinds of cuts.
That is deeply concerning, and of course that's why we're seeing all these lawsuits come out against this kind of exercise of power. And already public opinion shows, public opinion polls rather show how unpopular this is. Elon Musk's approval
rating is underwater. Yes, we can trim cut, we can be more efficient, but that's not what they are doing, and not what they are interested in, and not a process that they are following that is legal or that is something that we've ever seen in the United States. And so all of those things are deeply concerning.
Rick. You've worked with your share of bureaucrats in your time here in Washington, in the Senate and in the White House. Elon Musk says, I think we do need to delete entire agencies as opposed to leave a lot of them behind. Will he accomplish it, Yeah, I think he will be able to do that.
Look, there's nothing in the Constitution that specifies which agencies a government should be existing, and many of these are relatively modern affectations of expansion of the government role. You know, Department of Education is a classic example. Since Ronald Reagan, it's been orthodoxy in the Republican Party to say that we're going to get rid of the Department of Education. Lenna McMahon is just in a process of getting confirmed. Maybe you know, she can just stay at home and
not have to worry about coming into the office. But you know, this is a state function, not a federal function. There's there's a lot of argument to be made that those closest to the education and we have a you know, quilt of different rules and regulations that govern education as well. It should be the last thing we want is federal intervention in the teaching of our children. And so you know, nobody's making that argument, but that's been the argument for
fifty years. In the Republican Party Commerce department. Howard Lutnik put him out of a job. You know, we have duplicate trade roles, and and you know, you scratch your head and you wonder, what do we really need a commerce department for? If we have if we believe in market economies and the free trade system. So at the end of the day, I think, you know, we have to understand there is only two elected officials in the executive branch. Never has been more than that. President and
Vice president. They tell their staff and a cabinet secretary is a staff member what to do every day. And that's all that Elon Musk is doing. He's just a little bit better at it than most have been in the past. And so I'm not condoning all his tactics. But at the end of the day, much like in his first term, Donald Trump said, hey, you know, every Republican president says they want to make Jerusalem the you know, the location for our embassy, and he's the only one
who's done it. So and look at that's worked out just fine, So at the end of the day, I think we got to give them a little bit of space here. And and Genie's right, you know, there is a recourse go to the courts and and and let them decide, you know, what is legal within our system.
How about that, Genie, your thoughts on the way Rick just framed that having just heard Elon Musk say that we're talking about laying the foundation for prosperity that may last many decades, maybe centuries. So is the temporary pain worth it?
You know? I don't think anybody said that the bureaucracy is in the constitution. But when we reference the Constitution, it is the fact that we live in a democratic state and that the president not directly elected but indirectly elected, and you do have members of the cabinet. They are responsible and responsive to the Senate. Elon Musk is not
in that trect. Sure, presidents appoint all kinds of people, including family members, but they do not wield this kind of power, nor are they on the dole for the federal government. Let's not forget Elon Musk and his companies get huge amounts of money from the federal government and we're not seeing any cuts there. So there is absolutely a case to be made that what is being done here is improper.
And we will see.
The courts have upheld certain things like the retirements the buyouts at least at this point, but most of the other things that this unelected efficient person has talked about, they have not upheld at least so far, and they have said, we have to take time to look at it.
And let's not forget.
This is all being done against a backdrop of a Republican Congress that is talking about four point five billion dollars trillion rather dollars in cuts so that they can extend tax cuts for the wealthy. So this is the environment in which this is being had, and so this is the impropriety that people are feeling, and this is the frustration that they are feeling, and people are starting
to voice concern about that. Yes, you can cut the federal bureaucracy, but don't forget when they tried to do it, what did George Bush end up coming in to do in two thousand to take back education to the federal level because it was that unpopular with the American public. And we are still the sovereign people in the United States, not people who are appointed by the president and beholden to no one, especially not the wealthiest person in the world.
So there is so much wrong with how that was just laid out.
Well, I'm glad you mentioned the budget resolution that was passed out of committee last night. This followed twelve hours of debate, the defeat of dozens of Democratic amendments. As I said, we had a lot of noise in Washington yesterday, a lot of talk about Donald Trump, no fewer than four encounters in the last forty eight hours with the media, a lot of threatening of tariffs. Nothing was actually implemented. We did set the timeline on some to be the
real news yesterday, Rick. Was this a budget resolution approved by the House Budget Committee, as Genie mentioned, four and a half trillion dollars in tax cuts, at least one and a half trillion in spending cuts. Is this something the Freedom Caucus can endorse that could actually be passed on the floor.
Well, I think you know, we heard from the chairman of the Freedom Caucus that he got a deal cut. His deal was that they would the Freedom Caucus would be for this bill as long as you know, they would be able to explore another five hundred billion in cuts to get it to two trillion, you know, by the time the tax cuts are approved. So so they got bought in, and I see no opposition to this bill at this stage, so you know, conceptually they could win by one vote on the floor of the House
of Representatives and have one big, beautiful bill. So that'll put actually a little pressure on the Senate now to finalize their budget resolution that does not include the tax cuts. What I'm hoping is that we get a step back, and has been discussed on this program today, not just look at taxes, but tax reform, because there's a lot in the tax code that can save Americans a lot of money that generates revenue without stifling our growth, and be a better tax code gone in the days of
the debates about flat tax and things like that. But the idea that we are going to spend this amount of political capital in re upping these tax cuts and not actually revised the tax code just seems to be a missed opportunity to me.
Gene the democrat on that panel, ranking Democrat Brendan Boyle Pennsylvania called the proposal cruel, heartless, and toxic, harmful to low income families by slashing medicaid. We've only got about thirty seconds, is he right?
Well, it's not only Brendan Boyle, He's absolutely right. It's also Steve Bannon, who warned everybody last night that a lot of MAGA supporters in Red States really, really like medicaid and are on it, and these cuts are draconian. The President has said privately he agrees this is the challenge they have with eight hundred billion cuts Medicaid.
Great conversation with our signature panel, GENI thank you and Rick as well, Genie Shanzano and Rick Davis, Bloomberg Politics contributors. I'm Joe Matthew in Washington on the fastest show in politics. We're going to turn our attention back to Ukraine talks under way today in Munich. Blenda Herring from the Atlantic councils up next on Bloomberg.
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and five pm Eastern on Alma Coarckley and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
President Trump is set to sign more executive actions. There has been some reporting that it will be directed at the Department of Education, but we have not seen the president yet. He's going to be soon making tracks for mar Alago, where he'll be spending the weekend.
Here.
Jd Vance, the Vice President, carrying the message of the administration today at the Munich Secure Conference, where Ukraine is story and issue number one. In fact, it's not just jd Vance he was meeting a short time ago. They could still be underway with Voladimir Zelenski, the President of
Ukraine there as well. Following a speech by jd Vance that really raised a lot of eyebrows directed towards Europe, but also in an interview with Politico suggesting the troops are very much on the table, suggesting as well that sanctions against Russia may also be employed if no deal can be reached. The gears are starting to turn. We did hear from Vladimirer Zelensky in Munich earlier today.
Here he is I will meet with Russians with only one Russian guy, with Putin only after we will have common plan with Trump Europe and we will sit it with Putin and stop the war. Only in this case I'm ready to meet, not in other compromus platorms.
That's where we start our conversation with the true expert. We wanted to reach out to Melinda Harring because she's been with us every step of the way since Russia's invasion of Ukraine, and as we seek peace, we want to talk with the senior fellow at the Atlantic count Council's Eurasia Center. She's senior advisor rasm for Ukraine. Melinda, great to have you back here on Bloomberg TV in radio. How seriously are you taking the opening salvo in these negotiations?
It was an interview with the Wall Street Journal in fact, where Jade Vance said, everything is on the table. How is the Trump administration posturing itself ahead of talks?
Hey, Joe, thanks for having me back. So it's been a big week for the war in Ukraine and we saw the actual opening salvo was Donald Trump's tweet this week, and he said a lot of things, but it opened the question of territory, It opened the question of NATO, It opened the question of long term security guarantees, and also the question of American boots on the ground. And we've seen the administration pull back and where they are today and the way that it looks could obviously change tomorrow.
But the administration is currently saying that the nineteen ninety one borders, so a much larger Ukraine than what we see right now is possible, NATO membership is possible. They ruled out American boots on the ground, so that was one no go.
But in the.
Original statement, it doesn't mean that American troops couldn't be in Poland or in nearby NATO territory. But really the issue is about long term security guarantees, and jd Vance said today that we're going to put a plan together that gives Ukraine real security guarantees and we're all waiting for what those details are. Joe.
This follows what we heard from the Defense Secretary yesterday, Melinda, and I'm sure you were listening when Pete Hegseth ruled out US troops for Ukraine, suggested that a return to Ukraine's pre twenty fourteen borders was an un realistic objective and suggested that the country would never be able to join NATO, which do you believe?
So I believe today's version. So you have to remember that the Defense Secretary has waffled, his positions have been all over the place. He's not the decider, as George W. Bush would like to say, So I'm going to go with today's version, and if I have to go with yesterday'st version, Joe, I want to parse it a little bit. The headlines were not as bad as they were made out to be. So even if it even if Pete Heegsath's version wins, the US is not recognizing the twenty
percent of Ukraine that Russia currently occupies as Russian. So that's one they're not Washington is not saying NATO membership is never going to happen. They're saying it won't happen now. And there's a possibility of putting US troops in NATO territory to back up European troops. So even if the worst case scenario, what heg Seth said is true that if that turns out to be policy, it's not terrible. It's not great, but it's not terrible and we can work with it.
Okay, Well, that's good perspective when it comes to pre twenty fourteen borders, though, Melinda, how realistic is it? In any conversation to have Crimea return to Ukraine.
So joe Crimea is the tricky question. You'll remember that the Russians illegally annexed Crimea. This is the boot of Ukraine the peninsula in twenty fourteen in a sham referendum, and the status of Crimea is still disputed. The Russians occupy it and they have a military operation there, but Ukraine says it's ours. And the best historical example that
the international community looks to are the Baltic States. So even when the Soviets occupy the Baltic States, they refuse to recognize them as Soviet and the international community has done the same thing for Crimea. So in these negotiations, I don't expect to see Crimea formally change hands. I don't think that Ukraine is going to be able to
get it back legally right now. But the international community and Ukraine will continue to recognize that it was illegally taken and they have the hope and aspiration that Crimea will be returned to Ukraine someday.
Yeah. We talked a little earlier with Michael Allen this hour, Melinda, and he was very skeptical of Vladimir Putin's objectives here. Some see a Russian president seeking an off ramp. Michael Allen said he's only looking for a short term ceasefire so he can regroup in Ukraine. What do you think.
I think that's right. I think Michael Allen has put his finger on it. I don't see a lot of momentum on Putin's part or desire on his part to seek a ceasefire. He thinks he's winning. He's still taking territory. It's slow going, but he has momentum, particularly in the Dawn Boss, and there's no reason for him to jump ship. He wants to destroy Ukraine, Joe. That's his goal, and he's doing it slowly but surely. And he's betting that he cares more about Ukraine than the United States or
Europe does. And that's still That was the decision and the calculate he made in twenty two and that's his calculus.
Now.
Well, surely Donald Trump knows this right. How can you negotiate with an actor who does not have a motivation to seek peace?
So that's a really good question. It's unclear what Donald Trump thinks about Putin and his motivations. I think are opaque to be generous. So I think Donald Trump wants to be a peacemaker, which is a great impulse. You know, the New Testament says, blessed are the peacemakers, for they should be children of God. We all want to be peacemakers.
But the conflict in Russia and Ukraine, the war in Russia and Ukraine is very difficult, and I think Donald Trump is learning the hard way that the devil is in the details, and it's going to be difficult for him to broker a real, lasting and just peace in Ukraine. So I think we're going to have to wait and see.
The headlines from Ukraine today are not terribly incouraging. As Zelenski continues his trip to Munich, Ukraine says a Russian drone hit Chernobyl. The nuclear plan actually targeted Chernobyl on purpose, Melinda, causing significant damage to the containment shelter that surrounds the reactor. Russia says Ukraine staged the attack, which is straight out of the playbook that we've seen over the past couple
of years. Are we about to see a fit of additional violence in Ukraine ahead of any kind of a deal?
Joe, we don't know exactly what we're gonna see, but the drone attack on Chernobyl is part of a larger pattern every day. I just got back from Ukraine. I was in Denipro, in Harky ven Kiev for ten days, and every day is uncertain. You don't know if you're going to wake up the next day. You don't know if you'll if you'll hear drones in the morning. You don't know if your apartment building will be hit with a ballistic missile. You don't know if your train will
be struck. This is the uncertainty that people live with every day. But I expect Putin to continue what he's doing. He's trying to destroy Ukraine as a sovereign, independent country. Joe, I went out to one of the old villages, one of the small villages in Harkiv Oblast, near Izoom, and this is a city that you'll remember that the Russians occupied. Went out to a village and in the gymnasium there were books tied up, and I said, what are these books?
And there were books that the Russians had taken in this Ukrainian school. They tied them up in rope and they were planning to burn the books because they want to destroy Ukraine's educational system. The books were in Russian and Ukrainian. That's Russia's vision for Ukraine. They want to destroy the educational system and they don't want the country to exist.
Wow.
These are the first hand stories that Melinda brings us that you won't hear anywhere else. I want to bring you back to that speech from jd Vance Melinda, the Vice President, speaking earlier today in Munich, with a focus directly on our European allies. Here's what he said.
The threat that I worry the most about visa e Europe is not Russia, it's not China, it's not any other external actor. And what I worry about is the threat from within, the retreat of Europe from some of its most fundamental values, values shared with the United States of America.
Not of a lot of applause in the room, there, not a shocker, Melinda. I'm not sure what you thought he was referring to there. But is he strengthening America's hands? Is he strengthening Ukraine's hand by turning criticism on Europe right now?
So, Joe, I want to take the most generous assessment of JD Vance's speech, and I think the most generous assessment I can give you is that he is trying to provoke the Europeans into action, and he's right to do it. The Europeans have been lazy and they have talked a big game. And here I'm pointing my finger
at Germany in France in particular. You know, there's a lot of good countries like Poland and the Lithuanians and also the Nordic countries that have done a huge amount for Ukraine, but Germany and France in particular, they like to talk and they don't do. So I think he's right to point out that Ukraine is in Europe's backyard and it's time to actually do to make good on all the promises and and secure Europe.
What promises are we talking beyond paying dues to NATO and beyond investing in each country's own military? Is that what we're talking about? Is there more than that?
No, there's more than that. So if you go to the Keel Institute's website, it's a great think tank in Germany. It looks at the commitments that country donor governments have made and then the actual amount of military kit that they've delivered, and in many of these cases there's a huge gap between the promise and the delivery. So I'm saying Germany and France in particular need to make good on the promises that they've made and deliver.
We've rarely heard your commentary hit Europe so hard, Melinda. What's the big picture here? If talks are starting now, Donald Trump Vladimir Putin apparently are going to get together. At one point floated to get together in Saudi Arabia. Apparently that's not going to happen. What's the window for negotiations? When does this war end?
So this war ends when Vladimir Putin decides that it ends. That's the hard truth. If Donald Trump pulls out and sends no more military assistance, Ukraine will keep fighting and the Ukrainians have six to eight months more where they can continue at about the same pace. So even if the United States says no more, it's over, that doesn't mean it's over. And you hear you heard Vladimir Zelensky saying any negotiations have to involve Ukraine. So don't try
this y Alta like format where you exclude Ukraine. We're not going to agree to it. So I think we are getting closer and closer. We see Trump wants, he wants peace, he wants the rumor is Joe that he wants the Nobel Prize and he thinks that bringing peace to Ukraine might give him that. And let's hope, you know, if he can do it sutely. But it's really a question of when Putin has decided that the costs exceed the benefits, and they don't at this point. For Moscow, does.
A peace plan need to be permanent to win the Nobel Prize?
You'd have to ask the committee that one. I would urge them though, to only issue a peace plan that involves a just and lasting piece. And that's going to mean some kind of security arrangement with permanent presence of troops in Ukraine, and it means Article five guarantees. And unfortunately NATO membership is not on the cards right now. As Pete haig Seth mentioned yesterday.
Wellind I'm really glad you could join us today. Welnda Herring, Senior Fellow for the Atlantic Council's Eurasia Center, Senior Advisor RASM for Ukraine and just back from Kiev, as Melinda mentioned, thank you for the insights. As always, Melinda, fascinating conversation as we try to track the ball here on negotiations surrounding Europe. We've got another day in Munich tomorrow as talks will continue.
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and five pm Eastern on Apple Cockley and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Yeah, you made it to the end of the week, and boy, I haven't even mentioned Valentine's Day. Happy Valentine's Day. It's not just the Friday edition, it's the Cupid edition. And the White House knows this too. If you check out the Twitter page at the White House, Producer James pointed me to this. Roses are red, violets are blue. It says, come here illegally and we'll deport you. Donald Trump,
the last of the Romantics. It's a big day at sixteen hundred Pennsylvania Avenue, so we have to talk about some hard decisions. An important thing happened last night. By the way, we talk about all the noise that comes out of the West Wing every day, and there are going to be more executive orders, we're told being signed around one pm Eastern time. Sometimes you forget what to pay attention to, and I got into that a little
bit yesterday. We're going to be the flashlight in the dark for you where there's actual news, because well, Donald Trump was threatening reciprocal tariffs all day long, none of them implemented. Maybe they will be someday, maybe they won't. Something actually happened last night. A budget got out of committee in the House. This is a big deal. If
you listen to this broadcast. We had Ralph Norman on yesterday talking about some of the tough decisions that they need to make here when it comes to spending cuts to make the freedom COCKUS happy, tax cuts to make Donald Trump happy. There are a lot of moving parts here, so they get it out of committee even as the Senate is marking up its own bill. The big questions, though, remain, beginning with how you pay for it, And this is
where things got complicated. When you add salt, no tax on tips, no tax on overtime, no tax on anything. I guess anymore, and so decisions are going to have to be made. I dared you to stay with us for this conversation. You hear about the sausage being made. We're going to do this right now and figure this out a little bit together and try on some ideas. Because a group called Arnold Ventures just produced a report on wasteful spending and proposed ways to cut and save.
The face of that study is George Callis, who served for fifteen years on Capitol Hill, a senior tax council in the US House of Representatives, was on ways and means. Former Speaker Paul Ryan also served as counsel for the House Budget Committee. So we have the perfect voice for this right now. The report offers twenty reforms, okay, ten
spending cuts, ten tax loopholes to close. You will not agree with them all, but according to this research, if they all ended up in the legislation, Trump tax cuts are paid for. What a concept. George Callis is with us right now in the studio. It's great to see you, Thanks for coming in. I hope I framed that close to being what we have here. You've got cuts, you've got loopholes. I want to walk through some of these
specifically year. But as you sit in front of me right now, having been through this process before, do you actually believe that all of these proposals that Donald Trump rolled out during the campaign, on top of the twenty seventeen tax cuts, we'll end up in a final piece of legislation.
Well, first of all, Joe, it's great to be here. Appreciate you having me on. It is hard for me to prognosticate. You know, you watch Congress just like I do, and it's hard to know what's going to happen in twenty four hours, much less as we get to the endgame. I think yesterday's markup at the House Budget Committee was the first step in a long and winding road to quote a Beatles song, and there'll be a lot of twists and turns before this thing, you know, gets to
an endgame. I think I don't know about the President's proposals my senses. Some of them are maybe higher priorities than others. They certainly add a lot to the four point five trillion dollar cost of simply making permanent the expiring tax provisions from twenty seventeen, and digs are whole even deeper you know, we put out this report and it wasn't it wasn't just me, it was you know,
at Arnold Ventures, we have experts. I'm a tax expert, we have healthcare experts, higher education experts, and this was a collaborative effort to come up with what was what we thought of as a balanced proposal. You know, twenty spending cuts or sorry, ten spending cuts, ten tax loophole closers that we that are we think are politically viable, and therefore we really want to put them on the table and have Congress take a close look at them. You know, our view is that Congress can do both
and should do both. And what I mean by that is both make permanent and extend pro growth tax policy, tax policies that simplify tax filing for American families, make the tax code fairer, but also do it without increasing are already unsustained able dead burden.
Well, that would be a feat based on what we've been hearing. So just to be clear before I start getting specific, you're looking at TCJA without all of the other additives, without tips, without overtime, without moving salt. Is that fair to say? We're looking at this in the twenty seventeen structure.
That that's how this project started. I mean that was the yes, that was the basis.
Just to set the baseline here. So number one, let's start with spending cuts. You find up to a trillion dollars by modifying risk adjustment payments to Medicare advantage insurers. This is heady stuff, it's complicated, but as you write, insurers receive higher payments for enrollees with higher risk scores. You make the argument that creates strong financial incentives for insurers to make their patients appear sicker than they actually are. So what do you do with it?
Right?
And so this you know, this is a policy that can save up to one trillion dollars. There's a lot of money there's you can, as we say in kind of DC parlance, you can dial you can do less
than the whole. It's not everything or nothing kind of policy, but it's a good representation of the kinds of policies that we proposed in that we think, not only can Congress save trillions of dollars, but they can save trillions of dollars before they have to go straight to things like cutting benefits or raising.
People's tax right, This would not cut benefit, that's right.
This is about ringing inefficiencies and waste out of the system.
Yep, got it. Simplifying student loan repayment, you find over two hundred billion dollars there by simply streamlining seven plans into two. How easy would that be?
That's right?
Well, I think from a technical perspective it's pretty easy. In fact, legislation to that effect has already been introduced. So there was clearly congressional Republican support on the Hill for it. You know, politically, of course, as we know, one or two votes in the House on a partisan bill can stop anything, so but there is clearly interest in doing the We think the policy case is strong. You know, a lot of this money is going to law students and medical students who earn a lot of money.
A lot of it goes to professional students.
Who just get degree after degree after degree that may not be worth a whole lot and then get their loans forgiven. So there's a lot of you know, poorly targeted money there that could be targeted better at the students who are really using it appropriately.
You call for repealing the IRA expansion of the EV tax credit, Electric vehicles. That is, the savings of one hundred you find another one hundred billion dollars there alone. Elon Muskin to let you do that.
We'll have to see.
I don't think he's from what I've seen, he hasn't been to shown much concern about reducing the EV subsidies. I think there's a view that of the IRA Green Energy Package of the Democrats enacted in twenty twenty two, the EV subsidies have, like the Lead East bang for the buck. They cost the most relative to the climate impact they have. And so if there's any low hanging fruit in the green energy space, I think it's the electric vehicle area.
All right, So we're flying along pretty smooth flights so far, we're about to hit massive turbulence. Ready, apply the salt cap to businesses. Brace yourself. Eight hundred and twenty three billion dollars. I thought we were going to raise the cap on salt for individuals. I'm assuming you don't want to see that happen, and you want to add it to business.
Is that right? Well?
Right, right?
So there's a currently a ten thousand dollars PA on the salt deduction.
If you if you simply extend everything. It stays there.
You know, I think from a policy perspective, the ideal salt cap is zero dollars.
Someone's screaming right now in New York. I could hear it.
Well, I like, I like to say I would double that amount for married couples, double the zero.
Mike Lawler's calling.
He wants to I suspect, yes, I suspect they'll have a note from his office when I get back later this afternoon. But you know, the policy rationale is that if somebody's in the thirty seven percent federal tax bracket and their state raises their taxes by one hundred dollars, if there's an unlimited salt deduction, it only cost them sixty seven dollars or sixty three dollars. They just right, and the other thirty seven dollars is basically paid for by the rest of the country. And so you know,
that rationale applies to both individual taxes and to business taxes. Now, I would say the revenue from extending it to business taxes is pretty substantial, and there are a lot of good pro growth business and corporate tax relief provisions on the table as well, provisions that I think we would say are good policy, and so maybe the corporate salt
deduction revenues should be allocated mostly to those provisions. Whether it's Trump wants to reduce the corporate rate further, sure depreciation, R and D, things like that.
My terminal is exploding right now on this. All right, if I had time to mention one more this loophole, this is right down the middle for the Bloomberg audience, reduce tax preference for stock buybacks over dividends. A lot of people watching and listening right now are going to bristle at this idea. Why would it work?
So that's a good example of another principle we had with a lot of these proposals, which is we're not trying to punish people. We're trying to find areas where there's non neutrality, where there's economic distortions, and move closer to economic neutrality because in the long run that leads to more economic efficiency, more economic growth, a stronger economy.
There is a tax distortion that from a tax perspective, Using stock buybacks to return cash to shareholders is favored from a tax perspective compared to just paying out dividends.
Why they just keep buying stock.
That's why they keep buying.
Right, right, And like we're not against stock buybacks, but there shouldn't be a tax subsidy for stock buybacks, right.
Penwharton budget Model did an estimate.
There's currently a one percent tax on stock buybacks. Penwharton Budget Model did an estimate that said the economically neutral tax would be about four point six percent. That would that would eliminate the tax advantage and make them money.
Equal with dividends.
So we've proposed, you know, not going over four point six if anything, undershooting to reduce that distortion.
Let's set the market decide.
Have you sent this research to the dough We've we have distributed it widely to yes, the policymakers in both the executive and legislative reaction. Again, I haven't heard from Elon yet, Okay, but we've gotten a lot of interest. We've got a lot of interest from Capitol Hill.
I'm sure each office finds a different component that they like here.
They right, So then they.
All go on the room, they bang their heads against the wall and try to come up with something. When you add politics to this document, how realistic is any of this?
That's a that's a great question.
So again, if you're assuming that this is a part is an exercise, and yes, every Democrat is going to vote no, you know better. We know that everything is difficult in the House because they have a one or two vote margin. Senate has a little more of a cushion, so everything is politically difficult.
It's sort of a baseline matter. Now.
We did apply kind of a political viability test to identify our top twenty, and we think there's enough interest in these proposals to make them.
Viable achieving fiscally responsible tax reform. I've got the hard copy here, you can find it online. It's pretty remarkable, arnold ventures you want to agree with it all, but at least somebody has taken a crack at this great conversation and many thanks for being with us, George Kallis, pleasure to have you with us here on Bloomberg. 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.