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Welcome to the Tuesday edition of Bloomberg Sound On. I'm Joe Matthew in Washington, where it's all about Ukraine today. That's certainly the storyline so far, and that's going to continue to develop as President Zelenski, as we told you in person today in the nation's Capital, will make his way from the Capital to the other end of Pennsylvania Avenue and a bilateral meeting followed by a news conference with Joe Biden.
We will get there. That's a few hours off.
In fact, we'll carry it live when these two get in front of reporters later on today. So far it's about Congress, though in a very skeptical Republican conference in the House as opposed to the one in the Senate.
Remember Mitch mcconoch, Chuck Schumer invited President Zelensky here to make the case today and all Senators briefing and then the one on one with Speaker Mike Johnson who just stood in front of the microphones to talk to reporters coming out of that meeting, knowing that he has been skeptical that he is not looking to send a blank check to Ukraine and in fact is pursuing this deal on border security that is also being pursued in the
Senate that would somehow unlock Ukraine funding. That was not, however, the first condition that he rolled out when Republicans are when reporters rather asked him about his wariness of sending more money to Ukraine. Here's Speaker Mike Johnson.
I have asked the White House since the day that I was handed the gavel as Speaker for clarity. We need a clear articulation of the strategy to allow Ukraine to win, and thus far their responses have been insufficient. They have not provided us the clarity and the detail that we requested over and over since literally twenty four hours after I was handed the gavel as Speaker of
the House. And so what the Biden administration seems to be asking for is billions of additional dollars with no appropriate oversight, no clear strategy to win, and none of the answers that I think the American people are owed.
Then I guess there's the border now. To be fair, Speaker Johnson has been making that case and asking those questions. But we thought that this money would be unlocked with or without conditions for Ukraine, with or without a strategy to win, as he says, if there was a deal on the border. And that's where we start our conversation with Congressman Jonathan Jackson, the Democrat from Illinois, First Great City of Chicago. Congressman, it's good to see on Bloomberg.
We welcome you from your perch on the Foreign Affairs Committee. I wonder your thoughts today on what you heard from Speaker Johnson. Will Ukraine ever get this money?
Well, I certainly hope so, but I would also like to for this money to go through the normal process. There's a check and balance in place, and we've been duly elected our constituents to be here to be a part of that balance. This is part of our congressional responsibility. By going around our Congress and bypassing money to go to Israel or to not let us have a robust debate about Ukraine. What does peace look like? How you measure it? Can we have equal parts diplomacy as well
as defense. Can we all get to the table. Imagine that's like a growing frustration. And then there are limits. We have course thirty three trillion dollars and national debt. We have two trillion dollars and a growing deficit, and we have some serious needs at home. So I think the high mark of America being able to write blank checks may be behind us at this moment. And so we have to be very much responsive to our constituents at home. We have issues and water systems and housing.
We just can't have it one way for all military and not understanding the strength of our diplomacy, and where does this end? How do we achieve peace and how do we achieve compromise? That should also be on the table.
Have you heard from the White House on this, Congressman, because Joe Biden's obviously making the case here for our own national security and in fact was the one who injected the border debate into this funding request that came from the White House for Ukraine, Israel, and Taiwan. We're going to, of course, see a news conference later with
Joe Biden and President Zelenski. Is there any answer he could give you that would satisfy you in terms of strategy, knowing that, well, we don't know if Ukraine can beat Russia, do we.
Well, I think this is where the issue is. I mean, we have to go back to the original. What was Russia's initials concern I would say that they were wrong to cross over the border and going to Ukraine, But when they were talking about the Dombaas region and going to the eastern part, they said they have stopped teaching the Russian language and in a region that did speak Russian. They were also saying that they have a, if you will, a bomb phobia. They did not want to see missiles
at their front door. They did not want to see Ukraine joining NATO. And if we go back to recent history and World War Two, we know that twenty two million Russians were killed and they were like, stop expanding NATO. NATO has continually been expanding and going into eastern Europe, and now when it got to Russia's doorstep, they said enough. So I'd like for us to take a pause, go back and revisit this and find out where they are borders. These borders now are less than thirty years old. They
are border disputes that we can see. They're going on all around the world, it seems like at the same time, and I do think that it's time for us to talk. I mean I have constantly been, if you will, a little bit dismayed to think that we're quick to jump into military action without exhausting all of our opportunities to have diplomacy. I'm for a strong defense with an equal part of diplomacy, with an equal part of development. I like to do a trifecta diplomacy, development and defense, not
so quick to have an endless amount of war. Now we're over one hundred big and dollars into the Ukraine. This is another sixty four bigon dollar package. They thought this would be a one month issue. I thought this was going possibly for six months. And like Russia is now their economy is getting stronger as a result of the strength as result of the sanctions, they're increasing their ties with Iran, they increased their ties with like China. So I want to see America's playing field get bigger
and not smaller. The more people we cut off from our foreign policy, the stronger we're making our adversaries.
Well, you just said a lot of congressmen I'd love to unpack some of that because I realized these are recently drawn borders, but they are all so agreed to by Russia. Should the US not have come to the defense of Ukraine to begin with because of that reason and the fact that we have not put any American boots on the ground or in harm's way is something that the Biden administration has been trumping. Made a huge dent in the Russian military by way of this proxy war, if we.
Can call it that.
Are there no benefits to US national security?
There? Oh? Absolutely there is. We have to stop aggression at all levels. We have to. I think US defending Ukraine was the right thing to do, and now I think it's time to revisit it. This is a very substantial army, they have an enormous amount of resources, and we have to measure are we going to scale back what we would consider not to be our ideal desire for Ukraine to have recaptured all the land, versus when do we start saving lives and preserving what we have.
There comes a point where there is a law of diminishing returns on how many more bombs for how many more inches of land? Ukraine and Belarus, that entire region is very important to the world as a bread basket. In the meantime, there's other unintended consequences. There are other countries that suffer. So I'm trying not to look at this through a keyhole, but through the door that we saw a spike in worldwide food prices, and my ultimate
goal is to get back to peace. I don't want to bomb my way into a solution that I don't see a very good an well.
I would suggest that there's a diplomatic solution possible. Do you believe that Vladimir Putin is capable of such a thing.
I think everyone is. And I'm a first term freshman congressman. Call me naive if you will, I'm fine with that. But I do believe in continuously being a peacemaker, continually trying to exhaust peaceful means. I'm sure that the body count it's going up in Russia, it's substantial. The body count that's gone up in Ukraine is substantial and exhausting. The people that have fled the country has been enormous.
The land can get now contaminated with the amount of bombs, so it has reached a point of what's left and how do we move forward? So at what point do we have any sort of pause, if you will, any sort of truce and try to get back to the table. What does that look like? I don't know, but I do know we have to continue to talk. I was in a foreign affairs meeting and I asked, who is talking to President Putin? Who's talking to President Buten? And
they said there were some backdoor channels. I said, well, I'd like to see the front door. I like to see the President Biden and possibly President Puten try to get together to talk face to face, man to man, eye to eye. I will not stop until peace is exhausted. The possibility of peace. We have to believe peace in order to achieve it.
Well, I would certainly never call you naive, Congressman, but I wonder if it makes you uncomfortable that you're agreeing with some members of the conservative right in the Republican Conference, the Marjorie Taylor Greens who say not another dollar.
JD.
Vance says it's time for accountability, and it sounds like you're keeping company with them from a policy standpoint.
Do you disagree I've not followed all of their policies. Some of the persons you mentioned are not on foreign affairs. I'm looking at the information as i've received it. I've got enormous amount of respect for many of my colleagues. People have come here to be representatives, and we're seeing a lot of the same facts. So if we end up with the same conclusion having seen the same facts,
I think that's progress. I don't like to go into an ideological bucket or lane, or let's get to what's right versus what's wrong.
We're spending time with Congressman Jonathan Jackson, Democrat from Illinois as they look at headlines coming from the President's and he was at a fundraiser a short time ago. Congressman, and I'd like to get your take on funding for Israel as well. Because the president's making news here, I can't play it for you. This was not something that we could record, but he says Benjamin NETANYAHUO and the Israeli government are starting to lose support, which is pretty
remarkable to hear. Joe Biden says Netanyahu is a good friend, but I believe he has to change.
Do you agree?
Oh? Absolutely, And I think the benefit of having a special relationship having a friendship is you can tell your friends things that are inconvenient, things that are uncomfortable, but you can tell them the truth. I have the opportunity to go to Israel in September with the Congressional Black Caucus an APEX. We were in a meeting with the
Prime Minister, mister Netanyahoo. I specifically asked a question regarding the Palestinian visa waiver program, the reciprocal visa waiver program, and that simply was, if a person has a blue passport. Missus Connaisa Rice was on this program as well. A blue passport is a blue passport. If you an American citizen and our country has a visa waiver reciprocal program
with you, you honor our visa likely honor as yours. The Palestinian constituents in my district were having a problem going into Tel Aviv and on to visit their family in the West Bank and Gaza. I specifically asked mister Netanyahu about that. He deflected, he had two of his other persons answered the questions, so I didn't think he was answering with much candor. I think that President Biden is telling them the truth that if one hundred and three
countries have said cease fire. Now if the United States, that is your special friend, is the only one that goes against everyone in the Security Council, and you're still going forward. The humanitarian crisis is unfolding before our very eyes. And you see babies now that are missing limbs, when you see people that are missing water, that are lacking water, when medical supplies are no longer aiding, when you see that we have hostages.
Would we not send money then to Israel? Does Israel really need more money?
Well from the usl Well, that's the second part of the question. First, I want to get the hostages out, and you can't get the hostages out while you're seeking revenge. You have to seek reconciliation or revenge. When I first sign on the seas fire, I was seeking reconciliation so we could prioritize the hostages. I felt for all those families that are in the streets of Israel that were
asking for their family members to be returned. I don't want to see one of them killed because of collateral damage. That's another death that's unnecessary. When you see two to one children and women are dying, that's wrong. Even when you saw George Bush going to Afghanistan, he gave us a deck of cards to tell us who he was looking for when he went into Iraq, Like who is a mosque? And how many people they're saying it's thirty thousand.
I've heard the Israeli defense firm director say if we're killing only two to one of civilians, that that's not bad. Where did that calculation come from? That's wrong. So I do think that President Biden has to have an uncomfortable conversation with mister Netanyaho to tell them the truth. I am pro Israel, I'm pro their defense. I do have concerns about mister Netanyah who's leadership. I don't think you're serving the interests of the people the best.
Well, this has been a fascinating conversation, Congressman. I appreciate your honesty and your generosity with time here because we don't have a lot of Democrats speaking specifically to Ukraine the way that.
You are now.
And I wonder before you leave us, when you look at this menu. We've talked about two items on a very long menu of items to be taken care of by this Congress. It looks like you are going to be going onto holiday recess at the end of this week. That leaves funding for the government these supplemental requests. We've discussed a deal on the border extensions for Faiza and the FAA all into next year. Unless you tell me, can the House do anything in the next few days.
I doubt it. I'm hopeful, but on that I think I'll be pragmatic and say I don't see it that there is an extreme faction within the Republican Party that really doesn't want the government. They don't mind seeing the government shut down. We've seen them take the government to the edge with the spending cap, with the death ceiling. We've seen them take the government to the spending brink
with the appropriations for September speak. McCarthy did the right thing in avoiding the government shut down and bring the bill to the floor, and they took his head off. I mean like he was putting country first. I think some other people in the party need to think about country first and lose the hard line. No one's going to get everything that they want. Let's put America first. Let's move the country, our national security, our friends and allies,
and let's be take humane priorities abroad. What's happening in the West Bank, in the settlement, was happening in Gaza has to stop. Seventeen thousand people have died. The death toll is mounting. Now there's disease in humanitarian crisis. Reconciliation, I believe is the only path forward. And you asked about the specific funding for Israel. They do need stronger defense.
Do you know when we started on October seventh, the United States did not have a sworn did not have a confirmed ambassador from the United States to Israel in place. We did not have a confirmed ambassador from the United States to Egypt in place, so there was no place for the Palestinians to go, So our diplomacy was down. When mister Austin went over there with the gunboat, we didn't have our diplomacy in place, so we did not
have a development plan. I've never seen Yahoo speak aggressively forcibly about being a peacemaker and talking about a Palestinian development plan. He's never sought a two state solution. So I want to see peace in the region. I want to see children the next time I go over there, God willing playing together, not building up a bigger perimeter, a bigger border, but that only starts with the pathway through.
At the same time, Congressman, and I know I'm way over time here, but I just I can't get enough of the back and forth sometimes here I.
Can't get nobody with you. Well, God bless you.
Nobody was telling us what to do after nine to eleven or early, and if they did, we weren't listening very closely. Does that mean something to you when you consider what Israel just went through on October seventh? This was like multiple nine to elevens for them, and they think they need to root out evil here just across the border. Imagine if that happened in Canada, and what the heck we would do about it?
Right? Well, think about it. So what's a lesson learned that we figured out from Afghanistan after nine eleven? First of all, we went to go after ben Laden, which isn't an army, which is a spirit, which is a set and a group. Two trillion dollars later, twenty years later, we leave Afghanistan having to leave all of our guns and boats and planes everything behind, only to find that Osama bin Laden was in Pakistan watching Netflix. I guess or some of the TV ship of program in a
compound across the street from like a military base. Give me a break. I mean, so intelligence is the way. When this started on October seventh, we all agreed this was an intelligence failure. Let's not deflect. Let's beef up the intelligence. Look at what happened in Rwanda on that trip to Israel. I went to Rwanda after we left Israel, and Rwanda lost a million residents in one hundred days. They arrested thirty thousand people. They've been locked up for
thirty years. Rwandan intelligence. Rwanda now is the fourth largest group that's say, peacekeepers into the United Nations, and they have an economy that's thriving, and they've sought a certain peace with their neighbors. They had a five million people to die in a civil war, if you will, with the Congo. So be it in Israel, be it in Rwanda, being in South Africa, being with African Americans in the United States that had to overcome years and centuries of
Jim Crow and slavery. Its reconciliation is the pathway forward.
You know, I was going to ask you, Congressman, what your dad would do if he was having this conversation, or if he was holding your seat. But I think you probably already told us. I hope that you won't be a stranger. Jonathan Jackson, Democrat from Illinois. First, it's good to see you, Congressman.
I appreciate you.
Indeed, I'm Joe Matthew in Washington. We've got to bring the panel in right now. We're not breaking. We have to continue this conversation with Genie, Shanzeno and Chape and Fay because I have to admit and we're going to hear obviously perspective from the left and the right here.
I have to admit, Jeanie, I didn't expect that conversation with the congressman, with someone who sits on the House Foreign Affairs Committee, and I tried to make the point that he's actually in many cases sounding like conservative Republicans.
In the House.
Does that tell you about kind of a migration or an evolution of democratic thoughts specifically when it comes to Ukraine. Let's parse these out individually here, or is the congressman just giving us his take from his perch.
It was a remarkably candid conversation, and the representative just fascinating. My view is he does reflect what is happening in the Democratic base. I don't know his district well, but I would assume in his district in Illinois, and you hear it from Democrats across the country and you're focusing specifically in this instance on Ukraine, and I think he
is absolutely right. Americans want to know what is happening with their public funds and are those funds being utilized or is there a chance of success as it pertains to Ukraine. I am struck by the fact that you
know what a difference a year makes. As Vladimir Zelensky apparently leaves the capital empty handed, it is a year ago he was met with a standing ovation and you know, part of what has happened here is they have not had success and Russia has, and so there is that there is are the challenges economically and politically in the United States. All of those factors weigh in, and I think you know the representative mentioned, you know he is
new in his first termed in Congress. This is why bring in new voices to Congress, younger officials, people who represent all parts of our country. Because I think he is representing the Democratic base, not just what we're hearing from Republicans on both of these important issues.
Well, boy, that that would mean that Joe Biden's on an island here at least when it comes to Ukraine. Then again there's Chuck Schumer. Listen to the Senate Majority leader earlier today on the floor.
He made it clear, and we all made it clear that if we lose Putin wins, and this will be very, very dangerous for the United States. So we cannot let Putin influence through any surrogate. What is what we need to do for Ukraine?
We turned to Republican strategists, Chapin Fey, Now, Chapin, it's great to have you back. What do you make of this in person pitch here, he sat down with the Speaker, talked to all the Senators on his way to the White House. Now, as President Zelenski weren't out as welcome in Washington, I don't know if I.
Would quite characterize that as wearing out his welcome, but I you know, I agree with everything Ginny said earlier about the changing situation, right, and what a difference a year.
Makes, And I would just add some of the problems over the last year in America, you know, the migrant border. That's something on a lot of legislator's minds and may even hold up this whole, you know, may hold up the Ukraine eight package, you know, the war in Israel. Right, We're now seeing on a lot of different fronts financially for the United States where.
That money is going. And I think, you know, the representative we've just heard from and the other side of the aisle is very concerned with how much is going to Ukraine and whether we will be successful and what that money, you know, the accountability for the money. Right, I've read this morning that they're projecting the Ukraine may need another one hundred billion next year after one hundred
billion has already been allocated. So this is you know, a very big funding and foreign policy and war decisions for the Congress to make. So I think some negotiations and some questions about where the money is going is
totally fair. And I think, you know, like you said, a little struck by how the Democratic Caucus is asking similar questions to what the Republicans have been have been asking, which means I do think support To answer your first question, I do think the support he's going to have to work a lot harder this time around to get the funding.
Genie, what do you make of the messaging from Speaker Johnson? He again met one on one with President Zelenski. He did get to the border. Just to be clear, when he spoke to reporters coming out of the meetings, the microphone set up there and says, look, we just had our meeting.
Well, let's do it right now. Mike Johnson just.
Had a good meeting with President Zelenski. I reiterated to him that we stand with him and against Putin's brutal invasion. The American people stand for freedom and they're on the right side of this fight.
Then he got into conditions. He said, but we need a strategy, we need an endgame. We need to know how to win how long it's going to take. And he talked about that in length, saying that the Biden administration has not made good on this. We've been asking since the day I got the gavel, he said, And then eventually he got to a border deal. So, Genie, what is holding up funding for Ukraine. Is it lack of strategy or lack of a border deal.
I think there are components of both, and it depends on who you talk to which of those they stressed. I continue to believe it is and the Democrats' best interest to accept forward movement, even if it's not everything they want. As it pertains to security, the latest polling we've seen, Republicans are winning on the issue of border security at the polls. You know, you look at the Independent number, it's all over eighty percent of Independence say
the border on the south is insecure. It would behoove the Democrats to get there and to move forward. The concessions being asked for are not traumatic and not dramatic. I think the Biden administration needs to be actively pushing for those deeply concerning to me, as we are hearing that the White House, while they have talked about it and President Obama has, they are still not maybe as
actively involved in Congress and pushing for this. But it is to their benefits, so border they should go with. As it pertains to Ukraine, you know, the reality is the White House needs to educate on how much more expect and costly in lives this whole thing will be. Now if we don't fund Ukraine at this moment and we push this off, what will the next steps be Americans have to write to ask those questions. They've got to be answered over and over again by leadership in
Congress and the White House. And I include in that, by the way, Mike Johnson, you're the Speaker of the House. You answer that question. You said you supported it. It's not all on the White House, fair enough.
I wonder what we're going to hear a little bit later on today, By the way, four fifteen Washington time, if you want to take dibbs on when this starts, it'll be a bilateral news conference too. And two Biden Zelenski two questions each. And you can just imagine shaping with the questions are going to be. This might be the last opportunity Joe Biden has to make this case with President Zelenski standing at his side.
What do you want to hear?
Well, I just underscore what Ginny was just saying, and you would ask her about, you know, the different issues people have our life onto. The problem is people are finding excuses right where they were looking for ways to say yes a year ago, people are looking for the excuses latch onto to say no. So I do think the president needs to both silence both presidents need to just like GENNI say, explain why the investment now is going to be way less and easier than if we,
you know, let Ukraine do this all on its own. Right, what you know, we can't let Russia win. It will resonate with a lot of people in the Republican Party for sure. Right If not funding this war means that Russia is going to win and Putin gets a win, then I think people will think twice about it.
You know.
I don't know that the President will do this in this particular venue, but he really needs to show that he's addressing the problems you're at home as well, right, There are ways to do both, but a lot of us on the right are not seeing anything here at home for Americans. So you know, another one hundred billion next year to help Ukraine is a hard sell when nothing is happening here at home to help, you know, close this other border and help with problems here. So
I do think that has to come out. Whether he says that's sitting next to the Lensklee, I don't know. He's got two answers, you know, to really be concise and deliver a knockout blow here for his package.
Well, you know, the border is one thing. I wonder if he gets to that today, Genie, and maybe he's when they're in the Oval Office together they actually do craft a strategy if he gets to both of those issues, and he's going to say openly, I'm sure you know, look, I know that we need a deal on the border to make this happen.
We need to.
Close our border to secure our border. Whatever language he's going to use before we get to the matter of Ukraine, what does he need to say about strategy tonight when they go live at the White House.
You know, I think he needs to talk about the cost to the American public if they don't approve this funding. Now, you know, one of the things you mentioned is the rhetoric coming from the right about this and how Democrats are starting to match that. There is a key difference. We heard jd Vance talking to Steve Bannon and accusing
Zelensky of corruption. There is little evidence, no evidence that I know of that those points are a far afield from the valid questions about if we invest this money, what do we get out of it, what is it, why is it in our interest? And how that's what the president needs to focus on because the answers are very, very real. From that perspective, Just talk to the national security head of Poland who is saying, we have three years.
We have closed the border at this point, as has Finland because of where we are worried about an incursion by Russia. If we don't get this right this time, time is of the essence. The President has to say it's in our interest, in NATO's interest, to move forward on this now. The costs are too high to put this off.
Got to be honest, I think he needs to talk about where that money's going as well. Having listened to both of you, if the bulk of the sixty billion dollars stays here in the US and goes to Alabama, Georgia and Texas where the defense contractors are, maybe we rename this bill something to think about.
You're listening to the Bloomberg Sound on podcast. Catch the program live weekdays at one Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Welcome to our two of Sound on.
I'm Joe, Matthew and Washington, joined now by Kaylee Lions, which we do each day at this time. Try to expand our thoughts with Kaylee, and it's good to see you. We've likewise been talking politics Zelenski for the last hour. We've barely mentioned this CPI data, which glad to say, we'll be talking about with Baratramamordy in just a moment. You can look at this anyway you want. White House
put a good spin on it. Markets seem to be not freaking out about it, but the fact is inflation is picking up.
A little bit again here, just a little bit on the headline figure, So everything that incorporates food and energy prices, which we know are really volatile, up a tenth of one percent compared to last month. The expectation was inflation was not going to increase in peace a month over month, but everything else came in roughly in line, so could
have been worse, I think, is the general takeaway. However, we are still far above the Fed's two percent target, ahead of the Federal Reserve making a great decision tomorrow.
Yeah, that's right, And you know, look this always seems to come back to the market getting ahead of itself doesn't really change anything in terms of hikes, but it might not mean cuts as soon as people hoped.
Is that where we are?
Yeah, I mean, the market's still looking at more than one hundred basis points of cuts that they're expecting from the Federal Reserve that the Fed well, and see therein lies the rub Joe, and I wonder when we hear from Chairman Powell tomorrow how much he really is going to try to push back against the notion that the Fed's going to be cutting anytime soon, because the fact of the matter is, if the market keeps betting the Fed is going to turn, financial conditions are going to
stay easier, and that's going to undo a lot of the work that the Federal Reserve was trying to do in the first place by tightening things up.
Fascinating to get into this with borat raum Murdy. He's free to speak now, is I love this? Former Deputy Director of the National Economic Council in the White House.
Brot, welcome back to Bloomberg.
I wonder your thoughts on everything that Kaylee just mentioned here, because the FED is obviously looking at this pretty closely. I wonder how worried you are you may be about the FED starting to cut too early.
Well, I think the best way to look at the data is not necessarily in month over month increments, but at least over a three month period. And I think if you look at the annualized rate of headline CPI over the last three months, it's two point two percent, so it's basically at target. And I think that that accounts for the fact that there's a lot of housing disinflation in the pipeline that's not fully reflected in that figure.
So if I'm at the FED, certainly if I was at the White House, I'd be looking at the longer averages here and feeling pretty good that inflation was pretty much at target and on its way to at or below target over the next few months once the newest housing data gets fully incorporated into that data. So as for cuts, what the FED is going to do, I think what the FED is likely to do is keep rates where they are, including into early portion of next year.
I think, to be honest, what I think the FED should be doing is getting out ahead of things a little bit and considering rate cuts earlier next year, just given the fact that we know there's always a lag for that monetary policy to take effect, and you don't want to see a significant spike in unemployment before those cuts start to come. But I do think that it's unlikely that the FED will be cutting early next year.
Leaves the White House can comment directly on Fed polity, something that you can't do when you're inside the building. Brought the idea though, of the FED cutting. Does that imply that you think there's going to be some real softness showing up in the economy that they're going to have to address. Does that go against this whole idea of a soft landing, because if the landing is soft, why do they need to cut.
Well, I think that's precisely why they're not going to cut early next year. I think that the FED is likely to wait until they see evidence of a significant labor market softening before they start to cut. I just think that that may be a mistake in the sense that we all know that monetary policy operates with lags. I think that given the trend on inflation, the FED has largely won its battle against inflation. It's good news.
I think monetary policy and fiscal policy work together over the last few years very very well, and we've largely achieved a soft landing. Now is the time to start making the pivot away from the highly restrictive rates that they have towards more neutral rates. I think that that should start early next year. I just question whether this FED, which I think is very worried about inflation and its reputation on inflation, is likely to make that it as quick as it should.
What are the conversations like inside the White House, the ones that we don't hear barat. I don't know if you can tell me too much about it, but look, Donald Trump used to tweet directly at the FED share asking him to move interest rates. We now have the opposite, and we're referring to this with every question that we ask you here. The White House does not comment on the FED. Defer to the FED. Don't get in the middle of it. But certainly there are conversations behind closed doors.
And I wonder how this president and his economic advisors feel about the path that this FED has taken, knowing that he's going to be running for reelection in the midst of these conditions you're describing.
I think this President honestly takes it very seriously to respect the Fed's independence, and I think that filters down into his team, and of course senior members of his team like Secretary Yellen and NYC Director Brainard came from the FED, and so I think they also have a very healthy respect for the Fed's independence and the important role that plays in US economic stability. That said, I think that there has been a significant amount of progress
on inflation. I think the concern would always be that the FED starts to pivot too late, and unemployment starts to accelerate before the FED can start cutting, and then because of the delay in that taking effect, it's too late and you're starting to enter a recessionary period. My hope, again, the data we have right now suggests that the economy
is in a very strong position. There's nothing that I'm seeing right now that would suggest that labor market softening is going to happen over the last next few months. The question is what's going to be happening six, nine, twelve months from now, Because as the FED is making rate decisions today, that's really the time period where they have to be looking at in terms of the effect
of that decision. And I hope, I'm hoping that the FED is looking ahead a little bit, and in order to fully achieve this soft landing, you need to make sure that you pivot to a more neutral rate in advance of any labor market softening.
Well, on the subject of labor market softening and the statement that the President put out today in reaction to CPI, he noted that inflation has come down to three point one percent at the same time that the unemployment rate has made has remained below four percent for the longest stretch in decades at this point, and that statement went on to say, I know many Americans still find too
many things unaffordable and brought. We've talked about consistently this White House not getting credit for inflation coming down, in the economy hanging in there, and if you do start to see that labor market softening in a more material way, is the clock against the side of not just the President, but of the candidate Biden.
Yeah.
Look, I think the question of what the economy is going to do over the next nine or twelve months as we approached the presidential election, in many ways is going to be the key question electorally. You know, my hope is that we continue to see inflation at or near target over the next several months, and you continue to see robust consumer spending, robust business investment, and as a result, you know, steady economic growth. I think that
there's a pathway to see all of that. It requires the FED, like I said, to be a little bit proactive. It requires us to avoid any significant headwinds or unexpected turmoil like we saw when Russia and David Ukraine and disrupted international markets for oil and for wheat and for other products. If we can dodge those types of things, I think that there's a lot of optimism. I have a lot of optimism about where the economy is going
to be over the next six to nine months. And my guess and my expectation would be that if we see that, that's going to be beneficial to the President, and I think you'll start to get more credit for managing a very strong economic recovery, one that's much better, frankly than almost any other leading economy in the world.
I want to ask you about some of the warnings that we received months back. This is late summer going into fall, barad I'm sure you remember the resumption of student loan payments, told would be a significant drag on consumer spending.
The childcare cliff, we went over it.
Impacting potentially thousands of childcare programs. COVID Era funding that lapsed, we were told millions of families could be impacted. I could add the expanded child tax care credit. What happened to all of these potential threats were they not real?
Well?
I think that in the case of student loan repayment, yes, we've seen when it comes to actual student loan borrowers who are subject to repayment, we have seen a change in their behavior, which is what the White House was projecting.
I think that in terms of its macroeconomic effect, it has been fairly subdued, because, to be honest, we have a very large economy, and something that may end up affecting ten or twenty million people at the end of the day isn't necessarily going to be of macroeconomics significance. It's still very impactful for those ten or twenty million borrowers who are actively in repayment right now, and who have gone from paying zero dollars a month to in
some cases several hundred dollars a month. Towards their student loans. So I think we shouldn't diminish that. But I think it's also fair to say it hasn't had a massive at macroeconomic effect. Frankly, the White House was never projecting that it would have a massive macroeconomic effect on childcare.
That funding runs out at the end of the year, and so the real concern is, come January February March, once you see the impact of that funding being withdrawn, are you going to have lots of childcare centers across the country either pulling back on service or shutting down entirely. And what's the impact of that going to be not only on childcare workers, but on all those families who
rely on access to somewhat affordable childcare. So I think in that instance, I think it's vitally important that Congress step up and avoid that cliff and provide funding because we could have real serious labor market effects, labor supply effects in the spring of next year if that funding is withdrawn.
Yeah.
Well, on the subject of funding, Barot, obviously there is an ongoing conversation of funding, not just as it relates to childcare programs, but just overall. Top line figures for the US government of real argument on the Republican side that more fiscal discipline needs to be exercised, But you're even hearing it, and this ties back to the path of interest rates from Treasury Secretary Janet Yellen, who earlier today was talking about how she does think inflation can
get down to two percent. She went on to say, though, in her remarks, that persistently high rates could imperil US debt sustainability. It comes back down to not just a monetary policy question, but a fiscal one as well. Barot,
how worried should we be about that? Farther down the line if we're talking about, sure, a FED that may take rates from the high levels of which they are now a little lower, but we're still talking about a much higher interest rate regime than we were dealing with just a few years ago.
Right.
I think the key question in all of this is debt sustainability. In other words, what percentage of your GDP are you paying towards your debts. Obviously there's two variables there, the size of the debt and the interest rates that those that debt is at. You know, our hope is
that both of those will come down over time. You know, the President has proposed in his budget a three trillion dollar reduction in the deficit over the next ten years, with a mixture of some spending cuts and some revenue increases from those at the very top and from very large corporations. You know, I think that the story of the last twenty to twenty five years, with first the Bush tax cuts and the Trump tax cuts, is an enormous reduction in revenue, primarily through cutting taxes for the
rich and big corporations. And I agree with Secretary Yellen, it's not sustainable to maintain those rates and continue to fund the types of investments that we need. The solution is not to make huge cuts to entitlements or to make huge cuts to discretionary spending programs. The solution, as the President has proposed, is to increase the amount of revenue that we bring in from corporations and from large from wealthier individuals, in essence, to go back to the
free Bush era tax cut rates. That alone would get us most of the way there towards addressing the fiscal issues.
That you have.
So obviously in twenty twenty five, there's going to be a big debate about tax policy on the Hill because a lot of the individual provisions and the Trump tax bill expire that year, and I think it's underrated the extent to which twenty twenty four is going to be an election that has an enormous influence on the direction of tax policy in the United States.
That is going to be a grand debate.
I'm looking forward to hearing the arguments for it, because when I say the word revenue on the air, I get hate mail every time.
Broad We've only got a minute left.
Should we be worried about a downgrade from Moodies if this budget debate doesn't go well next year, Well.
No disrespect to Moodies, but I think what we've seen from previous downgrades is that it doesn't have much of an effect on market perception. I still think that there's an ample demand and respect for US treasuries, you know. Unfortunately, Moody is correct about one thing, which is that extremism from Republicans, which have caused multiple near misses on the debt ceiling, has has done some reputational harm. Again, this is solely caused by House Republicans who have taken us
to the brink of default over and over again. If we could avoid that, that would be great. But I think at the end of the day, people know the United States is good to pay its debts and US TATI communities.
He's not losing sleep. Barat Ramamurdy. Great to see you come back and talk to us again soon. Thanks for listening to the Sound on podcast. Make sure to subscribe if you haven't already, at Apple, Spotify, and anywhere else you get your podcasts, and you can find us live every weekday from Washington, DC at one pm Eastern Time at Bloomberg dot com.